As filed with the Securities and Exchange Commission on June 30, 2003

===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 20-F

   [_]   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, 2002

                                       OR

   [_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                       Commission file number: 000-28522

                                ASE TEST LIMITED
             (Exact Name of Registrant as Specified in Its Charter)

                                 NOT APPLICABLE
                (Translation of Registrant's Name into English)

                             REPUBLIC OF SINGAPORE
                (Jurisdiction of Incorporation or Organization)

                              10 WEST FIFTH STREET
                         NANTZE EXPORT PROCESSING ZONE
                               KAOHSIUNG, TAIWAN
                               REPUBLIC OF CHINA
                    (Address of Principal Executive Offices)

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

                                                    Name of Each Exchange
           Title of Each Class                       on which Registered
           -------------------                 -------------------------------
Ordinary Shares, par value U.S.$0.25 each        The Nasdaq National Market*

           *Ordinary Shares are traded on the Nasdaq National Market

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

                                      None
                                (Title of Class)

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act:

                                      None
                                (Title of Class)

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report:

             99,067,790 Ordinary Shares, par value U.S.$0.25 each

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

         Yes [X]  No [_]

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

         Item 17 [_]  Item 18 [X]

===============================================================================

<PAGE>


                               TABLE OF CONTENTS

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

<TABLE>
                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
INTRODUCTION
   USE OF CERTAIN TERMS.....................................................................................1
   SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........................................................1
PART I......................................................................................................1
     Item 1.  Identity of Directors, Senior Management and Advisers.........................................1
     Item 2.  Offer Statistics and Expected Timetable.......................................................1
     Item 3.  Key Information...............................................................................1
                SELECTED FINANCIAL DATA.....................................................................1
                CAPITALIZATION AND INDEBTEDNESS.............................................................4
                REASONS FOR THE OFFER AND USE OF PROCEEDS...................................................4
                RISK FACTORS................................................................................4
     Item 4.  Information on the Company...................................................................14
                HISTORY AND DEVELOPMENT OF THE COMPANY.....................................................14
                BUSINESS OVERVIEW..........................................................................15
                ORGANIZATIONAL STRUCTURE...................................................................30
                PROPERTY, PLANTS AND EQUIPMENT.............................................................31
     Item 5.  Operating and Financial Review and Prospects.................................................31
                OPERATING RESULTS AND TREND INFORMATION....................................................31
                LIQUIDITY AND CAPITAL RESOURCES............................................................45
                RESEARCH AND DEVELOPMENT...................................................................48
     Item 6.  Directors, Senior Management and Employees...................................................48
                DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICES........................................48
                COMPENSATION...............................................................................51
                EMPLOYEES..................................................................................52
                SHARE OWNERSHIP............................................................................52
     Item 7.  Major Shareholders and Related Party Transactions............................................53
                MAJOR SHAREHOLDERS.........................................................................53
                RELATED PARTY TRANSACTIONS.................................................................54
     Item 8.  Financial Information........................................................................55
                CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION....................................55
                LEGAL PROCEEDINGS..........................................................................55
                DIVIDEND POLICY............................................................................56
                SIGNIFICANT CHANGES........................................................................56
     Item 9.  Listing Details..............................................................................56
                MARKET PRICE INFORMATION AND MARKETS.......................................................56
     Item 10.  Additional Information......................................................................57
                MEMORANDUM AND ARTICLES OF ASSOCIATION.....................................................57
                MATERIAL CONTRACTS.........................................................................61
                EXCHANGE CONTROLS..........................................................................62
                TAXATION...................................................................................62
                DOCUMENTS ON DISPLAY.......................................................................64
     Item 11.  Quantitative and Qualitative Disclosures About Market Risk..................................64
                FOREIGN CURRENCY EXCHANGE RATE RISK........................................................64
                INTEREST RATE RISK.........................................................................65
     Item 12.  Description of Securities Other Than Equity Securities......................................65
Part II....................................................................................................65
     Item 13.  Defaults, Dividend Arrearages and Delinquencies.............................................65
     Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds................65
                MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS...................................65
     Item 15.  Controls and Procedures.....................................................................66
PART III...................................................................................................66
     Item 17.  Financial Statements........................................................................66
     Item 18.  Financial Statements........................................................................66
     Item 19.  Exhibits....................................................................................66
</TABLE>


<PAGE>


                              USE OF CERTAIN TERMS

     All references herein to (i) "ASE Test," the "Company," "we," "us," or
"our" are to ASE Test Limited and, unless the context requires otherwise, its
subsidiaries, (ii) "ASE Group" are to Advanced Semiconductor Engineering, Inc.
("ASE, Inc.") and its subsidiaries and affiliates, (iii) "ASE Test Taiwan" are
to ASE Test, Inc., a company incorporated under the laws of Taiwan, Republic of
China ("ROC"), (iv) "ASE Test Malaysia" are to ASE Electronics (M) Sdn. Bhd., a
company incorporated under the laws of Malaysia, (v) "ISE Labs" are to ISE
Labs, Inc., a corporation incorporated in the State of California, (vi) "ASE
Chung Li" are to ASE (Chung Li) Inc., a company incorporated in the ROC, (vii)
"ASE Korea" are to ASE (Korea) Inc., a company incorporated under the laws of
the Republic of Korea ("South Korea") and (viii) "ASE Material" are to ASE
Material Inc., a company incorporated in the ROC.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although these forward-looking
statements, which may include statements regarding our future results of
operations, financial condition or business prospects, are based on our own
information and information from other sources we believe to be reliable, you
should not place undue reliance on these forward-looking statements, which
apply only as of the date of this annual report. Our actual results of
operations, financial condition or business prospects may differ materially
from those expressed or implied in these forward-looking statements for a
variety of reasons, including risks associated with cyclicality and market
conditions in the semiconductor industry, demand for the outsourced
semiconductor testing and assembly services we offer and for such outsourced
services generally, our ability to maintain a high capacity utilization rate
relative to our fixed costs, competition in our industry, and other factors.
For a discussion of these risks and other factors, please see "Item 3. Key
Information -- Risk Factors".

                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisers.

     Not applicable.

Item 2.  Offer Statistics and Expected Timetable.

     Not applicable.

Item 3.  Key Information.

SELECTED FINANCIAL DATA

     The following table sets forth our selected historical consolidated
financial data. You should read this information together with our consolidated
financial statements, the notes to those financial statements and "Item 5.
Operating and Financial Review and Prospects" included herein. The selected
consolidated balance sheet data as of December 31, 2001 and 2002 and selected
consolidated statements of income data and statements of cash flow data for
each of the years ended December 31, 2000, 2001 and 2002 have been derived from
our audited consolidated financial statements included herein. These financial
statements have been audited by T.N. Soong & Co., previously a member firm of
Anderson Worldwide, SC, and from April 22, 2002, an associate member firm of
Deloitte Touche Tohmatsu. These financial statements, including notes thereto,
are referred to herein as the Consolidated Financial Statements. The selected
consolidated balance sheet data as of December 31, 1998, 1999 and 2000 and
selected consolidated statements of income data and statements of cash flow
data for each of the years ended December 31, 1998 and 1999 have been derived
from our audited consolidated financial statements not included herein.

<PAGE>

<TABLE>
                                                                        Year Ended and as of December 31,
                                                  --------------------------------------------------------------------------------
                                                      1998              1999            2000             2001             2002
                                                  ------------     ------------     ------------     ------------     ------------
                                                    (in thousands, except shares, per share data, operating data and percentages)
<S>                                               <C>              <C>              <C>              <C>              <C>
Consolidated Statement of Income Data:
ROC GAAP:
Net revenues ..................................   $    184,663     $    270,254     $    440,285     $    298,466     $    301,962
Cost of revenues ..............................        117,743          173,758          263,513          265,271          280,573
Gross profit ..................................         66,920           96,496          176,772           33,195           21,389
Operating expenses:
   Selling, general and
       administrative(1) ......................         13,165           23,091           42,807           35,335           68,903
   Research and development ...................          2,384            3,837           12,059           14,397           18,342
   Goodwill amortization(2) ...................             --            4,674            7,054            7,530           10,105
Income (loss) from operations .................         51,371           64,894          114,852          (24,067)         (75,961)
Non-operating income (expense):
   Interest--net ..............................         (3,267)         (11,703)         (14,740)         (13,783)         (14,396)
   Income (loss) from equity
     investees(3) .............................            133            4,842           16,127           (7,344)          (1,496)
   Gain on sale of long-term
     investments in shares of stock ...........             --            6,588               --               --               --
  Loss on long-term bonds .....................             --               --           (3,157)            (345)              --
  Foreign exchange gain (loss)--net ...........         (1,835)             151            3,280            2,382           (1,169)
  Other--net ..................................            609              863           (2,719)           1,393            1,511
Income (loss) before income taxes
   and minority interest ......................         47,011           65,635          113,643          (41,764)         (91,511)
Income tax benefit (expense) ..................          6,845             (678)          (2,197)          (6,522)          10,243
Loss from discontinued
     operations--net ..........................             --           (1,360)            (758)              --               --
Minority interest .............................             (5)          (1,437)          (3,493)           2,527               --
Net income (loss) .............................   $     53,851     $     62,160     $    107,195     $    (45,759)    $    (81,268)
Earnings (loss) per share: Basic...............   $       0.68     $       0.77     $       1.25     $      (0.48)    $      (0.82)
  Diluted .....................................   $       0.62     $       0.70     $       1.16     $      (0.48)    $      (0.82)
Operating income per share ....................   $       0.59     $       0.73     $       1.24     $      (0.25)    $      (0.77)
Income from continuing operations .............   $     53,856     $     64,957     $    111,446     $    (48,286)    $    (81,268)
Income from continuing operations
   per share ..................................   $       0.62     $       0.74     $       1.20     $      (0.51)    $      (0.82)
Shares used in earnings per share
   calculation:(4)
   Basic ......................................     78,767,112       80,230,420       85,970,361       94,921,412       98,600,205
   Diluted ....................................     86,660,780       88,359,934       92,673,040       94,921,412       98,600,205
U.S. GAAP:
Net revenues ..................................   $    184,663     $    270,254     $    440,285     $    298,466     $    301,962
Cost of revenues ..............................        119,488          177,382          265,655          264,264          281,006
Gross profit ..................................         65,175           92,872          174,630           34,202           20,956
Operating expenses ............................         16,602           32,755           62,564           82,819           87,238
Income (loss) from operations .................         48,573           60,117          112,066          (48,617)         (66,282)
Non-operating income (expense) ................         (5,823)          (1,290)          (4,445)         (20,316)         (17,286)
Income (loss) before income taxes
     and minority interest ....................         42,750           58,827          107,621          (68,933)         (83,568)
Income tax benefit (expense) ..................          6,845             (678)          (2,197)          (6,522)          10,243
Loss from discontinued
     operations--net ..........................             --           (1,360)            (758)              --               --
Minority interest .............................             (5)          (1,433)          (3,493)           2,527               --
Net income (loss) .............................   $     49,590     $     55,356     $    101,173     $    (72,928)    $    (73,325)
Earnings per share:
   Basic ......................................   $       0.63     $       0.69     $       1.18     $      (0.77)    $      (0.74)
   Diluted ....................................   $       0.57     $       0.63     $       1.09     $      (0.77)    $      (0.74)
Shares used in earnings per share calculation:
   Basic ......................................     78,767,112       80,232,420       85,970,361       94,921,412       98,600,205
   Diluted ....................................     86,660,780       88,359,934       92,673,040       94,921,412       98,600,205
</TABLE>


                                       2
<PAGE>

<TABLE>
                                                                        Year Ended and as of December 31,
                                                  --------------------------------------------------------------------------------
                                                      1998              1999            2000             2001             2002
                                                  ------------     ------------     ------------     ------------     ------------
                                                    (in thousands, except shares, per share data, operating data and percentages)
<S>                                               <C>              <C>              <C>              <C>              <C>
Consolidated Balance Sheet Data:
ROC GAAP:
Current assets ................................   $     60,439     $    142,625     $    290,458     $    217,962     $    203,124
Long-term investments .........................         24,303           70,708           87,161           95,042           93,702
Fixed assets ..................................        231,673          366,908          639,082          586,834          531,496
Total assets ..................................        332,286          657,257        1,091,655          959,406          925,473
Current liabilities ...........................         47,904           85,059          158,304           90,157          138,690
Long-term debts ...............................         73,499          264,872          265,489          248,371          244,271
Total liabilities .............................        121,647          350,303          424,756          340,679          386,534
Capital stock .................................         19,833           20,240           22,856           24,162           24,767
Cash dividend on ordinary shares ..............             --               --               --               --               --
Shareholders' equity ..........................        210,614          295,380          643,136          597,523          538,939

U.S. GAAP:
Current assets ................................   $     60,440     $    140,782     $    290,458     $    217,962     $    203,124
Long-term investments .........................         24,303           71,007           87,161           95,042           94,050
Fixed assets ..................................        231,144          372,591          638,392          585,670          529,901
Total assets ..................................        331,757          656,878        1,090,965          958,242          934,331
Current liabilities ...........................         49,794           87,636          161,879           90,157          138,690
Long-term debts ...............................         73,499          264,872          265,489          248,371          244,271
Total liabilities and minority
     interest .................................        123,703          364,584          452,215          361,990          386,634
Shareholders' equity ..........................        208,054          292,294          638,750          596,252          547,697

Consolidated Statement of Cash Flow Data:
ROC GAAP:
Depreciation and amortization .................   $     38,751     $     68,769     $    117,506     $    144,860     $    154,251
Capital expenditures ..........................         80,971          128,690          413,197          104,216          126,009
Net cash provided by operating
     activities ...............................         84,496           95,075          203,557          147,020          103,900
Net cash used in investing
     activities ...............................       (104,618)        (237,203)        (367,354)        (144,208)        (131,547)
   Net cash provided by (used in)
        financing activities ..................         29,982          166,238          277,801          (52,827)          38,711
Net cash inflow (outflow) .....................          9,239           24,472          112,341          (51,080)          12,763

Segment Net Revenues:
   Testing ....................................   $     98,210     $    178,667     $    316,158     $    223,193     $    214,331
   Packaging ..................................         86,453           91,587          124,127           75,273           87,631
   Testing ....................................           53.2%            66.1%            71.8%            74.8%            71.0%
   Packaging ..................................           46.8%            33.9%            28.2%            25.2%            29.0%

Operating Data:
Gross margin ..................................           36.2%            35.7%            40.1%            11.1%             7.1%
Operating margin ..............................           27.8%            24.0%            26.1%            (8.1)%          (25.2)%
ROC GAAP net margin ...........................           29.2%            23.0%            24.3%           (15.3)%          (26.9)%
U.S. GAAP net margin ..........................           26.9%            20.5%            23.0%           (24.4)%          (24.3)%
</TABLE>

---------
(1)  Excludes goodwill amortization.

(2)  Included in selling, general and administrative expenses in the
     Consolidated Financial Statements.

(3)  Includes investment income (loss) from ASE Chung Li, ASE Korea and ASE
     Material Inc.

(4)  Represents the weighted average numbers of shares and share equivalents
     outstanding during the periods indicated on a diluted basis after giving
     retroactive effect to the acquisition of ASE Test, Inc. and ASE
     Electronics (M) Sdn. Bhd. and the stock splits effected on February 8,
     1998 and April 5, 1999, respectively. Each stock split resulted in every
     one share being split into two shares, with a par value corresponding to
     one-half of the par value of the share prior to the stock split. See Notes
     1 and 12 of Notes to the Consolidated Financial Statements.


                                       3
<PAGE>

CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

RISK FACTORS

   Risks Relating to Our Business

Since we are dependent on the highly cyclical semiconductor industry and
conditions in the markets for the end-use applications of our products, our
revenues and earnings may fluctuate significantly.

     Our semiconductor testing and packaging business is affected by market
conditions in the highly cyclical semiconductor industry. All of our customers
operate in this industry, and variations in order levels from our customers and
service fee rates may result in volatility in our revenues and earnings. From
time to time, the semiconductor industry has experienced significant, and
sometimes prolonged, downturns. Because our business is, and will continue to
be, dependent on the requirements of semiconductor companies for independent
testing and packaging services, any future downturn in the semiconductor
industry would reduce demand for our services. For example, a worldwide
slowdown in demand for semiconductor devices led to excess capacity and
increased competition beginning in early 1998. As a result, price declines in
1998 accelerated more rapidly, which adversely affected our operating results
in 1998. Prices for testing and packaging services improved due to an upturn in
the industry in the second half of 1999 through the third quarter of 2000, but
have since fallen due to an industry downturn that commenced in the fourth
quarter of 2000. This most recent worldwide downturn resulted in an even more
significant deterioration in the average selling prices, as well as demand, for
our services in 2001, and significantly and adversely affected our operating
results in 2001. Although there has been a modest recovery in the semiconductor
industry during 2002, we expect this industry downturn to continue to exert
downward pressure on the average selling prices for our testing and packaging
services. If we cannot reduce our costs to sufficiently offset any decline in
average selling prices, our profitability will suffer and we may continue to
incur losses.

      Market conditions in the semiconductor industry depend to a large degree
on conditions in the markets for the end-use applications of semiconductor
products, such as communications, personal computer and consumer electronic
products. Any deterioration of conditions in the markets for the end-use
applications of the semiconductors we test and package would reduce demand for
our services, and would likely have a material adverse effect on our financial
condition and results of operations. In 2002, the substantial majority of our
sales was attributable to the testing and packaging of semiconductors used in
communications, consumer electronic and personal computer products. These
industries are subject to intense competition and significant shifts in demand
which could put pricing pressure on our testing and packaging services and
adversely affect our earnings.

A reversal or slowdown in the outsourcing trend for semiconductor testing and
packaging services could adversely affect our growth prospects and
profitability.

     In recent years, semiconductor manufacturers that have their own in-house
testing and packaging capabilities, known as integrated device manufacturers,
have increasingly outsourced stages of the semiconductor production process,
including testing and packaging, to independent companies in order to reduce
costs and shorten production cycles. In addition, the availability of advanced
independent semiconductor manufacturing services has enabled the growth of so
called "fabless" semiconductor companies that focus exclusively on design and
marketing and outsource their manufacturing, testing and packaging requirements
to independent companies. We cannot assure you that these integrated device
manufacturers and fabless semiconductor companies will continue to outsource
their testing and packaging requirements to third parties like us. A reversal
of, or a slowdown in, this outsourcing trend could result in reduced demand for
our services and adversely affect our growth prospects and profitability.

If we are unable to compete favorably in the highly competitive semiconductor
testing and packaging markets, our profits may decrease.

     The semiconductor testing and packaging markets are very competitive. We
face competition from a number of sources, including other independent
semiconductor testing and packaging companies, especially those which offer


                                       4
<PAGE>

turnkey testing and packaging services. We believe that the principal
competitive factors in the testing and packaging market are:

     o    the ability to provide total solutions to our customers;

     o    the technological expertise;

     o    the range of testing platforms and package types available;

     o    ability to work closely with customers at the product development
          stage;

     o    software conversion program capability;

     o    responsiveness and flexibility;

     o    production cycle time;

     o    capacity;

     o    production yield; and

     o    price.

     We face increasing competition from other testing and packaging companies,
as most of our customers obtain testing or packaging services from more than
one source. In addition, some of our competitors may have access to more
advanced technologies and greater financial and other resources than we do.
Many of our competitors have shown a willingness to quickly and sharply reduce
prices, as they did in 1998 and in 2001, in order to maintain capacity
utilization in their facilities during periods of reduced demand. Although
prices have stabilized, any renewed erosion in the prices for our testing and
packaging services could cause our revenues and earnings to decrease and have a
material adverse effect on our financial condition and results of operations.

The complexity of the semiconductor testing and packaging process increases the
costs and production risks of our business.

     Semiconductor testing and packaging involve significant technological and
process expertise. In order to improve capacity utilization and efficiencies in
our testing operations, we maintain advanced and expensive equipment and
develop software conversion programs which enable us to test semiconductors
utilizing different testing platforms. If we fail to successfully develop
software conversion programs or if we are unable to effectively reduce the lead
time necessary to interface our customers' semiconductors with our testing
equipment, our operational efficiency could suffer. In addition, our testing
and packaging operations take place in clean rooms where air purity,
temperature and humidity are controlled. If we are unable to effectively
control our testing and packaging environment, some semiconductors could be
damaged. Although we believe our operational efficiency has generally improved
in recent years, we have from time to time experienced, and may in the future
experience, production interruptions due to technical problems or operator
errors in our testing and packaging processes. Any interruption in our
operations could have a material adverse effect on our business.

Our profitability depends on our ability to respond to rapid technological
changes in the semiconductor industry.

     The semiconductor industry is characterized by rapid increases in the
diversity and complexity of semiconductors. As a result, we expect that we will
need to constantly offer more sophisticated testing and packaging technologies
and processes in order to respond to competitive industry conditions and
customer requirements. If we fail to develop, or obtain access to, advances in
testing or packaging technologies or processes, we may become less competitive
and less profitable. In addition, advances in technology typically lead to
declining average prices for semiconductors tested or packaged with older
technologies or processes. As a result, if we cannot reduce the costs
associated with our testing or packaging services, the profitability of a given
service, and our overall profitability, may decrease over time.


                                       5
<PAGE>

Our operating results are subject to significant fluctuations, which could
adversely affect the market value of your investment.

     Our operating results have varied significantly from period to period and
may continue to vary in the future. Downward fluctuations in our operating
results may result in decreases in the market price of our shares. Among the
more important factors affecting our quarterly and annual operating results are
the following:

     o    changes in general economic and business conditions, particularly
          given the cyclical nature of the semiconductor industry and the
          markets served by our customers;

     o    our ability to quickly adjust to unanticipated declines or shortfalls
          in demand and market prices for our testing and packaging services,
          due to our high percentage of fixed costs;

     o    timing of capital expenditures in anticipation of future orders;

     o    changes in prices for our testing and packaging services;

     o    volume of orders relative to our testing and packaging capacity;

     o    our ability to obtain adequate testing and packaging equipment on a
          timely basis;

     o    changes in costs and availability of raw materials, equipment and
          labor; and

     o    earthquakes, drought, epidemics and other natural disasters, as well
          as industrial accidents.

     Due to the factors listed above, it is possible that our future operating
results or growth rates may be below the expectations of research analysts and
investors. If so, the market price of our shares, and thus the market value of
your investment, may fall.

Due to our high percentage of fixed costs, we will be unable to maintain our
gross margin at past levels if we are unable to achieve relatively high
capacity utilization rates.

     Our operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses in connection with the acquisition of new
testing and packaging equipment and new facilities. Our profitability depends
in part not only on absolute pricing levels for our services, but also on the
utilization rates for our testing and packaging equipment, commonly referred to
as "capacity utilization rates". In particular, increases or decreases in our
capacity utilization rates can have a significant effect on gross margins since
the unit cost of testing and packaging services generally decreases as fixed
costs are allocated over a larger number of units. In periods of low demand, we
experience relatively low capacity utilization rates in our operations due to
relatively low growth in demand, which leads to reduced margins during that
period. During 2001, we experienced lower than anticipated utilization rates in
our operations due to a significant decline in worldwide demand for our testing
and packaging services, which led to reduced margins during that period.
Although our utilization rates have improved recently, we cannot assure you
that we will be able to maintain or surpass our past gross margin levels if we
cannot consistently achieve or maintain relatively high capacity utilization
rates.

Because of the highly cyclical nature of our industry, our capital requirements
are difficult to plan. If we cannot obtain additional capital when we need it,
our growth prospects and future profitability may be adversely affected.

     Our capital requirements are difficult to plan in our highly cyclical and
rapidly changing industry. We will need capital to fund the expansion of our
facilities as well as fund our research and development activities in order to
remain competitive. We believe that our existing cash and cash equivalents,
short-term investments, expected cash flow from operations and existing credit
lines under our short-term loan facilities will be sufficient to meet our
capital expenditures, working capital, cash obligations under our existing debt
and lease arrangements, and other requirements through the end of 2003.
However, future capacity expansions or market or other developments may cause
us to require additional funds. Our ability to obtain external financing in the
future is subject to a variety of uncertainties, including:


                                       6
<PAGE>

     o    our future financial condition, results of operations and cash flows;

     o    general market conditions for financing activities by semiconductor
          companies; and

     o    economic, political and other conditions in Taiwan and elsewhere.

     If we are unable to obtain funding in a timely manner or on acceptable
terms, our growth prospects and future profitability may decline.

Restrictive covenants and broad default provisions in the agreements governing
our existing debt may materially restrict our operations as well as adversely
affect our liquidity, financial condition and results of operations.

     We are a party to numerous loans and other agreements relating to the
incurrence of debt, many of which include restrictive covenants and broad
default provisions. In general, covenants in the agreements governing our
existing debt, and debt we may incur in the future, may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. In the event of a
prolonged downturn in the demand for our services as a result of a downturn in
the worldwide semiconductor industry or otherwise, we cannot assure you that we
will be able to remain in compliance with our financial covenants which, as a
result, may lead to a default. Furthermore, a default under one agreement may
also trigger cross-defaults under our other agreements. In the event of
default, we may not be able to cure the default or obtain a waiver on a timely
basis, and our operations could be significantly disrupted or harmed. An event
of default under any agreement governing our existing or future debt, if not
cured or waived, could have a material adverse effect on our liquidity,
financial condition and results of operations.

     As a result of the reduced levels of operating cash flow due primarily to
the recent downturn in the worldwide semiconductor industry, we and our
subsidiaries had on occasion during 2001 and 2002 failed to comply with certain
financial covenants in some of our loan agreements. Such non-compliance may
also have, through broadly worded cross-default provisions, resulted in
defaults under some of the agreements governing our other existing debt. We and
our subsidiaries have obtained waivers from the relevant lenders relating
specifically to such non-compliance. In addition, we and our subsidiaries have
repaid or refinanced all amounts owed under agreements containing cross-default
provisions that we and our subsidiaries have identified which may have been
triggered by such non-compliance. Such non-compliance has not had any
significant effect on our ability to repay or refinance amounts due in respect
of our existing debt. For these and other reasons, including our financial
condition and our relationship with our lenders, no lender has to date sought
and we do not believe that any of our lenders would seek to declare a default
or enforce remedies in respect of our existing debt, as a result of
cross-default provisions or otherwise, although we cannot provide any assurance
in this regard.

We depend on select personnel and could be affected by the loss of their
services.

     We depend on the continued service of our executive officers and skilled
technical and other personnel. Our business could suffer if we lose the
services of any of these personnel and cannot adequately replace them. Although
some of these management personnel have entered into employment agreements with
us, they may leave before the expiration of these agreements. We are not
insured against the loss of key personnel. In particular, we may be required to
increase substantially the number of these employees in connection with our
expansion plans, and there is intense competition for their services in the
semiconductor industry. We may not be able to either retain our present
personnel or attract additional qualified personnel as and when needed. In
addition, we may need to increase employee compensation levels in order to
attract and retain our existing officers and employees and the additional
personnel that we expect to require. A portion of the workforce at our
facilities in Taiwan are foreign workers employed by us under work permits
which are subject to government regulations on renewal and other terms.
Consequently, our business could also suffer if the Taiwan regulations relating
to the import of foreign workers were to become significantly more restrictive
or if we are otherwise unable to attract or retain these workers at reasonable
cost.


                                       7
<PAGE>

If we are unable to obtain additional testing and packaging equipment or
facilities in a timely manner and at a reasonable cost, our competitiveness and
future profitability may be adversely affected.

     The semiconductor testing and packaging businesses are capital-intensive
and require significant investment in expensive equipment manufactured by a
limited number of suppliers. The market for semiconductor testing and packaging
equipment is characterized, from time to time, by intense demand, limited
supply and long delivery cycles. Our operations and expansion plans depend on
our ability to obtain a significant amount of such equipment from a limited
number of suppliers, including, in the case of testers, Advantest Corporation,
Agilent Technologies, Inc., Credence Systems Corporation, LTX Corporation, NP
Test Inc. and Teradyne, Inc., and in the case of wire bonders, ASM Pacific
Technology Ltd. and Kulicke & Soffa Industries Inc. From time to time, we have
also leased certain equipment. We have no binding supply agreements with any of
our suppliers and acquire our testing and packaging equipment on a purchase
order basis, which exposes us to changing market conditions and other
substantial risks. For example, shortages of capital equipment could result in
an increase in price of equipment and longer delivery times. Semiconductor
testing and packaging also requires us to operate sizeable facilities. If we
are unable to obtain equipment or facilities in a timely manner, we may be
unable to fulfill our customers' orders, which could adversely affect our
growth prospects as well as financial condition and results of operations.

Fluctuations in exchange rates could result in foreign exchange losses.

     Currently, the majority of our revenues from testing and packaging
services are denominated in U.S. dollars and NT dollars. Our costs of revenues
and operating expenses associated with testing and packaging services, on the
other hand, are incurred in several currencies, primarily in NT dollars, U.S.
dollars and Malaysian ringgit, as well as, to a lesser extent, Singapore
dollars, Japanese yen and Hong Kong dollars. In addition, a substantial portion
of our capital expenditures, primarily for the purchase of testing and
packaging equipment, has been, and is expected to continue to be, denominated
in U.S. dollars with much of the remainder in Japanese yen. Fluctuations in
exchange rates, primarily among the U.S. dollar, the NT dollar and the Japanese
yen, will affect our costs and operating margins. In addition, these
fluctuations could result in exchange losses and increased costs in NT dollar
and other local currency terms. Despite hedging and mitigating techniques
implemented by us, fluctuations in exchange rates have affected, and may
continue to affect, our financial condition and results of operations. We
recorded foreign exchange gains of $3.3 million in 2000 and $2.4 million in
2001, and incurred a foreign exchange loss of $1.2 million in 2002.

The loss of a major customer or disruption of our strategic alliance and other
commercial arrangements with semiconductor foundries and providers of other
complementary semiconductor manufacturing services may result in a decline in
our revenues and profitability.

     Although we have over 200 customers, due in part to the concentration of
market share in the semiconductor industry, we have derived and expect to
continue to derive a large portion of our revenues from a small group of
customers during any particular period. Our five largest customers together
accounted for approximately 41%, 39% and 31% of our net revenues in 2000, 2001
and 2002, respectively. There has been significant variation in the composition
of our largest five customers over time. This variation is due primarily to the
high level of competition in the semiconductor industry in which our customers
operate. The demand for our services from a customer is directly dependent upon
that customer's level of business activity, which could vary significantly from
year to year. As a result, we have been less dependent on any particular
customer over time.

     Our strategic alliance with Taiwan Semiconductor Manufacturing Company
Limited, the world's largest dedicated semiconductor foundry, and ASE, Inc., as
well as ASE, Inc.'s and our other commercial arrangements with providers of
complementary semiconductor manufacturing services, enable us, in conjunction
with ASE, Inc., to offer total semiconductor manufacturing solutions to our
customers. This strategic alliance and any of our other commercial arrangements
may be terminated at any time. A termination of this strategic alliance and
other commercial arrangements, and our failure to enter into substantially
similar alliances and commercial arrangements, may adversely affect our
competitiveness and our revenues and profitability.

     All of our key customers operate in the cyclical semiconductor business
and have in the past varied, and may in the future vary, order levels
significantly from period to period. Some of these companies are relatively
small, have limited operating histories and financial resources, and are highly
exposed to the cyclicality of the industry. We cannot assure you that these
customers or any other customers will continue to place orders with us in the
future at the same levels as in prior periods. The loss of one or more of our
significant customers, or reduced orders by any


                                       8
<PAGE>

one of them, and our inability to replace these customers or make up for such
orders could reduce our profitability. In addition, during cyclical market
downturns, we have in the past reduced, and may in the future reduce, our
prices to limit the level of order cancellations. Any price reduction would
likely reduce our margins and profitability.

The outbreak of Severe Acute Respiratory Syndrome, or SARS, in mainland China,
Hong Kong, Singapore, Taiwan and certain other regions may have an adverse
effect on the economies and financial markets of certain Asian countries and as
a result may adversely affect our results of operations.

     In March 2003, mainland China, Hong Kong, Singapore and certain other
regions in Asia encountered an outbreak of SARS, a highly contagious form of
atypical pneumonia. Since April 2003, the outbreak of SARS has spread to
certain other regions, including Taiwan. According to the World Health
Organization, or the WHO, as of June 24, 2003, 8,458 cases of SARS and 807
deaths have been reported worldwide, including 687 cases and 84 deaths in
Taiwan. In response to the severity of the SARS outbreak in certain regions,
the WHO issued a travel advisory recommending that persons traveling to certain
regions, including much of mainland China and Taiwan, consider postponing all
but essential travel. The ROC government has also imposed a variety of
SARS-preventive measures, including rules that require residents and visitors
to undergo a 10-day quarantine under certain circumstances. As a result, the
SARS outbreak may restrict the level of economic activity in the affected
areas, which may adversely affect our business and prospects.

     While the long-term impact of the SARS outbreak is unclear at this time,
the prolonged existence of the SARS outbreak, or the perception that the SARS
outbreak has not been contained, may have an adverse effect on the economic
conditions of certain regions in Asia. Each of the governments of Hong Kong,
Singapore and the ROC has recently revised downward its gross domestic product
growth forecasts for 2003 due to SARS. As a result, the economic fallout of the
SARS outbreak may result in a decrease in the demand for our packaging and
testing services. In addition, our production operations and that of our
suppliers or customers may be seriously interrupted due to the SARS outbreak or
the measures taken by the respective governments of the ROC, Singapore, Hong
Kong, the PRC or other regions against SARS.

We depend on our agents for sales and customer service in North America and
Europe. Any serious interruption in our relationship with these agents, or
substantial loss in their effectiveness, could significantly reduce our
revenues and profitability.

     We depend on non-exclusive agents for sales and customer service in North
America and Europe. Our sales agents help us identify customers, monitor
delivery acceptance and payment by customers and, within parameters set by us,
help us negotiate price, delivery and other terms with our customers. Purchase
orders are placed directly with us by our customers. Our customer service
agents provide customer service and after-sales support to our customers.

     Currently, our sales and customer service agents perform services only for
ASE, Inc. and ASE, Inc.'s subsidiaries, including us and our subsidiaries, but
they are not owned or controlled by us or ASE, Inc. These agents are free to
perform sales and support services for others, including our competitors. In
particular, we may not be able to find an adequate replacement for these agents
or to develop sufficient capabilities internally on a timely basis. Any serious
interruption in our relationship with these agents or substantial loss in their
effectiveness in performing their sales and customer service functions could
significantly reduce our revenues and profitability.

Adverse developments in ASE, Inc.'s operations, competitive position or
customer base could negatively affect us.

     We believe that we have benefited significantly from our relationship with
ASE, Inc. Our proximity to, and close working relationship with, ASE, Inc. have
enabled us to provide value-added services to our customers. A substantial
majority of our net revenues from testing services performed at our Kaohsiung,
Taiwan facilities has historically been, and is expected to continue to be,
derived from customers who are also customers of ASE, Inc. We have from time to
time billed ASE, Inc. directly for some of our testing services performed in
Taiwan as part of turnkey services provided by ASE, Inc. and by us. Because of
our close relationship with ASE, Inc., any adverse development in ASE, Inc.'s
operations, competitive position or customer base could have a material adverse
effect on our business, future revenues and profitability.


                                       9
<PAGE>

Our interests may conflict with those of our controlling shareholder, who may
take actions that are not in our or our shareholders' best interest.

     ASE, Inc., our controlling shareholder, is principally engaged in the
semiconductor packaging business. ASE, Inc. is also engaged in the
semiconductor testing business principally through its 50.5% shareholding in
our company, its 72.4% shareholding in ASE Chung Li and its 70% shareholding in
ASE Korea. We own the remaining 27.6% and 30.0% shareholding in ASE Chung Li
and ASE Korea, respectively. ASE, Inc. does not, under Singapore law, owe any
fiduciary obligation to our minority shareholders. ASE, Inc. is in a position
to control actions that require shareholders' approval, including the timing
and payment of dividends and the election of our entire board of directors. In
addition, some members of our board of directors are employed by, or serve as
directors of, companies within the ASE group of companies, and our Chairman and
four other directors hold similar positions at ASE, Inc. Accordingly, ASE, Inc.
or its affiliates may take actions that are not in our or our shareholders'
best interest.

     ASE, Inc. and we have had, and will continue to have, some common
customers. These customers conduct separate qualification procedures of ASE,
Inc.'s and our facilities based on their own evaluation of various factors,
including geographic location of the facilities, range and quality of testing
platforms available, technical expertise, testing capacity and price, and
generally indicate which facilities they desire to use. There are no agreements
between ASE, Inc. and us with respect to the allocation of business from our
common customers.

     We and ASE, Inc. and its affiliates continue to have contractual and other
business relationships and may, from time to time, engage in transactions that
are material to us.

     The ownership by ASE, Inc. of a substantial percentage of our outstanding
shares and ASE, Inc.'s affiliation with members of our board of directors may
have the effect of:

     o    delaying, deferring or preventing a change in who controls us;

     o    discouraging bids for our shares at a premium over the market price;
          and

     o    adversely affecting the market price of our shares.

Our revenue and profitability may decline if we are unable to obtain adequate
supplies of raw materials in a timely manner and at a reasonable price.

     Our packaging operations require that we obtain adequate supplies of raw
materials on a timely basis. Shortages in the supply of raw materials
experienced by the semiconductor industry have in the past resulted in
occasional price increases and delivery delays. For example, in 1999 and the
first half of 2000, the industry experienced a shortage in the supply of
advanced substrates used in ball grid array, or BGA, packaging. ASE, Inc.
established ASE Material in 1997 to partially reduce this risk. However, we do
not expect ASE Material to be able to provide sufficient raw materials to meet
all of our requirements. Consequently, we will remain dependent on market
supply and demand for our raw materials. We cannot assure you that we will be
able to obtain adequate supplies of raw materials in a timely manner and at a
reasonable price. Our revenues and earnings could decline if we are unable to
obtain adequate supplies of high quality raw materials in a timely manner or if
there are significant increases in the costs of raw materials that we cannot
pass on to our customers.

Any environmental claims or failure to comply with any present or future
environmental regulations may require us to spend additional funds and may
materially and adversely affect our financial condition and results of
operations.

     We are subject to a variety of laws and regulations relating to the use,
storage, discharge and disposal of chemical by-products of, and water used in,
our packaging process. Although we have not suffered material environmental
claims in the past, the failure to comply with any present or future
regulations could result in the assessment of damages or imposition of fines
against us, suspension of production or a cessation of our operations. New
regulations could require us to acquire costly equipment or to incur other
significant expenses. Any failure on our part to control the use of, or
adequately restrict the discharge of, hazardous substances could subject us to
future liabilities that may have a material adverse effect on our financial
condition and results of operations.


                                      10
<PAGE>

Any impairment charges required under U.S. GAAP may have a material adverse
effect on our net income on a U.S. GAAP reconciled basis.

     Under currently effective U.S. GAAP, we are required to evaluate our
equipment, goodwill and other long-lived assets for impairment whenever there
is an indication of impairment. If certain criteria are met, we are required to
record an impairment charge. We can give no assurance that impairment charges
will not be required in periods subsequent to December 31, 2002. Please see
Note 26 of Notes to the Consolidated Financial Statements for a discussion of
the criteria which, if met, may require impairment charges.

     As a result of new standards under U.S. GAAP that became effective on
January 1, 2002, we are no longer required to amortize remaining goodwill;
instead, we test goodwill for impairment on a periodic basis. We completed a
goodwill impairment review as of January 1, 2002 using a fair-value based
approach in accordance with the new standards and found no impairment. We also
completed our annual goodwill impairment test at December 31, 2002 and found no
impairment. Total goodwill amortization expenses amounted to $10.1 million
under ROC GAAP for the year ended December 31, 2002, which is not recorded for
U.S. GAAP reporting. As of December 31, 2002, the goodwill under U.S. GAAP
amounted to US$82.4 million. We currently are not able to estimate the extent
and timing of any goodwill impairment charge for future years. Any goodwill
impairment charge required under U.S. GAAP may have a material adverse effect
on our financial condition and result of operations on a U.S. GAAP reconciled
basis. Please see Note 26 of Notes to the Consolidated Financial Statements for
a discussion of the new standards under U.S. GAAP.

     The determination of an impairment charge at any given time is based
significantly on our expected results of operations over a number of years
subsequent to that time. As a result, an impairment charge is more likely to
occur during a period when our operating results are otherwise already
depressed.

   Risks Relating to Countries in Which We Conduct Operations

Adverse economic conditions in Asia could negatively affect our business,
financial condition and results of operations.

     Our current testing and packaging facilities are located in Taiwan,
Malaysia, the United States, Hong Kong and Singapore. We also have a 30.0% and
27.6% interest in ASE Korea and ASE Chung Li, respectively. Furthermore, our
customers are located in North America, Europe and other parts of Asia. As a
result, our business is subject to various risks beyond our control, such as:

     o    instability of economies and governments; and

     o    changes in laws and policies affecting trade and investment,
          including foreign exchange controls.

     In addition, the currencies of several countries in Asia, including
Malaysia and Taiwan, where our principal operating facilities are located and
where many of our customers have facilities, have experienced substantial
depreciation and volatility since July 1997 following the devaluation of
various currencies in Asia. In response to these declines, some governments in
the region have taken drastic steps to stabilize their currencies, including
raising official interest rates and other measures. In May 1998, the Malaysian
government imposed strict foreign currency exchange controls. Although the
foreign exchange controls imposed by Malaysia do not restrict the flow of funds
arising from trade transactions and repatriation of profits to investors, we
cannot assure you that other countries in Asia will not impose similar or other
currency control measures in the future. The currency fluctuations and other
factors materially and adversely affected the economies of many countries in
Asia, including Malaysia and, to a lesser extent, Taiwan.

     As a result of widespread failures of financial institutions, the banking
and financial sectors of many countries in Southeast Asia have undergone major
restructurings, closures and liquidations or mergers. Adverse economic
conditions in the region resulted in reduced availability of credit and other
financing sources. Although ASE Test Malaysia and ASE Test Taiwan have not been
affected adversely by the credit problem in the region, any prolonged liquidity
shortage could result in ASE Test Malaysia and ASE Test Taiwan having to rely
more heavily on us for funding. In addition, any adverse economic development
in the region, if prolonged, could result in lower demand for, and exert
further pressure on the prices of, the services and products provided by
companies in the region, including us. Any continued devaluation of currencies,
prolonged period of inflation, increase in interest rates or


                                      11
<PAGE>

political instability in certain countries in the region may adversely affect
the economies of Malaysia, Taiwan and other countries in the region and our
business.

Strained relations between the Republic of China and the People's Republic of
China could negatively affect our business and the market value of our shares.

     Our principal executive offices and our principal testing facilities are
located in Taiwan and approximately 46% of our net revenues in 2002 were
derived from our operations in Taiwan. Taiwan is under control of the
government of the Republic of China and has a unique international political
status. The People's Republic of China asserts sovereignty over all of China,
including Taiwan. The People's Republic of China government does not recognize
the legitimacy of the Republic of China government. Although significant
economic and cultural relations have been established in recent years between
the Republic of China and the People's Republic of China, the People's Republic
of China government has indicated that it may use military force to gain
control over Taiwan in some circumstances, such as the declaration of Taiwan's
independence by the Republic of China. Relations between the Republic of China
and the People's Republic of China have been particularly strained in recent
years. Past developments in relations between the Republic of China and the
People's Republic of China have on occasion depressed the market price of the
shares of Taiwanese companies. Relations between the Republic of China and the
People's Republic of China and other factors affecting the political or
economic conditions in Taiwan could have a material adverse effect on our
financial condition and results of operations, as well as the market price and
the liquidity of our shares.

As a substantial portion of our business and operations are located in Taiwan,
we are vulnerable to earthquakes, typhoons, drought and other natural
disasters, which could severely disrupt the normal operation of our business
and adversely affect our earnings.

     Taiwan is susceptible to earthquakes and has experienced severe
earthquakes which caused significant property damage and loss of life,
particularly in the central and eastern parts of Taiwan. These earthquakes
damaged production facilities and adversely affected the operations of many
companies involved in the semiconductor and other industries. We experienced no
structural damage to our facilities and no damage to our machinery and
equipment as a result of these earthquakes. There were, however, interruptions
to our production schedule primarily as a result of power outages caused by the
earthquakes.

     Taiwan is also susceptible to typhoons, which may cause damage and
business interruption to companies with facilities located in Taiwan. In 2001,
Taiwan experienced severe damage from typhoons, including a typhoon on
September 16 that caused over 100 deaths, severe flooding and extensive damage
to property and businesses. We have not experienced any material damage or
business interruption from the increased typhoon activity in Taiwan.

     In May 2002, Taiwan experienced a severe drought. Although our
manufacturing process does not rely on an adequate supply of water and we were
not affected by the May 2002 drought directly, a drought may interrupt the
manufacturing process of the foundries located in Taiwan, in turn disrupting
some of our customers' production and this could result in a decline in the
demand for our services. In addition, any temporary or sustained adverse impact
from any future droughts may adversely affect Taiwan's economic, social or
political conditions and may lead to fluctuations in the market price of our
shares.

     While we maintain several insurance policies relating to our business, we
do not currently carry any insurance coverage for interruptions in public
utility services or any other business interruption insurance except in
connection with fire. Should these interruptions occur, we will be exposed to
substantial risks and may be liable for the full amount of any losses.

     Our production facilities as well as many of our suppliers and customers
and providers of complementary semiconductor manufacturing services, including
foundries, are located in Taiwan. If our customers are affected by an
earthquake, a typhoon, a drought or other natural disasters, it could result in
a decline in the demand for our packaging and testing services. If our
suppliers and providers of complementary semiconductor manufacturing services
are affected, our production schedule could be interrupted or delayed. As a
result, a major earthquake, typhoon, drought, or other natural disasters in
Taiwan could severely disrupt the normal operation of business and have a
material adverse effect on our financial condition and results of operations.


                                      12
<PAGE>

   Risks Relating to Our Holding Company Structure

Our ability to receive dividends and other payments from our subsidiaries may
be restricted by commercial, statutory and legal restrictions.

     We are a holding company, and our only significant assets are our
ownership interests in ASE Test Taiwan, ASE Test Malaysia, ISE Labs and our
30.0% and 27.6% interest in ASE Korea and ASE Chung Li, respectively. Dividends
we receive from our subsidiaries, if any, will be subject to taxation. The
ability of our subsidiaries to pay dividends, repay intercompany loans from us
or make other distributions to us may be restricted by, among other things, the
availability of funds, the terms of various credit arrangements entered into by
such subsidiaries, as well as statutory and other legal restrictions. In
addition, although there are currently no foreign exchange control regulations
which restrict the ability of our subsidiaries to distribute dividends to us,
we cannot assure you that the relevant regulations will not be changed and that
the ability of our subsidiaries to distribute dividends to us will not be
restricted in the future.

Our ability to make further investments in our subsidiaries may be dependent on
regulatory approvals.

     Our subsidiaries are dependent on us for future equity-related financings,
and any capital contribution by us to our subsidiaries may require the approval
of the relevant authorities in the jurisdiction in which the subsidiary is
incorporated. For example, any capital contribution by us to ASE Test Taiwan
will require the approval of the authorities of the Nantze Export Processing
Zone, Kaohsiung, Taiwan. We may not be able to obtain any such approval in the
future in a timely manner or at all.

   Risks Relating to the Shares

Our shareholders may have difficulty protecting their shareholder rights.

     Our corporate affairs are governed by our Memorandum of Association and
Articles of Association and by the laws governing corporations incorporated in
Singapore. The rights of our shareholders and the responsibilities of members
of our board of directors under Singapore law may be different from those
applicable to a corporation incorporated in the United States. Therefore, our
shareholders may have more difficulty protecting their interests in connection
with actions by our management, members of our board of directors or our
controlling shareholders than they would as shareholders of a corporation
incorporated in the United States.

The volatility in the markets for our shares may result in fluctuations in the
market price of our shares.

     The market price of our shares and Taiwan depositary shares representing
our shares have been, and may continue to be, highly volatile and subject to
wide fluctuations in response to:

     o    quarterly variations in operating results;

     o    changes in financial estimates by securities analysts; and

     o    other events or factors.

     In addition, the Nasdaq National Market, on which our shares trade, has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies.
These fluctuations have often been unrelated to the operating performance of
such companies. The resulting volatility in the markets for our shares may
cause the market price of our shares to fluctuate widely. Our Taiwan depositary
shares are traded on the Taiwan Stock Exchange, which has often experienced
greater fluctuations than the Nasdaq National Market or other national stock
exchanges or quotation systems in the United States. As a result, our Taiwan
depositary shares generally experience greater price volatility than our
shares.

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

     Our company is incorporated under the laws of the Republic of Singapore. A
substantial majority of our directors and executive officers reside outside the
United States. In addition, a substantial majority of our assets and the assets
of those persons are located outside the United States. As a result, it may be
difficult for investors to enforce in the United States any judgment obtained
in the United States against us or any of these persons, including


                                      13
<PAGE>

judgments based upon the civil liability provisions of the United States
securities laws. In addition, in original actions brought in courts in
jurisdictions located outside the United States, it may be difficult for
investors to enforce in or out of the United States liabilities based upon
United States securities laws. We have been advised by Allen & Gledhill, our
Singapore legal counsel, that judgments of United States courts based on the
civil liability provisions of the federal securities laws of the United States
are not automatically enforceable in Singapore courts. Allen & Gledhill has
also advised us that there is doubt as to whether Singapore courts will enter
judgments in original actions brought in Singapore courts based solely upon the
civil liability provisions of the federal securities laws of the United States.

Anti-takeover provisions under Singapore company law may affect the market
price of our shares.

     Provisions of the Securities and Futures Act 2001 and the Singapore Code
on Take-Overs and Mergers may delay, deter or prevent a future takeover or
change in control of our company. Anyone acquiring an interest, either
individually or together with parties acting in concert, in 30.0% or more of
our voting shares must extend a takeover offer for the remaining voting shares
in accordance with the Singapore Code on Take-Overs and Mergers. A person
holding between 30.0% and 50.0% (both inclusive) of our voting shares either
individually or together with parties acting in concert must also make a
takeover offer if that person acquires an additional 1.0% of our voting shares
in any six-month period. In addition, the offeror must make an appropriate
offer or proposal to holders of our convertible securities and may also be
required to make such offer to holders of securities of our subsidiaries, which
are convertible into shares. These provisions may discourage or prevent some
types of transactions involving an actual or threatened change of control of
our company. This could harm our shareholders because a transaction of that
kind might otherwise provide an opportunity for our shareholders to sell shares
at a price above the prevailing market price.

Item 4.  Information on the Company.

HISTORY AND DEVELOPMENT OF THE COMPANY

     ASE Test Limited is a Singapore holding company incorporated on December
1, 1995 as Jarich Test Private Limited, which changed its name to ASE Test
Private Limited on February 13, 1996 and to ASE Test Limited on April 23, 1996.
We have, through an exchange of shares with our parent company, Advanced
Semiconductor Engineering, 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. Our registered offices
are located at 36 Robinson Road, #18-01 City House, Singapore 068877 and the
telephone number is (65) 6225-1611. Our principal executive offices are located
at 10 West Fifth Street, Nantze Export Processing Zone, Kaohsiung, Taiwan,
Republic of China and the telephone number is (886-7) 363-6641. Our agent for
service in the United States is CT Corporation System, 111 Eighth Avenue, New
York, New York 10011 and our agent's telephone number is 212-894-8940.

     ASE Test, Inc., whose predecessor was a subsidiary of ETC Flextronics,
Inc., is located in Taiwan and is engaged in the testing of semiconductors. It
has a wholly-owned subsidiary in the United States, ASE Test (U.S.A.) Inc.,
which was incorporated in 1996 and is engaged in after-sales service to
customers of ASE Test, Inc.

     In June 1996, our shares were approved for quotation on the Nasdaq
National Market in the United States.

     On April 15, 1997, we issued 18,000,000 shares (after retroactive
adjustments for two-for-one stock splits in 1998 and 1999) to ASE Holdings
(Bermuda), Inc., a wholly-owned subsidiary of ASE, Inc., in exchange for all of
the shares of ASE Holdings (Singapore) Pte. Ltd., which is a Singapore holding
company that owns 100% of the shares of ASE Electronics (M) Sdn. Bhd., also
known as ASE Test Malaysia. ASE Test Malaysia is engaged in the testing and
packaging of semiconductors.

     In December 1997 and January 1999, we obtained approval from the ROC
Securities and Futures Commission to issue Taiwan depositary receipts, also
known as TDRs, representing 6,000,000 and 2,500,000 shares (after retroactive
adjustments for two-for-one stock splits in 1998 and 1999) offered by the
Company's shareholder, J&R Holding Limited. These TDRs are listed on the Taiwan
Stock Exchange.


                                      14
<PAGE>

   ISE Labs

     In May 1999, we acquired 70.0% of the outstanding shares of ISE Labs, a
semiconductor testing company with principal facilities located in Fremont and
Santa Clara, California. The total purchase price for our 70.0% equity interest
in ISE Labs was $100.1 million.

     In April, July and November, 2000, we purchased additional shares of ISE
Labs at an aggregate purchase price of $70.9 million. As a result of these
purchases, we owned 80.4% of the outstanding shares of ISE Labs as of December
31, 2000. In January 2002, we purchased the remaining portion of the shares of
ISE Labs for an aggregate purchase price of $50.2 million. As a result, ISE
Labs is now our wholly-owned subsidiary.

   ASE Chung Li and ASE Korea

     In July 1999, we and our parent company, ASE, Inc., jointly acquired
Motorola's semiconductor businesses in Chung Li, Taiwan and Paju, South Korea
for the testing and packaging of semiconductors with principally
communications, consumer and automotive applications. Under the acquisition
agreements, ASE, Inc. acquired a 70.0% interest in each of the two businesses,
and we acquired the remaining 30.0% interest. This division of the investment
reflected in part our estimate of the relative testing and packaging values at
the facilities. The businesses are now operated by ASE Chung Li and ASE Korea.
Substantially all of the assets of ASE Chung Li were acquired for a base price
of $150.0 million in cash, consisting of an initial payment of $80.0 million at
closing and an additional $70.0 million in three annual installments ending in
July 2002, contingent upon certain targets of revenue from packaging, and
testing services provided to Motorola being met. These targets were met for the
first two years. The last installment of $23.3 million was due in July 2002. In
2002, ASE, Inc. and Motorola re-negotiated the agreement for the payment of the
final installment to take place in three smaller installments ending in July
2004 contingent upon certain targets of revenue from packaging and testing
services provided to Motorola being met.

     The ASE Korea acquisition was structured as a stock acquisition of 100% of
the outstanding shares of ASE Korea for a base price of $140.0 million in cash,
consisting of an initial payment of $36.0 million and an additional $104.0
million payable over four years. In addition to the combined base price of
$290.0 million, approximately $60.1 million in cash was paid to purchase
capital assets at both facilities which were acquired after January 1, 1999 and
specified inventories and cash positions at both facilities. Both facilities
provide semiconductor testing and packaging services for Motorola and will
continue to do so for at least three to five years following the completion of
the acquisition under manufacturing services agreements with Motorola.

BUSINESS OVERVIEW

Introduction

     We believe that we are one of the world's largest independent
semiconductor testing companies, providing a complete range of testing
services, including:

     o    front-end engineering testing at our facilities in Silicon Valley,
          California and Austin Texas, near many of the major semiconductor
          design houses in the United States;

     o    final testing of complex, high-performance logic/mixed-signal
          semiconductors at our facilities in Taiwan, Malaysia, Hong Kong,
          Singapore and Silicon Valley, California; and

     o    turnkey services, which include drop shipment of tested and packaged
          semiconductors to end users designated by our customers.

     In addition, we also provide a broad range of leadframe and laminate-based
semiconductor packaging services, including ball grid array, also called BGA,
quad flat packages, also called QFP, and thin quad flat packages, also called
TQFP, at our facilities in Malaysia.

     We have a close working relationship with ASE, Inc. and our facilities in
Kaohsiung are located close to the facilities of ASE, Inc., which enables us to
provide value-added services to our customers. A substantial majority of our
net revenues from testing services performed at our Kaohsiung facilities has
historically been, and is expected to continue to be, derived from customers
who are also customers of ASE, Inc.


                                      15
<PAGE>

     We focus primarily on testing complex, high-performance logic/mixed-signal
semiconductors and packaging high pin-count semiconductors. In 2002,
approximately 98% of our net testing revenues were derived from testing
complex, high-performance logic/mixed-signal semiconductors and approximately
57% of our net packaging revenues were derived from packaging high pin-count
semiconductors. Semiconductors tested and packaged by us are used in diverse
end-use markets, including communications, consumer electronic, personal
computer and industrial products and other applications.

     We believe that we are well positioned to meet the requirements of
semiconductor companies worldwide for outsourced testing and packaging services
across a diverse range of end-use applications because of:

     o    our ability to provide a broad range of advanced semiconductor
          testing services;

     o    our ability to offer, in conjunction with our parent company, ASE,
          Inc., a broad range of advanced packaging services;

     o    our scale of operations and financial position which enable us to
          make significant investments in capacity expansion and research and
          development, as well as to make selective acquisitions;

     o    our geographic presence in key centers of outsourced semiconductor
          and electronics manufacturing; and

     o    our long-term relationships with providers of complementary
          semiconductor manufacturing services, including our strategic
          alliance, in conjunction with our parent company, ASE, Inc., with
          Taiwan Semiconductor Manufacturing Company Limited, also called TSMC,
          the world's largest dedicated semiconductor foundry.

     As a part of our overall strategy to strengthen our testing capabilities
and increase our range of services, we intend to continue expanding through
internal growth and strategic acquisitions. In 1999, we completed the
acquisition of ISE Labs.

     Through this acquisition, we have expanded our testing capabilities and
established a broad geographic presence in the United States, Taiwan, Malaysia,
Hong Kong and Singapore in close proximity to foundries, integrated device
manufacturers and design houses which outsource testing and packaging services.
Our acquisition of ISE Labs has enabled us to become an independent provider of
complete semiconductor testing solutions, adding significant depth and
continuity to our testing services and providing us with a valuable competitive
advantage. In particular, ISE Labs allows us to conform our front-end and
back-end testing platforms for the same products tested, resulting in greater
operational efficiency and cost reduction. We intend to leverage our front-end
engineering testing relationships in Silicon Valley to grow our back-end
testing business.

     We provide semiconductor testing and packaging services both separately
and on a turnkey basis. Our turnkey services include testing and packaging
services and drop shipment of the tested and packaged semiconductors to end
users designated by our customers. We believe that the trend for semiconductor
companies to outsource their testing and packaging requirements is accelerating
as semiconductor companies increasingly rely on independent providers of
foundry and advanced testing and packaging services. In response to the
increased pace of new product development and shortened product life and
production cycles, semiconductor companies are increasingly seeking independent
testing and packaging companies that can provide turnkey services in order to
reduce time-to-market. We believe that our expertise and scale in advanced
technology and our ability to integrate our bound range of solutions into
turnkey services allow us to benefit from the accelerated outsourcing trend and
better serve our existing and potential customers. In addition, through the
strategic alliance with TSMC that ASE, Inc. and we have maintained since 1997,
as well as our other commercial arrangements with providers of other
complementary semiconductor manufacturing services, we, in conjunction with
ASE, Inc., have expanded the traditional scope of our turnkey services to offer
total semiconductor manufacturing solutions to our customers.

Industry Background

   General

     Semiconductors are the basic building blocks used to create an increasing
variety of electronic products and systems. Continuous improvements in
semiconductor process and design technologies have led to smaller, more complex
and more reliable semiconductors at a lower cost per function. These
improvements have resulted in


                                      16
<PAGE>

significant performance and price benefits to manufacturers of electronic
systems. As a result, semiconductor demand has grown substantially in our
primary markets of communications, consumer electronics and personal computers,
and has experienced increased growth in other markets such as automotive
products and industrial automation and control systems.

     The semiconductor industry is characterized by strong long-term growth,
with periodic and sometimes severe cyclical downturns. The Semiconductor
Industry Association estimates that worldwide sales of semiconductors increased
from approximately $50.5 billion in 1990 to $140.7 billion in 2002. The
semiconductor industry experienced strong growth between 1992 and 1995 and
between 1998 and 2000, with declines between 1996 and first half of 1997 as
well as in 1998. Starting from the fourth quarter of 2000, the semiconductor
industry experienced a severe downturn due to a slowdown in the global economy,
overcapacity in the semiconductor industry and worldwide inventory adjustment.
The semiconductor industry started to show signs of a modest recovery in 2002,
primarily as a result of inventory replenishment and the introduction of new
products. We believe that the pattern of long-term growth and cyclical
fluctuations will continue in the semiconductor industry.

   Overview of Semiconductor Manufacturing Process

     The manufacturing of semiconductors is a complex process that requires
increasingly sophisticated engineering and manufacturing expertise. The
following table sets forth the main stages of the manufacturing process. We are
involved in all stages of the semiconductor manufacturing process except
circuit design and wafer fabrication.

     Process                                 Description
     -------                                 -----------

    Circuit Design            The design of a semiconductor is developed by
                              laying out circuit components and
                              interconnections. A complex circuit may be
                              designed with as many as twenty layers of
                              patterns or more.

    Front-End Engineering     Throughout and following the design process,
    Test                      prototype semiconductors undergo front-end
                              engineering testing, which involves software
                              development, design validation verification and
                              reliability and failure analysis.

    Wafer Fabrication         The process begins with the generation of a
                              photomask through the definition of the circuit
                              design pattern on a photographic negative, known
                              as a mask, by an electron beam or laser beam
                              writer. These circuit patterns are transferred to
                              the wafers using various advanced processes.

    Wafer Probe               Each individual die is electrically tested, or
                              probed, for defects. Dies that fail this test are
                              marked to be discarded.

    Packaging                 Packaging, also called assembly, is the
                              processing of bare semiconductors into finished
                              semiconductors and serves to protect the die and
                              facilitate electrical connections and heat
                              dissipation.

    Final Test                Packaged semiconductors are tested to ensure that
                              each device meets performance specifications.

   Outsourcing Trends in Semiconductor Manufacturing

     Historically, semiconductor companies designed, manufactured, tested and
packaged semiconductors primarily in their own facilities. Over the past
several years, there has been a trend in the industry to outsource stages in
the manufacturing process. Virtually every significant stage of the
manufacturing process can be outsourced. Wafer foundry services and
semiconductor packaging are currently the largest segments of the independent
semiconductor manufacturing services market. Most of the world's major
integrated device manufacturers use some independent manufacturing services to
maintain a strategic mix of internal and external manufacturing capacity.

      The availability of technologically advanced independent manufacturing
services has also enabled the growth of "fabless" semiconductor companies that
focus on semiconductor design and marketing and outsource their fabrication,
testing and packaging requirements to independent companies. The growth in the
number and scale of


                                      17
<PAGE>

fabless semiconductor companies that rely solely on independent companies to
meet their manufacturing requirements will continue to be a driver of growth in
the market for independent foundry, testing and packaging services. Similarly,
the availability of technologically advanced independent manufacturing services
has encouraged integrated device manufacturers, which had traditionally relied
on in-house semiconductor manufacturing capacity, to increasingly outsource
their manufacturing requirements to independent semiconductor manufacturing
companies.

     We believe the outsourcing of semiconductor manufacturing services will
increase in the future from current levels for many reasons, including the
following:

     Technological Expertise and Significant Capital Expenditure. Semiconductor
manufacturing processes have become highly complex, requiring substantial
investment in specialized equipment and facilities and sophisticated
engineering and manufacturing expertise. Technical expertise becomes
increasingly important as the industry transitions from one generation of
technology to another, as evidenced by the current migration of fabrication
technology from 8-inch to 12-inch wafers. In addition, product life cycles have
been shortening, magnifying the need to continuously upgrade or replace
manufacturing equipment to accommodate new products. As a result, new
investments in in-house testing, packaging and fabrication facilities are
becoming less desirable for integrated device manufacturers because of the high
investment costs as well as their inability to achieve sufficient economies of
scales and utilization rates in order to be competitive with the independent
service providers. Independent testing, packaging and foundry companies, on the
other hand, are able to realize the benefits of specialization and achieve
economies of scale by providing services to a large base of customers across a
wide range of products. This enables them to reduce costs and shorten
production cycles through high capacity utilization and process expertise. In
the process, they are also able to focus on discrete stage of semiconductor
manufacturing and deliver services of superior quality.

     In addition, the outsourcing trend is affected by the cyclical nature of
the semiconductor industry as semiconductor companies reduce capital
investments during industry downturns. Since the recent industry downturn in
2001, semiconductor companies significantly reduced their investment in
in-house testing and packaging technologies and capacity. As a result, some
semiconductor companies may have limited in-house expertise and capacity to
accommodate large orders following a recovery in demand, particularly in the
area of advanced technology. We expect semiconductor companies to increasingly
outsource their testing and packaging requirements to take advantage of the
advanced technology and scale of operations of independent testing and
packaging companies.

     Focus on Core Competencies. As the semiconductor industry becomes more
competitive, semiconductor companies are expected to further outsource their
semiconductor manufacturing requirements in order to focus their resources on
core competencies, such as semiconductor design and marketing.

     Time-to-Market Pressure. The increasingly short product life cycle has
accelerated time-to-market pressure for semiconductor companies, leading them
to rely increasingly on outsourced suppliers as a key source for effective
manufacturing solutions.

     Gartner Dataquest forecasts that the total outsourced semiconductor
testing market will grow from $1.6 billion in 2002 to $3.9 billion in 2005.
Gartner Dataquest also forecasts that the total outsourced semiconductor
packaging market will grow from $6.8 billion in 2002 to $14.2 billion in 2005.

Strategy

     Our objective is to provide advanced semiconductor testing and packaging
services which set industry standards and to facilitate and lead the industry
trend towards outsourcing semiconductor manufacturing requirements. The
principal elements of our strategy are to:

     Maintain Our Focus on Providing a Complete Range of Semiconductor Testing
and Packaging Services

     We believe that an important factor in our ability to attract leading
semiconductor companies as our customers has been our ability, working in
conjunction with ASE, Inc., to provide turnkey services on a large scale.
Turnkey services consist of the integrated packaging, testing and direct
shipment of semiconductors to end users designated by our customers. As a
result of our technical expertise and, combined with ASE, Inc., large
production capacity in both testing and packaging, we are able to provide
turnkey services on a large scale. As product lives and


                                      18
<PAGE>

production cycles shorten and testing and packaging technologies advance more
rapidly, our customers increasingly value our ability, as a downstream service
provider, to work with them as an integral and strategic partner in the
upstream development of their products. We intend to enhance and expand our
expertise in both the upstream and downstream semiconductor manufacturing
processes in order to better serve our customers in providing our core services
of testing and packaging. The front-end engineering testing expertise of ISE
Labs has greatly enhanced our ability to participate in the earlier stages of
circuit design and the semiconductor manufacturing process.

     Continue to Focus on Advanced Technological and Processing Capabilities

     We intend to continue our focus on developing advanced process and product
technologies in order to meet the advanced testing and packaging requirements
of our customers. Our expertise in packaging technology has enabled us to
develop advanced solutions such as fine pitch bonding and stacked die
packaging. We are continuously investing in research and development in
response to and in anticipation of migrations in technology and intend to
continue to acquire access to new technologies through strategic alliances and
licensing arrangements.

     We intend to continue to strengthen our capabilities in testing complex,
high-performance semiconductors. In particular, we plan to focus on testing
logic/mixed signal semiconductors that are characterized by very high clock
speeds, high pin count and high levels of integration.

     Strategically Expand Production Capacity

     We intend to strategically expand our production capacity, both through
internal growth and through selective acquisitions, with a focus on providing
more advanced testing and packaging services, which we believe present greater
opportunities to achieve higher growth in our revenues and higher margins. We
believe that the demand for advanced semiconductor testing and packaging
services will grow at a faster pace than demand for traditional testing and
packaging services. Testing and packaging services for more advanced
semiconductors generally have higher margins for two reasons. First, as the
testing and packaging of advanced semiconductors become more complex, requiring
greater expertise in process and technology, such services typically command
higher average selling prices. Second, we have been able to achieve higher
utilization rates for the equipment we use for more advanced testing and
packaging, compared to other equipment that we maintain. We believe that our
technical expertise, as well as our scale of operations and financial position,
which had enabled us to continue to make investments in more advanced testing
and packaging equipment even in times of market downturn, have enabled us to
attract a greater proportion of the demand for more advanced testing and
packaging services.

     We evaluate acquisition opportunities on the basis of access to new
markets and technology, the enhancement of our production capacity, economies
of scale and management resources, and closer proximity to existing and
potential customers. In 1999, we acquired ISE Labs, an independent testing
company with operations in California, Hong Kong and Singapore. In 2002, ISE
Labs also commenced operations in Austin, Texas. Through combining the
front-end engineering testing capabilities of ISE Labs with our existing final
testing capabilities, we are able to provide our customers with complete
semiconductor testing solutions.

     Continue to Leverage Our Presence in Key Centers of Semiconductor and
     Electronics Manufacturing

     We intend to continue leveraging our presence in key centers of
semiconductor and electronics manufacturing to further grow our business. We
have significant testing operations in Taiwan, currently the largest center for
outsourced semiconductor manufacturing in the world. This presence enables our
engineers to work closely with our customers as well as foundries and other
providers of complementary semiconductor manufacturing services early in the
semiconductor design process, enhances our responsiveness to the requirements
of our customers and shortens production cycles. In addition, as a provider of
turnkey services, we, in conjunction with ASE, Inc., are able to offer in
Taiwan packaging and testing services, including interconnect materials
solutions, all within relatively close geographic proximity to our customers,
other service providers and the end users of our customers' products.

     In addition to our locations in Taiwan, we have operations in the
following locations:

     o    Malaysia and Singapore - an emerging center for outsourced
          semiconductor manufacturing in Southeast Asia with a concentration of
          integrated device manufacturers,


                                      19
<PAGE>

     o    Silicon Valley in California - the preeminent center for
          semiconductor design with a concentration of fabless customers, and

     o    Austin, Texas - the largest center for semiconductor design outside
          of Silicon Valley.

     Strengthen and Develop Strategic Relationships with Providers of
     Complementary Semiconductor Manufacturing Services

     We intend to strengthen existing and develop new strategic relationships
with providers of other complementary semiconductor manufacturing services,
such as foundries, as well as equipment vendors, raw material suppliers and
technology research institutes, in order to, in conjunction with ASE, Inc.,
offer our customers total semiconductor manufacturing solutions covering all
stages of the manufacturing of their products from design to shipment.

     Since 1997, our parent, ASE, Inc., has maintained a strategic alliance
with TSMC, the world's largest dedicated semiconductor foundry, which
designates it as the non-exclusive preferred provider of testing and packaging
services for semiconductors manufactured by TSMC. Through this strategic
alliance with and close geographic proximity to TSMC, ASE, Inc., including us,
is able to offer its customers a total semiconductor manufacturing solution
that includes access to foundry services in addition to our packaging, testing
and direct shipment services.

     ASE, Inc. and we are developing similar strategic relationships with other
major foundries and providers of other complementary semiconductor
manufacturing services in Taiwan and Southeast Asia with which we already have
close business relationships.

Principal Products and Services

     We offer a broad range of advanced semiconductor testing and packaging
services. Our testing services include front-end engineering testing, which is
performed during and following the initial circuit design stage of the
semiconductor manufacturing process; wafer probe; final testing and other
related semiconductor testing services. Our package types employ either
leadframes or substrates as interconnect materials. The semiconductors we
package are used in a wide range of end-use applications, including
communications, personal computers, consumer electronics, industrial,
automotive and other applications. We focus on testing and packaging logic
semiconductors. We, at our facilities in Malaysia and, in conjunction with ASE,
Inc., at our facilities in Taiwan, offer our customers turnkey services which
consist of testing, packaging and direct shipment of semiconductors to end
users designated by our customers.

     The following table sets forth, for the periods indicated, our testing and
packaging revenues as a percentage of net revenues.

                                                   Year Ended December 31,
                                           -----------------------------------
                                              2000         2001         2002
                                           ---------    ---------    ---------
                                               (percentage of net revenues)
Testing revenues .......................        71.8%        74.8%        71.0%
Packaging revenues .....................        28.2         25.2         29.0
                                           ---------    ---------    ---------
Total net revenues .....................       100.0%       100.0%       100.0%
                                           =========    =========    =========

   Testing

     We provide a complete range of semiconductor testing services, including
front-end engineering testing, wafer probing, final testing of
logic/mixed-signal and memory semiconductors and other test-related services.
The testing of semiconductors requires technical expertise and knowledge of the
specific applications and functions of the semiconductors tested as well as the
testing equipment utilized. We believe that our testing services employ
technology and expertise that are among the most advanced in the semiconductor
industry. In addition to maintaining different types of testing equipment,
which enables us to test a variety of semiconductor functions, we work closely
with our customers to design effective testing and conversion programs on
multiple equipment platforms for particular semiconductors.

     In recent years, complex, high-performance logic/mixed-signal
semiconductors have accounted for an increasing portion of our overall net
testing revenues. As the testing of complex, high-performance semiconductors


                                      20
<PAGE>

requires a large number of functions to be tested using more advanced testing
equipment, these products attract higher revenues per unit of testing time,
measured in central processing unit, or CPU, seconds.

     Front-End Engineering Testing. We provide front-end engineering testing
services, including software program development, electrical design validation
and reliability and failure analysis.

     o    Customized Software Development. Test engineers develop customized
          software to test the semiconductor on advanced testing equipment.
          Customized software, developed on specific testing platforms, is
          required to test the conformity of each particular semiconductor type
          to its unique functionality and specification.

     o    Electrical Design Validation. A prototype of the designed
          semiconductor is subjected to electrical tests using advanced test
          equipment and customized software. These tests assess whether the
          prototype semiconductor complies with a variety of different
          operating specifications, including functionality, frequency,
          voltage, current, timing and temperature range.

     o    Reliability Analysis. Reliability analysis is designed to assess the
          long-term reliability of the semiconductor and its suitability of use
          for intended applications. Reliability testing can include "burn-in"
          services, which electrically stress a device, usually at high
          temperature and voltage, for a period of time long enough to cause
          the failure of marginal devices.

     o    Failure Analysis. In the event that the prototype semiconductor does
          not function to specifications during either the electrical
          verification or reliability testing processes, it is typically
          subjected to failure analysis to determine why it did not perform as
          anticipated. As part of this analysis, the prototype semiconductor
          may be subjected to a variety of analyses, including electron beam
          probing and electrical testing.

     Wafer Probing. Wafer probing is the step immediately before packaging of
semiconductors and involves visual inspection and electrical testing of the
processed wafer for defects to ensure that it meets our customers'
specifications. Wafer probing services require expertise and testing equipment
similar to that used in final testing, and most of our testers can also be used
for wafer probing.

     Logic/Mixed-Signal Final Testing. We conduct final tests of a wide variety
of logic/mixed-signal semiconductors, with a number of leads ranging from the
single digits to over one thousand and operating frequencies of up to 800 MHz
for digital semiconductors and 6 GHz for radio frequency semiconductors, which
are at the high end of the range for the industry. The products we test include
semiconductors used for networking and wireless communications, graphics and
disk controllers for home entertainment and personal computer applications, as
well as a variety of application-specific integrated circuits, or ASICs, for
various specialized applications.

     Memory Final Testing. We provide final testing services for a variety of
memory products, such as static random access memory, or SRAM, dynamic random
access memory, or DRAM, and single-bit erasable programmable read-only memory,
or EPROM, semiconductors and flash memory semiconductors.

     Other Test-Related Services. We provide a broad range of additional
test-related services, including:

     o    Burn-in Testing. Burn-in testing is the process of electrically
          stressing a device, usually at high temperature and voltage, for a
          period of time to simulate the continuous use of the device to
          determine whether this use would cause the failure of marginal
          devices.

     o    Dry Pack. Process which involves heating semiconductors in order to
          remove moisture before packaging and shipping to customers.

     o    Tape and Reel. Process which involves transferring semiconductors
          from a tray or tube into a tape-like carrier for shipment to
          customers.


                                      21
<PAGE>

     The following table sets forth, for the periods indicated, the percentage
of our net testing revenues accounted for by each type of testing service.

                                                  Year Ended December 31,
                                           -----------------------------------
                                              2000         2001         2002
                                           ---------    ---------    ---------
                                           (percentage of net testing revenues)
Logic/mixed-signal testing .............         97%           98%          98%
Memory testing .........................          3             2            2
                                           ---------    ---------    ---------
Total net testing revenues .............       100.0%       100.0%       100.0%
                                           =========    =========    =========

   Packaging

     At ASE Test Malaysia, we offer a broad range of semiconductor packages
primarily using surface-mount technology, or SMT. In SMT, the leads on
semiconductors and other electronic components are soldered to the surface of
the printed circuit board. Within our packaging product portfolio, we focus on
the packaging of semiconductor package products for which there is expected to
be strong demand, including high pin-count SMT packages, such as ball grid
array, or BGA, which are based on laminate substrate, and quad flat packages
and thin quad flat packages, both of which are based on leadframes. In addition
to the more advanced SMT packages, we also offer packaging services using the
older pin-through-hole technology, such as plastic dual in-line packages, or
PDIP.

     An important subset of SMT packages are BGA packages. BGA packages
typically feature higher pin-count, smaller package sizes, greater reliability,
superior electrical signal transmission and better heat dissipation than
traditional leadframe-based packaging technology. Our packaging operations
focus primarily on plastic BGA, which is used in applications such as wireless
products, cellular phones, global positioning systems and notebook computers,
and film BGA, which is used in cellular phones, wireless communications and
digital signal processors.


                                      22
<PAGE>


     The following table sets forth our principal packaging products:

<TABLE>
                               Number of
      Package Format             Leads                Description                     End Use Applications
----------------------------  -----------   ----------------------------------  ------------------------------------
<S>                            <C>          <C>                                 <C>
Ball Grid Array (BGA)          64-1,069     Designed for semiconductors which   Cellular phones, pagers, wireless
                                            require the enhanced performance    communications, DSPs, micro-
                                            provided by BGA, including personal controller applications and
                                            computer chipsets, graphic          high performance disk drives.
                                            controllers and microprocessors,
                                            ASICs, digital signal processors,
                                            also called DSPs, and memory
                                            devices.

Quad Flat Package (QFP)/Thin   32-304       QFPs designed for advanced          Multimedia applications, cellular
QFP (TQFP)                                  processors and controllers,         phones, personal computers,
                                            ASICs, and DSPs.                    automotive and industrial
                                                                                products, hard disk drives,
                                                                                communication boards such as
                                                                                ethernet, integrated services
                                                                                digital network, also called ISDN,
                                                                                and notebook computers.

Plastic Leaded Chip            20-84        Designed for applications that do   Personal computers, scanners,
Carrier (PLCC)                              not require low profile package     electronic games and monitors.
                                            with high density of
                                            interconnects.

Small Outline Plastic          48-64        Leadframe packages designed for     Consumer audio/video and
Package (SOP)/Thin SOP (TSOP)               memory devices including logic      entertainment products, cordless
                                            and analog devices, SRAM, DRAM,     telephones, pagers, fax machines,
                                            fast static RAM, also called        printers, copiers, personal
                                            FSRAM, and flash memory devices.    computer peripherals, automotive
                                                                                parts, telecommunications
                                                                                products, recordable optical disks
                                                                                and hard disk drives.

Small Outline Plastic J-Bend   16-28        Designed for memory and low         DRAM memory devices,
Package (SOJ)                               pin-count applications.             microcontrollers, digital analog
                                                                                conversions and audio/video
                                                                                applications.


Plastic Dual In-line Package   8-16         Used in consumer electronic         Telephones, televisions,
(PDIP)                                      products.                           audio/video applications and
                                                                                computer peripherals.

Very Small Peripheral Array    80           Designed for fingerprint            Notebook computers, desktop
(VSPA)                                      identification.                     personal computers and automated
                                                                                teller machines.

Land Grid Array (LGA)          6-40         Designed for applications that      Computer servers, cellular phones,
                                            require high electricity            network hubs and base stations.
                                            consumption and small package
                                            sizes.

Quad Flat Non-Leaded           24-64        Designed for applications that      Cellular phones, computer servers
Package (QFN)                               require low profile packages and    and audio/visual equipment.
                                            high electricity consumption.

System In Package              48-208       Designed for sub-assembly and       Cellular phones and computer
(BGA/Module)                                module application.                 servers.
</TABLE>


                                      23
<PAGE>

     The following table sets forth, for the periods indicated, the percentage
of our net packaging revenues accounted for by each package type.

                                                 Year Ended December 31,
                                            --------------------------------
                                              2000        2001        2002
                                            --------    --------    --------
                                         (percentage of net packaging revenues)

BGA .....................................         14%         26%         22%
QFP/TQFP ................................         53          43          40
PLCC ....................................         16          12          10
SOJ/SOP/TSOP ............................         10           4           3
PDIP ....................................          7          14          23
Other ...................................         --           1           2
                                            --------    --------    --------
Total net packaging revenues ............      100.0%      100.0%      100.0%
                                            ========    ========    ========

   Drop Shipment Services

     We offer drop shipment services for shipment of semiconductors directly to
end users designated by our customers. We provide drop shipment services to
many of our testing customers. A substantial portion of our customers at each
of our facilities has qualified these facilities for drop shipment services.
Since drop shipment eliminates the additional step of inspection by the
customer prior to shipment to end users, quality of service is a key
consideration. We believe that our ability to successfully execute our full
range of services, including drop shipment services, is an important factor in
maintaining existing customers as well as attracting new customers.

Pricing

     We price our front-end engineering testing services principally on the
basis of hourly test rates and the cost of engineering resources. We price our
final testing services principally on the basis of the amount of time, measured
in CPU seconds, taken by the automated testing equipment, including testers and
handlers, to execute the test programs that are specific to the customer's
products. The price per CPU second for each particular product is determined
based on a number of factors, including:

     o    the complexity of the product;

     o    the number of functions tested;

     o    the time required to test the product pursuant to the customer's
          specifications;

     o    the current market landscape of each testing platform;

     o    labor cost;

     o    the ability of the machine to parallel-test, which involves testing
          multiple semiconductors simultaneously; and

     o    the cost of testers used to perform the testing services.

     For example, testing complex, high-performance semiconductors requires
more complex equipment, the use of which is priced significantly higher per CPU
second than the use of equipment employed in testing less complex or
lower-performance semiconductors.

     In general, the price per CPU second for the testing of particular
products tends to decline over time as the product becomes older and more
advanced products in the category are introduced in the market. These newer
products, which typically are more complex and higher performance, attract a
higher price per CPU second and generate higher margins, which have partially
offset price declines related to older products in the past. As older machines
become less appropriate for testing more advanced products, prices per CPU
second for using such machines decline, resulting in the gradual decline of
revenues for such machines.


                                      24
<PAGE>

     We price our packaging services primarily on a cost-plus basis and, to a
lesser extent, with reference to market prices. Prices for our testing and
packaging services are confirmed at the time firm orders are received from
customers, which is typically four to eight weeks before delivery.

Equipment

   Testing

     Testing equipment is the most important and most capital-intensive
component of the testing process. As of December 31, 2002, we operated 689
testers, of which 132 were consigned by our customers. We generally seek to
purchase testers from different suppliers with similar functionality and the
ability to test a variety of different semiconductors. We purchase testing
equipment from major international manufacturers, including Advantest
Corporation, Agilent Technologies, Inc., Credence Systems Corporation, LTX
Corporation, NP Test Inc. and Teradyne, Inc. We may consider purchasing
additional advanced testers depending on market demand for our testing services
and the availability of testers. Upon acquisition of new testing equipment, we
install, configure, calibrate, perform burn-in diagnostic tests on and
establish parameters for the testing equipment based on anticipated
requirements of existing and potential customers and considerations relating to
market trends. In addition to testers, we maintain a variety of other types of
testing equipment, such as automated handlers and probers (special handlers for
wafer probing), scanners, reformers and computer workstations for use in
software development. Each tester may be attached to a handler or prober.
Handlers attach to testers and transport individual packaged semiconductors to
the tester interface. Probers similarly attach to the tester and align each
individual die on a wafer with the interface to the tester.

     Test programs, which are the software that drives the testing of specific
semiconductors, are written for a specific testing platform. We often perform
test program conversions that enable us to test semiconductors on multiple
platforms. This portability between testers enables us to allocate
semiconductors tested across our available test capabilities and thereby
improve capacity utilization rates. In certain cases, where a customer requires
the testing of a semiconductor product that is not yet fully developed, the
customer may provide computer workstations to us to test specific functions. In
certain cases, where a customer has specified testing equipment that was not
widely applicable to other products which we test, we have required the
customer to furnish the equipment on a consignment basis.

   Packaging

     The most important equipment used in the semiconductor packaging process
is the wire bonder. The number of wire bonders at a given facility is commonly
used as a measure of the packaging capacity of the facility. The wire bonders
connect the input/output terminals on the silicon die using extremely fine gold
wire to leads on leadframes or substrates. Typically, wire bonders may be used,
with minor modifications, for the packaging of different products. We purchase
our wire bonders principally from ASM Pacific Technology Ltd. and Kulicke &
Soffa Industries Inc. As of December 31, 2002, we operated 391 wire bonders of
which 212 were fine pitch wire bonders. In addition to wire bonders, we
maintain a variety of other types of packaging equipment, such as wafer grind,
wafer mount, wafer saw, die bonders, automated molding machines, laser markers,
solder plates, pad printers, dejunkers, trimmers, formers, substrate saws and
scanners.

Software Development and Engineering/Conversion Program

     We work closely with our customers to provide sophisticated software
engineering services, including test program development, conversion and
optimization, and related hardware design. Generally, testing requires
customized testing software and related hardware to be developed for each
particular product. Software is often initially provided by the customer, and
then converted by us at our facilities, for use on one or more of our machines
and contains varying functionality depending on specified testing procedures.
Once a conversion test program has been developed, we perform trial tests on
the semiconductors. Customer feedback on the test results enables us to adjust
the conversion test programs prior to actual testing. We also typically assist
our customers in collecting and analyzing the test results, and recommend
engineering solutions to improve their design and production process. We have
developed proprietary software, which automatically generates codes for
creating and converting testing programs, and have also developed software for
parallel testing of logic semiconductors, and for converting programs from one
equipment platform to another. See "Item 5. Operating and Financial Review and
Prospectus -- Research and Development". Our inability to successfully develop
conversion software programs could materially


                                      25
<PAGE>

and adversely affect our operating efficiencies. See "Item 3. Key Information --
Risk Factors -- The complexity of the semiconductor testing and packaging
process increases the costs and production risks of our business".

Seasonality

     See "Item 5. Operating and Financial Review and Prospects -- Operating
Results and Trend Information -- Consolidated Quarterly Results".

Sales and Marketing

   Sales and Marketing Offices

     We maintain sales and marketing offices in the United States, Taiwan and
Malaysia. Our sales staff at all of our sales and marketing offices often call
on prospective customers with the sales staff of ASE, Inc. In addition, the
sales agent for our testing and packaging services maintains sales and
marketing offices in Austria, Belgium, Germany, Japan, Korea, Malaysia and the
United States. We conduct marketing research through our in-house customer
service personnel and those of our sales agent and through our relationships
with our customers and suppliers to keep abreast of market trends and
developments. In placing orders with us, our customers specify which of our
facilities these orders will go to. Our customers conduct separate
qualification and correlation processes for each of our facilities that they
use. See "-- Qualification and Correlation by Customers".

   Sales and Customer Service Agents

     Under commission agreements, ASE Test Taiwan and ASE Test Malaysia have
appointed Gardex International Limited, or Gardex, as the non-exclusive sales
agent for the sale of their services and products worldwide, excluding Asia.
Gardex helps us identify customers, monitor delivery acceptance and payment by
customers, and within parameters set by us, negotiate price, delivery and other
terms with our customers. Purchase orders are placed directly with us by our
customers. We pay Gardex a commission of 0.56% of our sales outside of Asia,
payable monthly, depending on the amount of these sales. In 2002, we paid $0.7
million in commissions to Gardex.

     Under service agreements, ASE Test Taiwan and ASE Test Malaysia have
appointed ASE (U.S.) Inc. as our non-exclusive agent to provide customer
service and after-sales support to our customers in Europe and North America.
We pay ASE (U.S.) Inc. a monthly fee based on its monthly services associated
costs and expenses plus a commission set by reference to the lower of a
percentage of sales or a fixed fee. In 2002, we paid $4.5 million in fees and
service charges to ASE (U.S.) Inc.

     Both Gardex and ASE (U.S.) Inc. are wholly owned by Y.C. Hsu, who has had
a long personal relationship with Jason C.S. Chang, our founder and former
Chairman, that pre-dates the founding of our company. We have maintained
business relationships with Gardex, ASE (U.S.) Inc. and their predecessors
since 1985. Gardex and ASE (U.S.) Inc. currently perform services only for ASE,
Inc. and us. We are currently negotiating with Gardex and ASE (U.S.) Inc. the
terms for the renewal of our agreements with them.

   Customers

     We believe that our (1) advanced testing and packaging technologies, (2)
focus on complex, high-performance products and (3) reputation for high quality
and reliable services have been, and will continue to be, important factors in
attracting and retaining customers. Our global base of over 200 customers
includes leading semiconductor companies across a wide range of end-use
applications, including:

     o   Agilent Technology            o   LSI Logic Corporation
     o   Altera Corporation            o   Marvell Technology Group
     o   ATI Technologies, Inc.        o   Motorola, Inc.
     o   ATMEL Corporation             o   NVIDIA Corp.
     o   DSP Group, Inc.               o   Qualcomm Incorporated
     o   ESS Technology                o   Silicon Integrated System Corporation
     o   Genesis Microchip             o   VIA Technologies, Inc.
     o   Legerity Corporation


                                      26
<PAGE>

     Our five largest customers together accounted for approximately 31% of our
net revenues in 2002. There has been significant variation in the composition
of our largest five customers over time, and as a result, we have been less
dependent on any particular customer over time. We test and package for our
customers a wide range of semiconductors with diverse end-use applications in
the communication, personal computer, consumer electronic and industrial
sectors.

     The following table sets forth, for the periods indicated, our net
revenues categorized by the principal end-use applications of the
semiconductors which we tested and packaged as a percentage of our net
revenues.

                                                     Year Ended December 31,
                                                  -----------------------------
                                                    2000       2001       2002
                                                  -------    -------    -------
                                                   (percentage of net revenues)

Communications ................................        24%        32%        31%
Personal computers ............................        32         29         32
Consumer electronics/industrial/automotive ....        32         37         32
Other .........................................        12          2          5
                                                  -------    -------    -------
Total net revenues ............................       100%       100%       100%
                                                  =======    =======    =======

     Many of our customers are leaders in their respective end-use markets. For
example, we provide testing and packaging services to Generic Microchip, a
world's leading supplier of display image processors, NVIDIA, a global leader
in advanced graphics processing technology for mainstream computing platforms,
as well as Qualcomm, a world's leading provider of wireless communications
solutions.

     We categorize our net testing and packaging revenues based on the country
in which the customer is headquartered. The following table sets forth, for the
periods indicated, the percentage breakdown of our net revenues, categorized by
geographic regions:

                                                    Year Ended December 31,
                                               -------------------------------
                                                 2000        2001        2002
                                               -------     -------     -------
                                                 (percentage of net revenues)

North America .............................         74%         76%         73%
Asia ......................................         20          21          23
Europe ....................................          6           3           4
                                               -------     -------     -------
Total net revenues ........................        100%        100%        100%
                                               =======     =======     =======

   Qualification and Correlation by Customers

     Customers generally require that our facilities undergo a stringent
"qualification" process during which the customer evaluates our operations and
production processes, including engineering, delivery control and testing
capabilities. The qualification process typically takes up to eight weeks, but
can take longer depending on the requirements of the customer. For test
qualification, after we have been qualified by a customer and before the
customer delivers semiconductors to us for testing in volume, a process known
as "correlation" is undertaken. During the correlation process, the customer
provides us with sample semiconductors to be tested and either provides us with
the test program or the requests that we develop a conversion program. In some
cases, the customer also provides us with a data log of results of any testing
of the semiconductor which the customer may have conducted previously. The
correlation process typically takes up to two weeks, but can take longer
depending on the requirements of the customer. We believe our ability to
provide turnkey services reduces the amount of time spent by our customers in
the qualification and correlation process. As a result, customers utilizing our
turnkey services are able to achieve shorter production cycles.

Quality Control

     We believe that our reputation for high quality and reliable services has
been important in attracting and retaining leading international semiconductor
companies as customers for our testing and packaging services. We maintain a
quality control staff at each of our facilities. Our quality control staff
typically includes engineers,


                                      27
<PAGE>

technicians and other employees who monitor testing and packaging processes in
order to ensure high quality. Our quality assurance systems impose strict
process controls, statistical in-line monitors, supplier control, data review
and management, quality controls and corrective action systems. Our quality
control employees operate quality control stations along production lines,
monitor clean room environment and follow up on quality through outgoing
product inspection and interaction with customer service staff. We have
established quality control systems which are designed to ensure high quality
service to customers and testing reliability and high production yields at our
facilities. In addition, our testing and packaging facilities have been
qualified by all of our major customers after satisfying stringent quality
standards prescribed by these customers.

     Our testing and packaging operations are undertaken in clean rooms where
air purity, temperature and humidity are controlled. To ensure stability and
integrity of our operations, we maintain clean rooms at our facilities that
meet U.S. Federal 209E Class 1,000, 10,000 and 100,000 standards.

     All of our facilities have been certified as meeting the ISO 9002 quality
standards by the International Standards Organization. Our facilities in Taiwan
and Malaysia have also been certified as meeting the Quality System 9000, also
known as QS-9000, quality standards. The ISO 9002 certification is required by
many countries worldwide in connection with sales of industrial products in
such countries. The QS-9000 quality standards provide for continuous
improvement with an emphasis on the prevention of defects and the reduction of
variation and waste in the supply chain. Like the ISO certification, the
QS-9000 certification is required by some semiconductor manufacturers as a
threshold indicating a company's quality control standards. Furthermore, our
facilities in Taiwan have received the SAC Level-1 certification for quality
assurance from the Semiconductor Assembly Council. The Semiconductor Assembly
Council is an organization of semiconductor manufacturers, subcontractors,
end-users, as well as materials and service providers established to certified
subcontract quality systems and process control practices. In addition, we have
received various vendor awards from our customers for the quality of our
products and services.

Competition

     We compete in the highly competitive independent testing and packaging
markets. Our competitors include large integrated device manufacturers with
in-house testing and packaging capabilities, independent semiconductor
packaging companies with in-house testing capabilities, and small independent
semiconductor testing companies which focus exclusively on testing. We believe
that the principal competitive factors in the independent semiconductor testing
industry are: (1) technological expertise; (2) the ability to work closely with
customers at the product development stage; (3) production yield; (4) software
conversion program capability; (5) responsiveness and flexibility; (6) cycle
time; (7) capacity; (8) range and quality of testing platforms available; and
(9) price. In packaging services, we primarily compete on the basis of: (1)
production yield; (2) cycle time; (3) process technology; (4) quality of
service; (5) capacity; (6) location; (7) range and quality of packaging types
available; and (8) price.

     Integrated device manufacturers that use our services continuously
evaluate our performance against their own in-house testing and packaging
capabilities. These integrated device manufacturers may have access to more
advanced technologies, and greater financial and other resources than we do. We
believe, however, that we can offer greater efficiency and lower costs while
maintaining equivalent or higher quality for several reasons. First, as we
benefit from specialization and economies of scale by providing services to a
large base of customers across a wide range of products, we are better able to
reduce costs and shorten production cycles through high capacity utilization
and process expertise. Second, as a result of our customer base and product
offerings, our equipment generally has a longer useful life. Third, as a result
of the continuing reduction of investments in in-house testing and packaging
capacity and technology at integrated device manufacturers, we are better
positioned to meet the advanced testing and packaging requirements on a large
scale.

Material Effects of Government Regulations

     ASE Test Taiwan is subject to regulation by the Export Processing Zone
Administration, Ministry of Economic Affairs in relation to land use, company
registration, factory establishment, labor safety inspections, issuance of
import and export licenses, foreign exchange and international trade
management. ASE Test Taiwan is also subject to regulation and periodic
monitoring by the ROC Environmental Protection Administration and the Bureau of
Environmental Protection, Kaohsiung City.


                                      28
<PAGE>

     ASE Test Malaysia operates under a license obtained from the Malaysian
Industrial Development Authority and issued by the Ministry of International
Trade and Industry of Malaysia. Some of the terms of the license are:

     o    ASE Test Malaysia's shares that are held by non-citizens of Malaysia
          cannot be sold without the prior written consent of the Ministry of
          International Trade and Industry.

     o    ASE Test Malaysia must recruit and train Malaysian citizens in a
          manner that reflects the multiracial composition of Malaysia for all
          levels of occupational classification.

     o    If ASE Test Malaysia proposes to utilize second-hand machinery or
          equipment, ASE Test Malaysia should obtain the prior written approval
          of the Ministry of International Trade and Industry and a report from
          an independent valuer acceptable to the Ministry of International
          Trade and Industry. The prior written approval of the Ministry of
          International Trade and Industry should also be obtained before any
          changes, additions or reductions with respect to machinery or
          equipment are proposed, in cases where there will be a material
          effect on production volume or labour.

     o    ASE Test Malaysia must obtain the prior written consent of the
          Ministry of International Trade and Industry before executing any
          agreements on technology transfers with foreigners.

     o    ASE Test Malaysia must select distributors of the "bumiputra"
          ethnicity, primarily ethnic Malays, to distribute at minimum 30% of
          its sales within Malaysia. The selection of "bumiputra" distributors
          should be effected only after consultation with the Ministry of
          International Trade and Industry. The election of foreign companies
          as distributors requires the prior approval of the Ministry of
          International Trade and Industry.

     o    ASE Test Malaysia must export at minimum 85% of its production.

     o    ASE Test Malaysia should use best endeavors to appoint Malaysian
          citizens to its board of directors and should inform the Ministry of
          International Trade and Industry on any appointment or change in its
          board of directors.

     o    ASE Test Malaysia should use best endeavors to utilize the services
          of Malaysian-owned companies and enterprises in the context of the
          New Economic Policy of Malaysia.

     o    The products of ASE Test Malaysia should attain a standard acceptable
          to the Malaysian government.

Raw Materials

     Semiconductor testing requires minimal raw materials. Substantially all of
the raw materials used in our packaging processes are interconnect materials
such as leadframes and substrates, gold wire and molding compound. Raw
materials costs as a percentage of our net revenues were 13.5% in 2002.

     We do not maintain large inventories of leadframes, substrates, gold wire
or molding compound, but generally maintain sufficient stock of each principal
raw material for approximately one month's production based on blanket orders
and rolling forecasts of near-term requirements received from customers. In
addition, several of our principal suppliers dedicate portions of their
inventories, typically in amounts equal to the average monthly amounts supplied
to us, as reserves to meet our production requirements. However, shortages in
the supply of materials experienced by the semiconductor industry have in the
past resulted in occasional price adjustments and delivery delays. For example,
in 1999 and the first half of 2000, the industry experienced a shortage in the
supply of advanced substrates used in BGA packages, which, at the time, were
only available from a limited number of suppliers located primarily in Japan.
In these instances, we generally negotiate an extension of the delivery date
from our customers.

Environmental Matters

     Semiconductor testing does not generate significant pollutants. The
semiconductor packaging process generates environmental wastes, including
gaseous chemical, liquid and solid industrial wastes. We have installed various
types of anti-pollution equipment for the treatment of liquid and gaseous
chemical waste generated at our semiconductor packaging facilities in Malaysia,
where substantially all of our packaging operations are located. We believe
that we have adopted adequate anti-pollution measures for the effective
maintenance of environmental


                                      29
<PAGE>

protection standards that are consistent with the semiconductor industry
practice in the countries in which our facilities are located. In addition, we
believe we are in compliance in all material respects with present
environmental laws and regulations applicable to our operations and facilities.

Insurance

     We have insurance policies covering property damage and damage to our
production facilities, buildings and machinery, due to fire. In addition, we
have insurance policies covering our liabilities in connection with certain
accidents. Significant damage to any of our production facilities, whether as a
result of fire or other causes, would have a material adverse effect on our
results of operations. We are not insured against the loss of key personnel.

ORGANIZATIONAL STRUCTURE

     The following is a brief description of our corporate structure and
effective ownership interest in each of our principal operating subsidiaries
and affiliates. Such description does not include wholly-owned intermediate
holding companies.

     We are a 50.5% owned subsidiary of ASE, Inc. As of May 31, 2003, we held:

     o    100% ownership interests of ISE Labs, Inc.;

     o    100% ownership interests of ASE Electronics (M) Sdn, Bhd.;

     o    100% ownership interests of ASE Test, Inc.;

     o    27.6% ownership interests of ASE (Chung Li) Inc.; and

     o    30% ownership interests of ASE (Korea) Inc.

     In addition, as of May 31, 2003, ASE, Inc. held 72.4% and 30%,
respectively, of the ownership interests of ASE Chung Li and ASE Korea,
respectively. Furthermore, as of May 31, 2003, ASE, Inc. and ASE Test, Inc.
also owned 56.6% and 4%, respectively, of the ownership interests of ASE
Material Inc., and the remaining shares of ASE Material were owned by the
management and employees of ASE Material, management and employees of ASE, Inc.
and its affiliates as well as a strategic investor.


                                      30
<PAGE>

     The following table sets forth summary information for our subsidiaries as
of May 31, 2003:

<TABLE>
                                                                                                      Percentage
                                                                                           Total        of our
                                                                    Jurisdiction of       Paid-in      Ownership
         Subsidiary                   Main Activities               Incorporation         Capital      Interest
-------------------------------   ------------------------------    -----------------   ----------- --------------
<S>                               <C>                               <C>                   <C>           <C>
ASE Electronics (M) Sdh, Bhd.     Packaging and testing of          Malaysia              $62,260       100.0%
                                  integrated circuits
ASE Test Inc.                     Testing of integrated circuits    Taiwan                186,322       100.0%
ISE LABS, Inc.                    Testing of integrated circuits    United States          70,564       100.0%
ASE (Chung Li) Inc.               Packaging and testing of          Taiwan                182,997        27.6%
                                  integrated circuits
ASE (Korea) Inc.                  Packaging and testing of          Korea                  37,976        30.0%
                                  integrated circuits
</TABLE>

PROPERTY, PLANTS AND EQUIPMENT

     We maintain operations in Taiwan, Malaysia, and California. Our operations
in Kaohsiung, Taiwan are located principally in three plants located in the
Nantze Export Processing Zone in Kaohsiung with a total floor space of
approximately 750,000 square feet, which includes a total clean-room space of
approximately 365,000 square feet. Substantially all of our facilities in
Kaohsiung, including our principal executive offices, are located at these
plants. One plant with a floor space of approximately 352,000 square feet is
located in a building purchased in January 1997 from a subsidiary of ASE, Inc.
and is located on land leased from the ROC government under a lease which
expires in December 2006. One plant with a floor space of approximately 289,000
square feet is located in a building purchased in December 2001 from an
affiliate of ASE, Inc. and is located on land leased from the ROC government
under a lease which expires in December 2012. In addition, we lease from ASE,
Inc. floor space of approximately 109,000 square feet in an adjacent building.
We also lease approximately 68,000 square feet from ASE Chung Li.

     We currently operate testing and packaging facilities in Bayan Lepas Free
Trade Zone, Penang, Malaysia, with a total floor space of approximately 703,000
square feet, which includes a front-end clean-room of approximately 37,000
square feet, a back-end packaging area of approximately 79,000 square feet and
a final test clean-room of approximately 76,000 square feet.

     ISE Labs maintains an approximately 194,000 square foot testing facility
in Fremont, California, an approximately 21,000 square foot testing facility in
Singapore, an approximately 20,000 square foot testing facility in Hong Kong,
and an approximately 13,000 square foot testing facility in Austin, Texas.

Item 5.  Operating and Financial Review and Prospects.

OPERATING RESULTS AND TREND INFORMATION

Overview

     We provide our customers with a complete range of semiconductor testing
services. These services are primary components of the semiconductor
manufacturing process. Our services generally focus on complex,
high-performance logic/mixed-signal semiconductors, such as system on a chip
("SOC"), and include front-end engineering testing, wafer probing and final
testing. At our facilities in Malaysia, we also provide a broad range of
leadframe and laminate-based semiconductor packaging services, including
package types such as ball grid array (BGA), quad flat package (QFP), and thin
quad flat package (TQFP). For more information on our testing and packaging
services, see "Item 4. Information on the Company--Business Overview--Principal
Products and Services."

     Beginning in the fourth quarter of 2000 and continuing through 2001, we
experienced a significant downturn in the semiconductor industry. During this
downturn we saw a material decline in our business caused by a decline in
average selling prices and a curtailment in overall business demand for our
services. We expect the average selling prices for our products to continue to
decline for the foreseeable future. The decrease in our net revenues during
2001 was across each of the principal end-use applications for the products
which we tested and packaged --


                                      31
<PAGE>

communication, personal computer and consumer electronics. In 2002, we
experienced a gradual improvement in our net revenues compared to 2001 as a
result of a modest recovery in the semiconductor industry since the second
quarter of 2002. This improvement was generally concentrated in the testing of
more complex, high-performance semiconductors and the packaging of more
advanced package types.

Sale of Manteca Packaging Facility

     In June 2000, we entered into an agreement to sell our Manteca, California
packaging operations to a group of buyers, which includes certain members of
ISE Labs' management, for an estimated price of $4.3 million. Upon completion
of the sale, the purchasers acquired all of the net assets of the Manteca
packaging operations arising subsequent to December 31, 1999. In 1999, our
Manteca packaging operations generated $8.7 million in net revenues and had a
pre-tax loss of $2.3 million. For the semi-annual period ended June 30, 2000,
our Manteca packaging operations generated $5.0 million in net revenues and had
a pre-tax loss of $1.1 million. ISE Labs incurred a disposition loss in 2000 of
approximately $1.3 million, net of tax benefits of $0.6 million, in connection
with the sale. This disposition loss was considered an adjustment of the
purchase price allocation.

Net Revenues and Pricing

     We recorded net revenues of $440.3 million, $298.5 million and $302.0
million in 2000, 2001 and 2002, respectively. Our net revenues are primarily
affected by the volume of units tested and packaged, the selling prices for
these units, and currency fluctuations. The volume of units tested and packaged
has been primarily affected by upturns and slowdowns in the semiconductor
industry. Our decrease in net revenues from 2000 to 2001 was the result of a
slowdown and our increase in net revenues from 2001 to 2002 was the result of
the modest recovery in the semiconductor industry since the second quarter of
2002. Currency fluctuations affect our net revenues by increasing or decreasing
the revenue we receive per unit when sales are translated into local currency.

     In 2000, 2001 and 2002, our packaging revenues accounted for 28.2%, 25.2%
and 29.0% while testing revenues accounted for 71.8%, 74.8% and 71.0%,
respectively, of our net revenues. In 2002, approximately 98% of our net
testing revenues were derived from testing complex, high-performance
logic/mixed-signal semiconductors, as compared to nearly the same percentage in
2001. High pin-count semiconductor packages are package types with pin-counts
of greater than 100 leads. In 2002, approximately 57% of our net packaging
revenues were derived from packaging high pin-count semiconductors, as compared
to 60% in 2001. We have expanded testing capabilities and a broad geographic
presence in the United States, Taiwan, Malaysia and Singapore in close
proximity to key centers for outsourced semiconductor manufacturing and
semiconductor designing. In 2002, approximately 54% of our net revenues were
derived from operations outside of Taiwan, as compared to 60% in 2001.

     The semiconductor industry is characterized by a general trend towards
declining prices for products and services of a given level of technology over
time. During periods of intense competition and adverse conditions in the
semiconductor industry, the pace of this decline in prices for our services may
be more rapid than that experienced in other years. The average selling prices
of our testing and packaging services have experienced sharp declines during
such periods as a result of intense price competition from other independent
testing and packaging companies that attempt to maintain high capacity
utilization levels in the fare of reduced demand. During the industry downturn
commencing in the fourth quarter of 2000, we experienced a significant
deterioration in average selling prices which resulted in our company incurring
a net loss in 2001 and 2002.

     Declines in selling prices have been partially offset over the last three
years by a change in our revenue mix. In particular, we have been testing more
complex, high-performance logic/mixed-signal semiconductors, which are used in
communication, personal computer, and consumer electronic and products, and
packaging higher pin-count package types. We plan to continue to develop and
offer new technologies in testing and packaging services and expanding our
capacity to achieve economies of scale, as well as improve production
efficiencies for older technology, in order to mitigate the effects of
declining prices on our profitability.

     We price our front-end engineering testing services principally on the
basis of hourly test rates and the cost of engineering resources. We price our
final testing services principally on the basis of the amount of time, measured
in CPU seconds, taken by the automated testing equipment, including testers and
handlers, to execute the test programs that are specific to the customer's
products. The price per CPU second for each particular product is determined
based on a number of factors, including: (1) complexity of the product, (2)
number of functions tested, (3) time required to test the product pursuant to
the customer's specifications, (4) current market landscape of each testing


                                      32
<PAGE>

platform, (5) labor cost, (6) ability of the machine to parallel-test, which
involves testing multiple semiconductors simultaneously, and (7) cost of
testers used to perform the testing services. The testing of complex,
high-performance semiconductors requires more complex equipment, the use of
which is priced at significantly higher levels per central processing unit
second than the use of equipment employed in the testing of less complex or
lower-performance semiconductors.

Cost of Revenues

     Our operations are capital intensive and are characterized by relatively
high fixed costs. High-end testers can cost several million dollars each.
Testing equipment has become more expensive in recent years because the growing
technological complexity of semiconductors has required increasingly complex
testing services. Increases or decreases in capacity utilization rates can have
a significant effect on gross profit margins, as the unit cost of testing
services generally decreases as fixed charges, such as equipment depreciation
expense, are allocated over a larger number of units. Depreciation and
amortization are the principal components of our testing costs as testing
requires minimal raw materials. In 2000, 2001 and 2002, our testing
depreciation expense as a percentage of net testing revenues was approximately
25%, 52% and 57%, respectively. We begin depreciating our equipment when it
is placed into service. There may be a time lag between when our equipment is
placed into service and when it achieves high levels of utilization. In periods
of depressed industry conditions such as 2001 and 2002, we may experience lower
than expected demand from customers and a sharp decline in the average selling
price of our testing services, resulting in an increase in depression expense
relative to net revenues. In particular, the capacity utilization rates for our
testing equipment are more severely affected during an industry down as a
result of the decrease in outsourcing demand from integrated device
manufacturers, which typically maintain larger in-house testing capacity than
in-house packaging capacity.

     In the past we have been able to partially offset the effect of
industry-wide fluctuations on our testing capacity utilization rates by relying
on a number of factors, including the fact that our newer testers tend to have
higher capacity utilization rates as they were purchased in response to market
demand and that we have maintained the capacity utilization rates of our older
testers by using them to test less complex and lower-performance products. In
addition, we also maintained our testing capacity utilization rates through the
development of conversion programs for our testers, which allows us to test
semiconductors on multiple platforms. Our ability to maintain or enhance our
gross margins will continue to be dependent in part on our ability to
effectively manage capacity utilization rates.

     As our testing operations require minimal raw materials, substantially all
of our raw material costs are accounted for by our packaging operations. Raw
material costs as a percentage of our packaging revenues were 40%, 46% and
46% in 2000, 2001 and 2002, respectively. We expect raw materials to become
an increasingly important component of the cost of our packaging revenues and
we plan to continue our development and production of interconnect material
through ASE Material in order to help ensure an adequate supply of raw
materials at competitive prices and reduce production time.

Operating Expenses

     Our operating expenses are composed of selling, general and administrative
expenses and research and development expenses. Selling, general and
administrative expenses are primarily composed of salaries and bonuses to
employees, goodwill amortization, depreciation and other amortization and sales
service charges. For more information concerning goodwill amortization, see "-
Goodwill Amortization". Selling, general and administrative expenses are stable
over time, relative to other costs, therefore selling, general and
administrative expenses expressed as a percentage of net revenues will vary, in
part, according to net revenues. If net revenues are increased, "economies of
scale" are achieved in which selling, general and administrative expenses
decrease as a percentage of net revenues. Research and development expenses
include primarily salaries and bonuses of employees, factory supplies and
depreciation expense. We have endeavored in recent years to expand our research
and development capabilities, therefore, our research and development costs
have increased.

Non-Operating Income and Expenses

     Our non-operating income and expenses are primarily composed of interest
income and expenses, goodwill amortization, gain or loss on long-term
investments, and foreign exchange gain or loss. Our interest income is
primarily derived from fixed return deposits and investment funds. For more
information concerning goodwill amortization, see "- Goodwill Amortization".
Our long-term investments include ASE Korea, ASE Chung Li and


                                      33
<PAGE>

ASE Material. The year-end restatement of our foreign exchange assets and
liabilities according to the prevailing exchange rate has a large impact on our
foreign exchange gain or loss.

     Our loss on long-term investments in equity investees was $1.5 million in
2002 compared to a loss of $7.3 million in 2001. This was composed of the
results of operations of ASE Chung Li and ASE Korea and the results of
operations of ASE Material. We own a 27.6% and 30.0% interest in ASE Chung Li
and ASE Korea, respectively. Therefore, we account for ASE Chung Li and ASE
Korea as affiliates under the equity method and record their gains and losses
to us as gain or loss on long-term investment. Although we only own 4.0% of ASE
Material, ASE, Inc. owns 56.6%; therefore, we account for ASE Material under
the equity method, recording their gains and losses to us as gain or loss on
long-term investment.

Goodwill Amortization

     Our operating and non-operating income in recent years have been affected
by goodwill amortization charges in connection with acquisitions, the
restructuring of our investment holdings and other share repurchases. Under ROC
GAAP, additional purchases of shares of consolidated subsidiaries (majority
owned) or of companies accounted for using the equity method (less than
majority but greater than 20% owned) will generate goodwill in an amount equal
to the difference between the purchase price and the book value per share of
those shares. The goodwill generated is amortized over ten years. Goodwill
amortization from the purchases of shares of consolidated subsidiaries are
recognized under general and administrative expense. Goodwill amortization from
the purchases of shares of companies accounted for using the equity method, are
recognized as a debit under investment income. Our goodwill is derived from the
acquisitions of ISE Labs and ASE Korea.

Critical Accounting Policies and Estimates

     Preparation of our consolidated financial statements requires us to make
estimates and judgments in applying our critical accounting policies which have
a significant impact on the results we report in our consolidated financial
statements. We continually evaluate these estimates, including those related to
allowances for doubtful accounts, inventories, allowances for deferred income
tax assets, useful lives of properties, realizability of long-term assets,
goodwill and valuation of marketable securities and long-term investments. We
base our estimates on historical experience and other assumptions, which we
believe to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions and conditions. We have
identified below the accounting policies that are critical to our consolidated
financial statements.

     Revenue recognition. Revenues from semiconductor packaging services that
we provide are recognized upon shipment. Revenues from testing services that we
provide are recognized upon completion of the services. We do not take
ownership of: (i) bare semiconductor wafers received from customers that we
package into finished semiconductors, and (ii) packaged semiconductors received
from customers that we test as to whether they meet performance specifications.
The title and risk of loss remains with the customer for those bare
semiconductors and/or packaged semiconductors. Accordingly, the cost of
customer-supplied semiconductor materials is not included in our consolidated
financial statements. Other criteria that we use to determine when to recognize
revenue are: (i) persuasive evidence that the services provided exist, (ii) the
selling price is fixed or determinable and (iii) collectibility is reasonably
assured. These policies are consistent with provisions in the Staff Accounting
Bulletin No. 101 issued by the United States Securities and Exchange
Commission. We do not provide warranties to our customers except in cases of
defects in the packaging services provided and deficiencies in testing services
provided. An appropriate sales allowance is recognized in the period during
which the sale is recognized, and is estimated based on historical experience.

     Allowance for Doubtful Accounts. We periodically record a provision for
doubtful accounts based on our evaluation of the collectibility of our accounts
receivable. The total amount of this provision is determined by us as follows.
We first identify the receivables of customers that are of a higher credit risk
based on their current overdue accounts with us, difficulties collecting from
these customers in the past or their overall financial condition. For each of
these customers, we estimate the extent to which it will be able to meet its
financial obligations to us, and we record an allowance that reduces our
accounts receivable for that customer to the amount that we reasonably believe
will be collected. For all other customers, we maintain an allowance for
doubtful accounts equal to a percentage of their aggregate accounts receivable.
Based on our experience, we currently maintain an allowance for the account
receivables of these other customers which average between 3% and 4%, on a
consolidated basis, of our accounts


                                      34
<PAGE>

receivable. Additional allowance may be required in the future if the financial
condition of our customers or general economic conditions deteriorate, and this
additional allowance would reduce our net income.

     Inventories. Inventories are recorded at cost when acquired and stated at
the lower of weighted average cost or market value. Market value for finished
goods and work in process is the net realized value. Market value for raw
materials, supplies and spare parts is the replacement costs. An allowance for
loss on decline in market value and obsolescence is provided based on the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. An additional
inventory provision may be required if actual market conditions are less
favorable than those projected.

     Allowances for Deferred Income Tax Assets. Tax benefits arising from
deductible temporary differences, unused tax credits and net operating loss
carry forwards are recognized as deferred tax assets. We record a valuation
allowance to reduce our deferred income tax assets to an amount that we believe
will more likely than not be realized. We have considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need
and amount for the valuation allowance. In the event we were to determine that
we would be able to realize our deferred income tax assets in the future in
excess of our net recorded amount, an adjustment to our deferred income tax
assets would increase income in the period such determination was made.
Alternatively, should we determine that we would no be able to realize all or
part of our net deferred income tax assets in the future, an adjustment to our
deferred income tax assets would decrease income in the period such
determination was made.

     Useful Lives of Properties. Our operations are capital intensive and we
have significant investment in expensive testing and packaging equipment.
Properties represented 61% and 57% of our total assets as of December 31, 2001
and 2002, respectively. We depreciate our properties based on our estimate of
their economic useful lives to us based on our judgment, historical experience
and the potential obsolescence of our existing equipment brought about by the
introduction of more sophisticated testing and packaging technologies and
processes. If we subsequently determine that the actual useful life of a
property is shorter than what we had estimated, we will depreciate the
remaining undepreciated value of that asset over its remaining economic useful
life. This would result in increased depreciation expense and decreased net
income during those periods. Similarly, if the actual lives of properties are
longer than what we had estimated, we would have a smaller depreciation expense
and higher net income in subsequent periods. As a result, if our estimations of
the useful lives of our properties are not accurate, our net income in future
periods would be affected.

     Realizabiity of Long-Term Assets. We are required to evaluate our
equipment, goodwill and other long-lived assets for impairment whenever there
is an indication of impairment. If certain criteria are met, we are required to
record an impairment charge. We have adopted U.S. Statement of Financial
Accounting Standards, or U.S. SFAS, No. 144, "Accounting for the Impairment for
Disposal of Long-Lived Assets" to account for the impairment of our long-lived
assets under both ROC GAAP and U.S. GAAP. In accordance with U.S. SFAS No. 144,
long-lived assets held and used by us are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. For purposes of evaluating the recoverability of
long-lived assets, the recoverability test is performed by comparing
undiscounted net cash flows of the assets against the net book value of the
assets. If the recoverability test indicates that an impairment has occurred,
the impairment loss is the amount of the asset's net book value in excess of
the related fair value. In 2002, we took a $35.3 million impairment charge
against some of our testing equipment to reflect the decline in economic value
of the equipment.

     Goodwill. Under U.S. GAAP, goodwill recognized prior to June 30, 2001 is
recognized as an asset and amortized over its estimated useful life. Goodwill
is reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The U.S. Financial Accounting
Standards Board, or FASB, issued U.S. SFAS No. 142, "Goodwill and Other
Intangible Assets". U.S. SFAS No. 142 requires the use of a nonamortization
approach to account for purchased goodwill and certain intangibles. Under U.S.
SFAS No. 142, goodwill and intangibles are evaluated at least annually to
determine if an impairment write down is required. As of December 31, 2002, we
had goodwill of $82.4 million primarily relating to our testing operations. We
completed our transitional impairment test as of January 1, 2002 and an annual
goodwill impairment test at December 31, 2002 and found no impairment. However,
if events and circumstances deteriorate in the future, the value of the
goodwill could be impaired under U.S. GAAP.


                                      35
<PAGE>

Results of Operations

     The following table sets forth, for the periods indicated, selected income
statement items from our Consolidated Financial Statements.

<TABLE>
                                                                   Year Ended December 31,
                                                           -----------------------------------------
                                                               2000           2001           2002
                                                           -----------    -----------    -----------
                                                                         (in thousands)
<S>                                                        <C>            <C>            <C>
Net revenues:
   Testing .............................................   $   316,158    $   223,193    $   214,331
   Packaging ...........................................       124,127         75,273         87,631
                                                           -----------    -----------    -----------
   Total net revenues ..................................       440,285        298,466        301,962
Cost of revenues .......................................       263,513        265,271        280,573
                                                           -----------    -----------    -----------
Gross profit ...........................................       176,772         33,195         21,389
Operating expenses:
   Selling, general and administrative .................        42,807         35,335         68,903
   Research and development ............................        12,059         14,397         18,342
   Goodwill amortization ...............................         7,054          7,530         10,105
                                                           -----------    -----------    -----------
     Total operating expenses ..........................        61,920         57,262         97,350
                                                           -----------    -----------    -----------
Income (loss) from operations ..........................       114,852        (24,067)       (75,961)
Non-operating income (expense):
   Interest expense - net ..............................       (14,740)       (13,783)       (14,396)
   Investment income (loss) under equity method - net ..        16,127         (7,344)        (1,496)
   Loss on long-term investments in bonds ..............        (3,157)          (345)            --
   Foreign exchange gain (loss) - net ..................         3,280          2,382         (1,169)
   Other non-operating income (expense) ................        (2,719)         1,393          1,511
                                                           -----------    -----------    -----------
     Total non-operating income (expense) - net ........        (1,209)       (17,697)       (15,550)
                                                           -----------    -----------    -----------
 Income (loss) from continuing operations before
  income taxes and minority interest ...................       113,643        (41,764)       (91,511)
Income tax benefit (expense) ...........................        (2,197)        (6,522)        10,243
Income (loss) from continuing operations ...............       111,446        (48,286)       (81,268)
Loss from discontinued operations ......................          (758)            --             --
Minority interest in net loss (income) of
     subsidiaries ......................................        (3,493)         2,527             --
                                                           -----------    -----------    -----------
Net income (loss) (ROC GAAP) ...........................   $   107,195    $   (45,759)   $   (81,268)
                                                           ===========    ===========    ===========
Net income (loss) (U.S. GAAP) ..........................   $   101,173    $   (72,928)   $   (73,325)
                                                           ===========    ===========    ===========
</TABLE>

     The following table sets forth, for the periods indicated, selected income
statement items from our Consolidated Financial Statements.

<TABLE>
                                                                 Year Ended December 31,
                                                           ------------------------------------
                                                             2000          2001          2002
                                                           --------     ---------     ---------
                                                               (percentage of net revenues)
<S>                                                            <C>          <C>           <C>
Net revenues ..........................................       100.0%        100.0%        100.0%
   Testing ............................................        71.8          74.8          71.0
   Packaging ..........................................        28.2          25.2          29.0
                                                           --------     ---------     ---------
Cost of revenues ......................................        59.9          88.9          92.9
                                                           --------     ---------     ---------
Gross profit ..........................................        40.1          11.1           7.1
Operating expenses:
   Selling, general and administrative ................         9.7          11.9          22.8
   Research and development ...........................         2.7           4.8           6.1
   Goodwill amortization ..............................         1.6           2.5           3.4
                                                           --------     ---------     ---------
     Total operating expenses .........................        14.0          19.2          32.3
Income (loss) from operations .........................        26.1          (8.1)        (25.2)
Non-operating income (expense):
   Interest expense - net .............................        (3.3)         (4.6)         (4.8)
   Investment income (loss) under equity method - net .         3.7          (2.5)         (0.5)
   Loss on long-term investments in bonds .............        (0.7)         (0.1)           --
   Foreign exchange gain (loss) - net .................         0.7           0.8          (0.4)
   Other non-operating income (expense) ...............        (0.7)          0.5           0.6
                                                           --------     ---------     ---------
</TABLE>


                                      36
<PAGE>

<TABLE>
                                                                 Year Ended December 31,
                                                           ------------------------------------
                                                             2000          2001          2002
                                                           --------     ---------     ---------
                                                               (percentage of net revenues)
<S>                                                            <C>          <C>           <C>
     Total non-operating income (expense) - net .......        (0.3)         (5.9)         (5.1)
                                                           --------     ---------     ---------
Income (loss) before income taxes and minority interest        25.8         (14.0)        (30.3)
Income tax benefit (expense) ..........................        (0.5)         (2.2)          3.4
Income (loss) from continuing operations ..............        25.3         (16.2)        (26.9)
Loss from discontinued operations .....................        (0.2)           --            --
                                                           --------     ---------     ---------
Minority interest in net income (loss) of subsidiaries         (0.8)          0.9            --
Net income (loss) (ROC GAAP) ..........................        24.3         (15.3)        (26.9)
                                                           ========     =========     =========
Net income (loss) (U.S. GAAP) .........................        23.0         (24.4)        (24.3)
                                                           ========     =========     =========
</TABLE>

     The following table sets forth, for the periods indicated, our
consolidated net revenues, gross profit and gross margin.

                                                    Year Ended December 31,
                                               --------------------------------
                                                 2000        2001        2002
                                               --------    --------    --------
                                                        (in thousands)
Net revenues:
   Testing .................................   $316,158    $223,193    $214,331
   Packaging ...............................    124,127      75,273      87,631
                                               --------    --------    --------
   Total ...................................    440,285     298,466     301,962

Gross profit:
   Testing .................................    142,078      27,277      15,346
   Packaging ...............................     34,694       5,918       6,043
                                               --------    --------    --------
   Total ...................................    176,772      33,195      21,389

Gross margin:
   Testing .................................       44.9%       12.2%        7.2%
   Packaging ...............................       28.0%        7.9%        6.9%
   Total ...................................       40.1%       11.1%        7.1%


Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Net Revenues. Our net revenues increased 1.2% to $302.0 million in 2002
from $298.5 million in 2001, primarily as a result of increased sales volumes,
partially offset by decreased average realized selling prices. In 2002, our net
testing revenues accounted for 71.0% of our net revenues and our net packaging
revenues accounted for 29.0% of our net revenues, compared to 74.8% and 25.2%,
respectively, of our net revenues in 2001. The decrease in testing revenues
resulted primarily from a decrease in the averaging selling prices for testing
services, partially offset by an increase in testing volume. The increase in
packaging revenues resulted primarily from an increase in packaging volume,
partially offset by a decrease in the averaging selling prices for packaging
services. The increases in testing and packaging volume resulted primarily from
the modest recovery in the semiconductor industry and the increase in
outsourcing of the packaging and testing of semiconductor devices. The decrease
in average realized selling prices reflects the general trend in the
semiconductor industry of declining prices for each input/output lead on a
semiconductor device. This decrease was partially offset by a change in the
revenue mix as a result of devices with higher numbers of leads per device
accounting for a greater portion of the packaging volume, and as we tested more
complicated semiconductor devices.

     Gross Profit. Our gross profit decreased 35.6% to $21.4 million in 2002
from $33.2 million in 2001 and our gross margin decreased to 7.1% in 2002 from
11.1% in 2001. This decrease was primarily a result of increases in
depreciation and raw materials costs. Our gross margin for testing decreased to
7.2% in 2002 from 12.2% in 2001 primarily as a result of an increase in
depreciation expense as a percentage of our net testing revenues. Our gross
margin for packaging decreased to 6.9% in 2002 from 7.9% in 2001 primarily as a
result of increases in raw material and factory supplies, partially offset by a
decrease in depreciation expense, all as a percentage of our net packaging
revenue. Depreciation expense increased 6.0% to $137.8 million in 2002 from
$130.1 million in 2001, primarily because new equipment was placed in service
in 2001 and 2000. Depreciation expense as a percentage of net revenues
increased to 45.6% in 2002 from 43.6% in 2001. Raw materials costs increased
18.7% to $40.8 million in


                                      37
<PAGE>

2002 from $34.3 million in 2001 primarily as a result of increased sales. As a
percent of net revenues raw materials costs increased to 13.5% in 2002 from
11.5% in 2001.

     Operating Income and Loss. We incurred an operating loss of $76.0 million
in 2002 compared to an operating loss of $24.1 million in 2001. Operating
margin declined to negative 25.2% in 2002 from negative 8.1% in 2001, primarily
as a result of an impairment of long-lived assets of $35.3 million booked under
selling, general and administrative expenses, as well as lower gross margin,
increased selling, generally and administrative expenses, and increased
research and development expenses, each expressed as a percentage of net
revenues. Selling, general and administrative expenses, including goodwill
amortization, increased 84.3% to $79.0 million in 2002 from $42.9 million in
2001. The increase was primarily due to an impairment charge of $35.3 million
of long-lived assets booked under general and administrative expenses in 2002
compared to nil in 2001 and increased goodwill amortization. We took this
impairment charge against some of our testing equipment in 2002 to reflect the
decline in economic value of the equipment. Goodwill amortization increased
34.2% to $10.1 million in 2002 from $7.5 million in 2001 due primarily to our
purchase of additional shares of ISE Labs. As a percentage of net revenues,
selling, general and administrative expenses, including goodwill amortization,
increased to 26.2% in 2002 from 14.4% in 2001. Research and development
expenses increased 27.4% to $18.3 million in 2002 from $14.4 million in 2001.
As a percentage of net revenues, research and development expenses increased to
6.1% in 2002 from 4.8% in 2001. The increase was primarily due to increased
depreciation of equipment dedicated to research and development uses, increased
expenditures on factory supplies and an increase in the numbers of employees
employed in research and development.

     Net Non-Operating Income and Expense. Net non-operating expense decreased
12.1% to $15.6 million in 2002 from $17.7 million in 2001, primarily as a
result of a decrease in loss from equity investees, partially offset by a
decrease in net foreign exchange gain. We had a loss of $1.5 million as
compared to a loss from equity investees of $7.3 million in 2001, primarily as
a result of decreased net loss of our affiliate, ASE Korea, and increased net
income of our affiliate, ASE Chung Li. We incurred a net foreign exchange loss
of $1.2 million in 2002 as compared to a net foreign exchange gain of $2.4
million in 2001, primarily as a result of the depreciation of the NT dollar,
which had a negative impact on our U.S. dollar denominated and Japanese yen
denominated liabilities.

     Net Income and Loss. As a result of the foregoing, we recorded a net loss
of $81.3 million in 2002 compared to a net loss of $45.8 million in 2001.

     We recorded a U.S. GAAP adjusted net loss of $73.3 million in 2002 as
compared to a net loss of $72.9 million in 2001. The U.S. GAAP adjustment in
2002 is primarily a result of an adjustment in goodwill amortization of $10.1
million in 2002. The U.S. GAAP adjustment in 2001 is primarily a result of
stock option compensation of $26.7 million in 2001 from a compensation expense
in relation to the exercise of certain stock options under the 1996 stock
option plan.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Net Revenues. Our net revenues decreased 32.2% to $298.5 million in 2001
from $440.3 million in 2000, primarily as a result of both decreased sales
volumes and decreased average realized selling prices. In 2001, our net testing
revenues accounted for 74.8% of our net revenues and our net packaging revenues
accounted for 25.2% of our net revenues, compared to 71.8% and 28.2%,
respectively, of our net revenues in 2000. Decreases in testing and packaging
revenues resulted primarily from an industry downturn commencing in the fourth
quarter of 2000, and a decrease in the average realized selling prices for
testing and packaging services. The decrease in average realized selling prices
reflects the general trend in the semiconductor industry of declining prices
for each input/output lead on a semiconductor device. This decrease was
partially offset by a change in the revenue mix as a result of devices with
higher numbers of leads per device accounting for a greater portion of the
packaging volume, and as we tested more complicated semiconductor devices.

     Gross Profit. Our gross profit decreased 81.2% to $33.2 million in 2001
from $176.8 million in 2000 and our gross margin decreased to 11.1% in 2001
from 40.1% in 2000. This decrease was primarily a result of increased
depreciation expense, partially offset by a decrease in raw materials costs.
Our gross margin for testing decreased to 12.2% in 2001 from 44.9% in 2000
primarily as a result of increases in depreciation expenses and plant and
machine rental costs, all as a percentage of our net testing revenue. Our gross
margin for packaging decreased to 7.9% in 2001 from 28.0% in 2000 primarily as
a result of increases in depreciation expense and raw material costs, all as a
percentage of our net packaging revenue. Depreciation expense increased 24.4%
to $130.1 million in 2001 from


                                      38
<PAGE>

$104.6 million in 2000, primarily because new equipment was placed in service
in 2001 and 2000. Depreciation expense as a percentage of net revenues
increased to 43.6% in 2001 from 23.8% in 2000. Raw materials costs decreased
30.7% to $34.3 million in 2001 from $49.5 million in 2000 primarily as a result
of decreased sales. As a percent of net revenues, however, raw materials costs
increased slightly to 11.5% in 2001 from 11.2% in 2000.

     Operating Income and Loss. We incurred an operating loss of $24.1 million
in 2001 compared to operating income of $114.9 million in 2000. Operating
margin decreased to negative 8.1% in 2001 from 26.1% in 2000, primarily as a
result of lower gross margins, increased research and development expenses and
increased selling, general and administrative expenses, each expressed as a
percentage of net revenues. Research and development expenses increased 19.4%
to $14.4 million in 2001 from $12.1 million in 2000. As a percentage of net
revenues, research and development expenses increased to 4.8% in 2001 from 2.7%
in 2000. The increase was primarily due to increased depreciation of equipment
dedicated to research and development uses, increased expenditures on factory
supplies and an increase in the numbers of employees employed in research and
development. Selling, general and administrative expenses, including goodwill
amortization, decreased 14.0% to $42.9 million in 2001 from $49.9 million in
2000. The decrease was primarily due to decreased expenses for salaries and
bonuses achieved by our implementation of cost-cutting measures, partially
offset by an increase in goodwill amortization in relation to the recalculation
of goodwill amortization due to the disposal of Manteca. Goodwill is amortized
using the straight-line method over five to ten years. As a percentage of net
revenues, selling, general and administrative expenses, including goodwill
amortization, increased to 14.4% in 2001 from 11.3% in 2000, primarily as a
result of decreased sales volume.

     Net Non-Operating Income and Expense. Net non-operating expense increased
1,375.0% to $17.7 million in 2001 from $1.2 million in 2000, primarily as a
result of a loss from equity investees and a decrease in net foreign exchange
gain, partially offset by a decreased loss on long-term investments in bonds.
We had a loss from equity investees of $7.3 million in 2001 as compared to an
income from equity investees of $16.1 million in 2000, primarily as a result of
a net loss from our affiliate, ASE Korea. Our net foreign exchange gain
decreased 27.3% to $2.4 million in 2001 from $3.3 million in 2000, primarily as
a result of gains produced by certain foreign exchange contracts in 2000. Our
loss on long-term investments in bonds decreased 90% to $0.3 million in 2001
from $3.2 million in 2000, primarily as a result of a provision in 2000 for
loss on the bonds of APP Global Finance Limited.

     Net Income and Loss. We recorded a net loss of $45.8 million in 2001
compared to a net income of $107.2 million in 2000, primarily as a result of
the foregoing, and also as a result of increased income tax expense. Income tax
expense increased 195.5% to $6.5 million in 2001 from $2.2 million in 2000,
primarily as a result of the provision of valuation allowance recognized for a
income tax credit in 2001 compared to a utilization of an income tax credit in
2000, both in relation to tax credits for machinery and equipment.

     We recorded a U.S. GAAP adjusted net loss of $72.9 million in 2001 as
compared to a net income of $101.2 million in 2000. The U.S. GAAP adjustment in
2001 is primarily a result of stock option compensation of $26.7 million in
2001 from a compensation expense in relation to the exercise of certain stock
options under the 1996 stock option plan. The U.S. GAAP adjustment in 2000 is
primarily the result of compensation expenses of $6.0 million arising from the
cash bonus given to our employees by us and ASE, Inc. shares given to our
employees by our parent company accrued in 2000.

Consolidated Quarterly Results

     The following table sets forth our unaudited consolidated results for the
quarterly periods indicated. You should read the following table in conjunction
with our Consolidated Financial Statements and related notes included elsewhere
in this annual report. Our operating results for any quarter are not
necessarily indicative of the results for any future period, and our quarterly
net revenues, gross profit and gross margins may fluctuate significantly.


                                      39
<PAGE>

<TABLE>
                                                                                            Quarter Ended
                                             -------------------------------------------------------------------------------
                                              Mar. 31,      Jun. 30,      Sep. 30,      Dec. 31,      Mar. 31,      Jun. 30,
                                                2001          2001          2001          2001          2002          2002
                                             ---------     ---------     ---------     ---------     ---------     ---------
                                                                                             (unaudited)
                                                                                           (in thousands)
<S>                                          <C>           <C>           <C>           <C>           <C>           <C>
Net revenues:
     Testing .............................   $  77,921     $  51,558     $  44,072     $  49,642     $  49,467     $  52,194
     Packaging ...........................      25,255        15,799        16,455        17,764        19,503        25,508
                                             ---------     ---------     ---------     ---------     ---------     ---------
     Total net revenues ..................     103,176        67,357        60,527        67,406        68,970        77,702
Cost of revenues .........................      73,585        63,292        61,868        66,526        66,273        70,861
                                             ---------     ---------     ---------     ---------     ---------     ---------

Gross profit .............................      29,591         4,065        (1,341)          880         2,697         6,841
                                             ---------     ---------     ---------     ---------     ---------     ---------
Operating expenses:
    Selling, general and administrative ..       9,635         9,872         8,085         7,743         8,576         7,849
    Research and development .............       3,975         3,086         3,455         3,881         3,964         4,818
 Goodwill amortization ...................       1,896         1,896         1,855         1,883         2,526         2,526
                                             ---------     ---------     ---------     ---------     ---------     ---------
 Total operating expenses ................      15,506        14,854        13,395        13,507        15,066        15,193
                                             ---------     ---------     ---------     ---------     ---------     ---------
Income (loss) from operations ............      14,085       (10,789)      (14,736)      (12,627)      (12,369)       (8,352)
Non-operating income (expense) ...........      (2,856)       (4,586)       (6,918)       (3,337)       (5,964)       (3,719)
                                             =========     =========     =========     =========     =========     =========
Income (loss) from continuing
    operations before income taxes and
    minority interest ....................      11,229       (15,375)      (21,654)      (15,964)      (18,333)      (12,071)
Income tax benefit (expense) .............      (1,578)       (3,767)         (202)         (975)        3,281         2,371
Minority interest in net loss (income)
        of subsidiaries ..................        (478)          423         1,008         1,574            --            --
                                             ---------     ---------     ---------     ---------     ---------     ---------
Net income (loss) (ROC GAAP) .............   $   9,173     $ (18,719)    $ (20,848)    $ (15,365)    $ (15,052)    $  (9,700)
                                             =========     =========     =========     =========     =========     =========
Net income (loss) (U.S. GAAP) ............   $   7,085     $ (44,441)    $ (22,498)    $ (13,074)    $ (13,882)    $  (8,433)
                                             =========     =========     =========     =========     =========     =========

Net revenues (ROC GAAP):
     Testing .............................        75.5%         76.5%         72.8%         74.8%         71.7%         67.2%
     Packaging ...........................        24.5%         23.5%         27.2%         25.2%         28.3%         32.8%

Gross margin .............................        28.7%          6.0%         (2.2)%         1.3%          3.9%          8.8%
Operating margin .........................        13.7%        (16.0)%       (24.3)%       (18.7)%       (17.9)%       (10.7)%

Net income margin:
     ROC GAAP ............................         8.9%        (27.9)%       (34.4)%       (22.8)%       (21.8)%       (12.5)%
     U.S. GAAP ...........................         6.9%        (66.0)%       (37.2)%       (19.4)%       (20.1)%       (10.9)%


<CAPTION>
                                             -----------------------
                                              Sep. 30,      Dec. 31,
                                                2002          2002
                                             ---------     ---------
<S>                                          <C>           <C>
Net revenues:
     Testing .............................   $  56,925     $  55,745
     Packaging ...........................      23,198        19,422
                                             ---------     ---------
     Total net revenues ..................      80,123        75,167
Cost of revenues .........................      73,721        69,718
                                             ---------     ---------

Gross profit .............................       6,402         5,449
                                             ---------     ---------
Operating expenses:
    Selling, general and administrative ..       8,609        43,869
    Research and development .............       5,057         4,503
 Goodwill amortization ...................       2,526         2,527
                                             ---------     ---------
 Total operating expenses ................      16,192        50,899
                                             ---------     ---------
Income (loss) from operations ............      (9,790)      (45,450)
Non-operating income (expense) ...........      (3,917)       (1,950)
                                             =========     =========
Income (loss) from continuing
    operations before income taxes and
    minority interest ....................     (13,707)      (47,400)
Income tax benefit (expense) .............       2,828         1,763
Minority interest in net loss (income)
        of subsidiaries ..................          --            --
                                             ---------     ---------
Net income (loss) (ROC GAAP) .............   $ (10,879)    $ (45,637)
                                             =========     =========
Net income (loss) (U.S. GAAP) ............   $  (7,998)    $ (43,012)
                                             =========     =========

Net revenues (ROC GAAP):
     Testing .............................        71.0%         74.2%
     Packaging ...........................        29.0%         25.8%

Gross margin .............................         8.0%          7.2%
Operating margin .........................       (12.2)%       (60.5)%

Net income margin:
     ROC GAAP ............................       (13.6)%       (60.7)%
     U.S. GAAP ...........................       (10.0)%       (57.2)%
</TABLE>

     Our results of operations have been adversely affected by the global
semiconductor industry downturn which commenced in the fourth quarter of 2000
and continued through the fourth quarter of 2001. Beginning in the second
quarter of 2002, we experienced a gradual improvement in our net revenues as a
result of a modest recovery in the semiconductor industry. To a lesser extent,
our results of operations have also been affected by seasonality. Our first
quarter net revenues have historically shown smaller sequential increases over
the preceding fourth quarter, compared to other quarters of the year, primarily
due to the combined effects of holidays in the United States, Taiwan and
Malaysia. Moreover, the increase or decrease in net revenues of a particular
quarter as compared with the immediately preceding quarter varies
significantly. See "Item 3. Key Information--Risk Factors--Our operating
results are subject to significant fluctuations, which could adversely affect
the value of your investment".


                                      40
<PAGE>

Exchange Rate Fluctuations

     Currently, our net revenues from testing and packaging services are
generally denominated in U.S. dollars and NT dollars, while the costs of
revenues and operating expenses associated with testing and packaging services
are generally incurred in U.S. dollars, NT dollars and Malaysian ringgit, as
well as, to a lesser extent, Japanese yen, Singapore dollars and Hong Kong
dollars. In addition, a substantial portion of our capital expenditures,
primarily for the purchase of testing equipment, has been, and is expected to
continue to be, denominated in U.S. dollars with the remainder in Japanese yen
and other currencies. Fluctuations in exchange rates, primarily among the U.S.
dollar, the NT dollar and the Malaysian ringgit, will affect our costs and
operating margins and could result in exchange losses. From time to time, we
have engaged in, and may continue to engage in, hedging of foreign currency
exposure through U.S. dollar borrowings and forward exchange rate contracts in
an effort to mitigate the impact of exchange rate fluctuations. Despite these
hedging and mitigating techniques, fluctuations in exchange rates have
affected, and may continue to affect, our financial condition and results of
operations. We recorded a net foreign exchange gain of $3.3 million in 2000 and
$2.4 million in 2001 and we incurred a net foreign exchange loss of $1.2
million in 2002.

Taxation

     Based on our status as a company which is engaged in certain designated
businesses in Taiwan, ASE Test Taiwan was granted exemptions from Republic of
China income taxes for a period of five years at the initial stage of its
operations and for periods of five years following subsequent capital increases
with respect to income attributable to such increases. While ASE Test Taiwan's
initial five-year tax exemption expired at the end of 1995, it qualified under
the ROC Statute for Upgrading of Industries for another five-year exemption,
with respect to income attributable to its capital increase for the purpose of
purchasing additional machinery and equipment in Taiwan following a rights
offering in December 1994. Following our initial public offering in June 1996,
ASE Test Taiwan was granted another five-year exemption with respect to income
attributable to its capital increase. Utilization of the exemption began when
installation of the machinery and equipment was completed. Furthermore,
following our rights offering in September 1998, ASE Test Taiwan applied for
another five-year exemption under the same statute. In October 1998, a
favorable interpretation of the ROC Statute for Upgrading Industries was
announced by the ROC Ministry of Finance that provided a formula for
calculating tax-exempt income under the statute. According to this formula,
100% of revenue increase is regarded as revenue attributable to the capital
increase. As a result of the increase in tax-exempt income, we had a higher tax
benefit in 1998 than in 1997. ASE Test Taiwan will also benefit in future years
from other tax incentives generally available to companies in the Republic of
China, including tax credits ranging from 10% to 25% of certain research and
development and employee training expenses and credits for investment in
automation equipment and technology.

     Based on its status as a "pioneer" company, ASE Test Malaysia was granted
exemptions from Malaysian income taxes for a period of five years from July 1,
1994 to June 30, 1999. Losses accumulated before the commencement of this
period may be used to offset taxable income after the period ends. ASE Test
Malaysia's tax holiday in Malaysia expired on June 30, 1999 and ASE Test
Malaysia has received approval to be a "pioneer high technology" company in
Malaysia, which entitles us to a five-year tax holiday substantially similar to
our previous tax holiday. This tax holiday began retroactively on July 1, 1999
and will extend to June 30, 2004. See Note 13 of Notes to Consolidated
Financial Statements.

     As of December 31, 2002, we had net deferred income tax assets, after
valuation allowance, of $20.7 million, which consisted of tax credits arising
from investments in machinery and equipment and research and development
expenditures of ASE Test Taiwan. The tax credits of ASE Test Taiwan generally
expire five years following their respective grants, and are available to
reduce 50% of its income taxes payable in the first four years and 100% of such
taxes payable in the fifth year. The tax credits of ASE Test Malaysia are
available to reduce 100% of its income taxes payable after its pioneer period
ends on June 30, 1999, and have no expiration date. The net non-current
deferred income tax assets of ASE Test Taiwan are expected to be realized by
2004. We incurred a net tax benefit (expense) of $10.2 million, $(6.5) million
and $(2.2) million in 2002, 2001 and 2000, respectively. See Note 13 of Notes
to Consolidated Financial Statements.

     With facilities located in special export zones such as the Nantze Export
Processing Zone in Kaohsiung, Taiwan and the Bayan Lepas Free Trade Zone in
Penang, Malaysia, we and some of our subsidiaries enjoy exemptions from various
import duties and commodity taxes on imported machinery, equipment, raw
materials and components. Goods produced by companies located in such zones and
exported or sold to others within the zones are exempt from otherwise
applicable commodity or business taxes in Taiwan and custom duties and sales
taxes in Malaysia.


                                      41
<PAGE>

     We are a holding company, and our only significant assets are our
ownership interests in ASE Test Taiwan, ASE Test Malaysia and ISE Labs, as well
as our 27.6% and 30.0% interest in ASE Chung Li and ASE Korea, respectively.
Accordingly, our only internal sources of cash flow are primarily our share of
the dividends, if any, paid by ASE Test Taiwan, ASE Test Malaysia and ISE Labs.

   Dividends from ASE Test Taiwan

     Under existing ROC law, dividends declared by ASE Test Taiwan out of
retained earnings and distributed to us are subject to ROC withholding tax,
currently at the rate of 20% for non-ROC investors, such as us, holding a
Foreign Investment Approval granted by the ROC Ministry of Economic Affairs, on
the amount of any cash dividends or on the par value of any stock dividends. In
the case of deferred-tax stock dividends distributed before January 2000, such
withholding tax need not be paid by us until the time at which the shares of
common stock distributed by ASE Test Taiwan as stock dividends are sold by us.
Nevertheless, the law of deferral of income tax on stock dividend was revoked
on January 2000. As such, dividends distributed after January 2000 will not be
entitled to tax deferral benefits. Except in limited circumstances, under the
ROC Company Law, ASE Test Taiwan is not permitted to distribute dividends or
make other distributions to shareholders in respect of any year in which it did
not record net income.

     The ROC Company Law also requires that 10% of annual net income as
determined under ROC GAAP (less previous years' losses) be set aside as a legal
reserve until the accumulated legal reserve equals the paid-in capital of ASE
Test Taiwan. In addition, the articles of incorporation of ASE Test Taiwan
require that before a dividend is paid out of the annual net income of ASE Test
Taiwan, up to 2% of its annual net income as determined under ROC GAAP (less
previous years' losses) should be paid to the directors and supervisors of ASE
Test Taiwan as remuneration and 3% to 7% (both inclusive) of its annual net
income as determined under ROC GAAP should be paid to the employees of ASE Test
Taiwan as bonuses. The remaining balance shall be allocated as dividends on a
pro rata basis pursuant to a resolution of the board of directors, approved by
the shareholders, except that certain amounts of the balance may be reserved at
the discretion of the board of directors of ASE Test Taiwan. See Note 12 of
Notes to Consolidated Financial Statements. ASE Test Taiwan will not distribute
any cash dividend with respect to the results of 2002.

   Dividends from ASE Test Malaysia

     Under existing Malaysia law, dividends declared and paid by ASE Test
Malaysia are not subject to withholding tax. Under Malaysia's taxation system,
the tax paid by a Malaysian company at the normal corporate tax rate is deemed
paid by its shareholders. Thus, the shareholders receive dividends net of the
tax paid by a Malaysian company. Dividends, either in cash or in any other
form, received by either a resident or a non-resident of Malaysia are not
subject to withholding tax. A corporate shareholder of a Malaysian company is
taxed on the gross amount of dividends (namely, the cash amount of the dividend
plus an amount of tax credit equal to the gross amount of dividends multiplied
by the corporate income tax rate at the date of payment of the dividend), and
the tax paid by the Malaysian company effectively becomes available to its
shareholders as a tax credit to offset their Malaysia income tax liability on
the gross amount of dividends received. Therefore, no further Malaysia income
tax will be imposed on the net dividends received by the shareholders of the
Malaysian company.

     ASE Test Malaysia is owned by our wholly-owned subsidiary, ASE Holdings
(Singapore) Pte Ltd., which we refer to as ASE Holdings Singapore. Based on its
pioneer company status, ASE Test Malaysia was granted exemptions from Malaysian
income taxes for a period of five years from July 1, 1994 to June 30, 1999
whereby 100% of adjusted income (before tax depreciation) is exempted. Capital
allowance and losses accumulated before the commencement of the five-year
period may be used to offset taxable income after ASE Test Malaysia's pioneer
period ends. ASE Test Malaysia has been granted tax exemptions for high
technology pioneer status, which began retroactively from July 1, 1999, and
will extend to June 30, 2004.

   Dividends from ISE Labs

     ISE Labs, as a California corporation, is subject to U.S. federal income
tax on its world-wide income. Under U.S. federal income tax law, dividends
received by us from ISE Labs are subject to withholding tax at the rate of
30.0%. ISE Labs is owned by our wholly-owned subsidiary, ASE Test Holdings,
Ltd., a Cayman Islands holding company, also called ASE Test Cayman Islands.


                                      42
<PAGE>

U.S. GAAP Reconciliation

     We have historically prepared our financial statements in accordance with
U.S. GAAP. Commencing January 1, 1999, we prepared our financial statements in
accordance with ROC GAAP with U.S. GAAP reconciliation in order to be
consistent with the preparation of the financial statements of ASE, Inc., our
parent company. ROC GAAP differs in certain material respects from U.S. GAAP.
The following table sets forth a comparison of our net income and shareholders'
equity in accordance with ROC GAAP and U.S. GAAP for the periods indicated.

                                                  Year Ended December 31,
                                             ---------------------------------
                                                2000        2001          2002
                                             --------    --------     --------
                                                       (in millions)
Net income:
ROC GAAP ................................    $  107.2    $  (45.8)    $  (81.3)
U.S. GAAP ...............................       101.2       (72.9)       (73.3)
Shareholders' equity:
ROC GAAP ................................    $  643.1    $  597.5     $  538.9
U.S. GAAP ...............................       638.8       596.2        547.7

     Note 26 of Notes to Consolidated Financial Statements provides a
description of the principal differences between ROC GAAP and U.S. GAAP as they
relate to us, and a reconciliation to U.S. GAAP of select items, including net
income and shareholders' equity. Differences between ROC GAAP and U.S. GAAP
which have a material effect on our net income as reported under ROC GAAP,
relate to impairment of goodwill and compensation expense pertaining to bonuses
to employees, directors and supervisors.

     Effective January 1, 2002, we adopted U.S. SFAS No. 142; "Goodwill and
other Intangible Assets", which requires that goodwill no longer be amortized,
and instead, be tested for impairment on a periodic basis. In conjunction with
the implementation of U.S. SFAS No. 142, we completed a goodwill impairment
review as of January 1, 2002 using a fair value based approach in accordance
with the provision of the standard and found no impairment. Based on
acquisitions completed as of June 30, 2001, application of the goodwill
non-amortization provisions resulted in a decrease in amortization of
approximately $10.1 million for 2002 which continues to be recorded for ROC GAAP
purposes. We completed our annual goodwill impairment test at December 31, 2002
and found no impairment.

     We paid bonuses to ASE Test Taiwan's employees in 2000 in the form of cash
and expect to pay all or a portion of employee bonuses in future periods in the
form of cash. We did not, however, pay such a bonus in 2001 and 2002. Under ROC
GAAP, cash bonuses are charged against retained earnings after such
appropriations are approved by the board of directors and the shareholders in
the following year. In addition to ASE Test Taiwan's regular bonus plan,
employees of ASE Test Taiwan are eligible to participate in our parent company
ASE, Inc.'s share bonus plan. Under ASE, Inc.'s share bonus plan, ASE, Inc.
grants bonuses in the form of its common shares which are issued from the
capitalization of its retained earnings to employees.

     Under U.S. GAAP, we would be required to charge the market value of the
employee bonus shares to employee compensation expense in the period for which
they relate, correspondingly reducing our net income and income per share
calculated in accordance with U.S. GAAP. However, since the amount and form of
the payment of the compensation is subject to board of directors and
shareholder approval and only determinable at the annual shareholders' meeting,
which is generally held after the issuance of our financial statements, under
U.S. GAAP the compensation expense is initially accrued based on management's
estimate regarding the amount to be paid and the market value of the ordinary
shares issued as payment of all or any part of the bonus is recorded. Any
difference between the initially accrued amount and the fair market value of
the bonus shares paid is recognized in the year approved by the board of
directors and shareholders. We estimate that the regular annual employees'
bonuses, including cash and shares, will be approximately three to four months'
salaries and wages.

     In addition to bonus shares granted under ASE, Inc.'s regular bonus plan,
ASE, Inc. granted a special share bonus to ASE Test Taiwan's employees in 2000.
The amount of the adjustment for market price for the purpose of U.S. GAAP
reconciliation for the special share bonus paid in 2000 is being amortized over
a period of three years commencing in the second quarter of 2001, reflecting
the mutual understanding that an additional three years of service would be
required from employees who received this special share bonus.


                                      43
<PAGE>

     In May 2001, the Company's directors exercised certain stock options for
2,480,000 shares at $3.5 per share under the 1996 stock option plan. ASE, Inc.
was concerned about potential dilution caused by the sales of these shares into
the marketplace and decided, based on a resolution of its board of directors,
to purchase these shares from the directors at the approximate market price of
$14.27 per share on the day the options were exercised. Under ROC GAAP, such a
share purchase is accounted for as additional investment in our shares by ASE,
Inc. However, under U.S. GAAP, when shares are purchased from employees within
six months after the exercise of vested options, the compensation expense shall
be measured as the difference between the market price of the shares on the
date of purchase and the market price on the date the options were issued.
Consequently, the difference amounting to $26,710,000 arising from such share
purchase by ASE, Inc. was recorded by the Company as compensation expenses and
credited to capital surplus. See Note 26 of Notes to Consolidated Financial
Statements.

Recent U.S. GAAP Accounting Pronouncements

     We are required by SEC Staff Accounting Bulletin No. 74 to disclose the
impact that recently issued accounting standards will have on our financial
statements when adopted in a future period, as well as make certain disclosure
about recently issued accounting standards.

     In June 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires,
among other things, retirement obligations to be recognized when they are
incurred and displayed as liabilities, with a corresponding amount capitalized
as part of the related long-lived asset. The capitalized element is required to
be expensed using a systematic and rational method over its useful life. SFAS
No. 143 was adopted by us on January 1, 2003 and is not expected to have a
material impact on our U.S. GAAP financial results.

     In April 2002, the FASB issued SFAS No.145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No.13, and Technical
Corrections". Among other things, this statement rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", which required all
gains and losses from the early extinguishment of debt to be aggregated and, if
material classified as extraordinary. This statement now requires those gains
and losses to be classified as unusual and infrequently occurring events and
transactions. The statement was effective upon issuance in April 2002 for
prospective transactions. The adoption of this statement would require the
Company to reclassify the extraordinary loss recognized for ROC GAAP to unusual
and infrequent events for U.S. GAAP. As this statement is for prospective
transactions, there is no impact to our financial information under U.S. GAAP.

     In July 2002, the FASB issued SFAS No.146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No.146 requires that a
liability for a cost associated with an exit or disposal activity should be
measured at fair value and recorded when it meets the definition of a liability
in FASB Concepts Statement No.6, "Elements of Financial Statements". SFAS No.
146 superceded EITF No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in Restructuring)", which required recognition of a liability
for costs associated with an exit or disposal activity when the company
committed to an exit/disposal plan. SFAS No.146 is effective for exit or
disposal activities initiated after December 31, 2002. Restatement of prior
periods is not required. SFAS No.146 applies to future restructuring activities
and the application of SFAS No.146 has no impact on our U.S. GAAP financial
information.

     In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation--Transition and Disclosure", and amends FASB No.123 "Accounting
for Stock Based Compensation". This statement provides alternative methods of
transition for an entity that voluntarily changes to the fair value based
method of accounting for stock--based employee compensation. It also amends the
disclosure provisions of that statement to require prominent disclosure about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. This statement is effective
January 1, 2003. We have elected not to account for stock-based employee
compensation using the fair value based method of accounting set forth in SFAS
No.123 and No.128, but to continue to provide the disclosure requirements under
SFAS No.123. Accordingly, this statement will not affect our financial
statements until we decide to adopt the fair value based method of accounting
set forth in SFAS No.123 and No.148.

     In November 2002, the FASB issued Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". The interpretation elaborates
on the existing disclosure requirements for most guarantees, including loan
guarantees such as standby


                                      44
<PAGE>

letters of credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair value,
or market value, of the obligations it assumes under the guarantee and must
disclose that information on its interim and annual financial statements. The
provisions related to recognizing a liability at inception of the guarantee for
the fair value of the guarantor's obligations does not apply to product
warranties or to guarantees accounted for as derivatives. The initial
recognition and initial measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. We currently believe the
adoption of recognition and initial measurement requirements of FIN 45 will not
have a material impact on our financial position, cash flows or results of
operations.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities--an Interpretation of Accounting Research Bulletin (ARB) No.
51". FIN 46 requires the primary beneficiary to consolidate a variable interest
entity (VIE) if it has a variable interest that will absorb a majority of the
entity's expected losses if they occur, receive a majority of the entity's
expected residual returns if they occur, or both. FIN 46 applies immediately to
VIEs created after January 31, 2003, and to VIEs in which the entity obtains an
interest after that date. For VIEs acquired before February 1, 2003, the
effective date for compliance by us is July 1, 2003. We are currently in the
process of determining the impact of this statement on our results of
operations, financial position and cash flows.

     In November 2002, the EITF reached a consensus on EITF 00-21, "Revenue
Arrangements with Multiple Deliverables", related to the timing of revenue
recognition for arrangements in which goods or services or both are delivered
separately in a bundled sales arrangement. The EITF requires that when the
deliverables included in this type of arrangement meet certain criteria they
should be accounted for separately as separate units of accounting. This may
result in a difference in the timing of revenue recognition but will not result
in a change in the total amount of revenue recognized in a bundled sales
arrangement. The allocation of revenue to the separate deliverables is based on
the relative fair value of each item. If the fair value is not available for
the delivered items then the residual method must be used. This method requires
that the amount allocated to the undelivered items in the arrangement is their
full fair value. This would result in the discount, if any, being allocated to
the delivered items. This consensus is effective prospectively for arrangements
entered into in fiscal periods beginning after June 15, 2003. We will apply
this consensus to our future multiple deliverable transactions and we do not
believe it has an impact on our current operations, financial position and cash
flows.

     In April 2003, the FASB issued SFAS No. 149, "Amendment to Statement 133
on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is applied prospectively and is effective for contracts
entered into or modified after June 30, 2003. We have not determined the
effect, if any, that SFAS No. 149 will have on our Consolidated Financial
Statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". The
Statement establishes standards for how an issuer classifies and measures
certain financial instruments. This Statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Statement requires that certain financial instruments that, under
previous guidance, could be accounted for as equity be classified as
liabilities, or assets in some circumstances. This Statement does not apply to
features embedded in a financial instrument that is not a derivative in its
entirety. The Statement also requires disclosures about alternative ways of
settling the instruments and the capital structure of entities whose shares are
mandatorily redeemable. We do not expect the adoption of SFAS No. 150 to have
an impact on our financial statements.

LIQUIDITY AND CAPITAL RESOURCES

     We have historically met a significant portion of our cash requirements
from cash generated from operations and, prior to our initial public offering
in June 1996, capital contributions by ASE, Inc. In addition, we have generated
cash from the exercise of stock options granted under our various share option
plans. From time to time, we have incurred short-term and long-term
indebtedness. Our primary uses of cash have been to fund capital expenditures
related to the expansion of our facilities and operations and for working
capital requirements. If adequate funds are not available on satisfactory
terms, we may be forced to curtail our expansion plans. Moreover, our ability
to meet our working capital needs from cash flow from operations will be
affected by the demand for our testing and packaging services, which in turn
may be affected by several factors. Many of these factors are outside of our
control, such as economic downturns and declines in the prices of our services
caused by a downturn in the


                                      45
<PAGE>

semiconductor industry. "See Item 3. Key Information--Risk Factors--Risks
Relating to Our Business--Our operating results are subject to significant
fluctuations, which would adversely affect the market value of your
investment". The average selling prices of our testing and packaging services
are likely to be subject to further downward pressure in the future. To the
extent we do not generate sufficient cash flow from our operations to meet our
cash requirements, we will have to rely on external financing. Other than as
described in "--Off-Balance Sheet Arrangements", we have not historically
relied, and we do not plan to rely in the foreseeable future, on off-balance
sheet financing arrangements to finance our working capital or capacity
expansion. Our net cash generated from operations (after working capital
requirements) was $103.9 million in 2002, $147.0 million in 2001 and $203.6
million in 2000. Our cash and cash equivalents are primarily held in U.S.
dollars.

     Net cash provided by operating activities amounted to $103.9 million for
2002, partly as a result of adjusting for non-cash depreciation and
amortization of $154.3 million. Net cash provided by operating activities
amounted to $147.0 million for 2001, partly as a result of adjusting for
non-cash depreciation and amortization of $144.9 million. The decline in net
cash generated by operating activities was primarily a result of a net loss of
$81.3 million in 2002, compared to a net loss of $45.8 million in 2001.
Depreciation and amortization increased in 2002 compared to 2001 primarily due
to an increase in capital expenditures in 2002. Our net cash provided by
operating activities amounted to $203.6 million for 2000, partly as a result of
adjusting for non-cash depreciation and amortization of $117.5 million. The
decline in net cash generated by operating activities in 2001 compared to 2000
was primarily a result of net loss of $45.8 million in 2001, compared to a net
profit of $107.2 million in 2000. Depreciation and amortization increased in
2001 compared to 2000 primarily due to the full year effect of our capacity
expansion in 2000.

     Net cash used in investing activities decreased to $131.5 million in 2002
from $144.2 million in 2001. This decrease reflected decreases in acquisitions
of long-term investments in shares of stock and short-term investments, which
was partially offset by the purchase of the shares of ISE Labs. Net cash used
in investing activities decreased to $144.2 million in 2001 from $367.4 million
in 2000. This decrease was primarily due to a significant decrease in the
acquisition of machinery and equipment for our testing and packaging operations
to $104.2 million in 2001 from $413.2 million in 2000.

     Net cash provided by financing activities in 2002 amounted to $38.7
million. This amount primarily reflected proceeds from long-term debt of $41.9
million, short-term debt of $34.1 million and issuance of ordinary shares of
$21.0 million, partially offset by repayment of long-term debts of $58.2
million. Net cash used in financing activities in 2001 amounted to $52.8
million. This amount primarily reflected a decrease in payables for fixed
assets of $39.3 million. Net cash provided by financing activities in 2000
amounted to $277.8 million, primarily reflecting proceeds of $271.8 million
from our offering of capital shares in July 2000.

     We incurred capital expenditures of $126 million in 2002, $104 million in
2001 and $413 million in 2000. These expenditures were incurred primarily for
the acquisition of new testing and packaging equipment and the expansion of
existing facilities. As of December 31, 2002, we had commitments of $34.9
million for capital expenditures. We have projected capital expenditures in
2003 of approximately $150 million, primarily in connection with the
acquisition of additional testing and packaging equipment and facility
improvement. However, the actual amount of capital expenditures may vary from
those budgeted for a variety of reasons, including changes in market
conditions, unavailability or changes in scheduled delivery of specific
equipment, changes in interest rates and other factors. In addition, we expect
to continue to expand capacity in future periods. We expect to finance these
expenditures from cash flow from operations and, when necessary, through debt
or equity financing.

     As of December 31, 2002, our primary source of liquidity was $118.8
million of cash and cash equivalents and $2.5 million of short-term
investments. Our short-term investments primarily consisted of investments in
fixed income mutual funds. As of December 31, 2002, we had total availability
under existing short-term lines of credit of $135.0 million, of which we had
borrowed $44.0 million. The interest rate for borrowings under these facilities
ranged from 1.78% to 2.57% per year as of December 31, 2002, as compared to
2.65% to 4.05% per year as of December 31, 2001. All of our short-term loans
are revolving facilities with a term of one year, each of which may be extended
on an annual basis with lender consent. We believe that our existing credit
lines under our short-term loan facilities, together with cash generated from
our operations, are sufficient to finance our working capital needs for the
next 12 months. As of December 31, 2002, we had working capital of $64.4
million.

     Our long-term liabilities consist primarily of bank loans. As of December
31, 2002, we had outstanding long-term bank loans, less current portion, of
$244.3 million. These long-term bank loans carried variable interest rates


                                      46
<PAGE>

which ranged between 2.86% and 7.92% per year as of December 31, 2002, as
compared to 2.91% to 7.92% per year as of December 31, 2001. We have pledged a
substantial portion of our assets, with a carrying value of $140.0 million as
of December 31, 2002, to secure our obligations under our short-term and
long-term facilities.

     In June 1999, our wholly-owned subsidiary, ASE Test Finance Limited,
issued $160 million in aggregate principal amount of 1% guaranteed convertible
notes due 2004 to fund the acquisitions of ISE Labs and ASE Korea. These notes
are convertible into our shares. These notes, which mature in July 2004 and,
unless previously redeemed, converted or purchased and cancelled, will be
redeemed at 136.92% of the principal amount in U.S. dollar at maturity. These
notes are also convertible at the option of the holders from December 29, 1999
through July 1, 2004. In 2000, $0.11 million in aggregate principal amount of
the convertible notes were converted into our shares. No conversions were made
in 2001 and 2002.

     In June 2003, ASE Test Finance Limited entered into a five-year syndicated
credit facility, for which Citibank N.A., Taipei Branch acted as the lead
arranger. The total commitments under the facility amounted to $150 million. We
plan to use the loan to refinance a portion of our $160 million 1% guaranteed
convertible notes due 2004. We and our wholly-owned subsidiary, ASE Test, Inc.,
and ASE, Inc. have provided guarantee for ASE Test Finance Limited's payment
obligations under the facility.

     Our long-term loans and facilities contain various financial and other
covenants that could trigger a requirement for early payment. Among other
things, these covenants require the maintenance of certain financial ratios,
such as liquidity ratio, indebtedness ratio, interest coverage ratio and other
technical requirements. In general, covenants in the agreements governing our
existing debt, and debt we may incur in the future, may materially restrict out
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. A default under one
debt instrument may also trigger cross-defaults under our other debt
instruments. An event of default under any debt instrument, if not cured or
waived, could have a material adverse effect on our liquidity, as well as our
financial condition and operations.

     The reduced levels of operating cash flow as a result of the downturn in
the semiconductor industry resulted in the failure of ISE Labs to comply with
the monthly and quarterly financial ratios under a $10 million bank loan
agreement for the months from October 2002 through February 2003 and for the
fourth quarter of 2002, respectively. These breaches constituted events of
default and, as a result, the bank declared all of ISE Labs obligations under
the agreement immediately due and payable. ISE Labs subsequently obtained a
wavier of its breaches from the bank, repaid all of the amounts owed under the
loan and terminated the loan agreement. See "Item 3. Key Factors--Risk
Factors--Risk Related to Our Business--Restrictive covenants and broad default
provisions in the agreements governing our existing debt may materially
restrict our operations as well as adversely affect our liquidity, financial
condition and results of operations".

     The following tables set forth our contractual obligations and commitments
with definitive payment terms which will require significant cash outlays in
the future, as of December 31, 2002:

<TABLE>
                                                           Payments Due by Period
                                    ---------------------------------------------------------------------
                                                                (in millions)
                                    ---------------------------------------------------------------------
                                                                                                 2007 and
    Contractual Obligations            Total       2003        2004        2005        2006    thereafter
---------------------------------   ---------   ---------   ---------   ---------   ---------  ----------
<S>                                     <C>          <C>        <C>          <C>         <C>          <C>
Long-term Debt ..................       267.2        30.7       212.9        11.1        10.3         2.2
Capital Lease Obligations .......        12.8         5.0         4.8         3.0          --          --
Operating Leases ................        45.3         7.6         7.6         7.7         7.1        15.3
</TABLE>

     We believe that our existing cash and cash equivalents, short-term
investments, expected cash flow from operations and existing credit lines under
our short-term loan facilities will be sufficient to meet our capital
expenditures, working capital, cash obligations under our existing debt and
lease arrangements, and other requirements through the end of 2003. We have
contractual obligations of $290.4 million due in the next three years. We
intend to meet our payment obligations through the expected cash flow from
operations, long-term debt and the issuance of additional equity or
equity-linked securities. We will continue to evaluate our capital structure
and may decide from time to time to increase or decrease our financial leverage
through equity offerings or debt borrowings. The issuance of additional equity
or equity-linked securities may result in additional dilution to our
shareholders.


                                      47
<PAGE>

     From time to time, we evaluate possible investments, acquisitions or
divestments and may, if a suitable opportunity arises, make an investment,
acquisition or divestment. We believe that after taking into account amounts
available under existing banking facilities, we will have adequate working
capital to meet our current requirements.

Off-Balance Sheet Arrangements

     We have, from time to time, entered into interest rate swap transactions
to hedge our interest rate exposure. As of December 31, 2002, there were no
outstanding interest rate swap transactions. In addition, we have entered into
foreign currency option contracts to hedge our existing assets and liabilities
denominated in foreign currencies and identifiable foreign currency purchase
commitments. As of December 31, 2002, we had no foreign currency option
contracts outstanding. See "Item 11. Quantitative and Qualitative Disclosures
About Market Risk".

Inflation

     We do not believe that inflation in Taiwan has had a material impact on
our results of operations.

RESEARCH AND DEVELOPMENT

     Our research and development efforts have focused primarily on improving
the efficiency and technology of our testing services. The efforts include
developing software for parallel testing of logic/mixed-signal semiconductors,
rapid automatic generation and cross-platform conversion of test programs to
test logic/mixed-signal semiconductors, and automatic code generation for
converting and writing testing programs, testing new products using existing
machines and providing customers remote access to monitor test results. We are
also continuing development of interface designs to provide for high-frequency
testing by minimizing electrical noise. We work closely with our customers in
designing and modifying testing software and with equipment vendors to increase
the efficiency and reliability of testing equipment. Our research and
development operations also include a mechanical engineering group, which
currently designs handler kits for semiconductor testing and wafer probing, as
well as software to optimize capacity utilization.

     As of December 31, 2002, we employed 443 professionals in our research and
development activities. In addition, other management and operational personnel
are also involved in research and development activities but are not separately
identified as research and development professionals. We incurred research and
development expenditures of $12.1 million, $14.4 million and $18.3 million in
2000, 2001 and 2002, representing approximately 2.7%, 4.8% and 6.1% of our net
revenues, respectively. We have historically expensed all research and
development costs as incurred and none is currently capitalized. ASE, Inc. has
historically shared its research and development relating to our packaging
operations with ASE Test Malaysia at no cost. While such arrangements are
expected to continue in the future, no assurances can be given that ASE, Inc.
will continue providing research and development at no cost, or at all.

Item 6.  Directors, Senior Management and Employees.

DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICES

Directors

     The following table sets forth information with respect to our directors
as of December 31, 2002. With the exception of Joseph Tung and Sim Guan Seng,
who were first appointed as directors in February 1996, Mr. Jeffrey Chen, who
was first appointed in March 1998, Mr. Wang Yung-Kang, who was first appointed
in April 1998, Mr. Raymond Lo, who was first appointed in May 2001, Mr.
Kanapathi A/L Kuppusamy, who was first appointed in August 2000, and Mr. Alan
Tien-Cheng Cheng, who was first appointed in June 1999, all of our directors
were first appointed in June 1996. Except for Mr. Jeffrey Chen and Mr. Joseph
Tung, whose terms have no expiration date, the current term of our directors
expires on the date of the annual general shareholders' meeting in 2005. As of
May 31, 2003, our directors and executive officers as a group held options
covering an aggregate of 4,588,000 shares, of which options with respect to
2,615,500 shares were exercisable as of that date.


                                      48
<PAGE>

<TABLE>
              Name                     Age                      Position
----------------------------------   ------    ---------------------------------------------
<S>                                    <C>     <C>
Richard H.P. Chang................     56      Chairman and Chief Executive Officer
Leonard Y. Liu....................     61      Director
David Pan.........................     58      Director and President
Jeffrey Chen......................     39      Director
Chin Ko-Chien.....................     57      Director
Wang Yung-Kang....................     62      Director
Alan Tien-Cheng Cheng.............     57      Director
Joseph Tung.......................     44      Director
Albert C.S. Yu....................     51      Director
David D.H. Tsang..................     61      Director
Sim Guan Seng.....................     43      Director
Raymond Lo........................     49      Director and President of ASE Test Taiwan
Kanapathi A/L Kuppusamy...........     51      Director and President of ASE Test Malaysia
</TABLE>

     Richard H.P. Chang has served as our Chairman since 2001 and our Chief
Executive Officer since February 2003. Mr. Chang served as our Vice Chairman
from 1996 to 2001. Mr. Chang is also the Vice Chairman and President of ASE,
Inc. He holds a degree in industrial engineering from Chung-Yuan University in
Taiwan. Mr. Chang is the brother of Jason C.S. Chang, the Chairman and Chief
Executive Officer of ASE, Inc.

     Leonard Y. Liu has served as a director of our company since 1996. Mr. Liu
was our Chief Executive Officer from November 1999 to January 2003, when he
elected to retire from that position. During that period, he also served as the
President of ASE, Inc. Prior to joining our company, Mr. Liu was the Chairman,
President and Chief Executive Officer of Walker Interactive Systems, Inc., a
software company. He also serves as a director of Cadence Design Systems, Inc.,
a software company. He holds a degree in electrical engineering from the
National Taiwan University and a doctorate in electrical engineering and
computer science from Princeton University.

     David Pan has served as a director of our company since 1996. Dr. Pan has
served as our President since December 1995 and President and Chief Executive
Officer of ISE Labs since December 1999. Dr. Pan has also served as director of
ASE, Inc. since April 1997. Prior to joining our company, Dr. Pan was the Vice
President for engineering and manufacturing at Ultratech Stepper, Inc., a
manufacturer of photolithography equipment used in semiconductor manufacturing.
He holds a degree in physics from the University of Illinois and a masters
degree and doctorate in physics from the University of California at Berkeley.

     Jeffrey Chen has served as a director of our company since 1998 and a
director of ASE, Inc. since June 19, 2003. He served as our Chief Financial
Officer from July 1998 to August 6, 2002. Mr. Chen has also served as Vice
President of ASE, Inc. since May 2002 and as Assistant Vice President of the
President's Office at ASE, Inc. since November 1994. Prior to joining ASE,
Inc., Mr. Chen worked in the corporate banking department of Citibank, N.A., in
Taipei and as the Vice President of corporate finance at Bankers Trust in
Taipei. He holds a degree in finance and economics from Simon Fraser University
in Canada and a masters degree in business administration from the University
of British Columbia in Canada.

     Chin Ko-Chien has served as a director of our company since 1996 and a
director of ASE Test Taiwan since December 1994. Mr. Chin is also a director of
ASE, Inc. where he has worked since 1984. He holds a degree in marine
engineering from the National Taiwan Ocean University in Taiwan.

     Wang Yung-Kang has served as a director of our company since 1998 and is
also currently a Senior Vice President of ASE, Inc., serving in various
administrative capacities since first joining ASE, Inc. in 1987. Prior to
joining ASE, Inc., Mr. Wang had over twenty years of experience in the
construction industry in Taiwan, most recently as a manager at Yuan Tai
Engineering Co. He holds a degree in civil engineering from Pingtung Technical
College in Taiwan.

     Alan Tien-Cheng Cheng has served as a director of our company since 1999
and is the Chairman of H.R. Silvine Electronics, Inc. as well as the Chairman
of Hung Ching Development & Construction Co., Ltd., an affiliate of ASE, Inc.
Mr. Cheng holds a degree in industrial engineering from Chung-Yuan University
in Taiwan and a masters degree in industrial engineering from Rhode Island
University.

     Joseph Tung has served as a director of our company since 1996. Mr. Tung
served as our Chief Financial Officer from 1996 until 1998. Mr. Tung has also
served as Chief Financial Officer of ASE, Inc. since January 1995, as a
director of ASE, Inc. since April 1997 and as Vice President of Hung Ching
Development & Construction Co.


                                      49
<PAGE>

Ltd., an affiliate of ASE, Inc., since December 1994. Prior to joining ASE,
Inc., he was Vice President of corporate banking at Citibank, N.A., in Taipei.
He holds a degree in economics from National Cheng-chi University in Taiwan and
a masters degree in business administration from the University of Southern
California.

     Albert C.S. Yu has served as a director of our company since 1996 and a
director of ASE Test Taiwan since December 1994. Mr. Yu has been the publisher
and chairman of the China Times, a Chinese language newspaper in Taiwan, since
1984. He holds a masters degree in business administration from San Francisco
University.

     David D. H. Tsang has served as a director of our company since 1996 and
is the founder and Chairman of Oak Technology, Inc., a semiconductor
manufacturer which is one of our customers. Prior to founding Oak Technology,
Inc. Mr. Tsang founded and served as President and Chairman of Data Technology
Corp., a manufacturer of disk controllers and high density disk drives, and
co-founded Xebec, a manufacturer of disk controllers. He holds a degree in
electrical engineering from Brigham Young University and a masters degree in
electrical engineering from the University of Santa Clara.

     Sim Guan Seng has served as a director of our company since 1996 and is a
certified public accountant in Singapore and the sole proprietor of Sim Guan
Seng & Co. Mr. Sim held various positions at Arthur Andersen and at GK Goh
Stockbrokers in Singapore from 1983 to 1991. He holds a degree in accountancy
from the National University of Singapore.

     Raymond Lo has served as President of ASE Test Taiwan since December 1999
after serving as Vice President of operations at ASE, Inc. since 1986. Mr. Lo
holds a degree in electrophysics from National Chiao-Tung University in Taiwan.

     Kanapathi A/L Kuppusamy was appointed President of ASE Test Malaysia in
June 1999. Prior to joining ASE Test Malaysia, Mr. Kanapathi worked for
Motorola, Inc. for 26 years, holding the positions of General Manager and Vice
President of the divisions in the Philippines, Mexico and Malaysia and Vice
President and Director of Manufacturing for Asia Region. He holds an advanced
diploma and masters degree in business administration from the University of
East Asia.

Executive Officers

     The following table sets forth information with respect to our executive
officers.

              Name                   Age                 Position
---------------------------------  ------   ------------------------------------
Richard H.P. Chang...............    56     Chairman and Chief Executive Officer
David Pan........................    58     President
Richard C. Wei...................    40     Chief Financial Officer
Raymond Lo.......................    49     President of ASE Test Taiwan
Kanapathi A/L Kuppusamy..........    51     President of ASE Test Malaysia
Tien Wu..........................    46     Chief Executive Officer of ISE Labs

     Richard H.P. Chang. See "--Directors".

     David Pan. See "--Directors".

     Richard C. Wei has served as our Chief Financial Officer since August
2002. He was previously the chief financial officer of ISE Labs. Prior to
joining our company in 2000, Mr. Wei was a research analyst with Morgan Stanley
and Lehman Brothers in Hong Kong, with responsibility to cover the technology
sector in non-Japan Asia, as well as a systems engineer with IBM in the United
States. He holds a B.S. degree in computer science from the Massachusetts
Institute of Technology and an MBA from Cornell University.

     Raymond Lo.  See "--Directors".

     Kanapathi A/L Kuppusamy.  See "--Directors".

     Tien Wu has served as the Chief Executive Officer of ISE Labs since March
2003 and a director of ASE, Inc. since June 19, 2003. Mr. Wu also serves as the
Vice President of worldwide marketing and strategy of ASE Group. Prior to join
ASE, Inc. in March 2000, he held various managerial positions with IBM. He
holds a B.S.C.E. degree


                                      50
<PAGE>

from the National Taiwan University and a M.S. degree in mechanical engineering
and a Ph.D. degree in applied mechanics from University of Pennsylvania.

     There is no family relationship between any of our directors and executive
officers and any other director and executive officer.

Audit Committee

     The audit committee has responsibility for, among other things, monitoring
the integrity of our financial reporting process and internal controls,
monitoring the independence of our independent auditors and our officers
performing internal audit functions and providing an avenue of communication
between the auditors, management, the officers performing internal audit
functions and the board of directors. The audit committee comprises Sim Guan
Seng, David D.H. Tsang and Albert C.S. Yu. The audit committee must meet at
least once annually and more frequently as circumstances dictate. The audit
committee must meet at least once annually with management officers performing
internal audit functions, independent auditors and as a committee to discuss
any matters that the audit committee or each of these groups believes should be
discussed.

COMPENSATION

     The aggregate compensation paid in 2002 to our directors and our executive
officers, including cash and share bonuses, was approximately $1.2 million. In
addition, options in respect of an aggregate of 240,000 shares were granted to
these persons in 2002. Such options have an exercise price of $6.1 and an
expiration date of November 7, 2012. We did not set aside for pension,
retirement or similar benefits for these persons in 2002. We also do not
provide any severance benefits for our directors.

Bonus Plans

     We award bonuses to our employees at ASE Test Taiwan based on overall
income and individual performance targets. All our employees at ASE Test Taiwan
are eligible to receive bonuses. Our employees at ASE Test Taiwan received an
aggregate of $0.0 million, $1.4 million and $1.9 million in 2002, 2001 and
2000, respectively, as cash bonuses.

     Starting in 1994, ASE, Inc. included employees of its subsidiaries in
Taiwan in its existing employee bonus plan. Pursuant to this arrangement, our
employees in Taiwan are eligible for cash and share bonuses based on ASE,
Inc.'s consolidated net income and our contribution to its consolidated net
income. We contributed $4.1 million to this bonus plan in 2000. We did not
contribute to the plan in 2001 and 2002. Bonuses are given in cash and shares
of ASE, Inc. common shares, valued at par, at the discretion of ASE, Inc.
Actual amounts of bonuses to individual employees are determined based upon the
employee meeting specified individual performance objectives. ASE, Inc. granted
no share awards to our employees in 2002. It granted an aggregate of 4,147,594
shares and 4,045,230 shares in 2001 and 2000, respectively, as share awards to
our employees with a fair market value at the date of grant of $3.3 million and
$9.3 million, respectively. We expect ASE, Inc. to continue this practice in
future periods. In addition to bonus shares granted under ASE, Inc.'s regular
bonus plan, ASE, Inc. granted a special bonus to ASE Test Taiwan's employees in
2000 of shares of ASE, Inc. We record a compensation charge in our consolidated
financial statements under U.S. GAAP based on the fair market value of the ASE,
Inc. shares awarded, calculated at the date of the relevant board of directors
meeting granting such awards. Because these were shares of ASE, Inc., the
issuance of these shares will not have a dilutive effect on our shareholders.
See "Item 5. Operating and Financial Review and Prospects -- Operating Results
and Trend Information -- U.S. GAAP Reconciliation" and Note 27 of Notes to
Consolidated Financial Statements.

Pension Plan

     ASE Test Taiwan has a defined benefit pension plan covering our regular
employees. Retirement benefits are based on length of service and average
salaries or wages in the last six months before retirement. ASE Test Taiwan
makes monthly contributions, at 2% of salaries and wages, to a pension fund
which is deposited in the name of, and administered by, the employees' pension
plan committee. Our accrued pension cost as of December 31, 2002 was $1.7
million. See Note 14 of Notes to the Consolidated Financial Statements.


                                      51
<PAGE>

EMPLOYEES

Employees

     We had 5,707, 4,882 and 5,315 employees as of December 31, 2000, 2001 and
2002, respectively. The following table sets forth certain information
concerning our employees as of the dates indicated:

                                                      As of December 31,
                                                ------------------------------
                                                  2000       2001       2002
                                                --------   --------   --------

Total .......................................      5,707      4,882      5,315
Function
Direct labor ................................      3,448      2,726      2,924
Indirect labor ..............................      1,291      1,280      1,410
Selling, general and administrative .........        582        527        538
Research and development ....................        386        349        443
Location
Taiwan ......................................      1,549      1,468      1,741
Malaysia ....................................      3,407      2,854      3,140
United States ...............................        523        438        361
Hong Kong ...................................        124         54          8
Singapore ...................................        104         68         65

     Our employees are not covered by any collective bargaining agreements. We
have not experienced any strikes or work stoppages by our employees and believe
that our relationship with our employees is good. Eligible employees may
participate in the ASE, Inc. employee share bonus plan and stock option plan as
well as the ASE Test share option plans.

SHARE OWNERSHIP

     The following table sets forth certain information with respect to our
officers and directors as of May 31, 2003.

<TABLE>
                                                   Percentage of
                                      Number of    Total Ordinary   Number of    Exercise Price
                                      Ordinary     Shares Issued     Options       of Options       Expiration Date of
      Officer or Director            Shares Held  and Outstanding    Held(1)          (US$)              Options
---------------------------------   ------------  ---------------  -----------   ---------------   --------------------
<S>                                   <C>                  <C>      <C>                <C>          <C>
Richard H.P. Chang...............     1,046,276            1.06     1,100,000          6.1 - 20     9/16/03 - 11/07/12
Leonard Y. Liu...................        40,000            0.04     1,400,000          6.1 - 20     9/16/03 - 11/07/12
David Pan........................         4,700            -          300,000          6.1 - 20     9/16/03 - 11/07/12
Jeffrey Chen.....................             -            -          247,000          6.1 - 25     9/16/03 - 11/07/12
Chin Ko-Chien....................        36,000            0.04       238,000          6.1 - 20     9/16/03 - 11/07/12
Wang Yung-Kang...................        20,000            0.02       186,000          6.1 - 20     9/16/03 - 11/07/12
Alan Tien-Cheng Cheng............             -            -           60,000          6.1 - 20     8/09/04 - 11/07/12
Joseph Tung......................       173,000            0.17       240,000          6.1 - 20     9/16/03 - 11/07/12
Richard C. Wei...................             -            -           40,000             8.875                1/04/11
Albert C.S. Yu...................        45,176            0.05       100,000          6.1 - 20     9/16/03 - 11/07/12
David D.H. Tsang.................        20,000            0.02        92,000          6.1 - 20     9/16/03 - 11/07/12
Sim Guan Seng....................             -            -                -                 -                     --
Raymond Lo.......................             -            -          240,000          6.1 - 25     8/09/09 - 11/07/12
Kanapathi A/L Kuppusamy..........             -            -          175,000          6.1 - 25     9/16/03 - 11/07/12
Tien Wu..........................        11,000            -          170,000        8.875 - 25      8/09/09 - 1/04/11
</TABLE>

---------
(1) Each option covers one ordinary share.

Share Option Plans

     We currently maintain five option plans which include plans adopted in
each year from 1996 to 2000. Under our share option plans, our directors,
employees, advisors and consultants and those of our affiliates may, at the


                                      52
<PAGE>

discretion of a committee of our directors administering the plan, be granted
options to purchase our shares at an exercise price of no less than their
market value on the date of grant. The committee has complete discretion to
determine which eligible individuals are to receive option grants, the number
of shares subject to each grant, the vesting schedule to be in effect for each
option grant and the maximum term for which each granted option is to remain
outstanding, up to a maximum term of five years, or in the case of the 1999 and
2000 option plans, ten years. Our board of directors may amend or modify the
plans at any time. As of December 31, 2002, an aggregate of 28,800,000 of our
shares had been reserved for issuance and 13,331,363 options to purchase our
shares remained outstanding under our various option plans. An aggregate of
7,480,000 options had been granted to the directors and executive officers of
ASE Test. Options granted under the various plans are exercisable at an
exercise price ranging from $3.0 to $25.0 per share. Options granted under
1996, 1997 and 1998 option plans will expire five years from the date of grant,
and in the case of the 1999 and 2000 plans, ten years from the date of grant.

     On August 13, 2002, ASE, Inc. adopted an employee stock option plan.
Pursuant to such plan, full-time employees of ASE, Inc. as well as the
full-time employees of ASE, Inc.'s domestic and foreign subsidiaries are
eligible to receive stock option grants. Under this plan, for a period of one
year from August 28, 2002, ASE, Inc. may issue up to 160,000,000 options on one
or more occasions. Each option entitles the holder to purchase one common share
of ASE, Inc. at a price equal to the closing market price on the date of the
option issuance. Each option is exercisable upon vesting for five years. Forty
percent of the options originally granted vest upon the second anniversary of
the grant date, and an additional 10% of the options originally granted vest
every six months thereafter. Each option expires at the end of the 10th year
following its issue date. The options are generally not transferable. As of
December 31, 2002, ASE, Inc. has issued a total of 145,989,000 options at an
exercise price of NT$20.8 per share.

Item 7.  Major Shareholders and Related Party Transactions.

MAJOR SHAREHOLDERS

     We are majority owned by Advanced Semiconductor Engineering, Inc., or ASE,
Inc. ASE, Inc. is one of the world's largest independent providers of
semiconductor packaging services and, through its majority ownership of us, one
of the largest independent providers of semiconductor testing services. ASE,
Inc. was founded by Mr. Jason C.S. Chang and his brother Mr. Richard H.P.
Chang, our Chairman and Chief Financial Officer, and was incorporated in 1984.
ASE, Inc.'s shares were listed on the Taiwan Stock Exchange in July 1989.

     As of May 31, 2003, ASE, Inc. indirectly owned approximately 50.52% of our
outstanding shares through two wholly-owned Bermuda subsidiaries, J&R Holding
Limited and ASE Holding Limited. ASE, Inc. is in a position to control actions
that require shareholders' approval, including the timing and payment of
dividends and the election of our entire board of directors.

     There have been no changes in our major shareholders or significant
changes in the amount of shares each major shareholder holds since January 1,
2000.

     The following table sets forth certain information regarding (1) ownership
of our shares by each person who is known to us to be the owner of more than 5%
of our shares and (2) the total amount owned by our executive officers and
directors as a group, as of May 31, 2003.

<TABLE>
                                                           Number of
             Identity of Person or Group                  Shares Owned       Percent Owned
------------------------------------------------------   ----------------    -------------
<S>                                                      <C>                      <C>
ASE, Inc..............................................   50,050,740(1)(2)         50.5%
Directors and executive officers as a group(3)........    1,396,152                1.4
</TABLE>

(1)  Owned through J&R Holding Limited and ASE Holding Limited, wholly-owned
     subsidiaries of ASE, Inc.

(2)  Excludes $50,000,000 aggregate principal amount of 1% guaranteed
     convertible notes issued by ASE Test Finance Limited currently held by
     ASE, Inc. Each note is convertible, at any time after December 29, 1999
     and before or on July 1, 2004, into one of our shares at a current
     conversion price of $24.75 per share.

(3)  Excludes shares issuable under currently exercisable options and shares
     held directly by J&R Holding Limited and ASE Holding Limited, which
     certain directors and executive officers may be deemed to beneficially
     own.


                                      53
<PAGE>

     ASE Holding Limited, one of ASE, Inc.'s subsidiaries through which ASE,
Inc. holds our shares, entered into a share purchase agreement dated as of May
19, 2001 with Jason C.S. Chang and our Chairman and Chief Executive Officer,
Richard H.P. Chang, under which ASE Holding Limited would purchase 2,480,000
shares from Jason C.S. Chang and Richard H.P. Chang upon the exercise of
certain options granted to them under our 1996 IPO option plan for an aggregate
purchase price of US$35,389,600. The closing date of this acquisition of shares
was May 22, 2001. ASE, Inc. engaged in this acquisition principally for
investment purposes.

     We are not aware of any arrangement which may at a subsequent date result
in a change of control of our company.

     As of May 31, 2003, approximately 99.1 million of our shares were
outstanding. We believe that, of such shares, approximately 37.3 million were
held by approximately 1,840 holders in the United States.

RELATED PARTY TRANSACTIONS

     ASE, Inc. and ASE Test from time to time jointly market turnkey services
provided at their respective Taiwan facilities. We expect that in future
periods a significant portion of our net revenues from testing services will
continue to be derived from customers who are also customers of ASE, Inc.

     In recent years, ASE, Inc. has made awards of its shares to our employees
at ASE Test Taiwan as part of their compensation, based in part on the
consolidated net income of ASE, Inc. and our contribution to the consolidated
income. ASE, Inc. granted 4,147,594 shares in 2001 and 4,045,230 shares in 2000
as stock awards to our employees at ASE Test Taiwan with a fair market value at
the time of grant of $3.3 million and $9.3 million, respectively. ASE, Inc. did
not grant any stock awards to our employees at ASE Test Taiwan in 2002.
However, we expect that ASE, Inc. will continue this practice in future
periods. In addition, ASE, Inc. granted a special share bonus to ASE Test
Taiwan's employees in 2000.

     ASE Test Taiwan has historically charged ASE, Inc. fees for the testing of
semiconductors packaged for a small number of customers that prefer to be
billed through ASE, Inc. for testing services performed by ASE Test Taiwan.
These fees amounted to NT$232.5 million (US$6.7 million), NT$178.3 million and
NT$142.7 million in 2002, 2001 and 2000, respectively. ASE, Inc. sold to ASE
Test Taiwan at book value a building at an aggregate price of NT$18.4 million
in 2000.

     ASE Test Malaysia has historically purchased a portion of the raw
materials used in its packaging operations, principally leadframes, from ASE,
Inc. when it faced a shortage in the supply of these types of raw materials.
These types of raw materials are typically sold by ASE, Inc. to ASE Test
Malaysia at book value. Purchases of raw materials by ASE Test Malaysia
amounted to NT$11.7 million (US$0.3 million), NT$17.2 million and NT$3.6
million in 2002, 2001 and 2000, respectively. In addition, ASE, Inc. purchased
raw materials, principally leadframes, from ASE Test Malaysia in an amount of
NT$0.1 million (US$0.003 million), NT$12.8 million and NT$11.9 million for
2002, 2001 and 2000, respectively.

     In 2001 and 2002, ASE Test Malaysia purchased raw materials, primarily
leadframes and substrates, from ASE Material in the aggregate amount of NT$79.3
million and NT$181.6 million (US$5.2 million), respectively. These types of raw
materials are typically sold by ASE Material to ASE Test Malaysia through ASE
Test Malaysia's relationship with ASE, Inc.

     ASE, Inc. has historically shared its research and development relating to
packaging with ASE Test Malaysia at no cost. While ASE, Inc. intends to
continue such arrangements in the future, if ASE, Inc. discontinued such
arrangements, ASE Test Malaysia would have to develop the capability for, and
bear the cost of, research and development relating to packaging.

     ASE, Inc. has in the past guaranteed some of our borrowings and may from
time to time provide similar guarantees in the future. Some of our directors
have in the past guaranteed our borrowings.

     In January 2000, ASE Chung Li and Hung Ching Development & Construction
Co. Ltd. ("Hung Ching"), an affiliate of ASE, Inc., entered into an agreement
for the development of buildings on land currently owned by ASE Chung Li. Under
the agreement, Hung Ching will bear all costs relating to the development. Upon
completion of the development, floor space in the buildings will be sold by
Hung Ching at prices to be negotiated between Hung Ching and the buyers. ASE
Chung Li and its affiliates will have priority in the purchase of the floor
space. In the


                                      54
<PAGE>

event that floor space is sold to persons other than ASE Chung Li, ASE Chung Li
will receive 25% of the selling price. The first phase of the development
project was the construction of a building with aggregate floor space of
approximately 800,000 square feet, which was completed in September 2000. The
total value of the first phase of the project, including land and the completed
building, is estimated at NT$2.0 billion. The new building is expected to house
ASE Chung Li's testing operations as well as part of the operations of other
ASE Group companies.

     In December 2001, ASE Test Taiwan and Hung Ching entered into an agreement
for the construction of a new building in the Nantze Export Processing Zone.
The contract was for an aggregate amount of NT$437 million (US$12 million). The
development project is expected to have an aggregate floor space of
approximately 337,000 square feet and will be used primarily for testing
operations.

     ASE Chung Li, a subsidiary of ASE, Inc., entered into a lease with ASE
Test Taiwan to lease floor space in a building located at 550-5, Section 1,
Chung-hwa Road, Fu-hwa Li, Chung Li City, Taiwan. An area of approximately
48,000 square feet was leased. The leased area will be used for production
facilities.

     We have based the above translations from NT dollars to U.S. dollars on
the noon buying rate certified by the Federal Reserve Bank of New York on
December 31, 2002, which was NT$34.7 to U.S.$1.00. The noon buying rate refers
to the rate in The City of New York for cable transfers in NT dollars per
U.S.$1.00 as certified for customs purposes by the Federal Reserve Bank of New
York. We make no representation that these NT dollar or U.S. dollar amounts
could be converted into NT dollars or U.S. dollars, as the case may be, at any
particular rate, the above rate or at all.

     On May 19, 2001, our former Chairman, Jason C.S. Chang and our Chairman
and Chief Executive Officer, Richard H.P. Chang, entered into a share purchase
agreement with ASE Holding Limited. See "Major Shareholders and Related Party
Transactions -- Major Shareholders".

Item 8.  Financial Information.

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     Consolidated financial statements are set forth under "Item 18. Financial
Statements".

LEGAL PROCEEDINGS

     We are not involved in material legal proceedings the outcome of which we
believe would have a material adverse effect on us.

     Criminal charges were brought in December 1998 by the district attorney
for Taipei against Jason C.S. Chang, Richard H.P. Chang, Chang Yao Hung-ying
and four others for alleged breach of fiduciary duties owned to Hung Ching, an
affiliate of ASE, Inc., in their capacity as directors and officer of Hung
Ching in connection with a land sale transaction in 1992 valued at
approximately NT$1.7 billion. We are not a party to these proceedings and we do
not expect that these charges will result in any liability to us. It was
alleged that the transaction in which Jason C.S. Chang sold the land to Hung
Ching unfairly benefited Jason C.S. Chang to the detriment of Hung Ching. Hung
Ching at that time was a privately owned company whose principal shareholders
were members of the Chang family. Ancillary charges were brought against Jason
C.S. Chang, Chang Yao Hung-ying and another for alleged forgery of Hung Ching
board resolutions relating to that transaction. In January 2001, the District
Court of Taipei rendered a judgment finding Jason C.S. Chang and Chang Yao
Hung-ying guilty of forgery of corporate and other documents and breach of
fiduciary duties and Richard H.P. Chang not guilty. In January 2002, the High
Court of Taiwan, ROC rendered a judgment relating to the appeal of the judgment
by the District Court of Taipei and found Jason C.S. Chang and Chang Yao
Hung-ying guilty and Richard H.P. Chang not guilty. In order to comply with the
particular requirements of the Singapore Companies Act, Jason C.S. Chang and
Chang Yao Hung-ying have both resigned as directors of the Company.

     Neither Jason C.S. Chang nor Chang Yao Hung-ying believes that he or she
committed any offense in connection with such transactions, and they appealed
the decision to the Supreme Court of Taiwan, ROC. On January 23, 2003, the
Supreme Court reversed the judgment of the High Court with respect to Jason
C.S. Chang and Chang Yao Hung-ying and remanded the case to the High Court for
retrial. If a final adverse judgment is rendered


                                      55
<PAGE>

against Jason C.S. Chang, he may be required under ROC law to resign as
Chairman and a director of ASE, Inc.

DIVIDEND POLICY

     To date, we have not distributed any dividends. We intend to retain our
earnings to finance the development and expansion of our business and
operations and do not intend to pay cash dividends for the foreseeable future.
See "Item 10. Additional Information - Memorandum and Articles of Association -
Dividends" and "Item 10. Additional Information - Memorandum and Articles of
Association - Stock Dividends and Rights Issue" for a description of the
provisions of our Memorandum and Articles of Association relating to dividend
distributions.

SIGNIFICANT CHANGES

     Other than those changes disclosed in "Legal Proceedings" above and the
purchase of the remaining portions of shares of ISE Labs, we have not
experienced any significant changes since the date of the annual financial
statements. See "Item 4. Information on the Company -- History and Development
of the Company -- ISE Labs".

Item 9.  Listing Details.

MARKET PRICE INFORMATION AND MARKETS

     Our shares are traded on the Nasdaq National Market under the symbol
"ASTSF". Public trading of our shares, par value $.25, commenced on June 6,
1996. Prior to that time, there was no public market for our shares. The
following table sets forth the high and low sales prices for the shares for the
periods indicated as reported by the Nasdaq National Market for the periods
indicated.

                                                     Ordinary Share Price(1)
                                                     -----------------------
                                                       High           Low
                                                     --------       --------
1998............................................      28.250         10.000
1999............................................      26.938         24.375
2000............................................      36.250          8.500
2001............................................      17.438          6.800
   First Quarter................................      17.438          8.000
   Second Quarter ..............................      15.450         10.250
   Third Quarter ...............................      12.910          6.800
   Fourth Quarter ..............................      14.130          7.300
2002............................................      16.680          2.880
   First Quarter................................      16.680         10.350
   Second Quarter...............................      16.500          8.750
   Third Quarter................................       9.800          3.520
   Fourth Quarter...............................       7.690          2.880
        December................................       6.895          3.600
2003
   First Quarter................................       4.700          2.580
      January...................................       4.700          2.750
      February..................................       3.420          2.670
      March.....................................       3.780          2.580
    Second Quarter
      April.....................................       3.650          2.900
      May.......................................       3.910          2.590
      June (through June 20) ...................       5.030          3.400

---------
(1)  All share prices are adjusted retroactively to reflect stock splits that
     were effected on February 8, 1998 and April 5, 1999. See "Item 14.
     Material Modifications to the Rights of Security Holders and Use of
     Proceeds".

Source: Nasdaq National Market database

     The last reported sale price of the shares on the Nasdaq National Market
as of June 20, 2003 was $4.80. As of December 31, 2002, there were 29 members
who were holders of record of our shares.


                                      56
<PAGE>

     Taiwan depositary shares, or TDSs, representing shares are listed on the
Taiwan Stock Exchange. The Taiwan Stock Exchange is an auction market where
securities traded are priced according to supply and demand through announced
bid and ask prices. Each TDS represents .0125 of one share and has undergone
corresponding stock splits effected on February 8, 1998 and April 5, 1999. In
limited circumstances, shareholders may deposit shares in exchange for TDSs,
subject to certain restrictions on the re-issuance of TDSs. The total number of
TDSs outstanding is limited so that additional TDSs may be re-issued only upon
cancellation by a current holder and subject to our approval. As of May 31,
2003, there were 845.1 million TDSs representing 10.6 million shares.

     Public trading of our TDSs commenced on January 8, 1998, under the symbol
"9101". Prior to that time, there was no public market for the TDSs. The Taiwan
Stock Exchange generally experiences greater fluctuations than the Nasdaq
National Market or other national stock exchanges or quotation systems. As a
result, TDSs generally experience greater price volatility than shares. The
following table sets forth the high and low bid prices for the TDSs as reported
by the Taiwan Stock Exchange for the periods indicated:

                                                        TDS Prices(1)
                                                  --------------------------
                                                     High            Low
                                                  ----------      ----------
1998 ..........................................    NT$25.50        NT$7.20
1999 ..........................................       20.50          12.20
2000 ..........................................       26.00           4.04
2001 ..........................................        8.40           3.10
First Quarter..................................        8.40           4.05
Second Quarter ................................        7.35           5.20
Third Quarter .................................        5.60           3.10
Fourth Quarter.................................        6.35           3.11
2002
First Quarter..................................        7.35           4.95
Second Quarter.................................        7.20           4.30
Third Quarter..................................        5.10           3.10
Fourth Quarter.................................        3.81           2.81
December.......................................        3.70           2.81
2003
First Quarter..................................        3.39           2.61
January........................................        3.39           2.90
February.......................................        3.10           2.86
March..........................................        2.90           2.61
Second Quarter
April..........................................        2.87           2.38
May............................................        2.39           1.77
June (through June 20).........................        3.92           2.20

---------
(1)  All TDS prices are adjusted retroactively to reflect stock splits that
     were effected on February 8, 1998 and April 5, 1999. See "Item 14.
     Material Modifications to the Rights of Security Holders and Use of
     Proceeds".

Source: Taiwan Stock Exchange database

     The last reported sale price of the TDSs on the Taiwan Stock Exchange was
NT$3.92 per TDS on June 20, 2003.

Item 10.  Additional Information.

MEMORANDUM AND ARTICLES OF ASSOCIATION

     Set forth below is a description of our share capital, Memorandum of
Association and Articles of Association including brief summaries of our
shareholders' rights and the laws of Singapore. The description is not complete
and is qualified by reference to Singapore law and our Articles of Association,
a copy of which is incorporated by reference into the exhibits hereto.


                                      57
<PAGE>

Objects and purposes

     Clause 3 of our Memorandum of Association provides us with a broad range
of purposes, including to carry on the business of investment, to acquire
intellectual property, to carry on the business of advising as to matters of
packing and testing integrated circuits, to advise on the administration and
organization of business, to package and test integrated circuits, to carry on
the business of general merchandise sales, to purchase or lease land and
buildings, to develop purchased land, to lease or license our property, to vary
or dispose of our investments, to carry on the business of agents for sales of
merchandise, to carry on related business, to acquire any business carrying on
the same business for which we are organized, to merge or amalgamate, to hold
securities and to lend money and raise money.

Directors

     We may have between two and fifteen directors, all of whom must be natural
persons. Holding of shares is not a qualification of a director. A director who
is not a member of the Company may nevertheless attend and speak at general
meetings of shareholders. The ordinary remuneration of directors is determined
by a resolution of members; however, directors may approve remuneration for
expenses incurred by them in their duties as directors and may also approve
remuneration for any director who is also an executive officer for his duties
as an officer.

     A director may be a party to or in any way interested in any contract or
arrangement or transaction to which the Company is a party or in which the
Company is in any way interested and he may hold and be remunerated in respect
of any office or place of profit (other than the office of auditor of the
Company or any subsidiary thereof) under the Company or any other company in
which the Company is in any way interested and he (or any firm of which he is a
member) may act in a professional capacity for the Company or any such other
company and be remunerated therefor and in any such case as aforesaid (save as
otherwise agreed) he may retain for his own absolute use and benefit all
profits and advantages accruing to him thereunder or in consequence thereof.

     There are no provisions in the Memorandum of Association or Articles of
Association mandating any age limit for retirement. However, the Singapore
Companies Act provides that any director over age 70 must vacate office at each
annual general meeting. He may, however, be reappointed at the same annual
general meeting.

     Directors may exercise all the powers of the Company to borrow money, to
mortgage or charge its undertaking, property and uncalled capital and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any third party.

Shares

     We have an authorized capital of $150,000,000 divided into 600,000,000
ordinary shares of par value $.25 each, resulting from the subdivision of
shares effected by us on February 8, 1998 and April 4, 1999. Our Company has
only one class of shares, each share having identical rights in all respects
and ranking equal with one another. Our Articles of Association provide that,
subject to the provisions of the Singapore Companies Act, we may issue shares
of a different class with preferential, deferred or other special rights or
restrictions as our board of directors may determine. Our board of directors
may also issue shares at a premium. If shares are issued at a premium, a sum
equal to the aggregate amount or value of the premium will be transferred to a
share premium account.

     As of May 31, 2003, 99,067,790 shares were issued and outstanding. All of
our shares are in registered form. Except in circumstances permitted by the
Singapore Companies Act, we can neither purchase our own shares nor grant any
financial assistance for the acquisition or proposed acquisition of our own
shares.

New Shares

     New shares may only be issued with the prior approval of our shareholders
in a general meeting. The approval, if granted, will lapse at the conclusion of
the next annual general meeting following the date the approval was granted or
the expiration of the period within which the next annual general meeting is
required by law to be held, whichever is earlier. Our shareholders have
provided our board of directors with the general authority to issue any
authorized but unissued shares prior to the next annual general meeting, or the
expiration of the period within which the next annual general meeting is
required by law to be held, whichever is earlier. Subject to the foregoing and
the provisions of the Singapore Companies Act, our board of directors may allot
and issue new shares with such rights and restrictions as they believe are
appropriate.


                                      58
<PAGE>

Members

     Only persons who are registered in our register of members are recognized
as members of our company. As of December 31, 2002, there were 29 members who
were holders of record of our shares. We will not, except as required by law,
recognize any equitable, contingent, future or partial interest in our shares
or any other rights in respect of our shares other than the rights of a member.
We may, on giving not less than 14 days' notice to the Registrar of Companies
and Businesses of Singapore, close our register of members for any time or
times except that we may not close the register for more than 30 days in the
aggregate in any calendar year.

Transfer of Shares

     There is no restriction on the transfer of fully paid shares except where
required by law or the listing rules or by-laws of any stock exchange on which
we are listed. Our directors may decline to register any transfer of our shares
which are not fully paid shares or shares on which we have a lien. Our shares
may be transferred upon the presentation of a duly signed instrument of
transfer in any form approved by our directors. Our directors may also decline
to register any instrument of transfer unless, among other things, it has been
duly stamped and is presented for registration together with the relevant share
certificate and such other evidence of title as our directors may require. We
will replace lost or destroyed share certificates if we are properly notified
and if the applicant pays a fee not exceeding two Singapore dollars and
furnishes any evidence and indemnity as our directors may require.

General Meetings of Members

     We are required to hold an annual general meeting each year not later than
fifteen months following the preceding annual general meeting. Our sixth annual
general meeting was held on June 27, 2002. Our directors may convene an
extraordinary general meeting whenever they think fit or if requested in
writing by two or more members holding not less than 10% of our paid-up share
capital. In addition, members holding not less than 10% of the paid-up capital
carrying the right of voting at general meetings may call for a meeting. Unless
otherwise required by law or by our Articles of Association, voting at general
meetings is by ordinary resolution requiring an affirmative vote of a simple
majority of the votes cast at that meeting. An ordinary resolution suffices,
for example, in respect of re-election of directors. A special resolution
requiring the affirmative vote of at least 75% of the votes cast at the meeting
is necessary for some matters under Singapore law, including:

     o    the voluntary winding-up of our Company;

     o    amendments to our Memorandum of Association and our Articles of
          Association;

     o    a change of name of our Company; or

     o    a reduction in our share capital, share premium account or capital
          redemption reserve fund.

     At least 21 days' prior notice in writing is required to convene a general
meeting for the purpose of passing a special resolution. A meeting to pass an
ordinary resolution generally requires at least 14 days' prior notice in
writing.

Voting Rights

     A member is entitled to attend, speak and vote at any of our general
meetings, whether in person or by proxy. Except as otherwise provided in our
Articles of Association, the quorum at any of our general meetings shall be
members holding in aggregate not less than one third of our total issued and
fully paid shares present in person or by proxy. Under our Articles of
Association, on a show of hands, every member present in person and by proxy
shall have one vote, and on a poll, every member present in person or by proxy
shall have one vote for each share of which he is the holder. A poll may be
demanded in some circumstances, including:

     o    by the chairman of the meeting;

     o    by any member present in person or by proxy and representing not less
          than 10% of the total voting rights of all members having the right
          to attend and vote at the meeting; or

     o    by any three members present in person or by proxy and entitled to
          vote.


                                      59
<PAGE>

Dividends

     Our members may in a general meeting by ordinary resolution declare
dividends. However, no dividend will be payable in excess of the amount
recommended by our board of directors. Our board of directors may also declare
an interim dividend. No dividend may be paid except out of our profits. Except
insofar as the rights attaching to the terms of issue of any share otherwise
provide, all dividends are paid pro rata among the members. Dividends unclaimed
for a period of six years after the initial date of declaration may be
forfeited.

Stock Dividends and Rights Issue

     Our directors may, with the approval of our members in a general meeting,
capitalize amounts from our Company's retained earnings and capital surplus and
distribute the same in the form of fully paid shares to our members in
proportion to their shareholdings.

Takeovers

     The Securities and Futures Act 2001 and the Singapore Code on Takeovers
and Mergers regulate the acquisition of shares of public companies. Any person
acquiring an interest, either on his own or together with parties acting in
concert with him, in 30% or more of the voting shares in our Company is
obligated to extend a takeover offer for our remaining voting shares in
accordance with the provisions of the Singapore Code on Takeovers and Mergers.

     "Parties acting in concert" include a company and its related and
associated companies, a company and its directors (including their close
relatives, related trusts and companies controlled by any of the directors,
their close relatives and related trusts), a company and its pension funds and
employee share schemes, a person and any investment company, unit trust or
other fund whose investment such person manages on a discretionary basis, a
financial or other professional adviser and its clients in respect of shares
held by the financial adviser and persons controlling, controlled by or under
the same control as the adviser and all the funds managed by the financial
adviser on a discretionary basis where the shareholdings of the financial
adviser and any of those funds in the client total 10.0% or more of the
client's equity share capital, directors of a company (including their close
relatives, related trusts and companies controlled by any of such directors,
their close relatives and related trusts) that is subject to an offer or where
the directors have reason to believe a bona fide offer for the company may be
imminent, partners, and an individual and his or her close relatives, related
trusts, any person who is accustomed to act in accordance with his instructions
and companies controlled by the individual, his or her close relatives, his or
her related trusts or any person who is accustomed to act in accordance with
his or her instructions.

     A mandatory takeover offer is also required to be made if a person
holding, either on his own or together with parties acting in concert with him,
between 30% and 50% (both inclusive) of the voting shares acquires additional
voting shares representing more than 1% of our voting shares in any six month
period. An offer for consideration other than cash must, subject to certain
exceptions, be accompanied by a cash alternative at not less than the highest
price paid by the offeror or parties acting in concert within the preceding six
month. In addition, the offeror must make an appropriate offer or proposal to
holders of our convertible securities and may also be required to make such an
offer to holders of securities of our subsidiaries which are convertible into
shares of our company.

Liquidation or Other Return of Capital

     On a winding-up or other return of capital, subject to any special rights
attaching to any other classes of our shares, holders of our shares will be
entitled to participate in any surplus assets in proportion to their
shareholdings. Our shareholders are not entitled to the benefits of a sinking
fund or redemption privileges.

Indemnity

     Our Articles of Association provide that, subject to the Singapore
Companies Act, our directors and officers will be indemnified by us against any
liability incurred by them in defending any proceedings, whether civil or
criminal, in respect of actions or omissions as an officer, director or
employee of our Company. We may not indemnify our directors and officers
against any liability which by law would otherwise attach to them in respect of
any negligence, default, breach of duty or breach of trust of which they may be
guilty in relation to our Company.


                                      60
<PAGE>

Limitations on Rights to Hold or Vote Shares

     Except as described in "-- Voting Rights" and "-- Takeovers" above, there
are no limitations imposed by Singapore law or by our Memorandum or Articles of
Association on the right of non-resident members to hold or vote our shares.

Minority Rights

     The rights of our minority members are protected under Section 216 of the
Singapore Companies Act, which gives the Singapore courts a general power to
make any order, upon application by any member of our Company, the court
believes is appropriate to remedy any of the following situations:

     o    the affairs of our Company being conducted or the powers of our
          directors being exercised in a manner oppressive to, or in disregard
          of the interests of, one or more of our members; or

     o    some act our Company having been done or being threatened or some
          resolution of our members having been passed or being proposed which
          unfairly discriminates against, or is otherwise prejudicial to, one
          or more of our members, including the applicant.

     Singapore courts have wide discretion as to the forms of relief they may
grant. Singapore courts may:

     o    direct or prohibit any act or cancel or vary any transaction or
          resolution;

     o    regulate the conduct of our Company's affairs in the future;

     o    authorize civil proceedings to be brought in the name of, or on
          behalf of, our Company by such person or persons and on such terms as
          the court may direct;

     o    provide for the purchase of the minority member's shares by our other
          members or by our Company itself and, in the case of a purchase of
          shares by us, a corresponding reduction of our share capital;

     o    provide that our Memorandum of Association or our Articles of
          Association be amended; or

     o    provide that our Company be wound up.

Transfer Agent and Registrar

     The transfer agent and registrar for the shares is The Bank of New York,
101 Barclay Street, New York, New York 10286; telephone number: (212) 495-1784.

MATERIAL CONTRACTS

Service Agreement dated as of August 1, 2002 between ASE Electronics (M) Sdn.
Bhd. and ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test
Malaysia's non-exclusive sales service and sales support agent in Europe and
North America for its products and services. For such services, our subsidiary
pays ASE (U.S.) 12% of their monthly incurred services associated costs and
expenses plus 5% or $189,000, whichever is lower. ASE (U.S.) agreed to
reimburse our subsidiary for expenses for any employee traveling to the U.S. or
Europe if such travel was necessary to ASE (U.S.)'s services. This agreement
will expire on July 31, 2003.

Service Agreement dated as of August 1, 2002 between ASE Test Inc. and ASE
(U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test Inc.'s
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE
(U.S.) 17% of their monthly incurred services associated costs and expenses
plus 5% or $267,750, whichever is lower. ASE (U.S.) agreed to reimburse our
subsidiary for expenses for any employee traveling to the U.S. or Europe if
such travel was necessary to ASE (U.S.)'s services. This agreement will expire
on July 31, 2003.


                                      61
<PAGE>

Commission Agreement dated as of August 1, 2002 between ASE Electronics (M)
Sdn, Bhd. and Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Test Malaysia's
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Malaysia, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2003.

Commission Agreement dated as of August 1, 2002 between ASE Test Inc. and
Gardex International Limited

     This contract established Gardex as our subsidiary, ASE Test Inc.'s
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Taiwan, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2003.

EXCHANGE CONTROLS

Singapore Exchange Controls

     There are currently no exchange controls in effect in Singapore that would
affect the import or export of capital, including the availability of cash or
cash equivalents for use by the Company's group or that would affect the
remittance of dividends, interest or other payments to nonresident holders of
the Company's securities.

ROC Exchange Controls

     The Foreign Exchange Control Statute and regulations of the ROC provide
that all foreign exchange transactions must be executed by banks designated to
engage in such transactions, by the Ministry of Finance or by the Central Bank
of China. Current regulations favor trade-related foreign exchange transactions
and Foreign Investment Approval investments. Consequently, foreign currency
earned from exports of merchandise and services may now be retained and used
freely by exporters, and all foreign currency needed for the importation of
merchandise and services may be purchased freely from the designated foreign
exchange banks.

     Trade aside, ROC companies and resident individuals may, without foreign
exchange approval, remit outside the ROC foreign currency of up to
U.S.$50,000,000 (or its equivalent) and U.S.$5,000,000 (or its equivalent)
respectively in each calendar year. In addition, ROC companies and resident
individuals may, without foreign exchange approval, remit into the ROC foreign
currency of up to U.S.$50,000,000 (or its equivalent) and U.S.$5,000,000 (or
its equivalent) respectively in each calendar year. The above limits apply to
remittances involving conversion of NT dollars to a foreign currency and vice
versa. A requirement is also imposed on all enterprises to register medium-and
long-term foreign debt with the Central Bank of China.

     In addition, foreign persons may, subject to specified requirements, but
without foreign exchange approval of the Central Bank of China, remit outside
and into the ROC foreign currencies of up to U.S.$100,000 (or its equivalent)
for each remittance. The above limit applies to remittances involving a
conversion of NT dollars to a foreign currency and vice versa. The above limit
does not, however, apply to the conversion of NT dollars into other currencies,
including U.S. dollars, from the proceeds of sale of any underlying shares
withdrawn from a depositary receipt facility.

TAXATION

Singapore Taxation

     The following discussion is a summary of the material Singapore income
tax, stamp duty and estate duty consequences of the purchase, ownership and
disposition of the shares to a holder of the shares that is not resident in
Singapore. This discussion does not purport to be a comprehensive description
of all of the tax considerations that may be relevant to a decision to
purchase, own or dispose of the shares and does not purport to deal with the
tax consequences applicable to all categories of investors. Shareholders and
prospective purchasers of our shares should consult their own tax advisors
concerning the tax consequences of their particular situations. This summary is
based on laws, regulations, treaty provisions and interpretations now in effect
and available as of the date of this annual report. The laws, regulations,
treaty provisions and interpretations, however, may change at any time, and any
change could be retroactive to the date of issuance of our shares. These laws,
regulations and treaty provisions are


                                      62
<PAGE>

also subject to various interpretations and the relevant tax authorities or the
courts could later disagree with the explanations or conclusions set out below.

   Dividends Distributions

     Singapore does not impose withholding tax on dividends paid to
non-resident shareholders.

     As we are not tax resident in Singapore and we do not carry on a trade or
business in Singapore, our dividends paid to our shareholders are not
considered to be income sourced in Singapore, and will therefore not be subject
to tax in Singapore, unless the dividends are received in Singapore or if they
are considered, in the hands of a particular shareholder, to be derived in
Singapore (for example where they constitute the income of a trade or business
carried out in Singapore).

   Gain on Disposal of Shares

     Singapore does not impose any tax on capital gains. However, there are
currently no specific laws or regulations which address the characterization of
capital gains; hence gains may be construed to be of an income nature and
subject to tax if they arise from activities which the Inland Revenue Authority
of Singapore regards as the carrying on of a trade or business in Singapore.

     Thus, any profits from the disposal of shares are not taxable in Singapore
unless the seller is regarded as having derived gains of an income nature, in
which case the disposal profits would be taxable.

   Stamp Duty

     There is no stamp duty payable in respect of the issuance and holding of
shares. Where existing shares are acquired in Singapore, stamp duty is payable
on the instrument of transfer of the shares at the rate of S$2.00 for every
S$1,000.00 of the consideration for, or market value of, the shares, whichever
is higher. The stamp duty is borne by the purchaser unless there is an
agreement to the contrary. Where an instrument of transfer is executed outside
Singapore or no instrument of transfer is executed, no stamp duty is payable on
the acquisition of existing shares. However, stamp duty would be payable if an
instrument of transfer which is executed outside Singapore is received in
Singapore.

   Estate Duty

     In the case of an individual who is not domiciled in Singapore, Singapore
estate duty is imposed on the value of immovable properties situated in
Singapore owned by such individual, subject to specific exemption limits.
Previously, movable assets of persons who are not domiciled in Singapore at the
time of death were also included. With respect to deaths occurring on or after
January 1, 2002, the movable assets of persons who are not domiciled in
Singapore at the time of death are exempt from estate duty. Therefore, an
individual holder of shares who is not domiciled in Singapore at the time of
his or her death will not be subject to Singapore estate duty on the value of
our shares. Individuals should consult their own tax advisors regarding the
Singapore estate duty consequences of their ownership of our shares.

   Tax Treaty

     Currently, Singapore does not have a comprehensive double taxation treaty
with the United States.

United States Taxation

     The following discussion describes the material U.S. federal income tax
consequences of the ownership and disposition of the shares by U.S. holders.
This summary is based on the Internal Revenue Code of 1986 (the "Code"),
Treasury Regulations, Revenue Rulings and judicial decisions, all of which are
subject to change. This discussion deals only with shares held as capital
assets within the meaning of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of such person's
particular circumstances or to holders subject to special rules, such as
insurance companies, tax-exempt entities, dealers in securities, traders in
securities that elect to mark to market, financial institutions, persons who
hold shares as a part of an integrated transaction for U.S. federal income tax
purposes, persons whose functional currency is not the U.S. dollar or persons
who own 10% or more of the voting stock of ASE Test.


                                      63
<PAGE>

     U.S. holders should consult their tax advisors with regard to the
application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any states or local
or foreign taxing jurisdiction.

     As used herein, a "U.S. holder" is a beneficial owner of shares that, for
U.S. federal income tax purposes is:

     (1) a citizen or resident of the United States;

     (2) a corporation organized under the laws of the U.S. or of any political
subdivision thereof; or

     (3) an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.

   Taxation of Dividends

     Any dividends a U.S. holder receives on the shares, other than certain pro
rata distributions of shares to all shareholders, will constitute foreign
source dividend income to the extent paid out of ASE Test's current and
accumulated earnings and profits, as calculated for U.S. federal income tax
purposes. The amount a U.S. holder will be required to include in income for
any dividend paid in a currency other than U.S. dollars will be equal to the
U.S. dollar value of the non-U.S. currency paid, calculated by reference to the
exchange rate in effect on the date the dividend is received. If a U.S. holder
realizes gain or loss on a sale or other disposition of such non-U.S. currency,
it will be U.S. source ordinary income or loss. U.S. holders will not be
entitled to a dividends received deduction for dividends received. Under
recently enacted legislation, dividends received by non-corporate U.S. holders
on shares may be subject to U.S. federal income tax at lower rates than other
types of ordinary income if certain conditions are met. U.S. holders should
consult their own tax advisors regarding the implications of this new
legislation in their particular circumstances.

     For foreign tax credit purposes, dividends paid by ASE Test on the shares
will generally constitute "passive income" or, in the case of U.S. holders that
are financial services providers, may be, "financial services income."

   Taxation of Capital Gains

     A U.S. holder will recognize capital gain or loss for U.S. federal income
tax purposes on a sale or other disposition of shares in the same manner as on
the sale or disposition of any other shares held as capital assets. Such gain
or loss, if any, will generally be U.S. source income or loss. U.S. holders
should consult their tax advisors regarding the treatment of capital gains,
which may be taxed at lower rates than ordinary income for non-corporate
taxpayers, and capital losses the deductibility of which may be limited.

DOCUMENTS ON DISPLAY

     It is possible to read and copy documents referred to in this annual
report that have been filed with the SEC at the SEC's public reference rooms in
Washington, D.C., New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the reference rooms. Documents filed
or furnished by us via EDGAR are available from the SEC's website at:
http://www.sec.gov.

Item 11.  Quantitative and Qualitative Disclosures About Market Risk.

     Our exposure to financial market risks relates primarily to changes in
interest rates and foreign exchange rates. To mitigate these risks, we have
occasionally utilized derivative financial instruments, the application of
which was primarily to manage these exposures and not for speculative purposes.

FOREIGN CURRENCY EXCHANGE RATE RISK

     Our foreign currency exposures give rise to market risk associated with
exchange rate movements against the NT dollar, U.S. dollar and Malaysian
ringgit. Our liabilities as of December 31, 2002 include liabilities
denominated in U.S. dollars, NT dollars, Malaysian ringgit and other
currencies. As of December 31, 2002, approximately 37.0% of our cash and
accounts receivable and receivable from related parties were denominated in
U.S. dollars, approximately 59.3% in NT dollars, approximately 0.3% in
Malaysian ringgit and approximately 3.4% in other


                                      64
<PAGE>

currencies. As of December 31, 2002, approximately 68.7% of our accounts
payable and payable for fixed assets were denominated in U.S. dollars,
approximately 10.9% in NT dollars, approximately 5.5% in Malaysian ringgit and
approximately 14.9% in other currencies. In addition, a substantial portion of
our capital expenditures primarily for the purchase of testing and packaging
equipment, has been, and is expected to continue to be, denominated primarily
in U.S. dollar with the remainder in Japanese yen. To protect against
reductions in value and the volatility of future cash flows caused by changes
in foreign exchange rates, we have occasionally utilized currency forward and
option contracts to minimize the impact of foreign currency fluctuations on our
results of operations. Our policy is to account for such contracts on a
mark-to-market rate basis, and the premiums are amortized on a straight-line
method over the life of the contract. As of December 31, 2002, there was no
foreign currency forward and option contract outstanding. See Note 21 of Notes
to the Consolidated Financial Statements.

INTEREST RATE RISK

     Our exposure to interest rate risks relates primarily to our long-term
debt, which is normally incurred to support our corporate activities, primarily
for capital expenditures. We currently do not enter into derivative
transactions with regard to interest rates, but we would consider engaging in
currency interest rate swaps to lock in currency and interest rate levels from
time to time, if available, on terms considered attractive by us. No derivative
contract for interest rates was outstanding as of December 31, 2002.

     The following table provides information about our significant obligations
that are sensitive to interest rate fluctuations.

<TABLE>
                                                                 As of December 31, 2002
                               -------------------------------------------------------------------------------------------
                                                                 Expected Maturity Date
                               -------------------------------------------------------------------------------------------
                                                                                           2008 and                 Fair
                                 2003        2004        2005        2006        2007     Thereafter    Total       Value
                               --------    --------    --------    --------    --------    --------    --------   --------
                                                            (in millions, except percentages)
<S>                             <C>           <C>          <C>        <C>          <C>         <C>      <C>        <C>
Short-term debt:
  Variable rate (NT$)           1,053.4          --          --          --          --          --     1,053.4    1,053.4
    Average interest rate          1.95%         --          --          --          --          --
  Variable rate (US$)              13.7          --          --          --          --          --        13.7       13.7
    Average interest rate          1.99%         --          --          --          --          --
Long-term debt:
  Variable rate (NT$)             530.1       466.4       366.4       338.9        30.8          --     1,732.6    1,732.6
    Average interest rate          3.08%       3.70%       4.05%       4.06%       2.49%         --
  Fixed rate (US$)                 20.5       204.3         3.6         0.5         0.5         0.8       230.2      230.2
    Average interest rate          5.71%       7.30%       9.26%       7.92%       7.92%       7.92%
</TABLE>

Item 12.  Description of Securities Other Than Equity Securities.

     Not applicable.

                                    PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies.

     Not applicable.

Item 14.  Material Modifications to the Rights of Security Holders and Use of
          Proceeds.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

     On February 8, 1998, we effected a stock split of 150,000,000 shares, with
a par value of $1.00 per share, into 300,000,000 shares, with a par value of
$.50 per share. The effect of this stock split was to cause holders of shares
on January 26, 1998 to own two shares of par value $.50 per share for each
share of par value $1.00 per share previously held by them.


                                      65
<PAGE>

     On April 5, 1999, we effected another stock split of 300,000,000 shares of
par value $.50 per share, into 600,000,000 shares, with a par value of $.25 per
share. The effect of this stock split was to cause holders of shares on March
20, 1999 to own two shares of par value $.25 per share for each share of par
value $.50 previously held by them.

     Since all our shareholders were affected, the two stock splits did not
result in a dilution of the percentage of aggregate equity ownership, voting
rights, earnings or net book value of our shareholders. The stock splits
reduced per share earnings and net book value of our shares since there were
more shares outstanding following the stock splits.

Item 15.  Controls and Procedures.

     Within 90 days prior to the date of this annual report, we, under the
supervision and with the participation of our management, including the Chief
Executive Officer and the Chief Financial Officer, performed an evaluation of
the effectiveness of our disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures are effective for
gathering, analyzing and disclosing the information we are required to disclose
in the reports we file under the Securities Exchange Act of 1934, within the
time periods specified in the SEC's rules and forms. Our management necessarily
applied its judgment in assessing the costs and benefits of such controls and
procedures, which by their nature can provide only reasonable assurance
regarding management's control objectives.

     There have been no significant changes in our internal controls or other
factors that could significantly affect internal controls subsequent to the
date of their evaluation.

                                    PART III

Item 17.  Financial Statements.

     The Company has elected to provide financial statements for fiscal year
2002 and the related information pursuant to Item 18.

Item 18.  Financial Statements.

     The consolidated financial statements of the Company and the report
thereon by its independent auditors listed below are attached hereto as
follows:

          (a)  Report of Independent Auditors of the Company dated February 10,
               2003 (page F-2).

          (b)  Consolidated Balance Sheets of the Company and subsidiaries as
               of December 31, 2001 and 2002 (page F-3).

          (c)  Consolidated Statements of Income of the Company and
               subsidiaries for the years ended December 31, 2000, 2001 and
               2002 (page F-5).

          (d)  Consolidated Statements of Changes in Stockholders' Equity of
               the Company and subsidiaries for the years ended December 31,
               2000, 2001 and 2002 (page F-6).

          (e)  Consolidated Statements of Cash Flows of the Company and
               subsidiaries for the years ended December 31, 2000, 2001 and
               2002 (page F-8).

          (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
               (incorporating all amendments as at June 4, 1998) (incorporated
               by reference to Exhibit 1(a) to the Company's annual report on
               Form 20-F for the year ended December 31, 1997).


                                      66
<PAGE>

          (b)  Resolutions passed on May 29, 1997 (incorporated by reference to
               Exhibit 1(b) to the Company's annual report on Form 20-F for the
               year ended December 31, 1997).

          (c)  Resolutions passed on September 26, 1997 (incorporated by
               reference to Exhibit 1(c) to the Company's annual report on Form
               20-F for the year ended December 31, 1997).

          (d)  Resolutions passed on June 4, 1998 (incorporated by reference to
               Exhibit 1(d) to the Company's annual report on Form 20-F for the
               year ended December 31, 1997).

          (e)  Resolutions passed on May 14, 1999 (incorporated by reference to
               Exhibit 1(e) to the Company's annual report on Form 20-F for the
               year ended December 31, 1998).

          (f)  Resolution passed on June 14, 2000 (incorporated by reference to
               Exhibit 1(f) to the Company's annual report or Form 20-F for the
               year ended December 31, 1999).

          (g)  Resolutions passed on June 28, 2000 (incorporated by reference
               to Exhibit 1(g) to the Company's annual report or Form 20-F for
               the year ended December 31, 1999).

          (h)  Resolutions of an Extraordinary General Meeting of the
               shareholders passed on October 14, 1999 (incorporated by
               reference to Exhibit 1(h) to the Company's annual report on Form
               20-F for the year ended December 31, 2000).

     4.   (a)  Lease Agreement with Nantze Export Processing Zone
               Administration (New Plant) (incorporated by reference to Exhibit
               10.7 to the 1997 Registration Statement).

          (b)  Lease Agreement between ASE Test Malaysia and Penang Development
               Corporation (incorporated by reference to Exhibit 2(c) to the
               Company's annual report on Form 20-F for the year ended December
               31, 1997).

          (c)  Indenture dated June 29, 1999 among ASE Test Finance Limited,
               ASE Test Limited and The Bank of New York, as Trustee
               (incorporated by reference to Exhibit 2(g) to the Company's
               annual report on Form 20-F for the year ended December 31,
               1998).

          (d)  License Agreement dated as of January 16, 2001 between 1st
               Silicon (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd.
               (incorporated by reference to Exhibit 4(e) to the Company's
               annual report on Form 20-F for the year ended December 31,
               2000).

          (e)  Service Agreement dated as of August 1, 2002 between ASE
               Electronics (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by
               reference to Exhibit 10.21 to ASE Inc.'s Registration Statement
               on Form F-3 (File No. 333-89428) filed on March 31, 2003).

          (f)  Service Agreement dated as of August 1, 2002 between ASE Test
               Inc. and ASE (U.S.) Inc. (incorporated by reference to Exhibit
               10.22 to ASE Inc.'s Registration Statement on Form F-3 (File No.
               333-89428) filed on March 31, 2003).

          (g)  Commission Agreement dated as of August 1, 2002 between ASE
               Electronics (M) Sdn. Bhd. and Gardex International Limited.
               (incorporated by reference to Exhibit 10.26 to ASE Inc.'s
               Registration Statement on Form F-3 (File No. 333-89428) filed on
               March 31, 2003).

          (h)  Commission Agreement dated as of August 1, 2002 between ASE Test
               Inc. and Gardex International Limited. (incorporated by
               reference to Exhibit 10.27 to ASE Inc.'s Registration Statement
               on Form F-3 (File No. 333-89428) filed on March 31, 2003).

          (i)  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).


                                      67
<PAGE>

          (j)  Sub-lease Agreement dated October 3, 2000 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated
               by reference to Exhibit 4(k) to the Company's annual report on
               Form 20-F for the year ended December 31, 2000).

          (k)  Sub-lease Agreement dated June 3, 1999 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd. (incorporated
               by reference to Exhibit 4(l) 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(m) to
               the Company's annual report on Form 20-F for the year ended
               December 31, 2000).

          (m)  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).

          (n)  Tenancy Agreement dated April 1, 1999 between ISE Labs (HK)
               Limited and Hing Seng Plastic Factory Limited (incorporated by
               reference to Exhibit 4(o) to the Company's annual report on Form
               20-F for the year ended December 31, 2000).

          (o)  Lease dated September 28, 2000 between ISE Labs Hong Kong
               Limited and Shinano Kenshi (HK) Co., Ltd. (incorporated by
               reference to Exhibit 4(p) to the Company's annual report on Form
               20-F for the year ended December 31, 2000).

          (p)  Lease dated October 20, 2000 between ISE Labs Hong Kong and
               Bless Silver Development Limited. (incorporated by reference to
               Exhibit 4(q) to the Company's annual report on Form 20-F for the
               year ended December 31, 2000).

          (q)  Lease Agreement for Factory Building dated September 18, 2000
               between ASE, Inc. and ASE Test Inc. (incorporated by reference
               to Exhibit 4(r) to the Company's annual report on Form 20-F for
               the year ended December 31, 2000).

          (r)  Sale and Purchase Agreement between Afasia Knitting Factory
               (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd. dated
               February 24, 1997 (incorporated by reference to Exhibit 4(s) to
               the Company's annual report on Form 20-F for the year ended
               December 31, 2000).

          (s)  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).

          (t)  Plant Lease Agreement between ASE (Chung Li) Inc. and ASE Test
               Inc. dated October 5, 2001. (incorporated by reference to
               Exhibit 4(xx) to the Annual Report on Form 20-F filed by ASE,
               Inc. for the year ended December 31, 2001).

     8.   List of Subsidiaries

     12.  (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.

     The Company agrees to furnish to the Securities and Exchange Commission
upon request a copy of any instrument which defines the rights of holders of
long-term debt of the Company and its consolidated subsidiaries.


                                      68
<PAGE>


                         INDEX TO FINANCIAL STATEMENTS

                                                                         Page
                                                                         ----
ASE Test Limited and Subsidiaries
  Independent Auditors' Report......................................     F-2
  Consolidated Balance Sheets.......................................     F-3
  Consolidated Statement of Income..................................     F-5
  Consolidated Statements of Changes in Shareholders' Equity........     F-6
  Consolidated Statements of Cash Flows.............................     F-8
  Notes to Consolidated Financial Statements........................     F-10





                                      F-1
<PAGE>


                          Independent Auditors' Report

The Board of Directors and Shareholders
ASE Test Limited

We have audited the accompanying consolidated balance sheets of ASE Test
Limited and its subsidiaries (collectively the "Company") as of December 31,
2001 and 2002, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three year
period ended December 31, 2002, all prepared in accordance with accounting
principles generally accepted in the Republic of China and expressed in US
dollars. These 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.

We conducted our audits in accordance with auditing standards generally
accepted in the Republic of China and the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2001 and 2002, and the consolidated results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the Republic of China.

Accounting principles generally accepted in the Republic of China vary in
certain significant respects from accounting principles generally accepted in
the United States of America. The application of the latter would have affected
the determination of net income for each of the three years in the period ended
December 31, 2002, and the determination of shareholders' equity and financial
position at December 31, 2001 and 2002, to the extent summarized in Note 26.

As discussed in Note 27 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets to
conform to Statement of Financial Accounting Standard No. 142, "Goodwill and
Other Intangible Assets" effective January 1,2002.


T N Soong & Co.
(Associate Member Firm of Deloitte Touche Tohmatsu
  Effective April 22, 2002)
(Formerly a Member Firm of Andersen Worldwide, SC)
Taipei, Taiwan, Republic of China

February 10, 2003


                                      F-2
<PAGE>

                       ASE TEST LIMITED AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
             (Expressed in Thousands US Dollars, Except Share Data)

<TABLE>
                                            December 31,                                                       December 31,
                                    -----------------------------    LIABILITIES AND                   ----------------------------
A S S E T S                             2001             2002        SHAREHOLDERS' EQUITY                  2001             2002
-----------                         ------------     ------------    ------------------------------    ------------    ------------
<S>                                 <C>              <C>             <C>                               <C>             <C>
CURRENT ASSETS                                                       CURRENT LIABILITIES
Cash and cash equivalents (Note 2)  $    106,065     $    118,828    Short-term borrowings (Notes 9    $      9,946    $     24,597
                                                                     and 19)
Short-term investments (Note 2)           31,503            2,500    Commercial paper and bank                   --          19,403
                                                                     acceptances payable (Notes 10
                                                                     and 19)
Accounts receivable                                                  Accounts payable

       Related companies - net             7,835            9,340           Related companies (Note           6,013           3,003
(Note 17)                                                            17)
       Other - net (Note 3)               38,738           49,291           Other                            11,794          15,432
Inventories (Notes 2 and 4)               13,439           13,059    Payable for fixed assets                24,961          27,139
Deferred income tax assets - net           9,784            1,521    Income tax payable                       3,545           3,105
(Notes 2 and 13)
Pledged time deposits (Note 19)              274            1,237    Current portion of long-term            20,730          35,725
                                                                     debts (Notes 11 and 19)
Prepayments and other                     10,324            7,348    Accrued expenses and other (Note 8)     13,168          10,286
                                    ------------     ------------                                      ------------    ------------

Total current assets                     217,962          203,124    Total current liabilities               90,157         138,690

LONG-TERM INVESTMENTS (Notes 2            95,042           93,702    LONG-TERM DEBTS (Notes 11 and          248,371         244,271
and 5)                                                               19)

PROPERTIES - NET (Notes 2, 6, 17,        586,834          531,496    ACCRUED PENSION COST (Notes 2              810           1,667
19 and 24)                                                           and 14)

DEFERRED INCOME TAX ASSETS - NET           3,148           19,215    OTHER LIABILITIES                        1,341           1,906
 (Notes 2 and 13)                                                                                      ------------    ------------


OTHER ASSETS                               2,723            5,614    Total liabilities                      340,679         386,534
                                                                                                       ------------    ------------
</TABLE>


                                      F-3
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS - (Continued)
             (Expressed in Thousands US Dollars, Except Share Data)

<TABLE>
<S>                                      <C>              <C>       <C>                                <C>             <C>
CONSOLIDATED DEBITS                      53,697           72,322    COMMITMENTS AND CONTINGENCIES
(Notes 1, 2 and 7)                 ------------     ------------    (Note 20)

                                                                    MINORITY INTEREST IN                     21,204              --
                                                                    CONSOLIDATED SUBSIDIARIES          ------------    ------------
                                                                    (Note 2)

                                                                    SHAREHOLDERS' EQUITY
                                                                    (Notes 1, 2, 12 and 15)
                                                                    Share capital - $0.25
                                                                    par value
                                                                        Authorized - 600,000,000
                                                                    ordinary shares
                                                                        Issued and outstanding
                                                                    - 96,647,199 ordinary shares
                                                                    in 2001 and
                                                                        99,067,790 ordinary                  24,162          24,767
                                                                    shares in 2002
                                                                    Capital surplus                         428,205         448,063
                                                                    Retained earnings                       220,767         139,814
                                                                    Unrealized loss on long-term               (442)           (611)
                                                                    investments in shares of stock
                                                                    Cumulative translation                  (75,169)        (73,094)
                                                                    adjustments                        ------------    ------------
                                                                    Total shareholders' equity              597,523         538,939
                                                                                                       ------------    ------------

TOTAL ASSETS                       $    959,406     $    925,473    TOTAL LIABILITIES AND              $    959,406    $    925,473
                                   ============     ============    SHAREHOLDERS' EQUITY               ============    ============

</TABLE>


    The accompanying notes are an integral part of the financial statements.


                                      F-4
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
           (Expressed in Thousands US Dollars, Except Per Share Data)

<TABLE>
                                                                                Year Ended December 31,
                                                                     --------------------------------------------
                                                                         2000            2001            2002
                                                                     ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>
NET REVENUES (Notes 2, 17 and 24)                                    $    440,285    $    298,466    $    301,962

COST OF REVENUES (Note 17)                                                263,513         265,271         280,573
                                                                     ------------    ------------    ------------

GROSS PROFIT                                                              176,772          33,195          21,389
                                                                     ------------    ------------    ------------

OPERATING EXPENSES
Selling                                                                     7,977           7,247           5,963
General and administrative                                                 41,884          35,618          37,724
Impairment of long - lived assets                                              --              --          35,321
Research and development (Note 2)                                          12,059          14,397          18,342
                                                                     ------------    ------------    ------------
Total operating expenses                                                   61,920          57,262          97,350
                                                                     ------------    ------------    ------------

INCOME (LOSS) FROM OPERATIONS                                             114,852         (24,067)        (75,961)
                                                                     ------------    ------------    ------------

NON-OPERATING INCOME (EXPENSES)
Interest - net (Notes 2, 6 and 16)                                        (14,740)        (13,783)        (14,396)
Investment income (loss) under equity method - net
  (Notes 2 and 5)                                                          16,127          (7,344)         (1,496)
Foreign exchange gain (loss) - net (Note 2 and 21)                          3,280           2,382          (1,169)
Other - net                                                                (5,876)          1,048           1,511
                                                                     ------------    ------------    ------------
Total non-operating expenses                                               (1,209)        (17,697)        (15,550)
                                                                     ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX AND MINORITY INTEREST                                   113,643         (41,764)        (91,511)

INCOME TAX EXPENSES (BENEFIT) (Notes 2 and 13)                              2,197           6,522         (10,243)
                                                                     ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                  111,446         (48,286)        (81,268)

LOSS FROM DISCONTINUED OPERATIONS (net of tax benefit of $388
in 2000) (Note 25)                                                           (758)             --              --
                                                                     ------------    ------------    ------------

INCOME (LOSS) BEFORE MINORITY INTEREST                                    110,688         (48,286)        (81,268)

MINORITY INTEREST IN NET (INCOME) LOSS OF
SUBSIDIARIES (Note 2)                                                      (3,493)          2,527              --
                                                                     ------------    ------------    ------------

NET INCOME (LOSS)                                                    $    107,195    $    (45,759)   $    (81,268)
                                                                     ============    ============    ============
EARNINGS (LOSS) PER SHARE (Notes 2 and 18)
Basic
   Continued operations                                                   $  1.26         $ (0.48)        $ (0.82)
   Discontinued operations                                                  (0.01)             --              --
                                                                     ------------    ------------    ------------
Diluted
   Continued operations                                                   $  1.16         $ (0.48)        $ (0.82)
   Discontinued operations                                                   0.00              --              --
                                                                     ------------    ------------    ------------
                                                                          $  1.16         $ (0.48)        $ (0.82)
                                                                     ============    ============    ============
INFORMATION ON NUMBERS OF SHARES:
Basic                                                                  85,970,361      94,921,412      98,600,205
                                                                     ============    ============    ============
Diluted                                                                92,673,040      94,921,412      98,600,205
                                                                     ============    ============    ============
</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                      F-5
<PAGE>

                       ASE TEST LIMITED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                      (Expressed in Thousands US Dollars)

<TABLE>
                                                                                          Unrealized
                                                                                            Loss on
                                                                                           Long-Term
                                                                                          Investment
                                                                                           in Shares
                                                                  Capital                   of Stock   Cumulative      Total
                                              Capital Stock       Surplus      Retained     (Notes 2  Translation  Shareholders'
                                           Shares      Amount    (Note 12)     Earnings      and 5)    Adjustment     Equity
                                         ---------   ---------   ---------    ---------   ----------- -----------  -------------
<S>                                      <C>         <C>         <C>          <C>          <C>          <C>          <C>
BALANCE, JANUARY 1, 2000                 80,958,206  $  20,240   $ 140,571    $ 168,967    $      --    $ (34,398)   $ 295,380

Issuance of new shares under stock
option plans (Note 15)                   1,263,041         315       7,610           --           --           --        7,925
Capital increase in cash in July, 2000   9,200,000       2,300     261,362           --           --           --      263,662
Convertible notes converted into
ordinary shares                              4,444           1         114           --           --           --          115
Reclassification of net gain on
disposal of properties                          --          --          27          (27)          --           --           --
Adjustment from changes in ownership
percentage of investee                          --          --          (7)      (9,609)          --           --       (9,616)
Consolidated net income in 2000                 --          --          --      107,195           --           --      107,195
Unrealized loss on investments in
shares of stock                                 --          --          --           --         (541)          --         (541)
Translation adjustments (Note 2)                --          --          --           --           --      (20,984)     (20,984)
                                         ---------   ---------   ---------    ---------    ---------    ---------    ---------

BALANCE, DECEMBER 31, 2000               91,425,691     22,856     409,677      266,526         (541)     (55,382)     643,136

Issuance of new shares under stock
option plans (Note 15)                   5,221,508       1,306      18,548           --           --           --       19,854
Adjustment from changes in ownership
percentage of investee                          --          --         (20)          --           --           --          (20)
Consolidated net loss in 2001                   --          --          --      (45,759)          --           --      (45,759)
</TABLE>


                                      F-6
<PAGE>

                       ASE TEST LIMITED AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)
                      (Expressed in Thousands US Dollars)


<TABLE>
<S>                                      <C>         <C>         <C>          <C>          <C>          <C>          <C>
Reversal of unrealized loss on
long-term investments in shares of
stock                                           --          --          --           --           99           --           99
Translation adjustments (Note 2)                --          --          --           --           --      (19,787)     (19,787)
                                         ---------   ---------   ---------    ---------    ---------    ---------    ---------

BALANCE, DECEMBER 31, 2001               96,647,199     24,162     428,205      220,767         (442)     (75,169)     597,523

Issuance of new shares under stock
option plans (Note 15)                   2,420,591         605      20,173           --           --           --       20,778
Adjustment of equity in subsidiary
from reversal of prior years' gain on
  disposal of properties                        --          --        (315)         315           --           --           --
Consolidated net loss in 2002                   --          --          --      (81,268)          --           --      (81,268)
Unrealized loss on investments in
shares of stock                                 --          --          --           --         (169)          --         (169)
Translation adjustments (Note 2)                --          --          --           --           --        2,075        2,075
                                         ---------   ---------   ---------    ---------    ---------    ---------    ---------

BALANCE, DECEMBER 31, 2002               99,067,790  $  24,767   $ 448,063    $ 139,814    $    (611)   $ (73,094)   $ 538,939
                                         =========   =========   =========    =========    =========    =========    =========
</TABLE>


    The accompanying notes are an integral part of the financial statements.


                                      F-7
<PAGE>

                       ASE TEST LIMITED AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Expressed in Thousands US Dollars)

<TABLE>
                                                                             Year Ended December 31,
                                                                       -----------------------------------
                                                                          2000         2001         2002
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                      $ 107,195    $ (45,759)   $ (81,268)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
      Minority interest                                                    3,493       (2,527)          --
      Depreciation and amortization                                      117,506      144,860      154,251
      Impairment loss on fixed assets                                         --           --       35,321
      Accrued interest on convertible bonds                               11,350       10,526       12,161
      Provision (reversal of allowance) for doubtful accounts and
        sales discounts                                                    2,226          (39)         285
      Loss from idle assets                                                  738          456           --
      Investment loss (income) under equity method                       (16,127)       7,344        1,496
      Provision for loss on long-term bond investments                     3,157          345           --
      Gain on disposal of properties                                         (30)        (154)         (75)
      Deferred income taxes                                               (4,872)       4,375       (7,804)
      Loss from discontinued operations                                      758           --           --
      Other                                                                1,397          218           51
      Changes in operating assets and liabilities
         Accounts receivable                                             (34,096)      39,536      (12,343)
         Inventories                                                      (7,178)       3,988          380
         Prepayments and other                                            (2,183)        (465)       2,717
         Accounts payable                                                 16,534      (11,913)         628
         Income tax payable                                                3,144         (965)        (440)
         Accrued pension cost                                                238          282          857
         Accrued expenses and other                                        1,226       (3,088)      (2,317)
         Changes in net assets of discontinued operations                   (919)          --           --
                                                                       ---------    ---------    ---------
Net cash provided by operating activities                                203,557      147,020      103,900
                                                                       ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of properties                                               (372,561)    (102,490)    (108,717)
Acquisition of long-term investments in shares of stock                   (7,100)     (18,670)          --
Purchase of ISE Labs, Inc. shares                                           (428)          --      (50,161)
Decrease (increase) in pledged time deposits                                 (86)           6         (963)
Proceeds from sales of properties                                          9,868        3,107        5,625
Proceeds from disposal of discontinued operations                          4,900           --           --
Increase in other assets                                                  (4,325)      (3,180)      (6,334)
Decrease (increase) in short-term investments                              2,378      (22,981)      29,003
                                                                       ---------    ---------    ---------
Net cash used in investing activities                                   (367,354)    (144,208)    (131,547)
                                                                       ---------    ---------    ---------
</TABLE>


                                      F-8
<PAGE>

                       ASE TEST LIMITED AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                      (Expressed in Thousands US Dollars)

<TABLE>
                                                                             Year Ended December 31,
                                                                       -----------------------------------
                                                                          2000         2001         2002
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares                              $ 271,762    $  19,593    $  21,037
Increase (decrease) in short-term borrowings                              18,230       (7,707)      14,651
Increase in commercial paper and bank acceptances payable                     --           --       19,403
Proceeds from long-term debts                                             55,089          889       41,865
Decrease in payable for fixed assets                                          --      (39,252)          --
Repayments of long-term debts                                            (66,814)     (26,357)     (58,245)
Increase (decrease) in minority interest                                    (466)           7           --
                                                                       ---------    ---------    ---------
Net cash provided by (used in) financing activities                      277,801      (52,827)      38,711
                                                                       ---------    ---------    ---------

TRANSLATION ADJUSTMENTS                                                   (1,663)      (1,065)       1,699
                                                                       ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                                              112,341      (51,080)      12,763

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                              44,804      157,145      106,065
                                                                       ---------    ---------    ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                                 $ 157,145    $ 106,065    $ 118,828
                                                                       =========    =========    =========

SUPPLEMENTAL INFORMATION
Interest paid (excluding amounts capitalized)                          $   8,647    $   8,533    $   4,361
Income tax paid                                                        $   3,387    $   3,274    $     217
Cash paid for acquisition of fixed assets
      Acquisition of fixed assets                                      $ 413,197    $ 104,216    $ 126,009
      Increase in payable                                                (40,636)      (1,726)      (2,178)
      Increase in obligation under capital lease                              --           --      (15,114)
                                                                       ---------    ---------    ---------
                                                                       $ 372,561    $ 102,490    $ 108,717
                                                                       =========    =========    =========
Cash received from sales of properties
      Sales price                                                      $   9,868    $   5,978    $   5,625
      Increase in receivable                                                  --       (2,871)          --
                                                                       ---------    ---------    ---------
                                                                       $   9,868    $   3,107    $   5,625
                                                                       =========    =========    =========
Cash received from issuance of ordinary shares (net of issuance
  expense)                                                             $ 271,587    $  19,854    $  20,778
Decrease (increase) in receivable for issuance of ordinary shares            175         (261)         259
                                                                       ---------    ---------    ---------
                                                                       $ 271,762    $  19,593    $  21,037
                                                                       =========    =========    =========
</TABLE>

    The accompanying notes are an integral part of the financial statements.


                                      F-9
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (Expressed in Thousands US Dollars, Unless Otherwise Stated)

1.   GENERAL

     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.

     ASE Test, Inc. is located in Taiwan, Republic of China (ROC) and is
     engaged in the testing of semiconductors. It has a wholly-owned subsidiary
     in the United States, ASE Test (USA) Inc., which was incorporated in
     October 1995 and is engaged in after-sales services to customers of ASE
     Test, Inc.

     On April 15, 1997, the Company issued 4,500,000 (before stock splits in
     1998 and 1999) shares to ASE Holdings (Bermuda), Ltd., a wholly-owned
     subsidiary of ASE, Inc., in exchange for all shares of ASE Holdings
     (Singapore) Pte. Ltd., which is a Singapore holding company and has a
     wholly-owned subsidiary, ASE Electronics (M) Sdn. Bhd. ("ASE Test
     Malaysia"). Such exchange was also accounted for as a reorganization of
     companies under common control.

     ASE Test Malaysia is engaged in the packaging and testing of
     semiconductors.

     Since June 1996, the Company's shares have been traded on the NASDAQ
     National Market in the United States under the symbol "ASTSF".

     J & R Holding Limited, a shareholder of the Company, sold 6,000,000 shares
     and 5,000,000 shares in December 1997 and February 1999, respectively, in
     the form of Taiwan Depositary Receipts (the "TDR"). The TDRs are traded on
     the Taiwan Stock Exchange under the Symbol "9101".

     On May 5, 1999, the Company acquired 70% equity of ISE Labs, Inc., through
     ASE Test Holding Ltd, a newly incorporated wholly-owned holding company.
     The acquisition was accounted for using the purchase method. ISE Labs,
     Inc. and its wholly-owned subsidiaries ISE Labs Hong Kong Limited, ISE
     Labs Singapore Pte. Limited, ISE Technology, Inc., and Digital Testing
     Services Inc., together "ISE Labs", mainly provide semiconductor testing
     services. The acquisition cost was $100.1 million and the net book value
     of ISE Labs at the time of acquisition was $23.6 million. The excess of
     the purchase cost over the net book value of ISE Labs of $76.5 million was
     allocated as of May 5, 1999 and subsequent adjustments as follows (amount
     in millions US Dollars):

                                           As of
                                        May 5, 1999  Adjustment     Adjusted
                                        -----------  ----------    ---------

     Write-up of land                    $     2.5    $    (0.2)   $     2.3
     Write-up of buildings                     2.7         (2.3)         0.4
     Write-up of machinery                     9.0         (2.3)         6.7
     Deferred tax liabilities                 (5.7)         1.9         (3.8)
     Goodwill (see Note 7)                    68.0          3.8         71.8
                                         ---------    ---------    ---------

                                         $    76.5    $     0.9    $    77.4
                                         =========    =========    =========

     An adjustment to the allocation of the purchase price was made in the
     first quarter of 2000 as a result of the impairment loss incurred upon the
     disposition of the packaging operation of ISE Labs. The impairment loss
     was a preacquisition contingency at the date of acquisition (see Note 26).


                                     F-10
<PAGE>

     The Company's equity interest in ISE Labs increased to 100% as a result of
     the following: (i) subscription to 8,750,000 new shares at $8.00 per share
     (or at an aggregate subscription price of $70 million) on April 27, 2000
     and July 27, 2000, and (ii) purchase of 100,000 shares, on November 20,
     2000, from minority shareholders at $8.94 per share (or at an aggregate
     amount of $0.9 million), and (iii) purchase of 5,150,000 shares on January
     18, 2002 from minority shareholders at $9.74 per share (or at an aggregate
     amount of $50.2 million). As of December 31, 2002, the total investment
     amount in ISE Labs was $221.2 million.

     In June 1999, the Company established ASE Test Finance Limited (a
     wholly-owned subsidiary) in the Republic of Mauritius as a corporate
     vehicle used in the issuance of convertible notes (see Note 11).

2.   SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements have been prepared in conformity
     with generally accepted accounting principles in the ROC ("ROC GAAP").
     Significant accounting policies are summarized as follows:

     Presentation of Consolidated Financial Statements

     The Company prepares its consolidated financial statements using ROC GAAP
     with reconciliation to US GAAP (see Note 26) to be consistent with the
     basis of presentation of the consolidated financial statements of ASE,
     Inc. The accompanying consolidated balance sheets are presented for the
     two years ended as at December 31, 2001 and 2002, and the accompanying
     consolidated statements of income, changes in shareholders' equity and
     cash flows are presented for each of the three years ended December 31,
     2002.

     Unless otherwise stated, amounts presented are in thousands of US dollars.

     Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries, ASE Test, Inc., ASE Test (USA) Inc., ASE Holdings
     (Singapore) Pte. Ltd., ASE Test Malaysia, ASE Test Finance Ltd., ASE Test
     Holding Ltd., ISE Labs, Inc., ISE Labs Hong Kong Limited, ISE Labs
     Singapore Pte Limited, ISE Technology, Inc., and Digital Testing Services
     Inc. All significant intercompany accounts and transactions have been
     eliminated and the minority shareholders' interests in the equity and
     earnings of the subsidiaries are presented separately in the consolidated
     financial statements.

     The differences between the costs of investments and the proportionate
     equity in each subsidiary when the stocks were acquired are recorded as
     consolidated credits (debits) and are amortized on the straight-line
     method over ten years.

     Use of Estimates

     The preparation of consolidated financial statements in conformity with
     ROC GAAP and US GAAP requires management to make estimates and judgments
     that affect the recorded amounts of assets, liabilities, revenues and
     expenses of the Company. The Company continually evaluates these
     estimates, including those related to allowances for doubtful accounts,
     inventories, useful lives of properties, consolidated debits, income tax
     valuation allowances, pension plans and the fair value of financial
     instruments. The Company bases its estimates on historical experience and
     other assumptions, which it believes to be reasonable under the
     circumstances. Actual results may differ from these estimates under
     different assumptions and conditions.

     Cash and Cash Equivalents

     The Company considers all highly liquid investments within an original
     maturity from date of purchase of three months or less to be cash
     equivalents.

     Short-term Investments

     Short-term investments are carried at cost less allowance for decline in
     market value.


                                     F-11
<PAGE>

     Allowance for Doubtful Accounts

     Allowance for doubtful accounts is provided based on an evaluation of
     collectibility of receivables.

     The total amount of the provision is determined based on the
     identification of customers that the Company determines to have a higher
     credit risk based on overdue accounts, past collection difficulties or
     their overall financial condition. An estimation is made based on the
     extent to which the customer will be able to meet its financial
     obligations to the Company and a provision is recorded to reduce the
     accounts receivable balance to the amount the Company reasonably believes
     will be collected. For all other customers, an allowance is equal to a
     percentage of the aggregate accounts receivable based on history of
     collection. An allowance for these other customers averages between 3% and
     4%, on a consolidated basis, of the Company's accounts receivable.

     Inventories

     Inventories are stated at the lower of weighted average cost or market
     value. Unbilled processing charges incurred are included in finished goods
     and work in process and are stated at actual cost. Market value represents
     net realizable value for finished goods and work in process, and
     replacement costs for raw materials, supplies and spare parts. Materials
     received from customers for processing, mainly semiconductor wafers, are
     excluded from inventories as title and risk of loss remains with the
     customers.

     Long-term Investments in Shares of Stock

     Long-term investments of which the Company owns at least 20% of the
     outstanding voting shares or where the Company has significant influence
     over the investee company's operation are accounted for by the equity
     method. Under the equity method, the investments are initially carried at
     cost and subsequently adjusted for the Company's proportionate share in
     the net income or losses of the investee companies. Such proportionate
     share in net income or losses are recognized as investment income or
     losses while any cash dividends declared are reflected as a reduction in
     the carrying value of the investments. The goodwill representing the
     excess of the investment cost over 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, is amortized over ten years. Changes
     in the Company's ownership percentage of investees accounted under the
     equity method are accounted for as adjustments to long-term investments
     and capital surplus.

     Other long-term investments in shares of stock are carried at cost or
     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) are made when the market value of an
     investment is lower than its carrying value. If decline in value of the
     stock investment is determined to be other than temporary, such decline in
     value is charged against current income. Stock dividends declared are
     accounted for only as increases in number of shares held. Cash dividends
     declared are recognized as income.

     Properties

     Properties, except for leased equipment, are stated at cost. Equipment
     held under capital leases are recorded as an asset and an obligation at an
     amount equal to the lower of: (i) the 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 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 properties,
     construction, down payments and other direct costs plus interest charges
     attributable to the borrowings used to finance the acquisitions of these
     assets. Major renewals and improvements are capitalized, while maintenance
     and repairs are expensed currently.

     Depreciation is computed using the straight-line method over estimated
     service lives which range as follows: Long-term land leasehold rights, 60
     years (lease period); buildings and improvements, 5 to 40 years; machinery
     and equipment, 3 to 5 years; furniture and fixtures, 5 to 8 years; and
     leased assets, 3 to 4 years. In the event that an asset depreciated to its
     residual value is deemed to have a continual useful life, the residual
     value is depreciated over the remaining life, not to exceed 2 years.


                                     F-12
<PAGE>

     Impairment losses on properties are recorded as an operating expense.

     When properties 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. Prior to January 1, 2001, the gain, after
     deducting applicable income tax, was reclassified to capital surplus at
     the end of the year.

     Consolidated Debits

     The consolidated debits as shown in the balance sheet represent goodwill
     arising from acquisitions or investments in the consolidated subsidiaries
     and are amortized on the straight-line method over ten years.

     Pension Cost

     Pension cost is recorded based on actuarial calculations. Provisions for
     pension costs are accrued based on actuarially determined amounts which
     include service costs, interests, amortization of unrecognized net
     obligation and expected return on pension assets.

     Convertible Bonds

     Conversion of convertible bonds into common shares is accounted for by the
     book value method. Under this method, unamortized bond issuance cost,
     accrued interest no longer payable and the carrying value of the bond are
     written off. In addition, common shares are recorded at the par value of
     the shares issued and the excess is recorded as capital surplus.

     Revenue Recognition

     Revenues from semiconductor packaging services that the Company provides
     are recognized upon shipment. Revenues from semiconductor testing services
     that the Company provides are recognized upon completion of the services.
     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 remains with the customer for
     those bare semiconductors and/or packaged semiconductors. Accordingly, the
     cost of customer-supplied semiconductors materials is not included in the
     accompanying consolidated financial statements. Other criteria that the
     Company uses to determine when to recognize revenue are: (i) existence of
     persuasive evidence of the services provided, (ii) the selling price is
     fixed or determinable and (iii) collectibility is reasonably assured. The
     Company does not provide warranties to its customers except only in cases
     of defects in the packaging services provided and deficiencies in testing
     services provided. An appropriate sales allowance, based on historical
     experience, is recognized in the period the sale is recognized.

     Research and Development Costs

     Research and development costs are charged to expenses as incurred.

     Income Taxes

     Tax effects of deductible temporary differences, unused tax credits and
     operating loss carryforward are recognized as deferred income tax assets,
     while those taxable temporary differences are recognized as deferred
     income tax liabilities. A valuation allowance is provided for deferred
     income tax assets based on the estimated realizability.

     Tax credits of ASE Test, Inc. from investments in machinery and equipment
     and research and development are recognized in the year in which they are
     acquired and expended. 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.


                                     F-13
<PAGE>

     Income taxes on undistributed earnings (10%) generated in 1998 and onwards
     for consolidated entities in the ROC are recorded as tax expense when the
     shareholders have resolved that the earnings shall be retained. The tax
     expense may be reduced by income tax credits.

     Foreign Currency Transactions and Translation of Foreign-Currency
     Financial Statements

     The functional and reporting currency of ASE Test Limited is US 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, Malaysian Ringgit and US dollar, respectively.
     Transactions denominated in other currencies, except forward exchange
     contracts, are translated and recorded at the rates of exchange in effect
     when the transactions occur. Gains or losses caused by the application of
     different foreign exchange rates when cash in foreign currency is
     converted, or when foreign-currency receivables and payables are settled,
     are credited or charged to income in the year of conversion or settlement.
     Year-end balances of foreign-currency assets and liabilities are
     translated based on prevailing exchange rates and resulting gains or
     losses are credited or charged to income.

     The financial statements of the subsidiaries are translated into US
     dollars at the following rates: Assets and liabilities--current rate;
     shareholders' equity--historical rates; income, cost and expenses--average
     rate during the period. The net resulting translation adjustment is
     reported as a separate component of shareholders' equity.

     Derivative Financial Instruments

     Premiums or discounts on foreign currency forward exchange contracts which
     hedge foreign currency assets or liabilities arising from the difference
     between the foreign rate and the spot rate are deferred and amortized on
     the straight-line method over the contract periods. At year end, the
     balances of the forward exchange receivables or payables are restated
     based on prevailing exchange rates and the resulting gain or loss is
     credited or charged to income. Any exchange gain or loss when the contract
     is settled is also credited or charged to income. Receivables and payables
     are netted and the balance is shown as either an asset or liability in the
     balance sheet.

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

     Earnings per share ("EPS")

     Basic earnings per share is calculated by dividing net income by the
     weighted average number of shares outstanding during the period. Diluted
     earnings per share is calculated using the weighted average number of
     shares and dilutive equivalent shares outstanding during the period.
     Dilutive equivalent shares consist primarily of stock options and
     convertible notes and are excluded from the calculation if they are
     anti-dilutive.

3.   ACCOUNTS RECEIVABLE--OTHER, NET

<TABLE>
                                                                           2001        2002
                                                                         --------    --------
<S>                                                                      <C>         <C>
     Accounts receivable                                                 $ 42,954    $ 52,262
     Allowance for sales discounts and doubtful accounts (Note 2)          (4,216)     (2,971)
                                                                         --------    --------

                                                                         $ 38,738    $ 49,291
                                                                         ========    ========
</TABLE>


                                     F-14
<PAGE>

     The movement of allowance for sales discounts and doubtful accounts are as
     follows:

     Balance, beginning of 2000                                       $  3,029
     Additions                                                           2,123
     Deductions                                                           (377)
                                                                      --------
     Balance, end of 2000                                                4,775
     Additions                                                           1,463
     Deductions                                                         (2,022)
                                                                      --------
     Balance, end of 2001                                                4,216
     Additions                                                             285
     Deductions                                                         (1,530)
                                                                      --------
     Balance, end of 2002                                             $  2,971
                                                                      ========

4.   INVENTORIES--NET                                   2001            2002
                                                      --------        --------

     Raw materials                                    $  6,412        $  5,241
     Work in process                                       648             673
     Finished goods                                        678           1,307
     Supplies                                            6,493           6,464
     Materials in transit                                  298             156
                                                      --------        --------
                                                        14,529          13,841
     Allowance for obsolescence                         (1,090)           (782)
                                                      --------        --------

                                                      $ 13,439        $ 13,059
                                                      ========        ========

     The movement of allowance for obsolescence is as follows:

     Balance, beginning of 2000                                       $  1,102
     Additions                                                             560
     Deductions                                                           (668)
                                                                      --------
     Balance, end of 2000                                                  994
     Additions                                                             105
     Deductions                                                             (9)
                                                                      --------
     Balance, end of 2001                                                1,090
     Deductions                                                           (308)
                                                                      --------

     Balance, end of 2002                                             $    782
                                                                      ========

 5.  LONG-TERM INVESTMENTS                   2001                   2002
                                      -------------------   -------------------
                                                    % of      % of
                                      Carrying     Owner-   Carrying     Owner-
                                        Value       ship      Value       ship
                                      --------     ------   --------   --------
     Equity method
        ASE Material Inc.             $  2,897       4.0    $  1,933        4.0
        ASE (Chung-Li) Inc.             67,402      30.0      70,896       30.0
        ASE Investment (Labuan) Inc.    23,180      30.0      19,467       30.0
                                      --------              --------
                                        93,479                92,296
                                      --------              --------
     Cost method
        ASE, Inc.                          954        --         961         --
        UC Fund II                       1,000        --       1,000         --
                                      --------              --------
                                         1,954                 1,961
     Allowance for losses (Note 2)        (391)                 (555)
                                      --------              --------
                                         1,563                  1406
                                      --------              --------

                                      $ 95,042              $ 93,702
                                      ========              ========


                                     F-15
<PAGE>

     The investments in ASE (Chung-Li) Inc. (incorporated in the ROC in April
     1999) and ASE Investment (Labuan) Inc. (incorporated in Malaysia in June
     1999) were made in connection with the acquisitions of the operations of
     the Motorola Semiconductor Products Sector Businesses in Chung Li, Taiwan
     and Paju , Korea, respectively.

     The Company, together with ASE Inc., exercises significant influence over
     ASE Material Inc.'s operation. Accordingly, such investment is accounted
     for using equity method.

6.   PROPERTIES--NET                                        2001        2002
                                                          --------    --------
     Cost
        Land                                              $  3,892    $  3,892
        Long-term land leasehold rights                      1,789       1,789
        Building and improvements                           89,460      95,781
        Machinery and equipment                            801,118     808,380
        Furniture and fixtures                              11,263      13,466

                                                            2001        2002
                                                          --------    --------

        Leased assets - equipment                         $  5,337    $ 12,508
        Machinery in transit and prepayments                32,015      34,758
        Construction in progress                             2,107         589
                                                          --------    --------
                                                           946,981     971,163
                                                          --------    --------

     Accumulated depreciation
        Long-term land leasehold rights                        220         251
        Building and improvements                           18,975      25,533
        Machinery and equipment                            331,255     402,634
        Furniture and fixtures                               5,512       7,347
        Leased assets - equipment                            4,185       3,902
                                                          --------    --------
                                                           360,147     439,667
                                                          --------    --------
                                                          $586,834    $531,496
                                                          ========    ========

     In the fourth quarter of 2002, the Company concluded that certain
     equipment was impaired. This determination was based on the Company's
     projected undiscounted future cash flows the Company directly associated
     with and expected to arise as a result of the use and eventual disposition
     of this equipment. The impairment resulted from the decline in usage of
     the equipment. The impairment loss recognized is the amount by which the
     carrying amount of the equipment exceeded its fair value, which was
     determined by the Company based on an analysis of discounted cash flows.
     For the year ended December 31, 2002, the impairment amounted to $35,321,
     which is included in impairment of long-lived assets in the statement of
     operations. Upon recording of the impairment loss, the adjusted carrying
     amount of the equipment became its new cost basis, which will be
     depreciated over the remaining useful life of the equipment.

     Capitalized interest consists of the following:

<TABLE>
                                                                  2000        2001        2002
                                                                --------    --------    --------
<S>                                                             <C>         <C>         <C>
     Total interest expense including capitalization            $ 21,463    $ 19,190    $ 17,591
     Capitalized interest cost                                       888         161         904
     Interest rate for capitalization                                 7%          9%          3%
</TABLE>


                                     F-16
<PAGE>

7.   CONSOLIDATED DEBITS

     Consolidated debits represent goodwill arising from the purchases of
     shares of:

                                                       2001         2002
                                                    ---------    ---------

     ISE Labs                                       $  53,470    $  72,322
     Digital Testing Services, Inc.                       227           --
                                                    ---------    ---------

                                                    $  53,697    $  72,322
                                                    =========    =========

     Amortization of goodwill is reflected in general and administrative
     expenses in the consolidated statements of income and was $7,053, $7,530
     and $10,105 for the years ended December 31, 2000, 2001 and 2002,
     respectively.

8.   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other current liabilities consist of:

                                                       2001         2002
                                                    ---------    ---------

     Accrued bonuses and salary                     $   4,192    $   2,699
     Commission payable                                 1,286          192
     Deferred revenue                                     214           --
     Utilities payable                                    590          466
     Accrued shipping and other expenses                  225        2,245
     Other                                              6,661        4,684
                                                    ---------    ---------

                                                    $  13,168    $  10,286
                                                    =========    =========

9.   SHORT-TERM BORROWING

     These represent the revolving bank loans and letters of credit loans for
     purchase of material that bear interest rates from 2.65% to 4.05% in 2001
     and 2.22% to 2.57% in 2002.

     Unused credit lines for short-term borrowings, including commercial paper
     and bank acceptances, totaled approximately $91,000 as of December 31,
     2002.

10.  COMMERCIAL PAPER AND BANK ACCEPTANCES PAYABLE

     Commercial paper and bank acceptances payable bear interest rates ranging
     from 1.78% to 1.85% in 2002.

11.  LONG-TERM DEBT


                                                       2001         2002
                                                    ---------    ---------

     Convertible notes                              $ 186,812    $ 198,973
     Bank loans                                        47,501       48,096
     Revolving bank loans and acceptance payables      33,515       20,092
     Capital lease obligation (Note 20)                 1,094       12,835
     Notes payable                                        179           --
                                                    ---------    ---------
                                                      269,101      279,996
     Less:  Current portion                           (20,730)     (35,725)
                                                    ---------    ---------

                                                    $ 248,371    $ 244,271
                                                    =========    =========


                                     F-17
<PAGE>

          a.   Convertible notes

                                                            2001         2002
                                                         ---------    ---------

          Principal                                      $ 159,890    $ 159,890
          Accrued interest                                  26,922       39,083
                                                         ---------    ---------

                                                         $ 186,812    $ 198,973
                                                         =========    =========

          On June 29, 1999, ASE Test Finance Limited issued $160 million of 1%
          guaranteed convertible notes due July 1, 2004. The proceeds from the
          issuance of the convertible notes were used to finance the
          acquisitions of ISE Labs, Inc. and the Motorola Semiconductor
          Products Sector Businesses in Taiwan and Korea. ASE Test Finance
          Limited will redeem each convertible note that has not been
          previously redeemed, converted or purchased and cancelled at 136.92%
          of its principal amount in US dollars on July 1, 2004.

          The holders of the convertible notes may convert them into ordinary
          shares of ASE Test Limited at the specified conversion price
          (currently $24.75 per share, subject to adjustment) at any time
          between December 29, 1999 and July 1, 2004.

          The convertible notes may be redeemed under the following
          circumstances:

          1)   Redemption for taxation reasons

               If the applicable tax law or treaty is unfavorably revised, ASE
               Test Finance Limited or the Company may redeem the convertible
               notes in whole at a specified early redemption price, at any
               time upon giving written notice not less than 30 days and not
               more than 60 days to the holders of the convertible notes.

          2)   Redemption at the option of ASE Test Finance Limited

               On or at any time after July 1, 2002, ASE Test Finance Limited
               may redeem all or a part of the convertible notes at a specified
               early redemption price.

          The convertible notes aggregating $110 were converted into shares of
          ASE Test Limited in 2000. No conversions were made in 2001 and 2002.


                                     F-18
<PAGE>


     b.   Bank loans

<TABLE>
                                                                                         2001       2002
                                                                                       --------   --------
<S>                                                                                    <C>        <C>
          ASE Test, Inc.--Denominated in New Taiwan Dollar
                Repayable in quarterly installments through July 2006,
                  interest at 6.475%--6.755% in 2001 and 4.495%--4.65% in 2002         $    857   $  9,491
                Repaid in October 2002, interest at 6.475% in 2001                        2,299         --
                Repayable in quarterly installments through March 2003,
                  interest at 4.0% in 2001 and 3.0% in 2002                               4,144        834
                Repayable in quarterly installments through December
                  2004, interest at 4.0% in 2001 and 3.0% in 2002                         6,430      4,314
                Repayable in quarterly installments through March 2004,
                  interest at 4.0% in 2001 and 3.0% in 2002                               6,430      3,595
                Repaid in March 2002, interest at 6.11% in 2001                           2,501         --
                Repayable in quarterly installments through December 2006,
                  interest at 4.5% in 2002                                                   --     11,504
                                                                                       --------   --------
                                                                                         22,661     29,738
                                                                                       --------   --------

          ISE Labs, Inc.--Denominated in US Dollar
                Borrowing under line of credit of $10 million, expires
                  February 2005, at prime rate 5.5% in 2001 and 4.25% in 2002          $  5,022   $  3,022
                Borrowings under line of credit of $14 million
                      Repaid in May 2002, at prime rate 5.5% in 2001                      1,373         --
                      Expired in May 2003, at prime rate 4.25% in 2002                       --      1,873
                      Expires January 2004, interest at 7.75% in 2001 and 2002              889        494
                Equipment loan at prime rate 5.5% in 2001 and 4.25% in 2002,
                  due through December 2005                                              12,000      9,000
                Mortgage loan, interest at 7.92% in 2001 and 2002, due through
                  May 2009                                                                4,005      3,465
                Equipment loan at prime rate 5.5% in 2001 and 4.25% in 2002,
                  due through January 2004                                                1,551        504
                                                                                       --------   --------
                                                                                         24,840     18,358
                                                                                       --------   --------
                                                                                       $ 47,501   $ 48,096
                                                                                       ========   ========
</TABLE>

          The bank loan agreements provide that the interest rates are adjusted
          based on market rates.

          Some of ISE Labs, Inc.'s loan agreements contain certain convenant
          and default provisions that require ISE Labs, Inc. to maintain
          certain financial ratios, dividend and capital expenditure
          restrictions and maintenance of working capital requirements. ISE
          Labs, Inc. was in violation of covenants under these bank loan
          agreements to maintain certain monthly and quarterly financial ratios
          for the months from October 2002 through February 2003 and for the
          fourth quarter of 2002, respectively. These breaches constituted
          events of default and, as a result, the bank declared all of ISE
          Labs, Inc.'s obligations under the agreement immediately due and
          payable. ISE Labs, Inc. subsequently obtained a waiver of the
          aforementioned breaches from the bank, repaid all of the amounts owed
          under the loan and terminated the loan agreement. Accordingly, the
          total debt amount was included in the current portion of long-term
          debt at December 31, 2002.

          Certain loans contain restrictive covenants and broad default
          provisions such that a default under one agreement may also trigger
          cross-defaults under other agreements.


                                     F-19
<PAGE>

     c.   Revolving bank loans and acceptance payables

<TABLE>
                                                                                         2001       2002
                                                                                       --------   --------
<S>                                                                                    <C>        <C>
          Principal (under a syndicated money market instrument issuing facility
            agreement of NT$1.5 billion)--revolving within 5 years starting from
            June 1998, interest at 2.905%--5.745% in 2001 and
            2.855%--2.915% in 2002                                                     $ 34,295   $  8,628
          Revolving credit lines, repayable in 13 quarterly installments from
            January 2004 to January 2007, interest at 4.5%                                   --     11,504
                                                                                       --------   --------
                                                                                         34,295     20,132
          Less--unamortized discounts                                                      (780)       (40)
                                                                                       --------   --------

                                                                                       $ 33,515   $ 20,092
                                                                                       ========   ========
</TABLE>

          The following are certain significant terms of the Agreement:

          1)   ASE Test, Inc. shall not pledge its assets or assume the
               liabilities of others or other take similar actions, without the
               consent of the majority of the banks.

          2)   ASE Test, Inc. must maintain certain financial ratios.

          3)   ASE Test, Inc. shall pay an annual commitment fee at 0.15% of
               the difference between the authorized and utilized credit line.

          ASE Test Limited (the "Guarantor") guaranteed the obligations of ASE
          Test, Inc. under the Agreement. The Guarantor is required to maintain
          certain financial ratios and, without written consent of the majority
          banks, shall not:

          1)   Merge or consolidate with any other entity or take any action to
               dissolve, liquidate or reorganize.

          2)   Purchase or redeem its shares or reduce its share capital.

          3)   Reduce its ownership in ASE Test, Inc. to less than 51%.

          4)   Transfer, sell, lease or dispose of substantial portion of its
               assets.

     Summarized long-term debt by currency is as follows:

<TABLE>
                                             2000              2001             2002
                                        -------------     -------------    -------------
<S>                                     <C>               <C>              <C>
     New Taiwan Dollars                 NT$ 2,411,550     NT$ 1,965,613    NT$ 1,732,584
     U.S. Dollars                       US$   214,651     US$   212,925    US$   230,166
</TABLE>

     Maturities of long-term debt outstanding as of December 31, 2002 are as
     follows:

<TABLE>
<S>                                                                           <C>
     Within the following year                                                $   35,725
     During the second year                                                      217,689
     During the third year                                                        14,105
     During the fourth year                                                       10,287
     During the fifth year and thereafter                                          2,190
                                                                              ----------

                                                                              $  279,996
                                                                              ==========
</TABLE>

     The unused long-term credit facilities totaled $34,922 as of December 31,
     2002.


                                     F-20
<PAGE>

12.  SHAREHOLDERS' EQUITY

     The numbers of shares for all periods have been restated for the
     two-for-one stock splits effected on February 8, 1998 and April 5, 1999.

     Capital surplus from prior years' gains on disposal of properties has been
     transferred to retained earnings in the 2002 general shareholders'
     meeting.

     The Articles of Incorporation of ASE Test, Inc. provide that the annual
     net income as determined under ROC GAAP shall be appropriated as follows:

     a.  Offset against deficit; if any;

     b.  10% of the remainder as legal reserve;

     c.  Remuneration to directors and supervisors equal to not more than 2%,
         and bonus to employees equal to 3%--7% of the remainder, respectively.

     The appropriations shall be approved by the shareholders in the following
     year and given effect in the financial statements of such year.

     Under the ROC Company Law, the aforementioned legal reserve may be used to
     offset a deficit. Also, when the reserve has reached 50% of capital, up to
     50% thereof may be transferred to capital. This legal reserve amounted to
     $16,180 as of December 31, 2002 and is included in the consolidated
     retained earnings.

13.  INCOME TAX

     a.  Income tax expense attributable to continuing operations consists of
         the following:

<TABLE>
                                                                 2000         2001         2002
                                                              ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>
          Income tax expense (benefit)--current               $   4,130    $  (2,927)   $  (3,625)
          Income taxes (10%) on undistributed earnings            2,939        4,119          566
          Income tax expense (benefit)--deferred                 (4,872)       4,375       (7,184)
          Adjustment of prior year's income tax                      --          955           --
                                                              ---------    ---------    ---------

                                                              $   2,197    $   6,522    $ (10,243)
                                                              =========    =========    =========
</TABLE>


                                     F-21
<PAGE>

     b.   Reconciliation of income taxes attributable to continuing operations
          for the years ended December 31, 2000, 2001 and 2002 calculated at
          the statutory rate and the income tax expense (benefit) is as
          follows:

<TABLE>
                                                                                     2000        2001          2002
                                                                                  ---------    ---------    ---------
<S>                                                                               <C>          <C>          <C>
          ASE Test, Inc.
          --------------
          Tax expense (benefit) based on pretax accounting
            income (loss) at statutory rate (25%)                                 $  12,873    $   1,407    $  (2,453)
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income--tax holiday                                 (6,126)        (659)      (1,070)
                      Tax-exempt income--Gain from sales of
                        securities                                                       --         (135)        (122)
                Temporary differences
                      Investment loss (income)                                    $     146    $     (77)   $     256
                      Loss on long-term bond securities                                 789           49           --
                      Unrealized foreign exchange gain (loss)                           363          (17)         155
                      Bad debts                                                         290           37           --
                      Impairment loss on fixed assets                                    --           --        3,825
                      Other                                                            (135)          28          227
                Credits for investment in machinery and
                  equipment, and research and development
                  expenditures                                                       (8,527)      (4,752)      (1,342)
                Net change in deferred income tax for the period                     (9,651)      11,778       (3,990)
          Adjustment of prior year's income tax                                          --          955           --
          Income taxes (10%) on undistributed earnings                                2,939        4,119          566
          Other                                                                          71         (151)          --
                                                                                  ---------    ---------    ---------
          Income tax expense (benefit)                                               (6,968)      12,582       (3,948)
                                                                                  ---------    ---------    ---------

          ASE Test Malaysia
          -----------------
          Tax expense (benefit) based on pretax accounting income
            (loss) at statutory rate (28%)                                           13,780         (391)      (1,478)
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income                                              (8,881)          --           --
                      Others                                                            156           83           42
                Temporary differences
                      Depreciation and capital allowance                             (4,636)      (4,371)      (1,217)
                      Provisions and deferred assets                                   (219)         441           62
                      Unabsorbed capital allowances                                      --        4,380        2,280
                      Other                                                              --           --          372
                Deferred                                                              4,855       (1,737)      (1,001)
                                                                                  ---------    ---------    ---------
                Income tax expense (benefit)                                          5,055       (1,595)        (940)
                                                                                  ---------    ---------    ---------

          ISE Labs, Inc.
          --------------
          Tax expense (benefit) based on pretax accounting income (loss) at
          statutory rate (federal tax rate 35% and state tax rate 6%)                 7,121       (6,636)     (18,143)
          Add (deduct) tax effects of:
                Permanent differences
                      Penalty                                                         1,339           --           --
                      Amortization and expenses                                         250          128           --
                      Others                                                             --           18           12
                Utilization of loss carryforward                                     (1,087)          --       (1,000)
                Loss to be carryforward                                                  --        5,283       12,877
</TABLE>


                                     F-22
<PAGE>

<TABLE>
<S>                                                                               <C>          <C>          <C>
                Deferred                                                                (76)      (5,666)          --
                Lower foreign tax rate adjustment and other                          (3,437)       2,408          899
                                                                                  ---------    ---------    ---------
                Income tax expense (benefit)                                          4,110       (4,465)      (5,355)
                                                                                  ---------    ---------    ---------

          Income tax expense (benefit)                                            $   2,197    $   6,522    $ (10,243)
                                                                                  =========    =========    =========
</TABLE>

          The income of ASE Test, Inc. attributable to the capital increase (in
          1994 and 1998) for the purpose of purchasing machinery and equipment
          is exempt. The exemption is for five years starting when the
          installation of the machinery and equipment is completed. The Company
          completed the installation in respect to the foregoing capital
          increases in January 1996 and in January 2001. Also, ASE Test
          Malaysia has been granted approval of "hi-tech pioneer" status for an
          additional five years and is expected to commence the tax holiday
          retroactively from July 1, 1999 through June 30, 2004. The per share
          effect (basic earnings per share) of tax holiday is US$0.16 in 2000,
          US$0.01 in 2001 and US$0.00 in 2002.

          Undistributed earnings of the Company's subsidiaries amounted to
          $282,365, as at December 31, 2002. Those earnings are considered to
          be indefinitely reinvested and, accordingly, no provision for income
          tax has been provided thereon.


                                     F-23
<PAGE>

     c.   Deferred income tax assets and liabilities as of December 31, 2001
          and 2002 are summarized as follows:

<TABLE>
                                                                                     2001        2002
                                                                                   --------    --------
<S>                                                                                <C>       <C>
          Current assets
                ISE Labs, inc
                     Allowance for doubtful receivables and deferred revenue       $  1,315  $       --
                     Net operating loss carryforward                                  5,541          --
                     Amortization and other                                           1,925         855
                                                                                   --------    --------
                                                                                      8,781         855
                ASE Test, Inc. - unused tax credits                                   4,337       5,517
                                                                                   --------    --------
                                                                                     13,118       6,372
                Less--valuation allowance                                            (3,334)     (4,851)
                                                                                   --------    --------

                                                                                   $  9,784    $  1,521
                                                                                   ========    ========
          Non-current assets (liabilities)
                ASE Test, Inc. - unused tax credits                                $ 17,531    $ 18,488
                                                                                   --------    --------
                ASE Test Malaysia
                     Net operating loss carryforward                                    404         404
                     Unabsorbed capital allowances                                    4,810       7,090
                     Other                                                              209         291
                                                                                   --------    --------
                                                                                      5,423       7,785
                                                                                   --------    --------
                ISE Labs, Inc.
                     Deferred rent                                                      442         725
                     Net operating loss carryforward                                     --       9,950
                     Credit and others                                                   --         480
                     From foreign subsidiaries                                           --         228
                                                                                   --------    --------
                                                                                        442      11,383
                                                                                   --------    --------
                                                                                     23,396      37,656
                Less--valuation allowance                                            (7,949)     (4,766)
                                                                                   --------    --------
                                                                                     15,447      32,890
                                                                                   --------    --------
                ASE Test Malaysia
                     Timing difference between tax capital allowances and
                     Depreciation of property, plant and equipment                 $ (3,686)   $ (5,047)
                                                                                   --------    --------
                ISE Labs, Inc.
                     Depreciation                                                    (5,635)     (6,979)
                     Excess of purchase cost (Note 1)                                (1,604)     (1,026)
                     From foreign subsidiaries                                       (1,374)       (623)
                                                                                   --------    --------
                                                                                     (8,613)     (8,628)
                                                                                   --------    --------

          Total                                                                    $  3,148    $ 19,215
                                                                                   ========    ========
</TABLE>

          The deferred income tax assets consist of unused tax credits arising
          from investments in machinery and equipment and research and
          development expenditures in ASE Test Inc.; while those of ASE Test
          Malaysia and ISE Labs, Inc. are mainly from capital allowances and
          losses to be carryforward, respectively.


                                     F-24
<PAGE>


     d.   As of December 31, 2002, ASE Test, Inc. has unused tax credits which
          can be utilized to offset its future income tax are set forth below:

          Year of Expiry
          --------------

          2003                                                     $   5,517
          2004                                                         8,830
          2005                                                         3,158
          2006                                                         6,500
                                                                   ---------

                                                                   $  24,005
                                                                   =========

     In the ROC, tax credits may be utilized to reduce up to 50% of income tax
     payable each year. In the expiring year, any remainder of unused tax
     credits can be used entirely.

     ISE Labs, Inc.'s available U.S. Federal and California State net operating
     loss carryforward are approximately $25.7 million and $20.7 million with
     expiration period to 2022 and 2012, respectively.

     Income tax return of ASE Test, Inc. has been examined by the ROC tax
     authorities through 1999.

     14.  PENSION PLAN

     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. ISE
     Labs, Inc. has a defined contribution savings plan ("401k plan") for
     eligible employees. This plan permits employees to make contributions up
     to the maximum limits allowable under Internal Revenue Code Section 401k.
     ASE Test, Inc. makes monthly contributions, at 2% of salaries and wages,
     to pension funds 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"), a government agency. CTC may invest the assets of the
     fund in stocks, bonds and other securities. Information relating to such
     investments is unavailable to ASE Test, Inc. The changes in the retirement
     funds during the periods indicated are summarized as follows:

<TABLE>
                                                                      2000        2001        2002
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>
     Balance, beginning of year                                     $  1,015    $  1,341    $  1,542
     Contributions                                                       325         247         304
     Payments                                                             (6)        (21)         --
     Interest income                                                      84          57          39
     Exchange difference                                                 (77)        (82)          7
                                                                    --------    --------    --------

     Balance, end of year                                           $  1,341    $  1,542    $  1,892
                                                                    ========    ========    ========
</TABLE>

     Pension costs for ASE Test, Inc. during the periods indicated consist of:

<TABLE>
                                                                      2000        2001        2002
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>
     Service costs                                                  $    491    $    479    $  1,024
     Interest                                                            120         146         183
     Projected return on pension assets                                  (52)        (86)        (85)
     Amortization of net transition obligation gain or loss on
       plan assets, etc                                                  (13)         16          41
                                                                    --------    --------    --------

                                                                    $    546    $    555    $  1,163
                                                                    ========    ========    ========
</TABLE>


                                     F-25
<PAGE>


     Other pension information based on actuarial calculations of the plan
     during the periods indicated are as follows:

<TABLE>
                                                                2000          2001          2002
                                                             ---------     ---------     ---------
<S>                                                          <C>           <C>           <C>
     a.  Benefit obligations

          Vested benefit obligation                          $      30     $       9     $      10
          Non-vested benefit obligation                          1,114         2,005         3,438
                                                             ---------     ---------     ---------
          Accumulated benefit obligation                         1,144         2,014         3,448
          Additional benefits based on future salaries           1,345         1,600         2,743
                                                             ---------     ---------     ---------
          Projected benefit obligation                           2,489         3,614         6,191
          Fair value of assets                                  (1,341)       (1,542)       (1,892)
                                                             ---------     ---------     ---------
          Funded status                                          1,148         2,072         4,299
          Unrecognized net transition obligation                  (200)         (178)         (170)
          Unrecognized actuarial loss                             (380)       (1,084)       (2,462)
                                                             ---------     ---------     ---------

          Accrued pension cost                               $     568     $     810     $   1,667
                                                             =========     =========     =========

     b.   Vested obligation                                  $      30     $      10     $      11
                                                             =========     =========     =========

     c.   Actuarial assumption

          Discount rate                                            6.0%          5.0%          3.5%
          Increase in future salary level                          4.0%          3.0%          3.0%
          Expected rate of return on plan assets                   6.0%          5.0%          3.5%
</TABLE>

     The Company has no other post-retirement or post-employment benefit plans.

15.  EMPLOYEE STOCK OPTION PLANS

     The Company has five stock option plans, the 1996 Executive Management
     Option Plan (the "1996 Plan"), and the 1997, 1998, 1999 and 2000 Option
     Plans. Stock options granted under these plans are exercisable for the
     ordinary shares of the Company based on a vesting schedule over five years
     until the options expire. The Company applies US GAAP to the accounting
     for stock options granted under these plans (see Note 27 f).

16.  INTERESTi-DNET

<TABLE>
                                                                2000          2001          2002
                                                             ---------     ---------     ---------
<S>                                                          <C>           <C>           <C>
     Interest expense                                        $  20,575     $  19,029     $  16,687
     Interest income                                            (5,835)       (5,246)       (2,291)
                                                              --------     ---------     ---------

     Net                                                     $  14,740     $  13,783     $  14,396
                                                             =========     =========     =========
</TABLE>

17.  RELATED PARTY TRANSACTIONS

     Related party transactions made by the Company and its parent company with
     ASE, Inc. and its affiliates, ASE Material Inc., ASE (Chung-Li), Inc., ASE
     Korea, Inc., ASE Holding Electronics (Philippine) Inc. ("ASE Philippine"),
     J&R Industrial Inc. ("J&R") and Hung Ching Development & Construction Co.,
     ("HCDC") are as follows:


                                     F-26
<PAGE>


                                                       2000      2001      2002
                                                     -------   -------   -------
     For the year
     ------------
     Revenues--ASE, Inc.                             $    87   $    12   $    11
                                                     =======   =======   =======

     Purchase of machinery and equipment:
           ASE, Inc.                                 $   937   $   973   $    --
           ASE Korea, Inc.                               487       569     1,527
           ASE (Chung-Li), Inc.                           --     2,353        --
                                                     -------   -------   -------

                                                     $ 1,424   $ 3,895   $ 1,527
                                                     =======   =======   =======

     Purchase of buildings--HCDC                     $    --   $12,503   $    --
                                                     =======   =======   =======

     Purchase of raw materials:
           ASE, Inc.                                 $   730   $   774   $   533
           ASE Material, Inc.                          1,594     2,647     5,670
           ASE Philippine                                127        --        --
           ASE (Chung-Li), Inc.                           38        --       300
           ASE Korea, Inc.                                --        --     1,412
                                                     -------   -------   -------

                                                     $ 2,489   $ 3,421   $ 7,915
                                                     =======   =======   =======


                                                       2000      2001      2002
                                                     -------   -------   -------
     Sale of properties:
           ASE Philippine                            $    25   $   657   $    --
           ASE, Inc.                                      75        32        --
           ASE Korea, Inc.                                72     3,373     1,734
           ASE (Chung-Li), Inc.                        1,044     2,092       432
           J&R                                            --     1,341        --
                                                     -------   -------   -------

                                                     $ 1,216   $ 7,495   $ 2,166
                                                     =======   =======   =======


                                                                 2001      2002
                                                               -------   -------
     At year end
     -----------
     Accounts receivable:
           ASE, Inc.                                           $ 3,311   $ 5,961
           ASE Korea, Inc.                                          --     1,759
           ASE (Chung-Li), Inc.                                  2,115       701
           J&R                                                   1,293        --
           ASE Philippine                                          917       918
           Other                                                   199         1
                                                               -------   -------

                                                               $ 7,835   $ 9,340
                                                               =======   =======

     Accounts payable:
           ASE, Inc.                                           $ 3,704   $ 1,448
           ASE Korea, Inc.                                          --       444
           ASE Material, Inc.                                      404       275
           ASE (Chung-Li), Inc.                                  1,905       810
           ASE Philippine                                           --        26
                                                               -------   -------

                                                               $ 6,013   $ 3,003
                                                               =======   =======


                                     F-27
<PAGE>


     These transactions were conducted at prices and terms comparable to those
     applied in transactions with unrelated companies, except for the purchases
     and sales of machinery and equipment which were recorded at net book
     values.

18.  EARNINGS (LOSS) PER SHARE

     Since the Company incurred a loss from continuing operations for the years
     ended December 31, 2001 and 2002, only the basic net loss per share is
     presented. Diluted earnings per share for the year ended December 31, 2000
     is calculated as follows:

<TABLE>
<S>                                                                                          <C>
     Net income under ROC GAAP                                                               $   107,195
                                                                                             ===========

     Weighted average shares--denominator for basic earnings per share                        85,970,361
     Effect of diluted shares for ordinary share equivalents--stock options                    6,702,679
                                                                                             -----------
     Weighted average shares, as adjusted - denominator for diluted earnings per share        92,673,040
                                                                                             ===========
     Earnings per share (in US dollars)
           Basic                                                                             $      1.25
                                                                                             ===========
           Diluted                                                                           $      1.16
                                                                                             ===========
</TABLE>

     The number of shares to be issued upon conversion of the convertible notes
     is 6,460,202 for each of the three years in the period ended December 31,
     2002.

     The convertible notes had an antidilutive effect on earnings per share on
     all periods presented and, accordingly, are not deemed as the Company's
     ordinary share equivalent.

19.  ASSETS PLEDGED OR MORTGAGED

     The assets of ASE Test, Inc. pledged or mortgaged as collateral for bank
     loans and as guarantees for hiring of foreign laborers are summarized as
     follows:

                                                          2001          2002
                                                       ---------     ---------

     Machinery and equipment--net                      $  38,268     $  46,957
     Time deposits                                           274         1,237
                                                       ---------     ---------

                                                       $  38,542     $  48,194
                                                       =========     =========

     In addition, total assets of ISE Labs, Inc. amounting to $155,990 and
     $93,076 as of December 31, 2001 and 2002 have been pledged as collateral
     for its long-term debts.

20.  COMMITMENTS AS OF DECEMBER 31, 2002

     a.   ASE Test, Inc. leases the land on which its buildings are situated
          under various operating lease agreements with the government expiring
          on various dates from February 2006 to December 2012. The agreements
          grant ASE Test, Inc. option to renew the leases and reserve the right
          for the lessor to adjust the lease charges upon an increase in the
          assessed value of the land and to terminate the leases under certain
          conditions. ISE Labs, Inc. also leases office space and equipment
          under non-cancellable operating lease agreements. The rental expenses
          for the years ended December 31, 2000, 2001 and 2002 were $2,945,
          $10,656 and $9,936, respectively. The future minimum lease payments
          under above-mentioned operating leases are as follows:


                                     F-28
<PAGE>

          2003                                                   $    7,596
          2004                                                        7,635
          2005                                                        7,696
          2006                                                        7,087
          2007                                                        5,637
          2008 and thereafter                                         9,650
                                                                 ----------

                                                                 $   45,301
                                                                 ==========

          In addition, ASE Test, Inc. and ISE Labs, Inc. also lease equipment
          under non-cancellable capital lease agreements. As of December 31,
          2002, the net book value of the equipment acquired under the capital
          obligations amounted to $12,928. The future minimum lease payments
          under above-mentioned capital leases are as follows:

          2003                                                   $    6,050
          2004                                                        5,335
          2005                                                        3,152
                                                                 ----------
          Total minimum lease payments                               14,537
          Less:  Amount representing interest                        (1,702)
                                                                 ----------
          Present value of future lease obligations                  12,835
          Capital lease obligation, current                          (5,046)
                                                                 ----------

          Capital lease obligation, long-term                    $    7,789
                                                                 ==========

     b.   ASE Test, Inc. has unused letters of credit of $9,691.

     c.   ASE Test, Inc., ASE Test Malaysia and ISE Labs, Inc. have commitments
          to purchase machinery and equipment of $22,682, $3,358 and $8,902,
          respectively.

     d.   ASE Test, Inc. and ASE Test Malaysia engage outside sales agencies.
          Commissions and service fees were paid based on monthly incurred
          service--related costs and expenses plus 5%--10% in 2001 and 2002
          (starting August 2001, there is limited amounts prescribed for costs
          and expenses incurred) or based on 0.56%--0.7% in 2001 and 2002 of
          net export sales. Such commissions and service fees for 2000, 2001
          and 2002 were $6,323, $6,248 and $5,225, respectively.

21.  DERIVATIVE FINANCIAL INSTRUMENTS

     Information on derivative transactions are as follows:

     a.   Foreign currency options contracts

          Because ASE Test, Inc. expects to receive US dollars from export
          sales, it has occasionally entered into foreign currency option
          contracts to manage exposures to exchange rate fluctuations. As of
          December 31, 2002, there are no outstanding contract.

          The gain (loss) arising from such settled option contracts were
          immaterial in 2000, 2001 and 2002.

     b.   Forward exchange contract

          ASE Test Malaysia entered into forward contracts to manage exposures
          of foreign exchange rate fluctuations associated with its foreign
          currency liabilities. As of December 31, 2002, there is no open
          forward contract. The gain arising from settled forward contracts
          were $2,062 and $942 in 2000 and 2001, respectively.

     c.   Transaction risk


                                     F-29
<PAGE>

          1)   Credit risk

               ASE Test, Inc. is exposed to credit risk in the event of
               non-performance of the counter parties to option and forward
               contracts on maturity. In order to manage this risk, ASE Test,
               Inc. transacts only with financial institutions with good credit
               ratings. As a result, no material losses resulting from counter
               party defaults are anticipated.

          2)   Market risk

               Market risk is the exposure created by potential exposures to
               changes of foreign exchange rate related to its
               foreign--currency--denominated assets and/or liabilities.

          3)   Liquidity risk and cash flow risk

               At the maturity of these contracts, ASE Test, Inc. and ASE Test
               Malaysia have sufficient operating capital to meet cash
               requirements.

22.  NON-DERIVATIVE AND DERIVATIVE FINANCIAL INSTRUMENTS

<TABLE>
                                                                   2001                    2002
                                                          ---------------------    ---------------------
                                                           Carrying     Fair       Carrying      Fair
                                                            Value       Value        Value       Value
                                                          ---------   ---------    ---------   ---------
<S>                                                       <C>         <C>          <C>         <C>
     Non-derivative financial instruments
     ------------------------------------

     Assets
           Cash and cash equivalents (including
             pledged time deposits)                       $ 106,339   $ 106,339    $ 120,065   $ 120,065
           Short-term investments                            31,503      31,527        2,500       2,500
           Accounts receivable                               46,573      46,573       58,631      58,631
           Long-term investments                             95,042      95,019       93,702      92,710

     Liabilities
           Short-term borrowings                              9,946       9,946       24,597      24,597
           Commercial paper and bank acceptances
             payable                                             --          --       19,403      19,403
           Accounts payable                                  17,807      17,807       18,435      18,435
           Long-term debts (including current
             portion)                                       269,101     269,101      279,996     279,996

     Derivative financial instruments
     --------------------------------

     Forward exchange contracts                                  --          --           --          --
     Foreign currency options                                    --        (183)          --          --
</TABLE>

     The carrying values of cash and cash equivalents, accounts receivable,
     short-term borrowings, commercial paper and bank acceptances payable and
     accounts payable approximate fair values because of the short maturity of
     these instruments. The fair values of short-term and long-term investments
     are determined based on market values or net equity values. The fair
     values of long-term debts are determined based on the estimated present
     values of future cash flows using the interest rates of similar long-term
     debt instruments which the Company is able to obtain. Fair value of
     long-term debts is carrying value as floating interest rates are applied.
     The fair values of derivative financial instruments are based on the
     information of mark-to-market valuation.


                                     F-30
<PAGE>

23.  CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

     A substantial portion of sales are made to a small number of customers on
     credit and generally no collateral is required. Concentration of accounts
     receivable as of December 31, 2001 and 2002 are as follows:

                                                           Percentage of
                                                       Accounts Receivable
                                                      ---------------------
                                                        2001         2002
                                                      --------     --------

     Five largest customers                              34%          32%

     Credit evaluation of each customer is performed and reserves for potential
     credit losses are maintained. Losses from bad debts, in the aggregate,
     have not exceeded management's estimates.

24.  SEGMENT AND GEOGRAPHICAL INFORMATION

     a.   Geographical information--revenue

<TABLE>
                                                     2000                   2001                   2002
                                                -------------------    -------------------    -------------------
              Area                              Amount          %      Amount          %      Amount          %
          ----------------                      ----------     ----    ----------     ----    ----------     ----
<S>                                             <C>             <C>    <C>             <C>    <C>             <C>
          North America                         $  323,658       74    $  225,657       76    $  219,038       73
          Asia, excluding Australia                 87,897       20        62,952       21        68,130       23
          Europe                                    28,730        6         9,850        3        14,778        4
          Australia                                     --       --             7       --            16       --
                                                ----------     ----    ----------     ----    ----------     ----

                                                $  440,285      100    $  298,466      100    $  301,962      100
                                                ==========     ====    ==========     ====    ==========     ====
</TABLE>

     b.   Geographical information--long-lived assets

<TABLE>
                                                                            2001                   2002
                                                                       -------------------    -------------------
                                                                       Amount          %      Amount          %
                                                                       ----------     ----    ----------     ----
<S>                                                                    <C>             <C>    <C>             <C>
          Asia                                                         $  491,143       84    $  478,518       90
          North America                                                    95,691       16        52,978       10
                                                                       ----------     ----    ----------     ----

                                                                       $  586,834      100    $  531,496      100
                                                                       ==========     ====    ==========     ====
</TABLE>

     c.   Major customers

          Customers accounting for 10% or more of total revenues are shown
          below:

<TABLE>
                                                     2000                   2001                   2002
                                                -------------------    -------------------    -------------------
                                                Amount          %      Amount          %      Amount          %
                                                ----------     ----    ----------     ----    ----------     ----
<S>                                             <C>             <C>    <C>             <C>    <C>             <C>
          Customer A                            $   60,219       14    $   48,940       16    $   35,501       12
          Customer B                                42,719       10        14,428        5        18,566        6
                                                ----------     ----    ----------     ----    ----------     ----

                                                $  102,938       24    $   63,368       21    $   54,067       18
                                                ==========     ====    ==========     ====    ==========     ====
</TABLE>

          The revenues of ASE Test, Inc. from testing services provided to
          certain of ASE Inc.'s customers through ASE Inc. amounted to $4,493,
          $5,354 and $11,500 in 2000, 2001 and 2002, respectively. None of such
          customers individually accounted for more than 10% of ASE Test,
          Inc.'s revenues from testing services in any such period.

     d.   Segment information

          The Company has two reportable segments: testing and packaging.


                                     F-31
<PAGE>

          The Company bare semiconductors into finished semiconductors with
          enhanced electrical and thermal characteristics; provides testing
          services, including front-end engineering testing, wafer probing and
          final testing services. The accounting policies of the segments are
          the same as those described in Note 2. Segment information for the
          years ended December 31, 2000, 2001 and 2002 is as follows:

<TABLE>
                                                                     Testing       Packaging      All other        Totals
                                                                   -----------    -----------    -----------    -----------
<S>                                                                <C>            <C>            <C>            <C>
          2000
          ----

          Revenue from external customers                          $   316,158    $   124,127    $        --    $   440,285
          Interest revenue                                               1,222            527          4,086          5,835
          Interest expense                                              (7,814)          (110)       (12,651)       (20,575)
          Net interest revenue (expense)                                (6,592)           417         (8,565)       (14,740)
          Depreciation and amortization                                103,943         12,894            669        117,506
          Segment profit from continuing operation                      84,406         26,915          2,322        113,643
          Segment assets                                               762,811         84,414        244,430      1,091,655
          Expenditures for segment assets                              365,054         32,522         15,621        413,197

          2001
          ----

          Revenue from external customers                              223,193         75,273             --        298,466
          Interest revenue                                                 756            182          4,308          5,246
          Interest expense                                              (5,909)          (195)       (12,925)       (19,029)
          Net interest expense                                          (5,153)           (13)        (8,617)       (13,783)
          Depreciation and amortization                                127,617         16,463            780        144,860
          Segment profit (loss) from continuing operation              (23,258)         2,269        (20,775)       (41,764)
          Segment assets                                               647,774         73,777        237,855        959,406
          Expenditures for segment assets                               94,631          9,585             --        104,216

          2002
          ----

          Revenue from external customers                          $   214,331    $    87,631    $        --    $   301,962
          Interest revenue                                                 178             53          2,060          2,291
          Interest expense                                              (2,766)          (160)       (13,761)       (16,687)
          Net interest expense                                          (2,588)          (107)       (11,701)       (14,396)
          Depreciation and amortization                                124,723         17,751         11,777        154,251
          Segment loss from continuing operation                       (61,620)        (4,595)       (25,296)       (91,511)
          Segment assets                                               576,987        110,169        238,317        925,473
          Expenditures for segment assets                              110,044         15,965             --        126,009
</TABLE>

25.  DISCONTINUED OPERATIONS

     On July 25, 2000, ISE Labs, Inc. sold its packaging operation in Manteca,
     California to its existing shareholders for $4.9 million. ISE Labs, Inc.
     recognized a loss on disposition of $1,327, net of tax benefits of $608.
     As discussed in Note 1, this disposition loss was considered an adjustment
     of purchase price allocation.

     Summarized below are operating results of the discontinued segment for the
     period from May 5, 1999 to December 31, 1999 and for the year ended
     December 31, 2000:


                                     F-32
<PAGE>

                                                     1999           2000
                                                   -------        -------

     Net sales                                     $ 6,079        $ 5,024
     Gross profit                                      112            414
     Loss before income taxes                       (2,294)        (1,146)
     Income tax benefit                                934            388
     Net loss                                       (1,360)          (758)


26.  SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED
     BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
     STATES

     The Company's consolidated financial statements have been prepared in
     accordance with ROC GAAP, which differ in the following respects from US
     GAAP:

     a.   Pension benefits

          US Statement of Financial Accounting Standards (US SFAS) No. 87,
          "Accounting for Pensions", was effective no later than the beginning
          of the first period for which a US GAAP reconciliation is required. A
          portion of the unrecognized net transition obligation at the adoption
          date is to be allocated directly to equity. ASE Test, Inc. adopted US
          SFAS No. 87 on January 1, 1987. ROC SFAS No. 18, which is
          substantially similar in many aspects to US SFAS No. 87, was
          effective in 1996. Therefore, pension expense due to different
          adoption dates is adjusted.

     b.   Short-term investments

          Under ROC GAAP, marketable equity securities are carried at the lower
          of aggregate cost or market, and debt securities are carried at cost,
          with only unrealized losses recognized. Under US SFAS No. 115,
          "Accounting for Certain Investments in Debt and Equity Securities",
          debt and equity securities that have readily determinable fair values
          are to be classified as either trading, available-for-sale or
          held-to-maturity securities. Debt securities that the Company has the
          positive intent and ability to hold to maturity are classified as
          held-to-maturity securities and reported at amortized cost. Debt and
          equity securities that are bought and traded for short-term profit
          are classified as trading securities and reported at fair value, with
          unrealized gains and losses included in earnings. Debt and equity
          securities not classified as either held-to-maturity or trading are
          classified as available-for-sale securities and reported at fair
          value, with unrealized gains and losses excluded from earnings and
          reported as a separate component of shareholders' equity.

     c.   Bonuses to employees, directors and supervisors

          According to ROC regulations and the Articles of Incorporation of
          ASE, Inc. and ASE Test, Inc., a portion of distributable earnings
          should be set aside as bonuses to employees, directors and
          supervisors. Bonuses to directors and supervisors are always paid in
          cash. However, bonuses to employees are paid in cash by ASE Test,
          Inc., and may be granted in stock of ASE, Inc. by ASE, Inc. Cash
          bonuses which are distributed as bonuses to employees are charged
          against retained earnings under ROC GAAP, after such appropriations
          are formally approved by the board of directors and resolved by the
          shareholders in the following year. Under the regular bonus plan of
          the ASE Group effective in 1994, the bonuses payable to employees of
          all ASE Group companies in Taiwan (including ASE Test, Inc.) shall be
          paid in common shares of ASE, Inc. issued from the capitalization of
          its retained earnings to employees. Under US GAAP, such cash payment
          and the fair market value of the ASE, Inc. common shares received by
          ASE Test, Inc.'s employees have been recorded as compensation
          expenses, allocated to cost of revenues, research and development
          costs and selling, general and administrative expenses, and credited
          to capital surplus in the year when the bonuses were earned. ASE,
          Inc. pays the bonuses on behalf of the Company and does not require
          reimbursement. Since the amount and form of such bonuses are not
          finally determinable until the board of directors meeting in the
          subsequent year, the total amount of the aforementioned bonuses
          ("regular bonuses") is initially accrued based on the management's
          estimate regarding the amount to be paid based on Articles of
          Incorporation of ASE, Inc. and ASE Test, Inc. Any difference between
          the initially accrued amount and


                                     F-33
<PAGE>

          the fair market value of the bonuses settled by the issuance of
          shares is recognized in the year of approval by the board of
          directors. The management estimates that the regular annual
          employees' bonuses, including cash and stock, will approximate three
          to four months' salaries and wages. Such bonuses under US GAAP were
          charged to the costs and expenses as follows:

<TABLE>
                                                               2000         2001         2002
                                                             --------     --------     --------
<S>                                                          <C>          <C>          <C>
          Cost of revenues                                   $  3,037     $     --     $     --
          Selling, general and administrative expenses            507           --           --
          Research and development                                507           --           --
                                                             --------     --------     --------

                                                             $  4,051     $     --     $     --
                                                             ========     ========     ========
</TABLE>

          Aside from the aforementioned regular bonus plan, ASE, Inc., the
          parent of the Company, granted a special stock bonus to ASE Test,
          Inc.'s employees aggregating $5,800 and $6,900 in value of ASE, Inc.
          shares in 1997 and 1999. ASE Test, Inc. required its employees who
          received the special stock bonus to work for an additional three
          years. Accordingly, the amount of $5,800 and $6,900 is being
          allocated over three years starting April 1998 and July 2000,
          respectively, as additional compensation expense in the consolidated
          statement of income under US GAAP.

     d.   Depreciation of buildings

          Under ROC GAAP, the estimated life of a building can be as long as 40
          years based on ROC practices. For US GAAP purposes, the useful lives
          of buildings is estimated to be 25 years.

     e.   Excess of book value on transfer of building between related parties

          ASE Test, Inc., a consolidated subsidiary, purchased building and
          facilities from its affiliate, ASE Technology, in 1997. The purchase
          price from ASE Technology was based on market value. Such additional
          payment for the excess of book value of NT$17,667 (US$642) was
          capitalized by ASE Test, Inc. as allowed under ROC GAAP. Under US
          GAAP, transfers of assets between related parties should not be
          recorded by the transferee at stepped-up values.

     f.   Impairment of long-lived assets

          Under US GAAP, in accordance with US SFAS No. 144, "Accounting for
          the Impairment or Disposal of Long-Lived Assets", long-lived assets
          held and used by the Company are reviewed for impairment whenever
          events or changes in circumstances indicate that the carrying amount
          of an asset may not be recoverable. For purposes of evaluating the
          recoverability of long-lived assets, the recoverability test is
          performed by comparing undiscounted net cash flows of the assets
          against the net book value of the assets. If the recoverability test
          indicates that an impairment has occurred, the impairment loss is the
          amount of the asset's net book value in excess of the related fair
          value. As there is no requirement under ROC GAAP related to the
          evaluation of recoverability of impairment of long-lived assets, the
          Company has selected the same accounting for impairment of long-lived
          assts as US SFAS No. 144 for both ROC GAAP and US GAAP reporting.

     g.   Derivative financial instruments

          There are no specific accounting standards under ROC GAAP which
          address measurement for derivative instruments, except for
          foreign-currency forward contracts. Under ROC GAAP, forward contracts
          are accounted for in a manner similar to that required under US SFAS
          No. 52. Under US GAAP, accounting for derivative instruments is
          covered under US SFAS No. 133, as amended by US SFAS No. 138, which
          require companies to recognize derivative instruments as assets and
          liabilities in the statements of financial position at fair value. If
          certain conditions are met, entities may elect to designate a
          derivative instrument as a hedge. Under US GAAP, the Company does not
          apply hedge accounting, and derivatives have historically been, and
          continue to be, recorded on the consolidated balance sheets at fair
          value, with the changes in fair values recorded through current
          period earnings.


                                     F-34
<PAGE>

     h.   Stock option compensation

          For US GAAP reporting, the Company has elected to follow Accounting
          Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
          to Employees", which measures compensation expense based on the
          difference, if any, between the market price of the underlying common
          shares and the exercise price of the stock option on the date of the
          grant. The Company is required under US SFAS No. 123, "Accounting for
          Stock-based Compensation", to disclose the pro forma information
          regarding option grants to its employees computed as if the fair
          value method had been applied.

          In May 2001, the Company's directors exercised their stock options
          for 2,480,000 shares at $3.5 per share under the 1996 option plan.
          ASE, Inc. decided, based on resolution of its Board of Directors, to
          purchase these shares from the directors at the prevailing market
          price of US$14.27 per share on the same day the options were
          exercised. Under ROC GAAP, such share purchase is accounted for as
          additional investments of ASE Test Limited's shares by ASE, Inc.
          However, under US GAAP, the purchase of shares from employees within
          six months after exercise of vested option creates compensation
          expense equal to the difference between the market price of the share
          on the date of purchase and the market price on the date the options
          were granted. Consequently, the difference of $26,710 arising from
          such share purchase by ASE, Inc. was recorded by the Company as
          compensation expense and credited to capital surplus.

     i.   Goodwill

          Under ROC GAAP, the Company amortizes goodwill from acquisitions over
          ten years. Under US GAAP, the Company adopted the provisions of US
          SFAS No. 142 on January 1, 2002. US SFAS No. 142 requires the Company
          to review for possible impairment of goodwill existing at the date of
          adoption and perform subsequent impairment tests on at least an
          annual basis. In addition, existing goodwill and intangible assets
          must be reassessed and classified consistently in accordance with the
          criteria set forth in US SFAS No. 141 and US SFAS No. 142. As a
          result, the Company will no longer amortize goodwill. Definite lived
          intangible assets will continue to be amortized over the estimated
          useful lives. The Company completed its transitional impairment test
          on January 1, 2002 and found no impairment. The Company also
          performed its annual impairment test during the fourth quarter and
          found no impairment. Total amortization expense of goodwill under ROC
          GAAP in 2000, 2001 and 2002 are $7,053, $7,503 and $10,105,
          respectively.

     j.   Undistributed earnings tax

          Undistributed earnings generated after 1997 are subject to a 10% tax
          in compliance with the Income Tax Law of the ROC. Under ROC GAAP, the
          10% tax on undistributed earnings is recorded as an expense at the
          time the shareholders resolve that the Company's earnings shall be
          retained. Under US GAAP, the Company measures its income tax expense,
          using the rate that includes the tax on undistributed earnings.

     The following reconciles net income (loss) and shareholders` equity under
     ROC GAAP as reported in the consolidated financial statements to the
     approximate net income (loss) and shareholders' equity amounts as
     determined under US GAAP, giving effect of adjustments for the differences
     discussed above.


                                     F-35
<PAGE>

<TABLE>
                                                                         2000           2001            2002
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
     Net income (loss)
     -----------------

     Net income (loss) based on ROC GAAP                            $    107,195    $    (45,759)   $    (81,268)
                                                                    ------------    ------------    ------------
     Adjustments:
          a. Pension benefits                                                 53               7               7
          c. Bonuses to employees, directors and
                supervisors:
             --Regular bonuses                                            (2,790)          2,666              --
             --Special stock bonuses                                      (3,236)         (2,619)         (2,084)
          d. Depreciation of buildings                                       (62)           (526)           (446)
          e. Excess of book value of building transferred
             between related parties                                          13              13              13
          h. Stock option compensation                                        --         (26,710)             --
          i. Goodwill amortization in:
                Consolidated subsidiary                                       --              --          10,105
                Equity-method investee                                        --              --             348
                                                                    ------------    ------------    ------------
     Net increase (decrease) in net incomei]lossi^                        (6,022)        (27,169)          7,943
                                                                    ------------    ------------    ------------

     Net income (loss) based on US GAAP                             $    101,173    $    (72,928)   $    (73,325)
                                                                    ============    ============    ============

     Earnings (loss) per share (In US Dollars)
          Basic                                                     $       1.18    $      (0.77)   $      (0.74)
                                                                    ============    ============    ============
          Diluted                                                   $       1.09    $      (0.77)   $      (0.74)
                                                                    ============    ============    ============
     Number of shares (Note 28e)
          Basic                                                       85,970,361      94,921,412      98,600,205
                                                                    ============    ============    ============
          Diluted                                                     92,673,040      94,921,412      98,600,205
                                                                    ============    ============    ============
     Shareholders` equity
     --------------------

     Shareholders` equity based on ROC GAAP                         $    643,136    $    597,523    $    538,939
                                                                    ------------    ------------    ------------
     Adjustments:
          a. Pension benefits                                                (73)            (66)            (59)
          c. Bonuses to employees, directors and
             supervisors                                                  (3,796)             --              --
          d. Depreciation of buildings                                      (211)           (737)         (1,183)
          e. Excess of book value of building transferred
             between related parties                                        (570)           (557)           (544)
          i. Goodwill amortization in:
                Consolidated subsidiary                                       --              --          10,105
                Equity-method investee                                        --              --             348
     Effect of US GAAP adjustment on cumulative
       translation adjustment                                                264              89              91
                                                                    ------------    ------------    ------------
     Net decrease in shareholders` equity                                 (4,386)         (1,271)          8,758
                                                                    ------------    ------------    ------------

     Shareholders` equity based on US GAAP                          $    638,750    $    596,252    $    547,697
                                                                    ============    ============    ============

     Changes in shareholders` equity based on US GAAP
     ------------------------------------------------

     Balance, beginning of year                                     $    292,294    $    638,750    $    596,252
     Net income (loss) for the year                                      101,173         (72,928)        (73,325)
     Issuance of new shares under stock option plans                       7,925          19,854          20,778
     Capital increase in cash in July 2000                               263,662              --              --
     Convertible notes converted into ordinary shares                        115              --              --
     ASE, Inc. shares to be distributed as bonus to
       employees                                                           4,625           3,419           2,071
     ASE, Inc. purchase of exercised stock options                            --          26,710              --
     Cumulative translation adjustment for subsidiaries                  (20,887)        (19,632)          2,090
     Adjustment from changes in ownership percentage of
       investees                                                          (9,616)            (20)             --
     Unrealized holding gain (loss) on equity securities                    (541)             99            (169)
                                                                    ------------    ------------    ------------

     Balance, end of year                                           $    638,750    $    596,252    $    547,697
                                                                    ============    ============    ============
</TABLE>


                                     F-36
<PAGE>

     A reconciliation of the significant balance sheet accounts to the amounts
     as determined under US GAAP is as follows:

<TABLE>
                                                                                     2001        2002
                                                                                   --------    --------
<S>                                                                                <C>         <C>
     Long-term investment
     --------------------

     As reported                                                                   $ 95,042    $ 93,702
     US GAAP adjustments--goodwill amortization                                          --         348
                                                                                   --------    --------

     As adjusted                                                                   $ 95,042    $ 94,050
                                                                                   ========    ========

     Building and improvements
     -------------------------

     As reported                                                                   $ 70,485    $ 70,248
     US GAAP adjustments
           Effect of adjustments on useful life                                        (737)     (1,183)
           Excess of adjustments on building transferred between related
             parties                                                                   (557)       (544)
     Effect of change in exchange rate                                                  130         132
                                                                                   --------    --------

     As adjusted                                                                   $ 69,321    $ 68,653
                                                                                   ========    ========

     Consolidated debits
     -------------------

     As reported                                                                   $ 53,697    $ 72,322
     US GAAP adjustments - goodwill amortization                                         --      10,105
                                                                                   --------    --------

     As adjusted                                                                   $ 53,697    $ 82,427
                                                                                   ========    ========

     Accrued pension cost
     --------------------

     As reported                                                                   $    810    $  1,667
     US GAAP adjustments--pension benefits                                               66          59
     Effect of change in exchange rate                                                   41          41
                                                                                   --------    --------

     As adjusted                                                                   $    917    $  1,767
                                                                                   ========    ========
</TABLE>

     As a result of the adjustments presented above, the amounts of total
     assets based on US GAAP were $958,242 and $934,331 as of December 31, 2001
     and 2002, respectively. Total liabilities based on US GAAP were $340,786
     and $386,634 as of December 31, 2001 and 2002, respectively.

27.  ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

     a.   Recent accounting pronouncements

          In June 2001, the FASB issued US SFAS No. 143, "Accounting for Asset
          Retirement Obligations". The Statement requires, among other
          provisions, retirement obligations to be recognized when they are
          incurred and displayed as liabilities, with a corresponding amount
          capitalized as part of the related long-lived asset.


                                     F-37
<PAGE>

          The capitalized element is required to be expensed using a systematic
          and rational method over its useful life. US SFAS No. 143 was adopted
          by the Company on January 1, 2003 and does not have a material impact
          on its US GAAP financial information.

          In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
          Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
          Technical Corrections." Among other things, this statement rescinds
          FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment
          of Debt, " which required all gains and losses form the early
          extinguishment of debt to be aggregated and, if material, classified
          as extraordinary. This statement now requires those gains and losses
          to be classified as unusual and infrequently occurring events and
          transactions. The statement was effective upon issuance in April 2002
          for prospective transactions. The adoption of this statement would
          require the Company to reclassify the extraordinary loss recognized
          for ROC GAAP to unusual and infrequent events for US GAAP. The
          Company's management believes there is no impact to other financial
          information under US GAAP.

          In July 2002, the FASB issued SFAS NO. 146, "Accounting for Costs
          Associated with Exit or Disposal Activities". SFAS No. 146 requires
          that a liability for a cost associated with an exit or disposal
          activity should be measured at fair value and recorded when it meets
          the definition of a liability in FASB Concepts Statement No. 6,
          "Elements of Financial Statements". SFAS No. 146 superceded EITF No.
          94-3 "Liability Recognition for Certain Employee Termination Benefits
          and Other Costs to Exit and Activity (Including Certain Costs
          Incurred in Restructuring)", which required recognition of a
          liability for costs associated with an exit or disposal activity when
          the company committed to an exit / disposal plan. SFAS No. 146 is
          effective for exit or disposal activities initiated after December
          31, 2002. Restatement of prior periods is not required. SFAS No. 146
          applies to future restructuring activities and the application of
          SFAS No.146 has no impact on the Company's US GAAP financial
          information.

          In December 2002, the FASB issued SFAS No. 148, "Accounting for
          Stock-Based Compensation--Transition and Disclosure", and amends FASB
          No. 123 "Accounting for Stock Based Compensation". This statement
          provides alternative methods of transition for an entity that
          voluntarily changes to the fair value based method of accounting for
          stock - based employee compensation. It also amends the disclosure
          provisions of that statement to require prominent disclosure about
          the effects on reported net income of an entity's accounting policy
          decisions with respect to stock-based employee compensation. This
          statement is effective January 1, 2003. The Company has elected not
          to account for stock-based employee compensation using the fair value
          based method of accounting set forth in SFAS No. 123 and 128, but to
          continue to provide the disclosure requirements under SFAS No. 123.
          Accordingly, this statement will not affect the financial statement
          of the Company until the Company decides to adopt the fair value
          based method of accounting set forth in SFAS No. 123 and 128.

          In November 2002, the FASB issued Interpretation ("FIN") No. 45,
          "Guarantor's Accounting and Disclosure Requirements for Guarantees,
          Including Indirect Guarantees of Indebtedness of Others". The
          interpretation elaborates on the existing disclosure requirements for
          most guarantees, including loan guarantees such as standby letters of
          credit. It also clarifies that at the time a company issues a
          guarantee, the Company must recognize an initial liability for the
          fair value, or market value, of the obligations it assumes under the
          guarantee and must disclose that information on its interim and
          annual financial statements. The provisions related to recognizing a
          liability at inception of the guarantee for the fair value of the
          guarantor's obligations does not apply to product warranties or to
          guarantees accounted for as derivatives. The initial recognition and
          initial measurement provisions apply on a prospective basis to
          guarantees issued or modified after December 31, 2002. The Company
          currently believes the adoption of recognition and initial
          measurement requirements of FIN 45 will not have a material impact on
          our financial position, cash flows or results of operations.

          In January 2003, the FASB issued FIN 46, "Consolidation of Variable
          Interest Entities--an Interpretation of Accounting Research Bulletin
          (ARB) No. 51." FIN 46 requires the primary beneficiary to consolidate
          a variable interest entity (VIE) if it has a variable interest that
          will absorb a majority of the entity's expected losses if they occur,
          receive a majority of the entity's expected residual returns if they
          occur, or both. FIN 46 applies immediately to VIEs created after
          January 31, 2003, and to VIEs in which the entity obtains an interest
          after that date. For VIEs acquired before February 1, 2003, the
          effective date for the Company is


                                     F-38
<PAGE>

          July 1, 2003. The Company is currently in the process of determining
          the impact of this statement on its results of operations, financial
          position and cash flows.

          In November 2002, the EITF reached a consensus on EITF 00-21,
          "Revenue Arrangements with Multiple Deliverables," related to the
          timing of revenue recognition for arrangements in which goods or
          services or both are delivered separately in a bundled sales
          arrangement. The EITF requires that when the deliverables included in
          this type of arrangement meet certain criteria they should be
          accounted for separately as separate units of accounting. This may
          result in a difference in the timing of revenue recognition but will
          not result in a change in the total amount of revenue recognized in a
          bundled sales arrangement. The allocation of revenue to the separate
          deliverables is based on the relative fair value of each item. If the
          fair value is not available for the delivered items then the residual
          method must be used. This method requires that the amount allocated
          to the undelivered items in the arrangement is their full fair value.
          This would result in the discount, if any, being allocated to the
          delivered items. This consensus is effective prospectively for
          arrangements entered into in fiscal periods beginning after June 15,
          2003. The Company will apply this consensus to future multiple
          deliverable transactions entered into and believes it does not have
          an impact on current operations, financial position and cash flows.

     b    Significant investees--ASE (Chung-Li) Inc. The summarized financial
          information of significant investees is as follows:

          ASE (Chung-Li) Inc.
          -------------------

          1)   Selected balance sheet information

<TABLE>
                                                                                                     2001           2002
                                                                                                  ----------     ----------
<S>                                                                                               <C>            <C>
               Current assets                                                                     $   87,177     $   59,349
               Non-current assets                                                                    275,878        281,476
               Current liabilities                                                                    76,326         51,191
               Non-current liabilities                                                                62,054         53,313
</TABLE>

          2)   Selected income statement information

<TABLE>
                                                                                      2000           2001           2002
                                                                                   ----------     ----------     ----------
<S>                                                                                <C>            <C>            <C>
               Net sales                                                           $  243,501     $  145,305     $  149,711
               Gross profit                                                            76,454         20,807         26,418
               Pre-tax income from continuing operations                               54,989          4,275         10,379
               Net income                                                              51,262          1,274         10,806
</TABLE>


                                     F-39
<PAGE>

     c.   Pension

          According to US SFAS 132, the pension information is disclosed below:

<TABLE>
                                                                           2000         2001         2002
                                                                         --------     --------     --------
<S>                                                                      <C>          <C>          <C>
          Components of net periodic benefit cost
                Service cost                                             $    491     $    479     $  1,024
                Interest cost                                                 120          146          183
                Expected return on plan assets                                (52)         (86)         (85)
                Amortization of prior service cost                            (21)           9           34
                                                                         --------     --------     --------

          Net periodic benefit cost                                      $    538     $    548     $  1,156
                                                                         ========     ========     ========

          Change in benefit obligation
                Benefit obligation at beginning of year                  $  1,847     $  2,489     $  3,614
                Service cost                                                  491          479        1,024
                Interest cost                                                 120          146          183
                Actuarial gain                                                179          702        1,363
                Benefits paid                                                  (6)         (21)          --
                Exchange difference                                          (142)        (181)           7
                                                                         --------     --------     --------
                Benefit obligation at end of year                           2,489        3,614        6,191
                                                                         --------     --------     --------

          Change in plan assets
                Fair value of plan assets at beginning of year           $  1,064     $  1,341     $  1,542
                Actual return on plan assets                                   52           32           39
                Employer contribution                                         302          273          304
                Benefits paid                                                  (6)         (21)          --
                Exchange difference                                           (71)         (83)           7
                                                                         --------     --------     --------
                                                                            1,341        1,542        1,892
                                                                         --------     --------     --------
          Funded status                                                     1,148        2,072        4,299
          Unrecognized actuarial loss                                        (459)      (1,155)      (2,532)
                                                                         --------     --------     --------

          Net amount recognized (Recognized as accrued pension
            cost)                                                        $    689     $    917     $  1,767
                                                                         ========     ========     ========
</TABLE>

          Actuarial assumptions:

<TABLE>
                                                                           2000         2001         2002
                                                                         --------     --------     --------
<S>                                                                      <C>          <C>          <C>
          Discount rate                                                       6.0%         5.0%         3.5%
          Rate of compensation increase                                       4.0%         3.0%         3.0%
          Expected return on plan assets                                      6.0%         5.0%         3.5%
</TABLE>

     d.   Income tax

<TABLE>
                                                                           2000         2001         2002
                                                                         --------     --------     --------
<S>                                                                      <C>          <C>          <C>
          Tax benefits (currently payable)                               $  4,130     $ (2,927)    $ (3,625)
          Income taxes (10%) on undistributed earnings                      2,939        4,119          566
          Deferred                                                         (4,872)       4,375       (7,184)
          Adjustment of prior years' income tax                                --          955           --
                                                                         --------     --------     --------

                                                                         $  2,197     $  6,522     $(10,243)
                                                                         ========     ========     ========
</TABLE>


                                     F-40
<PAGE>

          Reconciliation of income tax for the years ended December 31, 2000,
          2001 and 2002 calculated on pretax financial statement income based
          on the statutory tax rate and the income tax expense (benefit), which
          conforms to US GAAP is as follows:

<TABLE>
                                                                                       2000        2001        2002
                                                                                     --------    --------    --------
<S>                                                                                  <C>         <C>         <C>
          ASE Test, Inc.
          --------------

          Tax expense (benefit) based on pretax accounting
            income (loss) at statutory rate (25%)                                    $ 11,367    $ (5,268)   $ (3,028)
          Add (deduct) tax effects of:
                Permanent differences
                      Bonuses to directors, supervisors and
                        employees                                                       1,507         (12)        521
                      Stock option compensation                                            --       6,677          --

                      Tax-exempt income--tax holiday                                 $ (6,126)   $   (659)   $ (1,070)
                      Tax-exempt income--Gain on sales of securities                       --        (135)       (122)
                Tax credits
                      Utilized                                                         (8,527)     (4,752)     (1,342)
                      Deferred                                                         (9,651)     11,778      (3,990)
                Adjustment of prior year's income tax                                      --         955          --
                Income taxes (10%) on undistributed earnings                            2,939       4,119         566
                Other                                                                   1,523        (121)      4,517
                                                                                     --------    --------    --------
          Income tax expense (benefit)                                                 (6,968)     12,582      (3,948)
                                                                                     --------    --------    --------

          ASE Test Malaysia
          -----------------

          Tax expense (benefit) based on pretax accounting income
            (loss) at statutory rate (28%)                                             13,780        (508)     (1,537)
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income                                                (8,881)         --          --
                      Others                                                              156          83          42
                Deferred                                                                   --      (1,170)        555
                                                                                     --------    --------    --------
          Income tax expense (benefit)                                                  5,055      (1,595)       (940)
                                                                                     --------    --------    --------

          ISE Labs, Inc.
          --------------

          Tax expense (benefit) based on pretax accounting income (loss) at
            statutory rate (federal tax rate 35% and
            state tax rate 6%)                                                          7,121      (6,636)    (18,143)
          Add (deduct) tax effects of:
                Permanent differences
                      Penalty                                                           1,339          --          --
                      Amortization and expenses                                           250         128          --
                      Other                                                                --          18          12
          Utilization of loss carryforward                                             (1,087)         --      (1,000)
          Deferred                                                                        (76)       (383)     12,877
          Lower foreign tax rate adjustments and other                                 (3,437)      2,408         899
                                                                                     --------    --------    --------
          Income tax expense (benefit)                                                  4,110      (4,465)     (5,355)
                                                                                     --------    --------    --------

          Income tax expense                                                         $  2,197    $  6,522    $(10,243)
                                                                                     ========    ========    ========
</TABLE>

     e.   Earnings (Loss) per share

          US SFAS 128 requires the presentation of basic and diluted earnings
          per share. Basic net income per share is computed based on the
          weighted average number of common shares outstanding during the
          period.


                                     F-41
<PAGE>

          Diluted net income per share includes the effect of diluted
          equivalent common shares (stock options) issued during the period
          using the treasury stock method.

          Following is a reconciliation of amounts used in the basic and
          diluted computation:

<TABLE>
                                                                         2000          2001           2002
                                                                    ------------   ------------   ------------
<S>                                                                 <C>            <C>            <C>
          Net income (loss) under US GAAP                           $    101,173   $    (72,928)  $    (73,325)
                                                                    ============   ============   ============

          Weighted average shares-denominator basic
            computation                                               85,970,361     94,921,412     98,600,205
          Effect of diluted shares-stock options                       6,702,679             --             --
                                                                    ------------   ------------   ------------

          Weighted average shares, as adjusted--denominator           92,673,040     94,921,412     98,600,205
                                                                    ============   ============   ============

          Earnings (loss) per share (In US Dollars)
               Basic                                                $       1.18   $      (0.77)  $      (0.74)
                                                                    ============   ============   ============
               Diluted                                              $       1.09   $      (0.77)  $      (0.74)
                                                                    ============   ============   ============

          Number of shares to be potentially issued from:
               Stock options                                          11,486,149     16,308,585     13,331,363
                                                                    ============   ============   ============
               Convertible notes                                       6,460,202      6,460,202      6,460,202
                                                                    ============   ============   ============
</TABLE>

     f.   Stock option plans

          The Company has five stock option plans, the 1996 Executive
          Management Option Plan (the "1996 Plan"), the 1997 Option Plan, the
          1998 Option Plan, the 1999 Option Plan and the 2000 Option Plan. Up
          to 10,000,000 shares, 3,200,000 shares, 1,600,000 shares, 2,000,000
          shares and 12,000,000 shares have been reserved for issuance under
          the 1996, 1997, 1998, 1999 and 2000 Option Plans, respectively.

          (B) The 1996, 1997, 1998, 1999 and 2000 Option Plans granted the
          following stock options to purchase the Company's shares which are
          exercisable based on a vesting schedule over a period of five years
          until the expiration of options, to directors, officers and key
          employees. If any granted shares are forfeited, the shares may be
          granted again, to the extent of any such forfeiture.

          Each aforementioned option exercise price was equal to the stock's
          market price on the date of grant. Options granted under the 1996,
          1997 and 1998 Option Plans expire 5 years after grant. Options
          granted under the 1999 and 2000 Option Plans expire 10 years after
          grant.

          Information regarding the option plans of the Company is presented
          below:


                                     F-42
<PAGE>

<TABLE>
                                                                        Weighted
                                                                        Average      Weighted
                                                                        Exercise     Average
                                                       Number of        Price        Grant Date
                                                        Shares          Per Share    Fair Values
                                                    ------------      ------------  ------------
<S>                                                   <C>              <C>           <C>
          Beginning balance--January 1, 2000          12,624,374       $    9.07
          Option granted                                 412,000           25.00      $  13.44
                                                                                      ========
          Option exercised                            (1,263,041)           6.31
          Option forfeited                              (287,184)          14.14
                                                    ------------
          Ending balance--December 31, 2000           11,486,149            9.82
          Option granted                              10,158,650            8.94      $   4.24
                                                                                      ========
          Option exercised                          $ (5,221,508)      $    3.81
          Option forfeited                              (114,706)          17.11
                                                    ------------
          Ending balance--December 31, 2001           16,308,585           11.15
          Option granted                                 414,500            0.36      $  10.46
                                                                                      ========
          Option exercised                            (2,420,591)           8.62
          Option forfeited                              (882,051)           9.88
          Option expired                                 (89,080)          13.84
                                                    ------------

          Ending balance--December 31, 2002           13,331,363       $   11.55
                                                    ============       =========
</TABLE>

          Options outstanding at December 31, 2002 and the related weighted
          average exercise price and remaining contractual life information are
          as follows (in US dollars):

<TABLE>
                                                        Outstanding                 Exercisable
                                                 ------------------------     ------------------------    Weighted
                                                                Weighted                     Weighted      Average
                                                                 Average                     Average      Remaining
                                                   Shares        Price          Shares        Price     Life (Years)
                                                 ------------  -----------    ------------ -----------  ------------
<S>                                                 <C>          <C>             <C>         <C>            <C>
          Options with exercise price of:
                $20--$25                            2,833,440    $   20.70       1,904,200   $   20.52      $   5.30
                $11--$16.5                          1,275,349        11.20         822,099       11.12          1.20
                $6.1--$9.15                         9,222,574         8.79       2,473,050        8.88          8.10
                                                 ------------                 ------------

          Options outstanding at
            December 31, 2002                      13,331,363                    5,199,349
                                                 ============                 ============
</TABLE>

          The Company has computed for pro forma disclosure purposes the fair
          value of each option grant, as defined by US SFAS No. 123, using the
          Black-Scholes option pricing model with the following assumptions:

<TABLE>
                                                             2000              2001              2002
                                                         ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>
          Risk free interest rate                        6.61%--6.75%      3.62%--4.66%      2.58%--4.48%
          Expected dividend yield                            0%                0%               0%
          Expected lives                                 3.4--5 years       3.4 years         5 years
          Volatility                                       55.53%            62.14%           62.14%
</TABLE>

          For purposes of pro forma disclosure, the estimated fair values of
          the options are amortized to expense over the option vesting periods.
          Had the Company recorded compensation costs based on the estimated
          grant date fair value, as defined by US SFAS No. 123, the Company's
          net income (loss) would have been reduced to the pro forma amounts
          below (EPS in US Dollars).


                                     F-43
<PAGE>

<TABLE>
                                                                                     2000          2001           2002
                                                                                  ----------    ----------     ----------
<S>                                                                               <C>           <C>            <C>
         Net income (loss) based on US GAAP                                       $  101,173    $  (72,928)    $  (73,325)
         Stock-based compensation expense                                            (14,616)      (17,397)       (19,005)
           (net of related tax effect)
                                                                                  ----------    ----------     ----------

         Pro forma net income (loss)                                              $   86,557    $  (90,325)    $  (92,330)
                                                                                  ==========    ==========     ==========

         Basic EPS                                       As reported                 $  1.18      $  (0.77)      $  (0.74)
                                                                                     =======          ====           ====
                                                         Pro forma                   $  1.01      $  (0.95)      $  (0.93)
                                                                                     =======          ====           ====

         Diluted EPS                                     As reported                 $  1.09      $  (0.77)      $  (0.74)
                                                                                     =======          ====           ====
                                                         Pro forma                   $  0.93      $  (0.95)      $  (0.94)
                                                                                     =======          ====           ====
</TABLE>

          The pro forma amounts reflect compensation expense related to option
          grants under the 1996, 1997, 1998, 1999 and 2000 option plans of the
          Company granted and vested only. In future years, the annual
          compensation expense may increase relative to the fair value of the
          options granted and vested in those future years.

     g.   According to US SFAS 130, the statements of comprehensive income
          (loss) for the years ended December 31, 2000, 2001 and 2002 are
          present below:

<TABLE>
                                                                          2000         2001         2002
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>
          Net income (loss) based on US GAAP                           $ 101,173    $ (72,928)   $ (73,325)
          Other comprehensive income, net of income tax benefit
            of $5,222 in 2000 and $4,908 in 2001 and income tax
            expense $523 in 2002, respectively
                Translation adjustment on subsidiaries                   (15,665)     (14,724)       1,567
                Unrealized holding gain (loss) of long-term
                  investments                                               (541)          99         (169)
                                                                       ---------    ---------    ---------

          Comprehensive income (loss)                                  $  84,967    $ (87,553)   $ (71,927)
                                                                       =========    =========    =========
</TABLE>

     h.   Goodwill

          As of January 1, 2002, the Company adopted US SFAS No. 142, "Goodwill
          and Other Intangible Assets", which requires that goodwill no longer
          be amortized, and instead, be tested for impairment on a periodic
          basis. In conjunction with the implementation of US SFAS No. 142, the
          Company completed a goodwill impairment review as of January 1, 2002
          using a fair-value based approach in accordance with the provision of
          the standard and found no impairment. Based on acquisitions completed
          as of June 30, 2001, application of the goodwill non-amortization
          provisions resulted in a decrease in amortization of approximately
          $10,105 for 2002. The Company completed its annual goodwill
          impairment test at December 31, 2002 and found no impairment. As of
          December 31, 2002, the Company had goodwill of $82,427, which was
          primarily in the reporting units of the testing operations.

          The following pro forma information reconciles the net income (loss)
          and earnings (loss) per share reported for 2000 and 2001 to adjusted
          net income (loss) and earnings (loss) per share, which reflects the
          adoption of US SFAS No. 142 and compares the adjusted information to
          the current year results:


                                     F-44
<PAGE>

<TABLE>
                                                                           2000          2001           2002
                                                                       -----------   -----------    -----------
<S>                                                                    <C>           <C>            <C>
          Net income (loss) based on US GAAP                           $   101,173   $   (72,928)   $   (73,325)
          Goodwill amortization                                              7,053         7,530             --
                                                                       -----------   -----------    -----------

          Net income (loss), as adjusted                               $   108,226   $   (65,398)   $   (73,325)
                                                                       ===========   ===========    ===========

          Earnings (loss) per share
                Basic earnings (loss) per share, as reported           $      1.18   $     (0.77)   $     (0.74)
                Goodwill amortization                                         0.08          0.08             --
                                                                       -----------   -----------    -----------

                Basic earnings (loss) per share, as adjusted           $      1.26   $     (0.69)   $     (0.74)
                                                                       ===========   ===========    ===========

                Diluted earnings (loss) per share, as reported         $      1.09   $     (0.77)   $     (0.74)
                Goodwill amortization                                         0.08          0.08             --
                                                                       -----------   -----------    -----------

                Diluted earnings (loss) per share, as adjusted         $      1.17   $     (0.69)   $     (0.74)
                                                                       ===========   ===========    ===========
</TABLE>

          Changes in the carrying amount of goodwill for the years ended
          December 31, 2002 and 2001, are as follows:

<TABLE>
<S>                                                                                                 <C>
          Balance as of January 1, 2001                                                             $    61,227
          Goodwill amortized during the period                                                           (7,530)
                                                                                                    -----------
          Balance as of December 31, 2001                                                                53,697
          Goodwill acquired during the period                                                            28,730
                                                                                                    -----------

          Balance as of December 31, 2002                                                           $    82,427
                                                                                                    ===========
</TABLE>


                                     F-45
<PAGE>


                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                           ASE TEST LIMITED


                                           By: /s/ Richard C. Wei
                                               -------------------------------
                                               Richard C. Wei
                                               Chief Financial Officer

Date: June 30, 2003


<PAGE>


                                 Certification

     I, Richard H.P. Chang, Chairman and Chief Executive Officer of ASE Test
Limited, certify that:

     1. I have reviewed this annual report on Form 20-F of ASE Test Limited;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report
         is being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

     c)  presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

     5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

     6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

     Date: June 30, 2003

                                          /s/ Richard H.P. Chang
                                          ---------------------------------
                                          Richard H.P. Chang
                                          Chairman and Chief Executive Officer


<PAGE>


                                 Certification

     I, Richard C. Wei, Chief Financial Officer of ASE Test Limited, certify
that:

     1. I have reviewed this annual report on Form 20-F of ASE Test Limited;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)  designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report
         is being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

     c)  presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

     5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

     a)  all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     b)  any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

     6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

     Date: June 30, 2003

                                            /s/ Richard C. Wei
                                            ----------------------------------
                                            Richard C. Wei
                                            Chief Financial Officer

<PAGE>


                                 EXHIBITS INDEX

   Exhibit
   Number                              Description                       Page
   ------                              -----------                       ----

    1.(a)      Memorandum and Articles of Association of the
               Registrant (incorporating all amendments as at June
               4, 1998) (incorporated by reference to Exhibit 1(a)
               to the Company's annual report on Form 20-F for the
               year ended December 31, 1997).

     (b)       Resolutions passed on May 29, 1997 (incorporated by
               reference to Exhibit 1(b) to the Company's annual
               report on Form 20-F for the year ended December 31,
               1997).

     (c)       Resolutions passed on September 26, 1997
               (incorporated by reference to Exhibit 1(c) to the
               Company's annual report on Form 20-F for the year
               ended December 31, 1997).

     (d)       Resolutions passed on June 4, 1998 (incorporated by
               reference to Exhibit 1(d) to the Company's annual
               report on Form 20-F for the year ended December 31,
               1997).

     (e)       Resolutions passed on May 14, 1999 (incorporated by
               reference to Exhibit 1(e) to the Company's annual
               report on Form 20-F for the year ended December 31,
               1998).

     (f)       Resolution passed on June 14, 2000 (incorporated by
               reference to Exhibit 1(f) to the Company's annual
               report or Form 20-F for the year ended December 31,
               1999).

     (g)       Resolutions passed on June 28, 2000 (incorporated
               by reference to Exhibit 1(g) to the Company's
               annual report or Form 20-F for the year ended
               December 31, 1999).

     (h)       Resolutions of an Extraordinary General Meeting of
               the shareholders passed on October 14, 1999
               (incorporated by reference to Exhibit 1(h) to the
               Company's annual report on Form 20-F for the year
               ended December 31, 2000).

    4.(a)      Lease Agreement with Nantze Export Processing Zone
               Administration (New Plant) (incorporated by
               reference to Exhibit 10.7 to the 1997 Registration
               Statement).

     (b)       Lease Agreement between ASE Test Malaysia and
               Penang Development Corporation (incorporated by
               reference to Exhibit 2(c) to the Company's annual
               report on Form 20-F for the year ended December 31,
               1997).

     (c)       Indenture dated June 29, 1999 among ASE Test
               Finance Limited, ASE Test Limited and The Bank of
               New York, as Trustee (incorporated by reference to
               Exhibit 2(g) to the Company's annual report on Form
               20-F for the year ended December 31, 1998).

     (d)       License Agreement dated as of January 16, 2001
               between 1st Silicon (Malaysia) Sdn. Bhd. and ASE
               Electronics (M) Sdn. Bhd. (incorporated by
               reference to Exhibit 4(e) to the Company's annual
               report on Form 20-F for the year ended December 31,
               2000).

     (e)       Service Agreement dated as of August 1, 2002
               between ASE Electronics (M) Sdn. Bhd. and ASE
               (U.S.) Inc. (incorporated by reference to Exhibit
               10.21 to ASE Inc.'s Registration Statement on Form
               F-3 (File No. 333-89428) filed on March 31, 2003).

     (f)       Service Agreement dated as of August 1, 2002
               between ASE Test Inc. and ASE (U.S.) Inc.
               (incorporated by reference to Exhibit 10.22 to ASE
               Inc.'s Registration Statement on Form F-3 (File No.
               333-89428) filed on March 31, 2003).

     (g)       Commission Agreement dated as of August 1, 2002
               between ASE Electronics (M) Sdn. Bhd. and Gardex
               International Limited. (incorporated by reference
               to Exhibit 10.26 to ASE Inc.'s Registration
               Statement on Form F-3 (File No. 333-89428) filed on
               March 31, 2003).

     (h)       Commission Agreement dated as of August 1, 2002
               between ASE Test Inc. and Gardex International
               Limited. (incorporated by reference to Exhibit
               10.27 to ASE Inc.'s Registration Statement on Form
               F-3 (File No. 333-89428) filed on March 31, 2003).

<PAGE>

   Exhibit
   Number                              Description                       Page
   ------                              -----------                       ----

     (i)       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).

     (j)       Sub-lease Agreement dated October 3, 2000 between
               ISE Labs Singapore Pte Ltd and Wan Tien Realty
               (Pte) Ltd. (incorporated by reference to Exhibit
               4(k) to the Company's annual report on Form 20-F
               for the year ended December 31, 2000).

     (k)       Sub-lease Agreement dated June 3, 1999 between ISE
               Labs Singapore Pte Ltd and Wan Tien Realty (Pte)
               Ltd. (incorporated by reference to Exhibit 4(l) 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(m) to the Company's annual
               report on Form 20-F for the year ended December 31,
               2000).

     (m)       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).

     (n)       Tenancy Agreement dated April 1, 1999 between ISE
               Labs (HK) Limited and Hing Seng Plastic Factory
               Limited (incorporated by reference to Exhibit 4(o)
               to the Company's annual report on Form 20-F for the
               year ended December 31, 2000).

     (o)       Lease dated September 28, 2000 between ISE Labs
               Hong Kong Limited and Shinano Kenshi (HK) Co., Ltd.
               (incorporated by reference to Exhibit 4(p) to the
               Company's annual report on Form 20-F for the year
               ended December 31, 2000).

     (p)       Lease dated October 20, 2000 between ISE Labs Hong
               Kong and Bless Silver Development Limited.
               (incorporated by reference to Exhibit 4(q) to the
               Company's annual report on Form 20-F for the year
               ended December 31, 2000).

     (q)       Lease Agreement for Factory Building dated
               September 18, 2000 between ASE, Inc. and ASE Test
               Inc. (incorporated by reference to Exhibit 4(r) to
               the Company's annual report on Form 20-F for the
               year ended December 31, 2000).

     (r)       Sale and Purchase Agreement between Afasia Knitting
               Factory (Malaysia) Sdn. Bhd. and ASE Electronics
               (M) Sdn. Bhd. dated February 24, 1997 (incorporated
               by reference to Exhibit 4(s) to the Company's
               annual report on Form 20-F for the year ended
               December 31, 2000).

     (s)       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).

     (t)       Plant Lease Agreement between ASE (Chung Li) Inc.
               and ASE Test Inc. dated October 5, 2001.
               (incorporated by reference to Exhibit 4(xx) to the
               Annual Report on Form 20-F filed by ASE, Inc. for
               the year ended December 31, 2001).

     8.        List of Subsidiaries                                    E-1

   12(a).      Certification of the Chief Executive Officer and        E-2
               the Chief Fiinancial Officer of ASE Test Limited
               for the purpose of complying with Section 1350 of
               Chapter 63 of Title 18 of the United States Code.