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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 20-F

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                                       OR

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the fiscal year ended December 31, 2000

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


                                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:

                Ordinary Shares of par value U.S.$0.25 per share

     Securities registered or to be registered pursuant to Section 12(g) of the
Act: None

     (As of the close of the period covered by the annual report)

     Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: None

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: 91,425,691

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

                  Yes X       No
                     ---        ---

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

                  Item 17       Item 18  X
                          ---           ---

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<PAGE>


                            -----------------------
                               TABLE OF CONTENTS
                            -----------------------

                                                                            Page
                                                                            ----
Introduction
          Use of Certain Terms................................................1
          Special Note Regarding Forward Looking Statements...................1

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...........................................2
                         Selected Financial Data..............................2
                         Capitalization and Indebtedness......... Not applicable
                         Reason for the Offer and Use of Proceeds.Not applicable
                         Risk Factors..........................................4

          Item 4    Information on the Company................................14
                         History and Development of the Company...............14
                         Business Overview....................................15
                         Organizational Structure.............................30
                         Properties...........................................31

          Item 5    Operating and Financial Review and Prospects..............31
                         Operating Results and Trend Information..............31
                         Liquidity and Capital Resources......................44
                         Research and Development.............................45

          Item 6    Directors, Senior Management and Employees................45
                         Directors and Senior Management and Board Practices..45
                         Compensation.........................................48
                         Employees............................................48
                         Share Ownership......................................49

          Item 7    Major Shareholders........................................50
                         Major Shareholders...................................50
                         Related Party Transactions...........................51

          Item 8    Financial Information.....................................52
                         Consolidated Statements and Other Financial
                           Information........................................52
                         Legal Proceedings....................................52
                         Significant Changes..................................52

          Item 9    Listing Details...........................................52
                         Market Price Information and Markets.................52

          Item 10   Additional Information ...................................54
                         Articles of Incorporation............................54
                         Material Contracts...................................58
                         Exchange Controls....................................59
                         Taxation.............................................60
                         Documents on Display.................................63


                                       i
<PAGE>


                                                                            Page
                                                                            ----
          Item 11   Quantitative and Qualitative Disclosures About
                      Market Risk.............................................63
                         Foreign Currency Exchange Rate Risk..................63
                         Interest Rate Risk...................................63

          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....................64
                         Material Modifications to the Rights of
                           Security Holders...................................64

Part III  Item 17   Financial Statements......................................64

          Item 18   Financial Statements......................................64

          Item 19   Exhibits..................................................65


                                       ii
<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 and
(vii) "ASE Korea" are to ASE (Korea) Inc., a company incorporated under the
laws of the Republic of Korea.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This press release 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, including statements regarding our future
revenues, earnings, and other results of operations. Our actual results may
differ materially from the results discussed 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 reasons. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this annual report. These
forward-looking statements are based on our own information and on information
from other sources we believe to be reliable. Our actual results may be
materially less favorable than those expressed or implied by these
forward-looking statements as a result of the reasons noted above and other
risks and factors which could depress the price of our market shares.


                                       1
<PAGE>


                                     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, 1999 and 2000 and selected
consolidated statement of income data and statement of cash flow data for each
of the years ended December 31, 1998, 1999 and 2000 have been derived from our
audited consolidated financial statements included herein. 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, 1996, 1997 and 1998 and selected consolidated statement of income
data and statements of cash flow data for each of the years ended December 31,
1996 and 1997 have been derived from our audited consolidated financial
statements not included herein.

<TABLE>
                                                                 Year Ended and as of December 31,
                                              -----------------------------------------------------------------------
                                                  1996           1997           1998          1999           2000
                                              -----------    -----------    -----------    -----------    -----------
                                           (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................................  $   112,791    $   176,541    $   184,663    $   270,254    $   440,285
Cost of revenues............................       81,043        112,824        117,743        173,758        263,513
                                              -----------    -----------    -----------    -----------    -----------
Gross profit................................       31,748         63,717         66,920         96,496        176,772
Operating expenses:
      Selling, general and
       administrative(1)....................        7,930         13,837         13,165         23,091         42,807
      Research and
       development..........................        1,729          3,084          2,384          3,837         12,059
      Goodwill amortization(2)..............            -              -              -          4,674          7,054
                                              -----------    -----------    -----------    -----------    -----------
Operating income............................       22,089         46,796         51,371         64,894        114,852
Non-operating income (expense):
      Interest-net..........................       (1,952)          (489)        (3,267)       (11,703)       (14,740)
      Income (loss) from equity
       investees(3).........................            -             28            133          4,842         16,127
      Gain on sale of long-term
       stock investments....................            -              -              -          6,588              -
      Loss on long-term bond securities.....            -              -              -              -         (3,157)
      Foreign exchange gain
       (loss)-net...........................          533          1,759         (1,835)           151          3,280
      Other-net.............................          398           (201)           609            863         (2,719)
                                              -----------    -----------    -----------    -----------    -----------
Income before income taxes
  and minority interest.....................       21,068         47,893         47,011         65,635        113,643
Income tax benefit (expense)................        3,587            945          6,845           (678)        (2,197)
Discontinuing operation loss................           --             --             --         (1,360)          (758)
Minority interest...........................          (23)            (4)            (5)        (1,437)        (3,493)
                                              -----------    -----------    -----------    -----------    -----------
Net income..................................  $    24,632    $    48,834    $    53,851    $    62,160    $   107,195
                                              ===========    ===========    ===========    ===========    ===========
Earnings per share:
      Primary...............................  $      0.34    $      0.58    $      0.62    $      0.71    $      1.16
                                              ===========    ===========    ===========    ===========    ===========
      Fully diluted.........................  $      0.34    $      0.57    $      0.62    $      0.70    $      1.16
                                              ===========    ===========    ===========    ===========    ===========
Operating income per share..................  $      0.30    $      0.55    $      0.59    $      0.73    $      1.24
                                              ===========    ===========    ===========    ===========    ===========
Income from continuing operations...........  $    24,655    $    48,838    $    53,856    $    64,957    $   111,446
                                              ===========    ===========    ===========    ===========    ===========


                                       2
<PAGE>


                                                                 Year Ended and as of December 31,
                                              -----------------------------------------------------------------------
                                                  1996           1997           1998          1999           2000
                                              -----------    -----------    -----------    -----------    -----------
                                           (in thousands, except shares, per share data, operating data and percentages)
<S>                                           <C>            <C>            <C>            <C>            <C>
Income from continuing operations per share.  $      0.34    $      0.57    $      0.62    $      0.74    $      1.20
                                              ===========    ===========    ===========    ===========    ===========
Shares used in earnings per
  share calculation:(4)
      Primary...............................   72,767,080     83,985,076     86,660,780     87,795,711     92,673,040
      Fully diluted.........................   72,917,536     85,169,212     86,660,780     88,359,934     92,673,040
U.S. GAAP:
Major adjustments:
      Compensation expense(5)...............       (1,919)        (2,875)        (4,279)        (6,682)        (6,026)
                                              -----------    -----------    -----------    -----------    -----------
Net income..................................  $    22,696    $    45,948    $    49,590    $    55,356    $   101,173
                                              ===========    ===========    ===========    ===========    ===========
Earnings per share:
      Basic.................................  $      0.31    $      0.60    $      0.63    $      0.69    $      1.18
                                              ===========    ===========    ===========    ===========    ===========
      Diluted...............................  $      0.31    $      0.54    $      0.57    $      0.63    $      1.09
                                              ===========    ===========    ===========    ===========    ===========
Shares used in earnings
  per share calculation:
      Basic.................................   72,377,608     77,166,836     78,767,112     80,232,420     85,970,361
      Diluted...............................   72,917,536     85,169,212     86,660,780     88,359,934     92,673,040

Consolidated Balance Sheet Data:
ROC GAAP:
Current assets..............................  $    66,930    $    67,291    $    60,439    $   142,625    $   290,458
Long-term investments.......................            -          6,596         24,303         70,708         87,161
Fixed assets................................      136,265        188,094        231,673        366,908        639,082
Total assets................................      211,523        271,009        332,286        657,257      1,091,655
Current liabilities.........................       35,830         67,730         47,904         85,059        158,304
Long-term debts.............................       27,644         45,401         73,499        264,872        265,489
Total liabilities...........................       63,535        113,247        121,647        350,303        424,756
Shareholders' equity........................      147,871        157,742        210,614        295,380        643,136

U.S. GAAP:
Shareholders' equity........................  $   147,051    $   155,546    $   208,054    $   292,294    $   638,750

Consolidated Statement of Cashflow Data:
Depreciation and amortization...............  $    24,481    $    30,614    $    38,751    $    68,769    $   117,506
Capital expenditure.........................       47,960        128,938         80,971        128,690        413,197
Net cash provided by
      (used in) operating activities........       39,311         80,161         84,496         95,075        203,557
Net cash used in investing activities.......      (57,172)      (109,639)      (104,618)      (237,203)      (367,354)
Net cash provided by
      (used in) financing activities........       24,593         25,999         29,982        166,238        277,801
Net cash inflow (outflow)...................       13,028         (1,935)         9,239         24,472        112,341

Segment Data:
Net revenues:
      Testing...............................  $    56,266    $    82,931    $    98,210    $   178,667    $   316,158
      Packaging.............................       56,525         93,610         86,453         91,587        124,127
      Testing...............................         49.9%          47.0%          53.2%          66.1%          71.8%
      Packaging.............................         50.1%          53.0%          46.8%          33.9%          28.2%

Gross profit:
      Testing:..............................  $    24,297    $    39,890    $    44,330    $    74,701    $   142,079
      Packaging:............................        7,451         23,827         22,590         21,795         34,693
      Testing:..............................         76.5%          62.6%          66.2%          77.4%          80.4%
      Packaging:............................         23.5%          37.4%          33.8%          22.6%          19.6%

Operating Data:
Testing gross margin........................         43.2%          48.1%          45.1%          41.8%          44.9%
Packaging gross margin......................         13.2%          25.5%          26.1%          23.8%          28.0%
Overall gross margin........................         28.1%          36.1%          36.2%          35.7%          40.1%
Operating margin............................         19.6%          26.5%          27.8%          24.0%          26.1%
ROC GAAP net margin.........................         21.8%          27.7%          29.2%          23.0%          24.3%
U.S. GAAP net margin........................         20.1%          26.0%          26.9%          20.5%          23.0%
</TABLE>

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


                                       3
<PAGE>


     (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 11 of Notes to Consolidated
          Financial Statements.

     (5)  Includes cash bonuses paid to our employees by us and the fair market
          value of common stock of ASE, Inc. granted by ASE, Inc. to our
          employees and issued from the capitalization of ASE, Inc.'s retained
          earnings, which will not have any dilutive effect on us.


CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

REASON 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 packaging and testing services improved due to an upturn in
the industry in the second half on 1999 continuing through the first half of
2000, but have since fallen due to an industry downturn which commenced in the
fourth quarter of 2000. This industry downturn places downward pressure on the
average selling prices for our packaging and testing services. If we cannot
reduce our costs to sufficiently offset any decline in average selling prices,
our profitability will suffer.

     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, consumer electronics and personal computers.
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, in turn, would likely have a material adverse effect on our financial
condition and results of operations. In 2000, 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.


                                       4
<PAGE>


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

     o    technological expertise;

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

     o    production yield;

     o    software conversion program capability;

     o    responsiveness and flexibility;

     o    cycle time;

     o    capacity;

     o    range and quality of testing platforms and packaging types available;
          and

     o    price.

     We face increasing competition from other testing and packaging companies.
In particular, most of our customers obtain testing or packaging services from
more than one source. Furthermore, 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 in order to maintain capacity utilization in their facilities during
periods of reduced demand. Any erosion in the prices for our testing and
packaging services could cause our profits to decrease and have a material
adverse effect on our financial condition and results of operations.

Our operating results are subject to significant fluctuations, which could
adversely affect the 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:


                                       5
<PAGE>


     o    our ability to quickly adjust to unanticipated declines or shortfalls
          in demand and market prices for our testing and packaging services in
          view of 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; and

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

     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, if we are unable to achieve
relatively high capacity utilization rates, our profitability will be adversely
affected.

     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." 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.

     During periods of industry downturn, we experience lower than anticipated
capacity utilization rates in our operations due to lower than expected growth
in demand, which leads to reduced margins during that period. If we are unable
to achieve relatively high capacity utilization rates, our profitability will
be adversely affected.

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,


                                       6
<PAGE>


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 on a given service, and our overall profitability, may decrease
over time.

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, Agilent Technology,
Advantest Corporation, Credence Systems Corporation, Electroglas, Inc.,
Megatest Corporation, Schlumberger Technologies and Teradyne, Inc., and in the
case of wire bonders, Kulicke & Soffa Industries Inc. 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 such
equipment could result in an increase in price and longer delivery times.
Semiconductor testing and packaging also requires us to operate sizeable
facilities. If we are unable to obtain equipment or construct facilities in a
timely manner to fulfill our customers' orders, it could adversely affect our
growth prospects as well as financial condition and results of operations.

We need to successfully integrate and manage our acquisitions to maintain
profitability.

     We intend to grow in part through the acquisition of semiconductor testing
operations that complement our existing business. This strategy will involve
reviewing and potentially reorganizing acquired business operations, corporate
structures and systems and financial controls. The success of our acquisition
strategy may be limited because of unforeseen expenses, difficulties,
complications and delays encountered in connection with these acquisitions. We
may not be able to acquire or manage profitably additional businesses or to
integrate successfully any acquired businesses into our existing business
without substantial costs, delays or other operational or financial
difficulties. In addition, we may be required to incur additional debt or issue
equity to pay for future acquisitions.

     In 1999, we acquired 70.0% of the outstanding shares of ISE Labs and a
30.0% interest in each of ASE Chung Li and ASE Korea. ASE, Inc. acquired the
remaining 70.0% interest in each of ASE Chung Li and ASE Korea. See "Item 4.
Information on the Company -- History and Development of the Company". These
acquisitions and any others we may make in the future may dilute our earnings
per share as a result of the specific scope of the business, cost structure or
condition of the operations being acquired. In particular, acquisitions may
involve risks, including:

     o    integration and management of the acquired operations;

     o    retention of select management personnel;

     o    integration of purchasing operations and information systems;

     o    coordination of sales and marketing efforts;

     o    cost of any existing, pending or potential litigation against the
          acquired businesses prior to our acquisition;

     o    management of an increasingly larger and more geographically
          disparate business; and

     o    diversion of management's attention from other ongoing business
          concerns.

     Our acquisitions may also involve the divestment of certain loss making
assets as well as the relocation of certain assets to locations which we
believe will better complement our business strategy. The divestment of these


                                       7
<PAGE>


loss making assets could adversely affect our financial condition. For example,
in June 2000 we sold ISE Labs' packaging operations at Manteca, California,
which resulted in ISE Labs incurring a disposition loss of $1.3 million, net of
tax benefits of $0.6 million, in 2000. We are relocating the operations of ISE
Labs from San Jose to Fremont, California, which could result in business
interruptions and loss of employees.

     If we are unable to successfully integrate and manage our recent
acquisitions, as well as any future acquisitions that we might pursue, our
growth plans may not be met and our profitability may decline.

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, taking into account amounts available
under existing banking facilities, our current cash and cash equivalents and
cash flow from operations will be sufficient to meet our anticipated needs
through the end of 2001, including our working capital and capital expenditure
requirements. However, future acquisitions 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:

     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.

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 nevertheless leave before the expiration of these agreements. We
are not insured against the loss of key personnel. We will 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.

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.


                                       8
<PAGE>


     Currently, our sales and customer service agents perform services only for
ASE, Inc. and us, but they are not owned or controlled by us. 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.

The loss of a major customer or disruption of our strategic alliance with TSMC
and ASE, Inc. 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 61.6%, 43.4% and 41.2% of our net revenues in 1998,
1999, 2000, 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 TSMC, the world's largest dedicated
semiconductor foundry, and ASE, Inc. enables us to offer total semiconductor
manufacturing services to our customers. This strategic alliance is terminable
at will by any party. A termination of this strategic alliance, and our failure
to enter into a substantially similar alliance, 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, and may in the future, vary order levels significantly
from period to period. Many of our customers 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 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 been, and may
in the future be, requested to reduce prices to limit the level of order
cancellations. These price reductions would in turn be likely to reduce our
margins and profitability.

Our interests may conflict with those of our controlling shareholder, who may
take actions that are not in 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 51.2% shareholding in
our company and its 70.0% shareholding in each of ASE Chung Li and ASE Korea.
We own the remaining 30.0% shareholding in each of these companies. 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, 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.


                                       9
<PAGE>


     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.

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

     We believe that we have benefitted significantly from our relationship
with ASE, Inc. Our proximity to, and close working relationship with, ASE, Inc.
has enabled us to provide value-added services to our customers. A substantial
majority of our net revenues from testing services performed at our 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.

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.

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. 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.

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, including NT dollars, U.S.
dollars, Malaysian ringgit, Singapore dollars 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,


                                       10
<PAGE>


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. For example, we recorded foreign exchange losses of $1.8 million
in 1998, a gain of $.2 million in 1999 and a gain of $3.3 million in 2000. The
foreign exchange losses in 1998 were due primarily to losses attributable to
Japanese yen-denominated liabilities created by us in the second half of 1998
to manage our foreign exchange exposure.

  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%
interest in each of ASE Korea and ASE Chung Li. 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;

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

     o    developing local infrastructure.

     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, as well as
higher interest rates 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 higher market interest rates for local
currency-denominated borrowings and liquidity shortages, reducing the
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, continued increase in
interest rates or 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 37.4% of our net revenues in 2000 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


                                       11
<PAGE>


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.

Because a substantial portion of our business and operations are located in
Taiwan, a severe earthquake could severely disrupt the normal operation of our
business and adversely affect our earnings.

     Taiwan is susceptible to earthquakes. On September 21, October 22 and
November 2, 1999, and on May 17 and June 11, 2000, Taiwan experienced severe
earthquakes which caused significant property damage and loss of life,
particularly in the central part 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 outage caused by the
earthquakes. 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, 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 in Taiwan could severely disrupt the normal
operation of business and have a material adverse effect on our financial
condition and results of operations.

  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% interest in each of ASE Korea and ASE Chung Li. 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.


                                       12
<PAGE>


  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 the fluctuation 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 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 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 Singapore Companies Act (Chapter 50) 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 25.0% 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 25.0% 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 3.0% of our voting shares
in any 12-month period. In addition, the offer or 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,


                                       13
<PAGE>


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 principal executive
offices are located at 10 West Fifth Street, Nantze Export Processing Zone,
Kaohsiung, Taiwan, Republic of China and our 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 the Republic of China 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 packaging and
testing of semiconductors.

     In December 1997 and January 1999, we obtained approval from the ROC
Securities and Futures Exchange 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.

  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 $98.0 million. The stock purchase agreement provides that in
the event ISE Labs (1) does not consummate an initial public offering of its
common stock prior to December 31, 2001 at or above a specified price or (2)
disposes of certain of its material assets, which in the aggregate is greater
than 15% of the total assets of ISE Labs as shown on the most recent audited
balance sheet of ISE Labs, then we will be obligated to purchase the remaining
shares for $42 million plus accrued interest. The purchase price is payable
either in cash or in shares of ASE Test at the option of the holders of the
remaining shares, who are primarily founders and employees of ISE Labs or its
predecessors.

     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.


                                       14
<PAGE>


  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 packaging and testing 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 was 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 payable over three years if sales
volume targets are 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, near most 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, South Korea,
          Hong Kong and Singapore; 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 focus primarily on testing complex, high-performance logic/mixed-signal
semiconductors and packaging high pin-count semiconductors. In 2000,
approximately 74.9% of our net testing revenues were derived from testing
complex, high-performance logic/mixed-signal semiconductors and approximately
66.8% of our net packaging revenues was derived from packaging high pin-count
semiconductors. Semiconductors tested and packaged by us are used in diverse
end use markets, including communication, 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 broad range of advanced semiconductor testing services;

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


                                       15
<PAGE>


     o    our financial position, which enables us to make significant
          investments for future growth through both the expansion of existing
          capacity and the acquisition of new businesses, technologies and
          operations;

     o    our experience in integrating acquired operations and using the
          acquired operations to provide services to their former owners;

     o    our strategic geographic locations with experienced teams in key
          centers for outsourced semiconductor manufacturing; and

     o    our strategic alliance with Taiwan Semiconductor Manufacturing
          Company Limited, also called TSMC, the world's largest dedicated
          semiconductor foundry, and ASE, Inc. to provide complete turnkey
          services.

     As a part of our overall strategy to strengthen our testing capabilities,
increase our range of services and diversify our geographic presence, we intend
to continue expanding through internal growth and strategic acquisitions. In
1999, we completed the acquisitions of ISE Labs and a 30% interest in each of
ASE Korea and ASE Chung Li.

     Through these acquisitions, we have now expanded our testing capabilities
and established a broad geographic presence in the United States, Taiwan,
Malaysia, South Korea, 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. In addition, our joint acquisition of ASE
Chung Li and ASE Korea broadened our presence across geographic regions,
customers and technology. For example, through our 30.0% interest in ASE Korea,
we gained access to high frequency radio test technology and geographic
proximity to one of the world's leading wireless markets.

     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. Through our strategic alliance entered into
in 1998 with TSMC and ASE, Inc., we expanded the traditional scope of our
turnkey services to offer total semiconductor manufacturing services to our
customers, including access to wafer fabrication, also called foundry services,
offered by TSMC.

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 devices at a lower cost per function. These improvements have
resulted in significant performance and price benefits to manufacturers of
electronic systems. As a result, semiconductor demand has grown substantially
in our primary markets of communications and personal computer equipment, and
has experienced increased growth in additional markets such as consumer
electronic devices, automotive products and industrial automation and control
systems.

  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.


                                       16
<PAGE>


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

     Wafer Fabrication                     This 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                             The processing of bare
                                           semiconductors into finished
                                           semiconductors serves to protect the
                                           die and facilitate electrical
                                           connections and heat dissipation.

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

   Outsourcing Trends in Semiconductor Manufacturing

     Historically, semiconductor companies designed, manufactured, packaged and
tested semiconductors primarily in their own facilities. In recent 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. We believe that many of these manufacturers
are significantly reducing their investments in new semiconductor testing and
packaging facilities and that several are contemplating the divestment of their
in-house testing and packaging operations. Motorola's sale of its testing and
packaging operations in Taiwan and South Korea to ASE, Inc. and us in 1999 and
the sale in 1999 and 2000 by Cirrus Logic and LSI Logic of a portion of their
testing operations in California to us are examples of this divestment trend.

     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. Similarly, the
availability of technologically advanced independent manufacturing services has
encouraged "systems companies," which traditionally outsourced the
manufacturing of semiconductor components used in the assembly of their systems
products to integrated device manufacturers, to increasingly outsource 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 Sophistication 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. In addition, product
life cycles have been shortening, magnifying the need to continuously upgrade
or replace manufacturing equipment to accommodate new products.


                                       17
<PAGE>


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.

     Focus on Core Competencies. As the cost of semiconductor manufacturing
facilities increases, 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.

     Growth of Fabless Semiconductor Companies and Outsourcing by Systems
Companies. The substantial growth in the number of fabless semiconductor
companies and systems companies that increasingly outsource their manufacturing
requirements to independent companies will also continue to drive growth in the
market for independent foundry, testing and packaging services.

Strategy

     Our goal is to provide a complete range of sophisticated, high-quality
advanced semiconductor testing and turnkey services as well as a broad range of
packaging services to leading semiconductor companies, while focusing
principally on testing complex, high-performance logic/mixed-signal
semiconductors and packaging high pin-count semiconductors. In pursuing this
strategy, we believe we will continue to benefit from our leading technological
capabilities and expertise, our extensive geographic presence, and our position
as one of the largest independent semiconductor testing companies in the world.
The principal components of our strategy are set forth below.

   Expand Our Market Share Through Internal Growth and Strategic Acquisitions

     We intend to expand our market share through internal growth as well as
strategic acquisitions on a global basis. Due to the increasing complexity of
semiconductor engineering and the increasing cost of operating in-house testing
and packaging operations, we believe that many integrated device manufacturers
will continue to focus on the core activities of design and marketing and
continue to divest their in-house testing and packaging operations. The
acquisitions of these in-house operations present strategic opportunities for
us to (1) acquire the select personnel and expertise of these operations, (2)
secure these integrated device manufacturers as our customers through
manufacturing services agreements and (3) expand our customer base in these
regions.

     Through our acquisition strategy, we have expanded our testing
capabilities and established a broad geographic presence in Taiwan, Malaysia,
South Korea, the United States, Hong Kong and Singapore in close proximity to
foundries, integrated device manufacturers and design houses which outsource
testing and packaging services. The following table sets forth certain
information relating to our recent acquisitions.

<TABLE>
Acquisition                           Geographic Region                      Technology/Capability
-----------                           -----------------                      ---------------------
<S>                                   <C>                                    <C>
ISE Labs (1999)                       o   Silicon Valley in California       o   front-end engineering testing
                                      o   Singapore                          o   final testing
                                      o   Hong Kong                          o   final testing
ASE Korea (1999)                      o   South Korea                        o   final testing of high frequency
(30.0% owned)                                                                    communications products
                                                                             o   high pin-count packaging


                                       18
<PAGE>


Acquisition                           Geographic Region                      Technology/Capability
-----------                           -----------------                      ---------------------
<S>                                   <C>                                    <C>
ASE Chung Li (1999)                   o   Taiwan                             o   final testing
(30.0% owned)                                                                o   high pin-count packaging
ASE Test Malaysia (1997)              o   Malaysia                           o   final testing
                                                                             o   high pin-count packaging
</TABLE>

     We acquired certain testing equipment and retained select personnel from
two of our customers, LSI Logic Corporation in 2000 and Cirrus Logic, Inc. in
1999. Under our arrangements with these customers, they outsource a portion of
their front-end and back-end testing requirements to us. We believe such
arrangements enhance our testing capabilities and intend to continue pursuing
similar strategic arrangements in the future.

  Offer a Comprehensive Range of Services While Focusing on Testing Complex,
High-Performance Semiconductors

     We intend to continue offering a comprehensive range of testing and
packaging services to our customers, which we believe differentiates us from
our competitors and enables us to capture a substantial share of the turnkey
market. At the same time, we plan to continue focusing on testing complex,
high-performance logic/mixed-signal semiconductors. These semiconductors are
characterized by a high degree of embedded functionality, very high clock
speeds and high pin-counts. We believe that our technology and our capability
position us well to capture this business. Our capability in testing
system-level circuits is demonstrated by our involvement in the integrated
graphics/chipset business. Furthermore, our relationships with companies like
Qualcomm and Motorola demonstrate our commitment to becoming a leader in
testing advanced semiconductors used in wireless and other communications
applications. We intend to maintain our capability to provide testing services
for increasingly complex semiconductors through our high level of investment in
advanced mixed-signal testers.

  Leverage Our Silicon Valley Front-End Testing Expertise to Grow Our
Back-End Testing Business

     Our acquisition of ISE Labs has provided us access to new customers to
whom we intend to provide "total solution" testing services. In particular, we
intend to leverage our strong position in providing front-end engineering
testing services to Silicon Valley semiconductor companies to more effectively
secure back-end testing. Front-end engineering is a critical component of the
semiconductor design cycle undertaken by both fabless and integrated
semiconductor companies, and includes the testing of prototype wafers before
being qualified for production. By setting up the software and hardware
platforms for such front-end tests, we gain expertise and experience which
enables us to offer faster, more competitive back-end testing services when
actual production of semiconductors commences.

  Increase Sales to Communications-Related Customers and Multinational
Integrated Device Manufacturers

     We plan to increase our sales to communications companies and
multinational integrated device manufacturers. We intend to leverage our
multi-platform testing capabilities and our geographical proximity to our
customers and the relationships formed during the design and front-end
engineering stages to capture an increasing share of these customers' high
volume back-end production business. Moreover, we believe that these companies
will be increasingly dependent on sophisticated testing solutions provided by
independent testing companies like us and will continue to outsource their
testing and packaging requirements. We already serve many of the leading
networking and communications equipment companies in the United States and aim
to increase our sales to these companies as they represent attractive long-term
growth opportunities for us. We have been successful in attracting customers in
communications semiconductors such as Broadcom Corporation, Intel Corporation
and 3Com Corporation.

  Enhance Our Turnkey Business Through Strategic Alliances with
Complementary Semiconductor Service Providers

     We believe that as testing and packaging technologies become more complex
and production cycles shorten, a portion of our customers may increasingly
contract for our services on a turnkey basis to reduce their own costs,


                                       19
<PAGE>


inventories and time to market. We believe that we benefit from our strategic
alliance with TSMC and ASE, Inc. through which we coordinate and conduct joint
marketing efforts and provide turnkey services. Key customers like Qualcomm and
DSP Group utilize our turnkey solutions. We also believe that this strategic
alliance makes us attractive to multinational integrated device manufacturers.
To better provide turnkey solutions in a seamless, integrated fashion, we will
continue to pursue additional selective strategic alliances with semiconductor
foundry manufacturers and other service providers.

  Work Closely with Equipment Vendors to Maximize Flexibility and Technology
Advantages

     We intend to leverage our position as one of the largest independent
testing companies to further collaborate with our vendors and better understand
the technological advances in testing equipment. In particular, our familiarity
with our testing equipment allows our engineers the ability to quickly convert
testing programs from one platform to another, typically requiring only one to
two weeks to complete the conversions. This flexibility results in reduced
dependence on any particular platform, higher utilization rates and improved
customer service. In addition, our close relations with our suppliers allow us
to have high levels of reliability and utilization of our machines, which
reduces unit costs. Our close relations with our suppliers also help ensure
that we receive satisfactory delivery performance, even during periods of
lengthening lead times in the industry. We work closely with all leading
suppliers of testing equipment, including Advantest Corporation, Agilent
Technology, Credence Systems Corporation, Electroglas, Inc., Megatest
Corporation, Schlumberger Technologies and Teradyne, Inc.

Principal Products and Services

     We offer a broad range of semiconductor testing and packaging services.
Our testing services include front-end engineering testing, wafer probing,
final testing and other test-related services. Our packaging products are based
primarily on surface mount technology, also known as SMT, and employ either
leadframes or laminate substrates as interconnect materials. Semiconductors
tested and packaged by us are used in a wide range of applications, including
communications, personal computers, consumer, industrial and automotive
applications. We offer our customers the integrated packaging, testing and drop
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,
                                   -----------------------------------------
                                    1998              1999             2000
                                   ------            ------           ------
                                         (percentage of net revenues)
Testing revenues..................  53.2%             66.1%            71.8%
Packaging revenues................  46.8              33.9             28.2
                                   -----             -----            -----
   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. 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 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  Software Program Development. Design and test engineers develop a
        customized software program and related hardware to test the
        semiconductor on advanced testing equipment. A customized software
        program 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 submitted to electrical tests using advanced test equipment,
        customized software programs and related hardware. 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 logic/mixed- signal testing, and several of our testers
are also 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 in the
single digits to several hundreds and operating frequencies of up to 400 MHZ,
which is 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 electronical programmable read-only
memory semiconductors.

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

     o  Burn-in Testing. 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,
                                   -----------------------------------------
                                    1998              1999             2000
                                   ------            ------           ------
                                     (percentage of net testing revenues)
Logic/mixed-signal testing......    88.2%             94.7%             97.5%
Memory testing..................    11.8               5.3               2.5
                                   -----             -----             -----
   Total net testing revenues...   100.0%            100.0%            100.0%
                                   =====             =====             =====

  Packaging

     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.

     The following table sets forth our principal packaging products.

<TABLE>
                                  Number
Package Format                    of Leads     Description                                End Use Applications
--------------                    --------     -----------                                --------------------
<S>                               <C>          <C>                                        <C>
Ball Grid Array (BGA)             112-665      Designed for semiconductors which          Cellular phones, pagers, wireless
                                               require the enhanced performance           communications, DSPs, micro-
                                               provided by BGA, including personal        controller applications and high
                                               computer chipsets, graphic                 performance disk drives.
                                               controllers and microprocessors,
                                               ASICs, digital signal processors, also
                                               called DSPs, and memory devices.

Quad Flat Package                 32-240       QFPs designed for advanced                 Multimedia applications, cellular
  (QFP)/Thin QFP (TQFP)                        processors and controllers, ASICs,         phones, personal computers,
                                               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 Carrier       20-84        Designed for applications that do not      Personal computers, scanners,
(PLCC)                                         require low profile package with high      electronic games and monitors.
                                               density of interconnects.


                                      22
<PAGE>


                                  Number
Package Format                    of Leads     Description                                End Use Applications
--------------                    --------     -----------                                --------------------
<S>                               <C>          <C>                                        <C>
Small Outline Plastic Package     8-54         Leadframe packages designed for            Consumer audio/video and
  (SOP)/Thin SOP (TSOP)                        memory devices including logic and         entertainment products, cordless
                                               analog devices, SRAM, DRAM, fast           telephones, pagers, fax machines,
                                               static RAM, also called FSRAM, and         printers, copiers, personal computer
                                               flash memory devices.                      peripherals, automotive parts,
                                                                                          telecommunications products,
                                                                                          recordable optical disks and hard
                                                                                          disk drives.

Small Outline Plastic J-Bend      20-44        Package designed for memory and            DRAM memory devices,
  Package (SOJ)                                low pin-count applications                 microcontrollers, digital analog
                                                                                          conversions and audio/video
                                                                                          applications.

Plastic Dual In-line Package      28-42        Package used in consumer electronic        Telephones, televisions, audio/video
  (PDIP)                                       products.                                  applications and computer
                                                                                          peripherals.
</TABLE>

     ASE Chung Li and ASE Korea, both 30.0% owned by us, offer a similar range
of packages. As of December 31, 2000, ASE Chung Li and ASE Korea operated a
total of approximately 796 wirebonders. ASE Chung Li offers mold array package
BGA, also called Map BGA. Map BGA is smaller and thinner than conventional BGA
and widely used in wireless communications products because of its smaller
size. ASE Korea's packaging services include stacked-die BGA. Stacked-die BGA
packages are used in local area network cards, also called LAN cards, graphic
processors, digital cameras and pagers.

     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,
                                   -----------------------------------------
                                    1998              1999             2000
                                   ------            ------           ------
                                    (percentage of net packaging revenues)
BGA..............................    0.4%              6.4%            13.8%
QFP/TQFP.........................   54.6              52.6             52.9
PLCC.............................   22.9              23.8             15.6
SOJ/SOP/TSOP.....................   11.1               8.1             10.4
PDIP.............................   10.2               9.0              7.2
Other............................    0.8               0.1              0.1
                                   -----             -----            -----
   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 a
majority 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.


                                       23
<PAGE>


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    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 is priced
significantly higher per CPU second than 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.

     We price our packaging services primarily on a cost-plus basis and, to a
lesser extent, with reference to market prices. Prices are confirmed at the
time firm orders are received from customers.

Equipment

   Testing

     Testing equipment is the most important and most capital intensive
component of the testing process. As of December 31, 2000, we operated
approximately 645 testers, of which 117 were consigned by our customers. In
addition, as of December 31, 2000, ASE Chung Li and ASE Korea operated
approximately 350 testers. 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
Technology, Credence Systems Corporation, Electroglas, Inc., Megatest
Corporation, Schlumberger Technologies 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 (with
special handlers for wafer probing), scanners, reformers and personal computer
workstations for use in software development.

     In general, particular semiconductors can be tested on only a limited
number of specially designed testers. As part of the qualification process,
customers will specify the machines on which their semiconductors may be
tested,


                                       24
<PAGE>


and we often develop test program conversion tools that enable us to test
semiconductors on multiple equipment 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 personal 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. In certain cases, such as our agreements with LSI Logic Corporation and
Cirrus Logic, Inc., we have purchased testers from companies and entered into
testing services agreements with them. See "Item 4. Information on the Company
-- Business Overview -- Strategy -- Expand Our Market Share Through Internal
Growth and Strategic Acquisitions".

     We will continue to place orders for and acquire additional testing
equipment in future periods to the extent market conditions, cash generated
from operations, the availability of financing and other factors make it
desirable to do so. However, some of this equipment and related spare parts
have been in short supply during periods of high demand in recent years.
Moreover, this equipment is only available from a limited number of vendors or
is manufactured in relatively limited quantities and may, during periods of
high demand, have lead times from order to delivery in excess of six months. We
work closely with our vendors to evaluate new equipment and have long-term
blanket orders and rolling forecasts in place. These orders are confirmed by us
approximately three to six months before our desired delivery date in order to
shorten the effective lead time necessary for the delivery of new equipment.

  Packaging

     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 wire
bonders principally from Kulicke & Soffa Industries Inc. As of December 31,
2000, we operated approximately 411 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 "-- Research and Development." Our inability to
successfully develop conversion software programs could materially 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 Prospectus-- Operating
Results and Trend Information-- Consolidated Quarterly Results".


                                       25
<PAGE>


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 Santa Clara, California; Tempe, Arizona; Austin, Texas;
Beverly, Massachusetts in the United States; and Brussels in Belgium. 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 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 0.7% of our sales outside of Asia, payable monthly,
depending on the amount of these sales. In 2000, we paid $1.6 million in
commission 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 ASE US's monthly services
associated costs and expenses In 2000, we paid $4.7 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:

     Advanced Micro Devices, Inc.            LSI Logic Corporation
     Altera Corporation                      Motorola, Inc.
     ATI Technologies, Inc.                  NVIDIA Corp.
     Cirrus Logic, Inc.                      Philips Electronics N.V.
     Conexant Systems, Inc.                  Qualcomm Incorporated
     Delphi Automotive Systems Corp.         Silicon Integrated Systems Corp.
     DSP Group                               ST Microelectronics N.V.
     Hewlett-Packard Company                 VIA Technologies, Inc.
     Lattice Semiconductor Corp.

     Our five largest customers together accounted for approximately 41.2% of
our sales in 2000. 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, consumer electronic, personal computer


                                       26
<PAGE>


and industrial sectors. We have been successful in attracting new customers
such as Broadcom Corporation, Intel Corporation and 3Com Corporation.

     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,
                                   -----------------------------------------
                                    1998              1999             2000
                                   ------            ------           ------
                                          (percentage of net revenues)
Communications/consumer.......      45.9%             51.5%             55.1%
Personal computers............      36.9              30.6              31.6
Industrial/others.............      17.2              17.9              13.3
                                   -----             -----             -----
   Total net revenues.........     100.0%            100.0%            100.0%
                                   =====             =====             =====

     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,
                                   -----------------------------------------
                                    1998              1999             2000
                                   ------            ------           ------
                                          (percentage of net revenues)
North America.................      83.1%             76.8%             73.5%
Asia..........................      12.2              18.8              20.0
Europe........................       4.7               4.4               6.5
                                   -----             -----             -----
   Total net revenues.........     100.0%            100.0%            100.0%
                                   =====             =====             =====

  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 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.

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
quality control staff at each of our facilities. Our quality control staff
typically includes engineers, 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 staff quality control stations
along production lines, monitor clean room environments 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.


                                       27
<PAGE>


     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 or
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 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. 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 and packaging
types 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; and (7) 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, we tend to
have lower unit costs because we generally have higher utilization rates as
compared to the in-house testing operations of integrated device manufacturers.
Second, we tend to offer a wider range of products in terms of complexity and
technology as compared to the in-house testing operations of integrated device
manufacturers since integrated device manufacturers are less able to utilize
individual testers for long periods of time following the migration of product
technology.

Material Patents, Licenses and Contracts

     We and our subsidiaries hold various patents and licenses covering a broad
range of packaging and testing technology and have various contracts as
described in "Item 10. Additional Information - Material Contracts" and
attached in "Item 19. Exhibits".

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.

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


                                       28
<PAGE>


     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    The prior approval of the Ministry of International Trade and
          Industry must 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 electricity
          consumption.

     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 elect distributors of the "bumiputra"
          ethnicity, primarily ethnic Malays, to distribute at minimum 30% of
          its sales within Malaysia. 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.

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 approximately 11.3% in
2000.

     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 1997 and 1998, the industry experienced a shortage in the supply of advanced
substrates used in BGA packages, which is currently available only 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 gaseous chemical wastes, principally
at the stage at which the copper leads protruding from the plastic or ceramic
casings of the semiconductor, commonly referred to as moldings, are plated with
tin or lead to improve their electrical conductivity. Liquid waste is produced
at the stage where silicon wafers are diced into chips with the aid of diamond
saws and cooled with running water. In addition, excess materials on leads and
moldings are removed from packaged semiconductors in the trimming and dejunking
processes, respectively. 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
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 losses due to fire. These insurance
policies cover our buildings, machinery and equipment at our major production
facilities. 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 or financial condition. We are not insured against the
loss of key personnel.


                                       29
<PAGE>


ORGANIZATIONAL STRUCTURE

     The following chart illustrates our corporate structure and effective
ownership interest in each of our principal operating subsidiaries and
affiliates.

        -------------------------- ASE INC.-------------------------------
        |                              |   --------------------------    |
        |                              |                            |    |
        |                              | 51.2%                      |    |
        |                              |                            |    |
        |70%                   ASE TEST LIMITED                 70% |    |
        |                              |                            |    |
        |                              |                            |    |
        |                              |                            |    |
        |                              |                            |    |
        |    ---------------------------------------------------    |    | 43.8%
        |    |          |              |           |           |    |    |
        |    | 30%      | 80.4%        | 100%      | 100%      | 30%|    |
        |    |          |              |           |           |    |    |
        |   ASE                       ASE                           |    |
        (CHUNG LI)   ISE LABS,    ELECTRONICS   ASE TEST   ASE (KOREA)   |
            INC.      INC.(1)    (M) SDH, BHD.    INC.         INC.      |
                                                   |                     |
                                                   | 6.7%                |
                                                   |                     |
                                                  ASE                    |
                                                MATERIAL-----------------
                                                INC.(2)

---------
     (1) The remaining shares of ISE Labs are owned primarily by the founders
and employees of ISE Labs or its predecessors.

     (2) The remaining shares of ASE Materials are owned by management and
employees of ASE Inc. and its affiliates.


                                       30
<PAGE>


PROPERTIES

     We maintain operations in Taiwan, Malaysia, and California. Our operations
in Kaohsiung, Taiwan are located principally in one plant located in the Nantze
Export Processing Zone in Kaohsiung with a total floor space of 324,000 square
feet, which includes a total clean-room space of over 191,721 square feet.
Substantially all of our facilities in Kaohsiung, including our principal
executive offices, are located at this plant. This plant 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. In addition, we lease from ASE, Inc. floor space of
approximately 82,000 square feet in an adjacent building. We currently intend
to lease from ASE, Inc. any additional floor space we may require in Kaohsiung
in connection with any expansion.

     We currently operate packaging and testing facilities in Bayan Lepas Free
Trade Zone, Penang, Malaysia, with a total floor space of 606,300 square feet,
which includes a front-end clean-room of 40,000 square feet, a back-end
packaging area of 66,000 square feet and a final test clean-room of 114,200
square feet.

     ISE Labs maintains a 71,000 square foot testing facility in Santa Clara,
California, a 64,163 square foot testing facility in Fremont, California, an
approximately 21,000 square foot testing facility in Singapore and a 23,380
square foot testing facility in Hong Kong. ISE Labs is currently in the process
of relocating its San Jose, California operation to Fremont, California.

Item 5. Operating and Financial Review and Prospects.

OPERATING RESULTS AND TREND INFORMATION

Overview

     Our predecessor was established as a Taiwanese subsidiary of ETC
Flextronics, Inc., which was subsequently acquired by our parent company, ASE,
Inc., in 1990. In 1999, we acquired 70.0% of the outstanding shares of ISE
Labs, which was subsequently increased to 80.4% following our purchase of
additional shares for an aggregate purchase price of US$70.9 million, and a
30.0% interest in each of ASE Chung Li and ASE Korea. ASE, Inc. owns the
remaining 70.0% interest in each of ASE Chung Li and ASE Korea.

     In 2000, we benefitted from the overall growth in the demand for
semiconductors and the trend towards outsourcing testing and packaging services
by both integrated device manufacturers and fabless semiconductor companies.
Our growth was increasingly diversified across a broad range of end use
applications and clients. We experienced strong growth in communications and
consumer-related sectors while maintaining our strong market position in
personal computer-related sectors. Our volume growth was increasingly
concentrated in the testing of more complex, high-performance
logic/mixed-signal semiconductors. We provided our customers with a complete
range of semiconductor testing services, which included front-end engineering
testing, final testing of complex, high-performance logic/mixed-signal
semiconductors, and turnkey services, which included drop shipment of tested
and packaged semiconductors to end users designated by our customers.

     We provide a broad range of leadframe and laminate-based semiconductor
packaging services, including packages such as ball grid array, or BGA, quad
flat package, or QFP, and thin quad flat package, or TQFP, at our facilities in
Malaysia. In 2000, 71.8% of our net revenues were from testing services,
compared to 66.1% in 1999.

     We focus primarily on testing complex, high-performance logic/mixed-signal
semiconductors and packaging high pin-count semiconductor packages. High
pin-count semiconductor packages are package types with pin-counts of greater
than 100 leads which includes plastic BGA, QFP and TQFP. In 2000, approximately
74.9% of our net testing revenues were derived from testing complex,
high-performance logic/mixed-signal semiconductors. In 2000, approximately
66.8% of our net packaging revenues were derived from packaging high pin-count
semiconductors.

     With the acquisition of ISE Labs and our 30.0% interest in ASE Chung Li
and ASE Korea, we now have expanded testing capabilities and a broad geographic
presence in the United States, Taiwan, Malaysia, South Korea,


                                       31
<PAGE>


Hong Kong and Singapore in close proximity to key centers for outsourced
semiconductor manufacturing and semiconductor designing. In 2000, 62.6% of our
net revenues were derived from operations outside of Taiwan.

     Our net revenues and net income have increased significantly since 1998.
In the three-year period from 1998 to 2000, net revenues increased 98.1% to
$440 million in 2000 from $185 million in 1998, while net income increased
98.1% to $107 million in 2000 from $54 million in 1998.

     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 period ending 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 in loss was considered an adjustment of
purchase price allocation.

Pricing and Revenue Mix

     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. In 2000, the selling prices
in our testing and packaging services experienced a normal rate of decline due
to strong demand for our services and tight capacity in the industry in
general.

     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, consumer electronic, and personal computer products, and
packaging higher pin-count package types, such as BGA, QFP and TQFP. We will
continue to develop and offer new technology in testing and packaging services,
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 central processing unit seconds, or 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) labor cost, (5)
ability of the machine to parallel-test, which involves testing multiple
semiconductors simultaneously, and (6) cost of testers used to perform the
testing services. The testing of complex, high-performance semiconductors is
priced at significantly higher levels per CPU second than the testing of less
complex or lower-performance semiconductors.

High Fixed Costs

     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. In 1998, 1999
and 2000, our testing depreciation expense as a percentage of net testing
revenues was 28.4%, 28.9% and 23.8%, 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. This was the case


                                       32
<PAGE>


in 1998, when depressed industry conditions resulted in lower than expected
demand from customers and a sharp decline in selling prices, resulting in an
increase in depreciation expense relative to sales.

     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.

Other Costs and Operating Expenses

  Raw Materials and Labor

     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 net revenues were 18.9%, 14.0% and 11.3%
in 1998, 1999 and 2000, respectively. Raw material cost as a percentage of net
revenues have been decreasing primarily as a result of the increasing
contribution of testing to our net revenues and, in 1999, a decrease in raw
material prices.

     Our direct and indirect labor cost as a percentage of net revenues was
11.6%, 12.7% and 11.8% in 1998, 1999 and 2000, respectively. The increase in
direct and indirect labor cost as a percentage of net revenues in 1999 compared
to 1998 was primarily a result of the acquisition of ISE Labs, which had higher
labor costs as compared to our other facilities. The decrease in direct and
indirect labor cost as a percentage of net revenues in 2000 as compared to 1999
was primarily a result of increased labor efficiency.

  Goodwill Amortization

     As a result of our acquisition of ISE Labs in 1999, we incurred additional
goodwill amortization costs. Goodwill amortization cost as a percentage of net
revenues was 1.6% in 2000.

Other Non-Operating Income (Expense)

  Gain on Sale of Long-Term Stock Investments

     Our gain on sale of long-term stock investments increased in 1999
primarily as a result of the sale of ASE, Inc. shares in December 1999. In 2000
we had no gain on sale of long term investments. We currently own less than
0.1% of the outstanding shares of ASE, Inc.

  Income (Loss) from Equity Investees

     Our income from equity investees was $16.1 million in 2000 compared to
$4.8 million in 1999. This was due to our acquisition of ASE Chung Li and ASE
Korea, of each of which we own 30.0%, and the results of operations of ASE
Material, of which we own 6.7%.

    Results of Operations

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


                                       33
<PAGE>


                                                Year Ended December 31,
                                            -----------------------------------
                                              1998          1999         2000
                                            ---------    ---------    ---------
                                                      (in thousands)
Net revenues:
   Testing................................. $  98,210    $ 178,667    $ 316,158
   Packaging...............................    86,453       91,587      124,127
                                            ---------    ---------    ---------
   Total net revenues......................   184,663      270,254      440,285
Cost of revenues:
   Raw materials...........................    34,805       37,756       49,518
   Depreciation and amortization...........    37,083       61,462      104,595
   Labor...................................    21,437       34,346       52,045
   Other manufacturing expenses(1).........    24,418       40,194       57,355
                                            ---------    ---------    ---------
        Total cost of revenues.............   117,743      173,758      263,513
                                            ---------    ---------    ---------
        Gross profit.......................    66,920       96,496      176,772
Operating expenses:
      Selling, general and administrative..    13,165       23,091       42,807
      Research and development.............     2,384        3,837       12,059
      Goodwill amortization................         -        4,674        7,054
                                            ---------    ---------    ---------
        Total operating expenses...........    15,549       31,602       61,920
                                            ---------    ---------    ---------
Operating income...........................    51,371       64,894      114,852
Non-operating income (expense):
   Interest-- net..........................    (3,267)     (11,703)     (14,740)
   Income (loss) from equity investees.....       133        4,842       16,127
   Gain on sale of long-term
      stock investments....................         -        6,588            -
   Loss on long-term bond securities.......         -            -       (3,157)
   Foreign exchange gain (loss)-- net......    (1,835)         151        3,280
   Other non-operating income (expense)....       609          863       (2,719)
                                            ---------    ---------    ---------
      Total non-operating income (expense)
       -- net..............................    (4,360)         741       (1,209)
                                            ---------    ---------    ---------
Income before income taxes
   and minority interest...................    47,011       65,635      113,643
Income tax benefit (expense)...............     6,845         (678)      (2,197)
Income from continuing operations..........    53,856       64,957      111,446
Loss from discontinuing operations.........         0       (1,360)        (758)
Minority interest..........................        (5)      (1,437)      (3,493)
                                            ---------    ---------    ---------
Net income (ROC GAAP)...................... $  53,851    $  62,160    $ 107,195
                                            =========    =========    =========
Net income (U.S. GAAP)..................... $  49,590    $  55,356      101,173
                                            =========    =========    =========

---------
(1)  Includes factory supplies, utility, plant and machinery rental, equipment
     maintenance and other manufacturing overhead.


                                       34
<PAGE>


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

                                                Year Ended December 31,
                                            -----------------------------------
                                              1998          1999         2000
                                            ---------    ---------    ---------
                                               (percentage of net revenues)
Net revenues................................  100.0%        100.0%      100.0%
   Testing..................................   53.2          66.1        71.8
   Packaging................................   46.8          33.9        28.2
                                              -----         -----       -----
Cost of revenues:
   Raw materials............................   18.9          14.0        11.3
   Depreciation and amortization............   20.1          22.7        23.8
   Labor....................................   11.6          12.7        11.8
   Other manufacturing expenses (1).........   13.2          14.9        13.0
                                              -----         -----       -----
        Total cost of revenues..............   63.8          64.3        59.9
                                              -----         -----       -----
        Gross profit........................   36.2          35.7        40.1
Operating expenses:
   Selling, general and administrative......    7.1           8.6         9.7
   Research and development.................    1.3           1.4         2.7
   Goodwill amortization....................      -           1.7         1.6
                                              -----         -----       -----
        Total operating expenses............    8.4          11.7        14.0
Operating income............................   27.8          24.0        26.1
Non-operating income (expense):
   Interest--net............................   (1.7)         (4.3)       (3.3)
   Income (loss) from equity investees......    0.1           1.8         3.7
   Gain on sale of long-term
      stock investments.....................      -           2.4           -
   Loss on long-term bond securities........      -             -        (0.7)
   Foreign exchange gain (loss)--net........   (1.0)            -         0.7
   Other non-operating income (expense).....    0.3           0.4        (0.7)
                                              -----         -----       -----
        Total non-operating
           income (expense)--net............   (2.3)          0.3        (0.3)
                                              -----         -----       -----
Income before income taxes
   and minority interest....................   25.5          24.3        25.8
Income tax benefit (expense)................    3.7         (0.3)        (0.5)
Income from continuing operations...........   29.2          24.0        25.3
Loss from discontinuing operations..........      -         (0.5)        (0.2)
Minority interest...........................      -         (0.5)        (0.8)
                                              -----         -----       -----
Net income (ROC GAAP).......................   29.2          23.0        24.3
                                              =====         =====       =====
Net income (U.S. GAAP)......................   26.9          20.5        23.0
                                              =====         =====       =====
---------
(1)  Includes factory supplies, utility, plant and machinery rental, equipment
     maintenance and other manufacturing overhead.


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

                                                Year Ended December 31,
                                            -----------------------------------
                                              1998          1999         2000
                                            ---------    ---------    ---------
Net revenues:
   Testing..........................        $  98,210    $ 178,667    $ 316,158
   Packaging........................           86,453       91,587      124,127
   Total ...........................          184,663      270,254      440,285
   Gross profit.....................           66,920       96,496      176,772
   Gross margin.....................             36.2%        35.7%        40.1%


                                      35
<PAGE>


Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Net Revenues. Our net revenues increased 62.9% to $440.3 million in 2000
from $270.3 million in 1999, primarily as a result of increased testing volume
achieved with our expanded capacity at our facilities in Taiwan and Malaysia
and secondarily as a result of the acquisition of ISE Labs. The volume increase
was offset by a decrease in our average realized selling prices for our testing
and packaging services. We experienced normal rate of decline in our average
selling prices in 2000.

     In 2000, our net testing revenues accounted for 71.8% of our net revenues
and our net packaging revenues accounted for 28.2% of our net revenues,
compared to 66.1% and 33.9%, respectively, of our net revenues in 1999. The
shift in our revenue mix towards a higher percentage of testing revenues is
primarily a result of stronger demand for our testing services and an increased
capacity in testing as compared to our capacity in packaging, including the
acquisition of ISE Labs.

     Gross Profit. Our gross profit increased 83.2% to $176.8 million in 2000
from $96.5 million in 1999 and our gross margin increased to 40.1% in 2000
compared to 35.7% in 1999. This increase was primarily a result of better
utilization of test equipment in 2000 driven by strong demand for our services.
Depreciation expense increased 70.1% to $104.6 million in 2000 from $61.5
million in 1999 and, as a percentage of net revenues, increased to 23.8% in
2000 from 22.7% in 1999, primarily as a result of testing revenues making up a
larger percentage of our total revenues. Testing revenues typically had higher
depreciation expense associated with them.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 85.3% to $42.8 million in 2000 from $23.1
million in 1999. As a percentage of net revenues, selling, general and
administrative expenses increased to 9.7% in 2000 from 8.6% in 1999. The
increase was primarily due to the acquisition of ISE Labs, which had higher
selling, general and administrative expenses as a percentage of revenues.

     Research and Development Expenses. Research and development expenses
increased 218.4% to $12.1 million in 2000 from $3.8 million in 1999. As a
percentage of net revenues, research and development expenses increased to 2.7%
in 2000 from 1.4% in 1999. This increase was primarily a result of higher
research and development based costs at ISE Labs and the establishment of a
research and development department at ASE Test Malaysia in 2000. All research
and development costs incurred during these periods were expensed.

     Goodwill Amortization. Goodwill amortization cost increased to $7.1
million in 2000 from $4.7 million in 1999, primarily reflecting the effects of
the acquisition of ISE Labs. Goodwill amortization decreased as a percentage of
net revenues to 1.6% in 2000 from 1.7% in 1999, primarily as a result of
increased net revenues. Goodwill is amortized using the straight-line method
over five to ten years.

     Operating Income. As a result of the foregoing, our operating income
increased 77.0% to $114.9 million in 2000 from $64.9 million in 1999,
reflecting in part the acquisition of ISE Labs.

     Our operating margin increased to 26.1% in 2000 compared to 24.0% in 1999,
primarily as a result of the higher gross margin we achieved in 2000.

     Net Non-Operating Income and Expense. Net non-operating expense increased
to $1.2 million in 2000 from a net non-operating income of $0.7 million in
1999, primarily as a result of a lack of gains on sale of long-term stock
investments, a loss on long-term bond securities and an increase in net
interest expense, partially offset by an increase in investment income under
the equity method and an increase in foreign exchange gain. We had a gain on
the sale of long-term investments in 1999 of $6.6 million as a result of the
sale of ASE, Inc. shares in 1999, but no such gain in 2000. We had a loss on
long-term bond securities in 2000 of $3.2 million as a result of a provision
for loss on bonds of APP Global Finance Limited. Our net interest expense
increased 25.6% to $14.7 million in 2000 from $11.7 million in 1999, primarily
as a result of interest on our subsidiary's 1% guaranteed convertible notes due
2004. Our investment income under the equity method increased 235.4% to $16.1
million in 2000 from $4.8 million in 1999, primarily as a result of the
acquisition of 30% of ASE (Korea) Inc. and ASE (Chung Li) Inc. Our


                                       36
<PAGE>


foreign exchange gain increased 1,550.0% to $3.3 million in 2000 from $0.2
million in 1999, primarily as a result of the depreciation of the NT dollar and
Japanese yen relative to the U.S. dollar.

     Net Income. As a result of the foregoing, our net income increased 72.3%
to $107.2 million in 2000 as compared to $62.2 million in 1999. Our U.S. GAAP
adjusted net income increased 82.7% to $101.2 million in 2000 as compared to
$55.4 million in 1999.

     The U.S. GAAP adjustment is primarily a result of compensation expenses of
$6.0 million and a $6.7 million compensation cost add-back 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 and 1999, respectively.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Net Revenues. Our net revenues increased 46.3% to $270.3 million in 1999
from $184.7 million in 1998, reflecting in part the effects of the acquisition
of ISE Labs. After eliminating the results of ISE Labs for comparative
purposes, our adjusted net revenues increased by 17.6% to $217.2 million in
1999 compared to our net revenues in 1998. This increase resulted primarily
from increased testing volume achieved with our expanded capacity, which was
partially offset by a decrease in the average realized selling prices for our
testing and packaging services during the first half of 1999. The decrease in
our average realized selling prices reflected the general trend in 1999 in the
semiconductor industry of declining prices for each input/output lead on
semiconductor devices. This decrease was partially offset by a change in our
revenue mix as we tested more complex, high-performance semiconductors and
packaged more higher pin-count products which typically have higher unit
prices.

     In 1999, our net testing revenues accounted for 66.1% of our net revenues
and our net packaging revenues accounted for 33.9% of our net revenues,
compared to 53.2% and 46.8%, respectively, of our net revenues in 1998. After
eliminating the results of ISE Labs for comparative purposes, our net testing
revenues accounted for 57.8% of our net revenues and our net packaging revenues
accounted for 42.2% of our net revenues. The shift in our revenue mix towards a
higher percentage of testing revenues is primarily a result of the acquisition
of ISE Labs, which has a higher percentage of net revenues derived from testing
services, and the increased testing volume of our testing facilities in Taiwan
and Malaysia achieved with our expanded capacity.

     Gross Profit. Our gross profit increased 44.2% to $96.5 million in 1999
from $66.9 million in 1998, reflecting in part the effects of the acquisition
of ISE Labs. After eliminating the results of ISE Labs for comparative
purposes, our adjusted gross profit increased by 15.8% to $77.5 million in 1999
compared to 1998.

     Our gross margin decreased to 35.7% in 1999 compared to 36.2% in 1998.
This decrease was primarily as a result of increases in depreciation expense,
labor and other manufacturing expenses, all as a percentage of net revenues,
partially offset by a decrease in raw materials as a percentage of net
revenues. Depreciation expense as a percentage of net revenues increased as a
result of a low capacity utilization rate during the first half of 1999.
Equipment maintenance costs increased as a result of new testing and packaging
equipment coming on line in the second half of 1999.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 75.0% to $23.1 million in 1999 from $13.2
million in 1998. As a percentage of net revenues, selling, general and
administrative expenses increased to 8.6% in 1999 from 7.1% in 1998. These
increases are primarily due to higher salary and bonus expenses resulting from
our acquisition of ISE Labs.

     After eliminating the results of ISE Labs for comparative purposes,
selling, general and administrative expenses increased 20.5% to $15.9 million
in 1999 compared to $13.2 million in 1998. This increase was primarily a result
of an increase in professional fees related to the acquisition of ISE Labs, ASE
Chung Li and ASE Korea. As a percentage of net revenues, selling, general and
administrative expenses increased slightly to 7.3% in 1999 compared to 1998.

     Research and Development Expenses. Research and development expenses
increased 58.3% to $3.8 million in 1999 from $2.4 million in 1998. As a
percentage of net revenues, research and development expenses increased


                                       37
<PAGE>


slightly to 1.4% in 1999 from 1.3% in 1998. The increase in research and
development expense was primarily a result of higher salary and bonus expenses
resulting from the acquisition of ISE Labs.

     After eliminating the results of ISE Labs for comparative purposes,
research and development expenses increased 12.5% to $2.7 million in 1999
compared to $2.4 million in 1998. As a percentage of net revenues, research and
development expenses remained at 1.3%. All research and development costs
incurred during these periods were expensed.

     Goodwill Amortization. Goodwill amortization cost increased to $4.7
million, representing 1.7% of net revenues in 1999 from nil in the comparable
period in 1998, reflecting the effects of the acquisition of ISE Labs. Goodwill
is amortized using the straight-line method over five to ten years.

     Operating Income. As a result of the foregoing, our operating income
increased 26.3% to $64.9 million in 1999 from $51.4 million in 1998, reflecting
in part the acquisition of ISE Labs. After eliminating the results of ISE Labs
for comparative purposes, our adjusted operating income increased 14.4% to
$58.8 million in 1999 compared to 1998.

     Our operating margin decreased to 24.0% in 1999 compared to 27.8% in 1998
as a result of the increase in goodwill amortization cost relating to the
acquisition of ISE Labs. After eliminating the results of ISE Labs for
comparative purposes, our adjusted operating margin decreased slightly to 27.1%
in 1999. This decrease was primarily as a result of increases in selling,
general and administrative expenses and research and development expenses, as a
percentage of net revenues at our existing facilities.

     Net Non-Operating Income. Net non-operating income was $0.7 million in
1999 compared to net non- operating expense of $4.4 million in 1998. This was
primarily a result of a gain on sale of long-term stock investments arising
from a one-time recognition from the sale of ASE, Inc. shares in December 1999
and investment income under the equity method from our 30.0% interest in each
of ASE Chung Li and ASE Korea. This increase was partially offset by the
increase in interest expense from our $160 million 1% guaranteed convertible
notes due 2004 issued by ASE Test Finance Limited in June 1999 primarily to
finance the costs of the acquisitions of ISE Labs, ASE Chung Li and ASE Korea.
Net foreign exchange loss decreased in 1999 compared to 1998, reflecting the
foreign exchange losses incurred in 1998 attributable to Japanese
yen-denominated liabilities created in the second half of 1998 to manage our
foreign exchange exposure.

     Net Income. As a result of the foregoing, our net income increased 15.4%
to $62.2 million in 1999 as compared to $53.9 million in 1998. Our U.S. GAAP
adjusted net income increased 11.7% to $55.4 million in 1999 as compared to
$49.6 million in 1998.

     The U.S. GAAP adjustment is primarily a result of compensation expenses of
$6.7 million and $4.3 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 1999 and 1998, respectively. Because these were shares of
ASE, Inc., the issuance of these shares did not have a dilutive effect on our
shareholders.

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.


                                      38
<PAGE>


<TABLE>
                                                                         Quarter Ended
                               ---------------------------------------------------------------------------------------------------
                               Jun. 30,     Sep. 30,     Dec. 31,     Mar. 31,     Jun. 31,     Sep. 30,     Dec. 31,     Mar. 31,
                                 1999         1999         1999         2000         2000         2000         2000         2001
                               --------     --------     --------     --------     --------     --------     --------    ---------
                                                                          (unaudited)
                                                                         (in thousands)
<S>                           <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Net revenues:
 Testing.................      $41,045      $51,212      $61,206      $66,037     $ 73,993     $ 85,617     $ 90,511     $ 77,921
 Packaging................      21,536       26,306       25,296       26,123       28,684       35,161       34,159       25,255
                               -------      -------      -------      -------     --------     --------     --------     --------
 Total net revenues.......      62,581       77,518       86,502       92,160      102,677      120,778      124,670      103,176
Cost of revenues..........      41,487       49,304       52,905       54,623       60,747       71,712       76,430       73,585
                               -------      -------      -------      -------     --------     --------     --------     --------

Gross profit..............      21,095       28,214       33,596       37,537       41,930       49,066       48,240       29,591
                               -------      -------      -------      -------     --------     --------     --------     --------

Operating expenses:
 Selling, general and
   administrative.........       4,750        6,901        8,589        8,994        9,076       11,127       13,610        9,635
 Research and
   development............         786          997        1,281        2,029        3,199        3,248        3,584        3,975
 Goodwill amortization....       1,115        1,780        1,779        1,699        1,795        1,795        1,765        1,896
                               -------      -------      -------      -------     --------     --------     --------     --------
 Total operating
   expenses...............       6,651        9,678       11,649       12,722       14,070       16,170       18,959       15,506
                               -------      -------      -------      -------     --------     --------     --------     --------
Operating income..........      14,444       18,536       21,947       24,815       27,860       32,896       29,281       14,085
Non-operating income
 (expense)................        (491)      (3,172)       5,644         (957)      (2,983)       1,175        1,556       (2,856)
                               -------      -------      -------      -------     --------     --------     --------     --------

Income before income taxes
 and minority interest....      13,953       15,364       27,591       23,858       24,877       34,071       30,837       11,229
Tax benefit (expense).....        (444)         202       (1,069)         (67)        (166)         (21)      (1,943)      (1,578)
Discontinuing operations
 loss.....................        (643)        (287)        (430)        (475)          (9)        (115)        (159)           -
Minority interest.........        (663)        (497)        (276)        (468)      (1,386)      (1,001)        (638)        (478)
                               -------      -------      -------      -------     --------     --------     --------     --------
Net income
 (ROC GAAP)...............     $12,203      $14,782      $25,816      $22,848     $ 23,316     $ 32,934     $ 28,097     $  9,173
                               =======      =======      =======      =======     ========     ========     ========     ========
Net income
 (U.S. GAAP)..............     $10,767      $13,075      $23,153      $21,270     $ 24,047     $ 30,363     $ 25,493     $  7,085
                               =======      =======      =======      =======     ========     ========     ========     ========

Net revenues:
 Testing..................        65.6%        66.1%        70.8%        71.7%        72.1%        70.9%        72.6%        75.5%
 Packaging................        34.4%        33.9%        29.2%        28.3%        27.9%        29.1%        27.4%        24.5%

Gross margin..............        33.7%        36.4%        38.8%        40.7%        40.8%        40.6%        38.7%        28.7%
Operating margin..........        23.1%        23.9%        25.4%        26.9%        27.1%        27.2%        23.5%        13.7%

Net income margin:
 ROC GAAP.................        19.5%        19.1%        29.8%        24.8%        22.7%        27.3%        22.5%         8.9%
 U.S. GAAP................        17.2%        16.9%        26.8%        23.1%        23.4%        25.1%        20.4%         6.9%
</TABLE>

     Our results of operations have been adversely affected by the global
semiconductor industry downturn which commenced in the fourth quarter of 2000.
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".

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, with
certain portions also incurred in 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


                                       39
<PAGE>


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. For example, we recorded a foreign
exchange loss of $1.8 million in 1998, a gain of $.2 million in 1999 and a gain
of $3.3 million in 2000. The foreign exchange loss in 1998 was due primarily to
losses attributable to Japanese yen-denominated liabilities created by us in
the second half of 1998 to manage our foreign exchange exposure.

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. We expect this tax holiday to commence retroactively
on July 1, 1999. See Note 12 of Notes to Consolidated Financial Statements.

     As of December 31, 2000, we had deferred income tax assets, after
valuation allowance, of $17.8 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 expense of $2.2 million and $0.7 million in 2000
and 1999, respectively, and a net income tax benefit of $6.8 million in 1998.
See Note 12 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.


                                       40
<PAGE>


     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% interest in each of ASE Chung Li and ASE Korea. Accordingly, our only
internal sources of cash flow are 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.
Under the tax treaty between Singapore and Taiwan, the withholding tax on
dividends paid to a Singapore shareholder together with the corporate income
tax payable by the Taiwan company should not exceed 40% of that part of the
retained earnings out of which the dividends were distributed. As ASE Test
Taiwan is currently entitled to a tax holiday granted under the ROC Statute for
Upgrading Industries and is exempt from corporate income tax for five years,
the dividend withholding tax (and its overall effective tax rate) to be paid by
a Singapore shareholder is reduced to 15%. 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 Republic of China generally accepted accounting principles,
also called ROC GAAP (less previous years' losses and any gains on the disposal
of properties) 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, any gains
on the disposal of properties and additions to legal reserves) should be paid
to the directors and supervisors of ASE Test Taiwan as remuneration and 3% and
7% (both inclusive) of its annual net income as determined under ROC GAAP (less
previous years' losses, any gains on the disposal of properties and additions
to legal reserves) 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 11 of Notes
to Consolidated Financial Statements. The shareholders of ASE Test Taiwan
approved a cash dividend at their annual general meeting of shareholders on May
31, 2000. ASE Test Taiwan paid dividends of NT$.01 per share to us in June
2000.

     We will be taxed at the prevailing Singapore corporate tax rate on the
dividends from ASE Test Taiwan when the dividends are received or deemed
received in Singapore. The Minister for Finance in a recent budget announcement
reduced the Singapore corporate tax rate to 24.5% from 25.5% with effect from
the year of assessment 2002 (financial year ending in 2001). Under the
Singapore-Taiwan Tax Treaty, we will be able to claim a foreign tax credit
against the Singapore tax payable on the dividends. The foreign tax credit will
take into account both the withholding tax paid on the dividends and underlying
tax paid on profits in Taiwan, for as long as we hold at least 25% of the share
capital of ASE Test Taiwan. The foreign tax credit is limited to the lower of
the foreign tax suffered and the Singapore tax payable on the net foreign
income (after attributable and allowable expenses). There is no provision for
the carryforward or carryback of foreign tax credits. Hence, any excess foreign
tax credits not immediately used by us in the year of remittance of the income
into Singapore will be lost.

     The Singapore-Taiwan Tax Treaty also provides for tax sparing (or deemed
paid) credits. This generally will be relevant where the dividend paying
company is enjoying specified tax incentives which result in a reduced tax rate
or a tax holiday. In general, the tax sparing credits will be equal to the tax
that would otherwise be payable in the absence of the tax incentive. As ASE
Test Taiwan has been granted tax incentives and is currently enjoying tax
holiday in Taiwan, subject to the requirements under the Singapore-Taiwan Tax
Treaty, tax sparing credits should


                                       41
<PAGE>


be available to us with respect to the dividends received from ASE Test Taiwan.
We therefore need not pay any additional Singapore tax on these dividends
received in Singapore from ASE Test Taiwan.

   Dividends from ASE Test Malaysia

     Under existing Malaysia law, dividends declared by ASE Test Malaysia and
paid to us 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. Shareholders of a Malaysian company are 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). 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. A shareholder of a Malaysian company who is not resident in
Malaysia, such as us, may be subject to taxation in Singapore on the gross
dividend received. Subject to the provision of the Double Tax Agreement between
Singapore and Malaysia, we may qualify for a tax credit on the Malaysian tax
paid for the above dividend for set off against its Singapore tax liability on
the same dividend.

     ASE Test Malaysia is owned by our wholly-owned subsidiary, ASE Holdings
(Singapore) Pte Ltd., also called 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. ASE Test
Malaysia has been granted tax exemptions for high technology pioneer status,
which we expect to begin retroactively from July 1, 1999. The Malaysian
dividends received or deemed received in Singapore by ASE Holdings Singapore
under these exemptions are technically subject to Singapore tax and since there
is no Malaysian tax suffered on such income, no foreign tax credit is available
to offset against the Singapore tax payable on these Malaysian dividends. As an
administrative concession, a tax remission is granted by the Singapore tax
authorities such that effectively ASE Holdings Singapore will be exempted from
Singapore tax on this income from Malaysia.

     Singapore adopts an imputation system with respect to the payment of
dividends by Singapore resident companies. That is, to the extent a dividend is
paid from profits previously taxed at the corporate level, no further Singapore
tax liability, including any withholding tax, will be imposed.

     When ASE Holdings Singapore pays dividends out of such Malaysian income,
it would not have sufficient franking credits (since it has not paid any
Singapore tax on such income). This may result in ASE Holdings Singapore being
liable to a Section 44 charge at the prevailing Singapore corporate tax rate.
This charge can be used to set off any future Singapore tax that ASE Holdings
Singapore may be liable to.

     To avoid the Section 44 charge, ASE Holdings Singapore may consider the
Singapore-Malaysia Tax Treaty which allows ASE Holdings Singapore to declare
itself to be a Malaysian resident company for purposes of paying the dividends
out of the Malaysian dividend income. This treatment is subject to agreement by
the Singapore and Malaysian tax authorities.

     The tax remission mentioned above applies only to dividends received in
Singapore from Malaysia during the five-year period referenced above. The
Malaysian dividends paid out of profits exempt under the hi-tech incentive,
when received or deemed received in Singapore by ASE Holdings Singapore, will
be subject to Singapore tax at the prevailing Singapore corporate tax rate.
Since there is no Malaysian tax suffered on such income, no foreign tax credit
is available to offset against the Singapore tax payable on such dividends. In
this case, therefore, Singapore tax at the prevailing Singapore corporate tax
rate will be payable by ASE Holdings Singapore. There will be no further
Singapore tax when ASE Holdings Singapore pays dividends out of such Malaysian
income to us.

   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%.


                                       42
<PAGE>


     ISE Labs is owned by our wholly-owned subsidiary, ASE Test Holdings, Ltd.,
a Cayman Islands holding company, also called ASE Test Cayman Islands. We will
be taxed at the prevailing Singapore corporate tax rate on the dividends from
ASE Test Cayman Islands remitted into or otherwise received in Singapore, since
there is no Cayman Islands tax imposed on such income and therefore no foreign
tax credit will be available to offset against the Singapore tax payable on
such dividends. There is no further Singapore tax on payment of dividends by us
to our shareholders.

  Foreign tax credit

     The foreign tax credit will be available only in the year the foreign
dividends are subject to tax in Singapore, that is, in the year of remittance
or deemed remittance into Singapore. The foreign tax credit is limited to the
lower of the foreign tax suffered and the Singapore tax payable on the net
foreign income (after attributable and allowable expenses). There is no
provision for the carry forward or carry back of foreign tax credits. Hence,
any excess foreign tax credits will be lost.

     The above comments on the tax implications are based on existing tax laws,
regulations and treaty provisions, as well as the current interpretation,
application and practice adopted by the Singapore tax authorities. There could
be changes in the laws and treaty provisions, as well as changes in position,
interpretation and application of such laws and treaties which may result in
different tax consequences.

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,
                                            -----------------------
                                               1999       2000
                                             --------   --------
                                                (in millions)
Net income:
   ROC GAAP......................            $   62.2   $ 107.2
   U.S. GAAP.....................                55.4     101.2
Shareholders' equity:
   ROC GAAP......................            $  295.4   $ 643.1
   U.S. GAAP.....................               292.3     638.8

     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 compensation expense pertaining to bonuses to employees, directors
and supervisors.

     We paid bonuses to ASE Test Taiwan's employees in 1998, 1999 and 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. 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


                                       43
<PAGE>


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 will be 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.

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. Our net cash generated from operations (after working
capital requirements) was $203.6 million in 2000, $95.1 million in 1999 and
$84.5 million in 1998. Our cash and cash equivalents are primarily held in U.S.
dollars.

     We incurred capital expenditures of $413 million in 2000, $129 million in
1999 and $81 million in 1998. These expenditures were incurred primarily for
the acquisition of new testing and packaging equipment and the expansion of
existing facilities. As of December 31, 2000, we had no material commitments
for capital expenditures. We have projected capital expenditures in 2001 of
approximately $80 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 the incurrence of short-term and long-term indebtedness.

     As of December 31, 2000, we had total outstanding indebtedness of $305.2
million, of which approximately $39.7 million was short-term indebtedness
(including the current portion of long-term debt), and $265.5 million was
long-term indebtedness (excluding the current portion of long-term debt). Our
long-term indebtedness consists primarily of long-term bank loans, which are
repayable in quarterly installments and secured by machinery and equipment, and
the $160 million 1% guaranteed convertible notes due 2004 issued by our
wholly-owned subsidiary ASE Test Finance Limited in June 1999. As of April 30,
2001, an aggregate principal amount of $0.1 million of the convertible notes
had been converted into our shares. The remaining portion of the convertible
notes is due in July 2004. Approximately $22.0 million and $20.9 million of our
long-term indebtedness (excluding accrued interest) is scheduled to be repaid
in 2001 and 2002. We expect to be able to meet such repayments from cash
generated from operations and, if necessary, the incurrence of additional
indebtedness. As of December 31, 2000, we had total available unused short-term
lines of credit of $130.2 million and unused long-term facilities of $22.6
million. See Notes 9 and 10 of Notes to Consolidated Financial Statements.

     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.


                                       44
<PAGE>


RESEARCH AND DEVELOPMENT

     Our research and development efforts have focused primarily on improving
the efficiency and technology of our testing services. Our current projects
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 March 31, 2001, we employed 382 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 $2.4 million, $3.8 million and $12.1 million in
1998, 1999 and 2000, representing approximately 1.3%, 1.4% and 2.7% 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 May 31, 2001. 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, 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, whose term has no expiration date, the current term of our
directors expires on the date of the annual general shareholders' meeting in
2002. As of May 31, 2001, our directors and executive officers as a group held
options covering an aggregate of 4,238,000 shares, of which options with
respect to 872,500 shares were exercisable as of that date.

Name                      Age     Position
----                      ---     --------
Richard H.P. Chang         52     Chairman
Leonard Y. Liu             59     Director and Chief Executive Officer
David Pan                  56     Director and President
Jeffrey Chen               37     Director and Chief Financial Officer
Chin Ko-Chien              55     Director
Wang Yung-Kang             59     Director
Alan Tien-Cheng Cheng      55     Director
Joseph Tung                42     Director
Albert C.S. Yu             49     Director
David D.H. Tsang           59     Director
Sim Guan Seng              41     Director
Raymond Lo                 47     Director and President of ASE Test Taiwan
Kanapathi A/L Kappusamy    49     Director and President of ASE Test Malaysia


                                       45
<PAGE>


     Richard H.P. Chang has served as our Chairman since 2001. Mr. Chang served
as our Vice Chairman from 1996 to 2001. Mr. Chang is also the Vice Chairman 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 of ASE, Inc.

     Leonard Y. Liu has served as a director of our company since 1996. Mr. Liu
was appointed our Chief Executive Officer in October 1999. He is also the
President of ASE, Inc. He 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, and a
director of Trident Microsystems, Inc., a semiconductor manufacturer which is
one of our customers. 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. He was
appointed as our Chief Financial Officer in July 1998. Mr. Chen has also served
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 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. 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
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


                                       46
<PAGE>


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        52      Chairman
Leonard Y. Liu            59      Chief Executive Officer
David Pan                 56      President
Jeffrey Chen              37      Chief Financial Officer
Raymond Lo                47      President of ASE Test Taiwan
Kanapathi A/L Kuppusamy   49      President of ASE Test Malaysia

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

     Leonard Y. Liu. See "--Directors".

     David Pan. See "--Directors".

     Jeffrey Chen. See "--Directors".

     Raymond Lo.  See "--Directors".

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

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.


                                       47
<PAGE>


COMPENSATION

     The aggregate compensation paid in 2000 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 60,000 shares were granted to
these persons in 2000. Such options have an exercise price of $25 and an
expiration date of April 18, 2010. We did not set aside for pension, retirement
or similar benefits for these persons in 2000. 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 $1.9 million, $1.4 million and $1.2 million in 2000, 1999 and
1998, respectively, as cash bonuses.

     We award bonuses to our employees at ASE Test Malaysia based on overall
income for ASE Test Malaysia. All our employees at ASE Test Malaysia are
eligible to receive bonuses. Our employees at ASE Test Malaysia received an
aggregate of $2.1 million, $1.4 million and $1.0 million in 2000, 1999 and
1998, 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, $2.8 million and $2.3 million to this
bonus plan in 2000, 1999 and 1998, respectively. 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 an aggregate of 4,045,230 shares, 875,000 shares and 691,390
shares in 2000, 1999 and 1998, respectively, as share awards to our employees
with a fair market value at the date of grant of $9.3 million, $2.1 million and
$1.7 million, respectively. We expect this practice to continue 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 26 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, 2000 was $0.56
million. See Note 13 of Notes to Consolidated Financial Statements.

EMPLOYEES

Employees

     We had 3,138, 4,469 and 5,707 employees as of December 31, 1998, 1999 and
2000, respectively. Our number of employees has grown as our business has
expanded, and grew in 2000 as compared to 1999 in part as a result of our
acquisition of ISE Labs. The following table sets forth certain information
concerning our employees as of the dates indicated:


                                       48
<PAGE>


                                                  As of December 31,
                                          ----------------------------------
                                           1998          1999          2000
                                          ------        ------        ------
Total...................................   3,138         4,469         5,707
Function
Direct labor............................   1,863         2,796         3,448
Indirect labor..........................     881         1,171         1,291
Selling, general and administrative.....     337           392           582
Research and development................      57           110           386

Location
Taiwan..................................     971         1,199         1,549
Malaysia................................   2,167         2,625         3,407
United States...........................     307           472           523
Hong Kong...............................     120           137           124
Singapore...............................       7            36           104

     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 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, 2001.

<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            1.09             1,100,000        8.9 ~ 20          6/15/02 ~ 1/4/11
Leonard Y. Liu                     40,000            0.04             1,400,000        8.9 ~ 20          6/15/02 ~ 1/4/11
David Pan                           4,700            0.01               300,000        8.9 ~ 20          6/15/02 ~ 1/4/11
Jeffrey Chen                            -               -               219,000        5.5 ~ 25           3/2/02 ~ 1/4/11
Chin Ko-Chien                      40,672            0.04               260,000        8.9 ~ 20          6/15/02 ~ 1/4/11
Wang Yung-Kang                     20,000            0.02               162,000        8.9 ~ 20          6/15/02 ~ 4/11/11
Alan Tien-Cheng Cheng                   -               -                20,000              20                    8/9/04
Joseph Tung                       153,000            0.17               240,000        8.9 ~ 20          6/15/02 ~ 1/4/11
Albert C.S. Yu                     45,176            0.05               100,000        9.6 ~ 20          6/15/02 ~ 8/9/04
David D.H. Tsang                   40,000            0.04                72,000        9.6 ~ 20          6/15/02 ~ 8/9/04
Sim Guan Seng                           -               -                     -               -                         -
Raymond Lo                              -               -               230,000        8.9 ~ 25          6/15/02 ~ 1/4/11
Kanapathi A/L Kuppusamy                 -               -               135,000        8.9 ~ 25          9/16/03 ~ 1/4/11
</TABLE>

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

Share Option Plans

   We currently maintain four option plans approved in 1997, 1998, 1999 and
2000. As of May 31, 2001, we have no outstanding options under the IPO option
plan of 1996 and the 1996 option plan, and these plans have expired. Under our
share option plans, our directors, employees, advisors and consultants and
those of our affiliates may, at the 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, or in the case of the 1999 and 2000 option plans, ten years. Our


                                       49
<PAGE>


board of directors may amend or modify the plans at any time. As of May 31,
2001, an aggregate of 18,800,000 of our shares had been reserved for issuance
and 16,221,853 options to purchase our shares remained outstanding under our
various option plans. An aggregate of 6,790,000 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 $2.0625 to $25.00 per
share. Options granted under the 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.

Item 7. Major Shareholders.

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 was incorporated in 1984. ASE, Inc.'s shares were
listed on the Taiwan Stock Exchange in July 1989.

     As of May 31, 2001, ASE, Inc. indirectly owned approximately 51.2% 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,
1998.

     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, 2001.

<TABLE>
                                                                                Number of
Identity of Person or Group                                                    Shares Owned         Percent Owned
---------------------------                                                    ------------         -------------
<S>                                                                            <C>                       <C>
ASE, Inc................................................................       49,250,740(1)(2)          51.2%
Capital Group International, Inc., Capital International, Inc.,
   Capital International Limited, Capital International S.A. and
   Capital International Research and Management, Inc.
   (together,  "Capital International ")................................        5,498,300                 5.7
Directors and executive officers as a group(3)..........................        1,389,824                 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.

     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, 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.


                                       50
<PAGE>


     As of April 30, 2001, approximately 92.6 million of our shares were
outstanding. We believe that, of such shares, approximately 19.7 million were
held by approximately 2,000 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 an aggregate of 4,045,230 shares in 2000, 875,000
shares in 1999 and 691,390 shares in 1998 as stock awards to our employees at
ASE Test Taiwan with a fair market value at the time of grant of $9.3 million,
$2.1 million and $1.7 million, respectively. We expect this practice to
continue 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$140.2 million (U.S.$4.5 million), NT$81.5 million and
NT$155.7 million in 2000, 1999 and 1998, respectively.

     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$23.2 million (U.S.$0.7 million), NT$14.6 million and NT$28.0
million in 2000, 1999 and 1998, respectively.

     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.

     In June 1996, we entered into an agreement with ASE, Inc. pursuant to
which we were granted a right of first refusal to purchase any future testing
operations of ASE, Inc. in the event that ASE, Inc. chooses to sell its testing
operations. The agreement provides that the sale of any testing operations of
ASE, Inc. shall be on terms and conditions to be negotiated and agreed upon
between the parties. In the event the parties fail to agree, the terms and
conditions shall be determined by a panel of three arbitrators. It is expected
that, in the event of arbitration, each party will appoint one arbitrator to
the panel who will then appoint the third arbitrator. If the two arbitrators
cannot agree, either party may request the International Chamber of Commerce to
appoint the third arbitrator.

     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.

     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 29, 2000, which was NT$33.17 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,
Richard H.P. Chang, entered into a share purchase agreement with ASE Holding
Limited. See "Major Shareholders -- Major Shareholders".


                                       51
<PAGE>


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
Development & Construction Co. Ltd. ("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. It was
alleged that the transaction in which Jason C.S. Chang sold the land to Hung
Ching unfairly benefitted 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. On January 5, 2001, the
District Court of Taipei rendered a judgment in the matter, finding Jason C.S.
Chang and Chang Yao Hung-ying guilty with sentences of six years' imprisonment
each 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 are
appealing the decision to the High Court of Taiwan, the ROC. Counsel to Jason
C.S. Chang and Chang Yao Hung-ying have advised that, as these proceedings may
not be finally determined until the case has been considered by the High Court
and the Supreme Court of Taiwan, the ROC, two or three years may elapse until
they are fully resolved.

SIGNIFICANT CHANGES

     Other than those changes disclosed in "Legal Proceedings" above, we have
not experienced any significant changes since the date of the annual financial
statements.

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.


                                       52
<PAGE>


                                                       Ordinary Share Price(1)
                                                       -----------------------
                                                       High            Low
Year Ended December 31,
   1996 (from June 6)..........................        4.906           2.500
    1997.......................................       21.938           4.781
    1998.......................................       27.750          10.125
    1999.......................................       17.500          16.063
    2000.......................................       31.875           8.500
Year Ended December 31, 1999
    First Quarter..............................       25.000          16.063
    Second Quarter ............................       22.563          17.000
    Third Quarter..............................       24.938          19.250
    Fourth Quarter.............................       26.375          18.813
Year Ended December 31, 2000
    First Quarter..............................       33.500          22.250
    Second Quarter ............................       30.688          23.438
    Third Quarter .............................       31.188          21.000
    Fourth Quarter ............................       20.875           8.500
Year Ending December 31, 2001
    First Quarter..............................       17.000           8.563
Monthly
    December 2000..............................       11.563           8.500
    January 2001...............................       17.000           8.563
    February 2001..............................       16.000          12.875
    March 2001.................................       15.188          11.813
    April 2001.................................       13.900          10.375
    May 2001...................................       15.100          12.900
    June 2001 (through June 27)................       14.160          12.500

---------
(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 27, 2001 was $12.500. As of December 31, 2000, there were 23 members
who were holders of record of our shares.

     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. Currently there
are 880.0 million TDSs representing 11.0 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:


                                       53
<PAGE>


                                                          TDS Prices(1)
                                                      --------------------
                                                      High             Low
                                                      ----             ---
Year Ended December 31,
   1998 (from January 8, 1998)..................... NT$25.50         NT$7.20
   1999............................................    20.50           12.20
   2000............................................    26.00            4.04
Year Ended December 31, 1999
   First Quarter ..................................    20.50           12.20
   Second Quarter..................................    19.40           14.10
   Third Quarter...................................    20.10           15.20
   Fourth Quarter..................................    19.30           16.30
Year Ended December 31, 2000
   First Quarter...................................    25.40           17.60
   Second Quarter .................................    21.80           17.10
   Third Quarter ..................................    19.20            8.40
   Fourth Quarter..................................     8.65            4.04
Year Ending December 31, 2001
   First Quarter...................................     8.40            4.05
Monthly
   December 2000...................................     6.45            4.04
   January 2001....................................     7.10            4.05
   February 2001...................................     8.40            6.40
   March 2001......................................     7.30            6.25
   April 2001......................................     7.35            6.20
   May 2001........................................     6.70            5.90
   June 2001 (through June 28).....................     6.30            5.20

---------
(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$5.30 per TDS on June 28, 2001.

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.

     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.


                                       54
<PAGE>


     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 December 31, 2000, 91,425,691 shares were issued and outstanding.
All 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.

     Members

     Only persons who are registered in our register of members are recognized
as members of our company. As of December 31, 2000, there were 23 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


                                       55
<PAGE>


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 fourth
annual general meeting was held on June 28, 2000. 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.


                                       56
<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 Singapore Companies Act 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 25% 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 relatives), a company
and its pension funds, a person and any investment company, unit trust or other
fund whose investment such person manages on a discretionary basis, and a
financial adviser and its clients in respect of shares held by the financial
adviser and shares held by 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% or more of the client's equity share
capital. An offer for consideration other than cash must be accompanied by a
cash alternative at not less than the highest price paid by the offeror, or
parties acting in concert with the client, within the preceding twelve months.
A mandatory takeover offer is also required to be made if a person holding,
either on his own or together with parties acting in concert with him, between
25% and 50% of the voting shares acquires additional voting shares representing
more than 3% of our voting shares in any twelve month period. In addition, the
offer or 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.

     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.


                                      57
<PAGE>


     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

     Indenture dated June 29, 1999 among ASE Test Finance Limited, ASE Test
Limited and The Bank of New York, as Trustee

     This indenture relates to U.S.$150 million of 1% Guaranteed Convertible
Notes due 2004 issued by our subsidiary, ASE Test Finance Limited, and
guaranteed by us. The notes are convertible into our common stock. The notes
were issued pursuant to an exemption under Rule 144A and Regulation S of the
Securities Act of 1933. At any time on or after July 1, 2002, our subsidiary
may redeem the notes.

     Resale Registration Rights Agreement dated June 29, 1999 among ASE Test
Finance Limited, ASE Test Limited and Lehman Brothers International (Europe).

     The initial purchasers of the U.S.$150 million of notes related to the
above indenture agree to purchase the notes, and in order to induce them to do
so, our subsidiary, ASE Test Finance Limited, agreed, in this contract, to
cause a shelf registration statement pursuant to Rule 415 under the Securities
Act to be filed, to use their best efforts to have the shelf registration
declared effective and to maintain its effectiveness for a period of two years
following the closing date of the transaction, which was June 29, 1999.

     Service Agreement dated as of July 1, 2000 between ASE Electronics (M)
Sdn. Bhd. and ASE (U.S.) Inc.


                                       58
<PAGE>


     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.) 12.5% of their monthly incurred services associated costs and
expenses plus 10%. 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 June 30, 2001.

     Service Agreement dated as of July 1, 2000 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.) 15% of their monthly incurred services associated costs and expenses
plus 10%. 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 June 30, 2001.

     Commission Agreement dated as of July 1, 2000 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, 0.7% of the sales amount for monthly sales. This agreement
expires on June 30, 2001.

     Commission Agreement dated as of July 1, 2000 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, 0.7% of the sales amount for monthly sales. This agreement will
expire on June 30, 2001.

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 a 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.


                                       59
<PAGE>


     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

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.

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

     As used herein, you are a "U.S. holder" if you are a beneficial owner of
shares and you are, for U.S. Federal income tax purposes:

     (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 you receive on the shares, other than pro rata distributions
of shares to all shareholders, will constitute foreign source dividend income
to the extent paid out of earnings and profits, as calculated for U.S. Federal
income tax purposes. The amount you 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 you receive the dividend. If you realize
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. You will not be entitled to a dividends
received deduction for dividends you receive.

     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." You will
not be eligible for a foreign tax credit for any underlying Singapore taxes on
profits paid by ASE Test with respect to such dividends. See "-- Singapore
Taxation -- Dividend Distributions."

     Taxation of Capital Gains

     You will recognize capital gain or loss for U.S. Federal income purposes
on a sale or other disposition of shares in the same manner as on the sale or
other disposition of other shares held as capital assets. Such gain or loss, if
any, will generally be U.S. source income or loss. You should consult your tax
advisors regarding the treatment of


                                       60
<PAGE>


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.

     Estate and Gift Taxation

     Singapore imposes an estate tax on a decedent who owns shares, even if the
decedent was not citizen or resident of Singapore. See "-- Singapore Taxation
-- Estate Duty" above. The amount of any estate duty paid to Singapore may be
eligible for credit against the amount of U.S. Federal estate tax imposed on
the estate of a U.S. holder. You should consult your tax advisors to determine
whether and to what extent they may be entitled to such credit.

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.

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

  In General

     Non-resident corporate taxpayers are subject to income tax on income that
is accrued in or derived from Singapore, and on foreign income received in
Singapore, subject to exceptions. A non-resident individual, subject to certain
exceptions, is subject to income tax on the income accrued in or derived from
Singapore.

     The Minister for Finance has in a recent budget announcement reduced the
Singapore corporate tax rate to 24.5% from 25.5% with effect from the year of
assessment 2002 (financial year ending in 2001).

     Subject to the provisions of any applicable double taxation treaty,
non-resident taxpayers that derive income from Singapore, are subject to a
withholding tax currently at 25.5% (for year of assessment 2001) on certain
types of income derived from Singapore (or generally 15.0% in the case of
interest, royalty and rental of movable property).

     A corporation will be regarded as being resident in Singapore if the
control and management of its business is exercised there, for example, if the
corporation's board of directors meets and conducts the business of the
corporation in Singapore. An individual will be regarded as being resident in
Singapore in a year of assessment if, in the preceding year, he was physically
present in Singapore or exercised an employment in Singapore other than as a
director of a company for 183 days or more, or if he resides in Singapore.

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

  Dividend Distributions

     Under Singapore's taxation system, as a company resident in Singapore, the
tax we pay at the prevailing corporate tax rate is in effect imputed to, and
deemed to be paid on behalf of our shareholders. Our shareholders are taxed on
the gross amount of dividends (that is, on the amount of net dividends plus an
amount equal to the amount of gross dividends multiplied by the prevailing
corporate tax rate). The tax we pay effectively becomes available to our
shareholders as a tax credit to offset their Singapore income tax liability on
the gross amount of dividends paid by us.


                                       61
<PAGE>


     Singapore does not impose withholding tax on dividends paid to
non-resident shareholders. As the tax we pay at the prevailing corporate tax
rate is deemed to be paid by our shareholders, no further Singapore income tax
liability is imposed on dividends received by such non-resident shareholders.
Conversely, such non-resident shareholders who do not have deductible expenses
which are accepted by the Inland Revenue Authority of Singapore as attributable
to such dividend income will normally not receive any refund from Inland
Revenue Authority of Singapore. Singapore taxpayers are taxed on dividends
received from us at the income tax rates applicable to such shareholders.

     You should consult your tax advisors as to whether credits for underlying
Singapore tax may be available to you under an applicable double taxation
treaty.

     Where we receive foreign income that has not been subject to full
Singapore income tax due to the availability of foreign tax credits, we may pay
tax exempt dividends out of the foreign income received in Singapore. The amount
of tax exempt dividend is equal to (1) the foreign tax credit allowed divided
by the prevailing corporate tax rate less (2) the foreign tax paid. We will
credit such amount to a special account known as the "Section 13E account". Any
subsequent dividends paid by us out of this account to our shareholders (other
than on any shares of a preferential nature) will be tax exempt subject to
certain conditions.

  Gain on Disposal of Shares

     Singapore does not impose tax on capital gains. However, gains may be
construed to be of an income nature and subject to tax especially if:

     o    they arise from activities which the Inland Revenue Authority of
          Singapore regard as the carrying on of a trade in Singapore; or

     o    they are short-term gains from the sales of real property and shares
          in unlisted companies with substantial real property or real property
          related assets 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. Stamp duty may be payable if the instrument
of transfer is received in Singapore.

  Estate Duty

     In the case of an individual who is not domiciled in Singapore, Singapore
estate duty is imposed on the value of most movable and immovable properties
situated in Singapore, subject to specific exemption limits. An individual
holder of the shares who is not domiciled in Singapore at the time of his or
her death will be subject to Singapore estate duty to the extent that the value
of the shares and any other assets subject to Singapore estate duty exceeds
S$600,000. Unless other exemptions apply to the other assets (for example, the
separate exemption limit for residential properties), any excess will be taxed
at a rate equal to 5.0% on the first of S$12,000,000 of the individual's
Singapore chargeable assets and thereafter at a rate equal to 10.0%.


                                       62
<PAGE>


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.

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 utilize
derivative financial instruments, the application of which is primarily for
hedging, 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 functional currencies. Our liabilities as of December 31, 2000
include liabilities denominated in U.S. dollars, NT dollars, Malaysian ringgit
and other currencies. As of December 31, 2000, approximately 86% of our cash
and accounts receivable and receivable from related parties were denominated in
U.S. dollars, approximately 8% in NT dollars, approximately 2% in Malaysian
ringgit and approximately 4% in other currencies. As of December 31, 2000,
approximately 74% of our accounts payable and payable for fixed assets were
denominated in U.S. dollars, approximately 5% in NT dollars, approximately 7%
in Malaysian ringgit and approximately 14% in other currencies. To protect
against reductions in value and the volatility of future cash flows caused by
changes in foreign exchange rates, we utilize 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.

     The following table sets forth information about our significant
obligations sensitive to foreign currency exchange rates. The principal amounts
are presented by year of maturity and translated into U.S. dollars based on the
current exchange rate.

<TABLE>
                                                                        As at December 31, 2000
                                                  --------------------------------------------------------------------
                                                                   Expected Maturity Date                   Fair Value
                                                  --------------------------------------------------        ----------
                                                  2001     2002     2003     2004     2005     Total
                                                  ----     ----     ----     ----     ----     -----
                                                                    (in millions)
<S>                                               <C>      <C>      <C>      <C>      <C>      <C>           <C>
Long Term Debt (including current portion)
U.S. dollars (interest rate: 5.223% ~ 9.5%)...... $22.0    $20.9    $49.5    $184.7   $10.4    $287.5        $287.5
</TABLE>

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 favorable currency and interest rate
levels from time to time, if available, on terms considered attractive by us.
No derivative contract was outstanding as of December 31, 2000.

Item 12. Description of Securities Other Than Equity Securities.

     Not applicable.


                                       63
<PAGE>


                                    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.

     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.

                                    PART III

Item 17. Financial Statements.

     The Company has elected to provide financial statements for fiscal year
2000 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 March 26, 2001
          (page F-1).

     (b)  Consolidated Balance Sheets of the Company and subsidiaries as of
          December 31, 1999 and 2000 (page F-2).

     (c)  Consolidated Statements of Income of the Company and subsidiaries for
          the years ended December 31, 1998, 1999 and 2000 (page F-3).

     (d)  Consolidated Statements of Changes in Stockholders' Equity of the
          Company and subsidiaries for the years ended December 31, 1998, 1999
          and 2000 (page F-5).

     (e)  Consolidated Statements of Cash Flows of the Company and subsidiaries
          for the years ended December 31, 1998, 1999 and 2000 (page F-7).

     (f)  Notes to Consolidated Financial Statements of the Company and
          subsidiaries (page F-8).


                                       64
<PAGE>













ASE Test Limited and Subsidiaries

Consolidated Financial Statements as of December 31, 1998, 1999 and 2000

Together with Independent Auditors' Report


<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 subsidiaries (the "Company") as of December 31, 1999 and 2000, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2000, all 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 generally accepted auditing
standards 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 financial position of the Company as of
December 31, 1999 and 2000 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with generally accepted accounting principles in the Republic of
China.

Certain accounting practices of the Company used in preparing the accompanying
consolidated financial statements conform with generally accepted accounting
principles in the Republic of China, but do not conform with generally accepted
accounting principles in the United States of America (US GAAP). A description
of the differences and the adjustments required to conform the financial
statements to US GAAP are set forth in Note 26.

T N Soong & Co
A Member Firm of Andersen Worldwide, SC.
Taipei, Taiwan
Republic of China

March 26, 2001


<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      (Expressed in Thousands US Dollars)

<TABLE>
                                                                                                 As of December 31
                                                                                           ----------------------------
A S S E T S                                                                                   1999            2000
-----------                                                                                ------------    ------------
<S>                                                                                        <C>             <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2)                                                         $     44,804    $    157,145
Pledged time deposits (Note 18)                                                                     227             295
Short-term investments (Note 2)                                                                  11,860           9,062
Accounts receivable
       Related companies - net (Note 16)                                                          1,181           3,178
       Other - net (Notes 2 and 3)                                                               58,466          83,288
Inventories - net (Notes 2 and 4)                                                                10,415          17,564
Deferred income tax assets - net (Notes 2 and 12)                                                 3,379           7,938
Prepayments and other                                                                             5,619          11,988
Net assets - discontinued operations (Note 25)                                                    6,674               -
                                                                                           ------------    ------------
Total Current Assets                                                                            142,625         290,458
                                                                                           ------------    ------------

LONG-TERM INVESTMENTS (Notes 2 and 5)
Shares of stock                                                                                  67,208          86,811
Bonds                                                                                             3,500             350
                                                                                           ------------    ------------
                                                                                                 70,708          87,161
                                                                                           ------------    ------------

FIXED ASSETS - NET (Notes 2, 6, 16 and 18)                                                      366,908         639,082
                                                                                           ------------    ------------

DEFERRED INCOME TAX ASSETS - NET (Notes 2 and 12)                                                 7,106           9,860
                                                                                           ------------    ------------

OTHER ASSETS                                                                                      5,531           3,867
                                                                                           ------------    ------------

CONSOLIDATED DEBITS (Notes 1, 2 and 7)                                                           64,379          61,227
                                                                                           ------------    ------------

TOTAL ASSETS                                                                               $    657,257    $  1,091,655
                                                                                           ============    ============
(Forward)
</TABLE>

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


                                      -2-

<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      (Expressed in Thousands US Dollars)

<TABLE>
                                                                                              As of December 31
                                                                                         -----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                                         1999             2000
------------------------------------                                                     ------------     ------------
<S>                                                                                      <C>              <C>
CURRENT LIABILITIES
Short-term borrowings (Notes 9 and 18)                                                   $          -     $     17,728
Accounts payable
       Related companies (Note 16)                                                              1,188            1,557
       Other                                                                                   11,402           24,788
Payable for fixed assets                                                                       29,843           68,412
Income tax payable                                                                                273            6,965
Current portion of long-term debts (Notes 10 and 18)                                           27,707           22,008
Accrued expenses and other (Note 8)                                                            14,646           16,846
                                                                                         ------------     ------------
Total Current Liabilities                                                                      85,059          158,304

LONG-TERM DEBTS (Notes 10 and 18)                                                             264,872          265,489

ACCRUED PENSION COST (Notes 2 and 13)                                                             362              568

OTHER LIABILITIES                                                                                  10              395
                                                                                         ------------     ------------

Total Liabilities                                                                             350,303          424,756
                                                                                         ------------     ------------

MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES (Note 2)                                                                          11,574           23,763
                                                                                         ------------     ------------

SHAREHOLDERS' EQUITY (Notes 1, 2, 11 and 14)

Share capital - $0.25 par value
       Authorized - 600,000,000 common shares in 1999 and 2000

       Issued and outstanding - 80,958,206 common shares in 1999 and
         91,425,691 common shares in 2000                                                      20,240           22,856
Capital surplus                                                                               140,571          409,677
Retained earnings                                                                             168,967          266,526
Unrealized holding loss on equity securities                                                        -             (541)
Cumulative translation adjustments                                                            (34,398)         (55,382)
                                                                                         ------------     ------------
Total Shareholders' Equity                                                                    295,380          643,136
                                                                                         ------------     ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                               $    657,257     $  1,091,655
                                                                                         ============     ============
</TABLE>


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

                                      -2-
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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

<TABLE>
                                                                                  Year Ended December 31
                                                                           ----------------------------------------
                                                                              1998           1999           2000
                                                                           ----------     ----------     ----------
<S>                                                                        <C>            <C>            <C>
NET REVENUES (Notes 2, 16 and 23)                                          $  184,663     $  270,254     $  440,285

COST OF REVENUES (Note 16)                                                    117,743        173,758        263,513
                                                                           ----------     ----------     ----------

GROSS PROFIT                                                                   66,920         96,496        176,772
                                                                           ----------     ----------     ----------

OPERATING EXPENSES
Selling, general and administrative                                            13,165         27,765         49,861
Research and development (Note 2)                                               2,384          3,837         12,059
                                                                           ----------     ----------     ----------
Total Operating Expenses                                                       15,549         31,602         61,920
                                                                           ----------     ----------     ----------

OPERATING INCOME                                                               51,371         64,894        114,852
                                                                           ----------     ----------     ----------

NON-OPERATING INCOME (EXPENSES)
Interest - net (Notes 2, 6 and 15)                                             (3,267)       (11,703)       (14,740)
Investment income under equity method - net (Notes 2 and 5)                       133          4,842         16,127
Gain on sale of long-term stock investments (Note 2 and 5)                          -          6,588              -
Loss on long-term bond securities (Notes 2 and 5)                                   -              -         (3,157)
Foreign exchange gain (loss) - net (Note 2)                                    (1,835)           151          3,280
Other - net                                                                       609            863         (2,719)
                                                                           ----------     ----------     ----------
Total Non-Operating Income (Expenses)                                          (4,360)           741         (1,209)
                                                                           ----------     ----------     ----------

INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX AND MINORITY INTEREST                                               47,011         65,635        113,643

INCOME TAX BENEFIT (EXPENSES) (Notes 2 and 12)                                  6,845           (678)        (2,197)
                                                                           ----------     ----------     ----------

INCOME FROM CONTINUING OPERATIONS                                              53,856         64,957        111,446

LOSS FROM DISCONTINUING OPERATIONS, NET
OF INCOME TAXES BENEFIT OF $934 IN 1999 AND                                         -         (1,360)          (758)
$388 IN 2000 (NOTE 25)                                                     ----------     ----------     ----------

INCOME BEFORE MINORITY INTEREST                                                53,856         63,597        110,688

MINORITY INTEREST IN NET INCOME OF                                                 (5)        (1,437)        (3,493)
SUBSIDIARIES (NOTE 2)                                                      ----------     ----------     ----------

NET INCOME                                                                 $   53,851     $   62,160     $  107,195
                                                                           ==========     ==========     ==========

EARNINGS PER SHARE (Note 17)
Primary

      Continued operations                                                 $     0.62     $     0.72     $     1.16
      Discontinued operations                                                       -          (0.01)             -
                                                                           ----------     ----------     ----------
                                                                           $     0.62     $     0.71     $     1.16
                                                                           ==========     ==========     ==========
Fully diluted

      Continued operations                                                 $     0.62     $     0.71     $     1.16
      Discontinued operations                                                       -          (0.01)             -
                                                                           ----------     ----------     ----------
                                                                           $     0.62     $     0.70     $     1.16
                                                                           ==========     ==========     ==========
(Forward)

                                      -3-
<PAGE>


NUMBERS OF SHARES INFORMATION:
Primary                                                                    86,660,780     87,795,711     92,673,040
                                                                           ==========     ==========     ==========
Fully diluted                                                              86,660,780     88,359,934     92,673,040
                                                                           ==========     ==========     ==========
</TABLE>


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

                                      -4-
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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


<TABLE>
                                                                        SHARE CAPITAL
                                                                 ---------------------------      CAPTIAL
                                                                                                  SURPLUS     RETAINED
                                                                     Shares         Amount       (Note 11)    EARNINGS
                                                                 -------------    ----------    -----------   --------
<S>                                                              <C>              <C>           <C>           <C>
BALANCE, JANUARY 1, 1998                                            77,685,096    $   19,421    $   124,347   $ 56,019

Issuance of new shares under stock option plans (Note 14)            1,645,884           412          7,597          -
Appropriations of 1997 earnings
       Compensation to directors and supervisors                             -             -              -       (388)
       Bonus to employees                                                    -             -              -       (992)
Transfer of net gain on disposal of properties                               -             -              7         (7)
Net income for 1998                                                          -             -              -     53,851
Unrealized holding loss on equity securities                                 -             -              -          -
Translation adjustments (Note 2)                                             -             -              -          -
                                                                 -------------    ----------    -----------   --------

BALANCE, DECEMBER 31, 1998                                          79,330,980        19,833        131,951    108,483

Issuance of new shares under stock option plans (Note 14)            1,627,226           407          8,466          -
Appropriations of 1998 earnings
       Compensation to directors and supervisors                             -             -              -       (477)
       Bonus to employees                                                    -             -              -     (1,199)
Transfer of net gain on disposal of properties                               -             -            245          -
Adjustment from changes in ownership percentage of investee                  -             -            (91)         -
Net income for 1999                                                          -             -              -     62,160
Reversal of unrealized holding loss on equity securities                     -             -              -          -
Translation adjustment (Note 2)                                              -             -              -          -
                                                                 -------------    ----------    -----------   --------

BALANCE, DECEMBER 31, 1999                                          80,958,206        20,240        140,571    168,967

Issuance of new shares under stock option plans (Note 14)            1,263,041           315          7,610          -
Capital increase in cash in July, 2000                               9,200,000         2,300        261,362          -
Convertible notes converted into ordinary shares                         4,444             1            114          -
Transfer of net gain on disposal of properties                               -             -             27        (27)
Adjustment from changes in ownership percentage of investee                  -             -             (7)    (9,609)
Net income for 2000                                                          -             -              -    107,195
Unrealized holding loss on equity securities                                 -             -              -          -
Translation adjustments (Note 2)                                             -             -              -          -
                                                                 -------------    ----------    -----------   --------

BALANCE, DECEMBER 31, 2000                                          91,425,691    $   22,856    $   409,677   $266,526
                                                                 =============    ==========    ===========   ========

(Forward)

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

                                      -5-
<PAGE>


                                                                    UNREALIZED
                                                                      HOLDING
                                                                       LOSS
                                                                     ON EQUITY      CUMULATIVE       TOTAL
                                                                     SECURITIES     TRANSLATION   SHAREHOLDERS'
                                                                  (Notes 2 and 5)   ADJUSTMENTS      EQUITY
                                                                  ---------------   -----------   ------------

BALANCE, JANUARY 1, 1998                                            $         -     $  (42,045)   $    157,742

Issuance of new shares under stock option plans (Note 14)                     -              -           8,009
Appropriations of 1997 earnings
       Compensation to directors and supervisors                              -              -            (388)
       Bonus to employees                                                     -              -            (992)
Transfer of net gain on disposal of properties                                -              -               -
Net income for 1998                                                           -              -          53,851
Unrealized holding loss on equity securities                             (9,864)             -          (9,864)
Translation adjustments (Note 2)                                              -          2,256           2,256
                                                                    -----------     ----------    ------------

BALANCE, DECEMBER 31, 1998                                               (9,864)       (39,789)        210,614

Issuance of new shares under stock option plans (Note 14)                     -              -           8,873
Appropriations of 1998 earnings
       Compensation to directors and supervisors                              -              -            (477)
       Bonus to employees                                                     -              -          (1,199)
Transfer of net gain on disposal of properties                                -              -             245
Adjustment from changes in ownership percentage of investee                   -              -             (91)
Net income for 1999                                                           -              -          62,160
Reversal of unrealized holding loss on equity securities                  9,864              -           9,864
Translation adjustment (Note 2)                                               -          5,391           5,391
                                                                    -----------     ----------    ------------

BALANCE, DECEMBER 31, 1999                                                    -        (34,398)        295,380

Issuance of new shares under stock option plans (Note 14)                     -              -           7,925
Capital increase in cash in July, 2000                                        -              -         263,662
Convertible notes converted into ordinary shares                              -              -             115
Transfer of net gain on disposal of properties                                -              -               -
Adjustment from changes in ownership percentage of investee                   -              -          (9,616)
Net income for 2000                                                           -              -         107,195
Unrealized holding loss on equity securities                               (541)             -            (541)
Translation adjustments (Note 2)                                              -        (20,984)        (20,984)
                                                                    -----------     ----------    ------------

BALANCE, DECEMBER 31, 2000                                          $      (541)    $  (55,382)   $    643,136
                                                                    ===========     ==========    ============
</TABLE>

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

                                      -5-
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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

<TABLE>
                                                                            Year Ended December 31
                                                                    ----------------------------------------
                                                                       1998           1999           2000
                                                                    ----------     ----------     ----------
<S>                                                                 <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                          $   53,851     $   62,160     $  107,195
Minority interest                                                            5          1,437          3,493
Depreciation and amortization                                           38,751         68,769        117,506
Accrued interest on convertible bonds                                        -          5,051         11,350
Provision for doubtful accounts and sales discounts                         59            780          2,226
Deferred revenue                                                             -              -          1,360
Provision for loss on idle assets                                            -              -            738
Investment income under equity method                                     (133)        (4,842)       (16,127)
Provision for loss on long-term bond securities                              -              -          3,157
Gain on disposal of fixed assets                                          (223)        (1,013)           (30)
Gain on sale of long-term stock investments                                  -         (6,588)             -
Cash dividend received                                                       -              -             37
Deferred income taxes                                                   (6,036)        (2,758)        (4,872)
Loss from discontinued operations (Note 25)                                  -          1,360            758
Changes in operating assets and liabilities
      Accounts receivable                                                3,483        (19,766)       (34,096)
      Inventories                                                        2,960         (2,762)        (7,178)
      Prepayments and other current assets                              (2,673)        (1,170)        (2,183)
      Accounts payable                                                  (1,656)           683         16,534
      Income tax payable                                                (1,765)        (2,371)         3,144
      Accrued pension cost                                                 118            128            238
      Accrued expenses and other current liabilities                    (2,245)        (4,187)         1,226
      Changes in net assets of discontinued operations                       -            164           (919)
                                                                    ----------     ----------     ----------
Net Cash Provided by Operating Activities                               84,496         95,075        203,557
                                                                    ----------     ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of fixed assets                                           (90,926)      (110,733)      (372,561)
Acquisitions of ISE Labs, Inc.                                               -        (95,833)             -
Increase in long-term investments                                      (27,222)       (56,875)        (7,100)
Increase in consolidated debits                                              -              -           (428)
Proceeds from disposal of long-term stock investments                        -         34,042              -
Decrease (increase) in pledged time deposits                             6,729            (15)           (86)
Proceeds from sale of fixed assets                                       1,832          5,441          9,868
Proceeds from disposal of discontinued operations (Note 25)                  -              -          4,900
Increase in other assets                                                    (7)        (1,370)        (4,325)
Decrease (increase) in short-term investments                            4,976        (11,860)         2,378
                                                                    ----------     ----------     ----------
Net Cash Used in Investing Activities                                 (104,618)      (237,203)      (367,354)
                                                                    ----------     ----------     ----------

(Forward)

                                      -6-

<PAGE>


CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital shares                                          $    7,755     $    9,029     $  271,762
Increase (decrease) in short-term borrowings                            (4,584)        (5,594)        18,230
Increase in long-term debts                                             99,899        191,865         55,089
Repayment of long-term debts and capital lease obligations             (71,708)       (27,386)       (66,814)
Compensation to directors and supervisors and bonus to employees        (1,380)        (1,676)             -
Decrease in minority interest                                                -              -           (466)
                                                                    ----------     ----------     ----------
Net Cash Provided by Financing Activities                               29,982        166,238        277,801
                                                                    ----------     ----------     ----------

TRANSLATION ADJUSTMENTS                                                   (621)           362         (1,663)
                                                                    -----------    ----------     -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     9,239         24,472        112,341

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            11,093         20,332         44,804
                                                                    ----------     ----------     ----------

CASH AND CASH EQUIVALENTS, END OF YEAR                              $   20,332     $   44,804     $  157,145
                                                                    ==========     ==========     ==========

SUPPLEMENTAL INFORMATION
Interest paid (capitalized interest cost excluded)                  $    4,978     $    7,870     $    8,647
Income tax paid                                                     $    2,190     $    6,652     $    3,387
Cash paid for acquisition of fixed assets
      Purchase price                                                $   80,971     $  128,690     $  413,197
      Decrease (increase) in payable                                     9,955        (17,650)       (40,636)
      Increase in obligation under long-term lease                           -           (307)             -
                                                                    ----------     ----------     ----------
                                                                    $   90,926     $  110,733     $  372,561
                                                                    ==========     ==========     ==========
Cash received for sales of fixed assets
      Sales price                                                   $    2,343     $    5,535     $    9,868
      Increase in receivable                                              (511)           (94)             -
                                                                    ----------     ----------     ----------
                                                                    $    1,832     $    5,441     $    9,868
                                                                    ==========     ==========     ==========
Cash received for issuance of capital stock (net of
  issuance expense)                                                 $    8,009     $    8,873     $  271,587
Decrease (increase) in receivable for issuance of
  capital stock                                                           (254)           156            175
                                                                    ----------     ----------     ----------
                                                                    $    7,755     $    9,029     $  271,762
                                                                    ==========     ==========     ==========

Total assets acquired from ISE Labs, Inc.                           $        -     $  136,067     $        -
Less:  Liabilities assumed                                                   -        (35,964)             -
                                                                    ----------     ----------     ----------
Cash paid                                                                    -        100,103              -
Less:  Cash received at the date of acquisition                              -         (4,270)             -
                                                                    ----------     ----------     ----------
Net cash out flow                                                   $        -     $   95,833     $        -
                                                                    ==========     ==========     ==========
</TABLE>

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

                                      -7-
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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


 1.  GENERAL

     ASE Test Limited (together with its consolidated subsidiaries, "the
     Company", unless the context requires otherwise) 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 integrated circuits; 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.

     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 owns 100%
     of the shares of 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 integrated
     circuits.

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

     In December 1997 and January 1999, the Company obtain approval from the
     ROC Securities and Futures Commission Ministry of Finance to issue Taiwan
     Depositary Receipts (TDR) for 6,000,000 and 2,500,000 (after stock splits
     in 1998 and 1999, respectively) shares offered by the Company's
     shareholder, J&R Holding Limited. These TDRs were listed on the Taiwan
     Stock Exchange.

     In May 1999, the Company acquired 70% of the equity of ISE Labs, Inc. (net
     book value $23.6 million) through a new wholly-owned holding company named
     ASE Test Holding Ltd. The acquisition transaction was accounted for using
     the purchase method. ISE Labs, Inc. is engaged in the front-end
     engineering testing and packaging operation, including its subsidiaries
     ISE Labs Hong Kong Limited, ISE Labs Singapore Pte Limited, ISE
     Technology, Inc., and Digital Testing Services Inc. (together "ISE Labs").
     The Company has committed to the minority shareholders of ISE Labs that if
     ISE Labs (i) does not consummate its initial public offering of its common
     stock in the United States by December 31, 2001 at or above a
     predetermined price or (ii) disposes of certain material assets, the
     Company will be obligated to purchase the remaining 30% of equity of ISE
     Labs for $42 million plus accrued interest (payable either in cash or the
     Company's shares, at the option of the minority shareholders). Any future
     acquisition for the remaining 30% equity of ISE Labs will be accounted for
     as step-acquisitions using the purchase method. The purchase cost was
     $100.1 million for the acquisition. The excess purchase cost was allocated
     as of May 5, 1999 as follows (amount in millions US dollars):


                                      -8-
<PAGE>


     Write-up of land                                         $   2.5
     Write-up in buildings                                        2.7
     Write-up in machinery                                        9.0
     Deferred tax liabilities                                    (5.7)
     Goodwill                                                    68.0
                                                              -------
                                                              $  76.5
                                                              =======

     The goodwill was presented as consolidated debits (Note 8) in the balance
     sheet.

     In the first quarter of 2000, the Company adjusted its allocation of
     purchase price by reducing the allocation to land by $0.2 million,
     buildings by $2.3 million, machinery by $2.3 million, deferred tax
     liabilities by $1.9 million and increasing the allocation to goodwill by
     $3.8 million because impairment loss incurred arising from the disposition
     of the packaging operation of ISE Labs subsequent to the acquisition (see
     Note 25).

     On April 27 and July 27, 2000, ASE Test Limited subscribed 8,750,000
     shares arising from the capital increase by ISE Labs at $8 per share at
     the amount of $70 million. In addition, on November 20, 2000, ASE Test
     Limited acquired 100,000 shares from minority shareholders at $8.94 per
     share with amount of $0.9 million. As a result, ASE Test Limited's
     ownership in ISE Labs increased from 70% to 80.38%.

     In June 1999, the Company established a wholly-owned subsidiary, ASE Test
     Finance Limited, in Mauritius to issue $160 million convertible notes,
     which was completed on June 29, 1999 (Note 10). The issuance of the
     convertible notes was to finance the acquisitions of ISE Labs and
     Motorola's Semiconductor Products Sector Businesses in Taiwan and Korea
     ("Motorola SPS Businesses").

 2.  SIGNIFICANT ACCOUNTING POLICIES

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

     Presentation of financial statements

     The Company prepared its financial statements using US GAAP in previous
     years. Effective 1999, the Company changed such basis from US GAAP to ROC
     GAAP and made reconciliation to US GAAP, to be consistent with the
     presentation of the financial statements of its ultimate parent company,
     ASE, Inc.. The major adjustment applicable to the Company as a result of
     change from US GAAP to ROC GAAP is accounting for employee bonuses (Note
     26).

     Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries, ASE Test, Inc., ASE Test (U.S.A.) 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. The minority shareholders' interests in the equity and earnings of
     subsidiaries are presented separately in the


                                      -9-
<PAGE>


     consolidated financial statements. All significant intercompany accounts
     and transactions have been eliminated.

     The statement of income for ISE Labs are consolidated since the date of
     acquisition. The net revenues, cost of revenues and operating expenses for
     the period from May 5 (date of acquisition) to December 31, 1999 are
     included in the Company's consolidated statements of income.

     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. As of December 31,1999 and 2000, cash equivalents were
     investments in money market fund stated at cost, which approximated fair
     value.

     Short-term investments

     Marketable securities are carried at cost less allowance for decline in
     market value.

     Allowance for doubtful accounts

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

     Inventories

     Inventories are stated at the lower of weighted average cost or market
     value.

     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 companies' operations 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 earnings or losses of the investee companies. Such proportionate
     share in earnings or losses are recognized as investment income or losses
     while cash dividends received are reflected as a reduction in the carrying
     value of the investments. The goodwill, representing the excess of the
     investment costs over the Company's proportionate equity in 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 five to ten years. Changes in the Company's ownership
     percentage of investees accounted for by equity method are recorded as
     adjustments of long-term investments and capital surplus. The writedown of
     carrying value of long-term investments has been taken on the basis of the
     discounted cash flows expected to be realized in the future.

     Other long-term stock investments are accounted for by the cost method.
     Such investments are carried at cost less allowances for decline in market
     value of listed stocks or for decline in value of unlisted stocks which is
     considered irrecoverable; these allowances are charged to shareholder's
     equity and current earnings, respectively. Stock dividends received are
     accounted for only as increases in number of shares held. Cash dividends
     received are recognized as income. The sales of ASE, Inc. common shares
     are reflected as gain from sales of long-term stock investment in the
     statement of income.


                                      -10-
<PAGE>


     Long-term investments in bonds

     Bond securities being held to maturity are stated at amortized cost.
     Allowance for loss in bond securities is provided based on the evaluation
     of recoverability of the carrying value of these securities.

     Fixed assets

     Fixed assets, except leased equipment, machinery in transit, construction
     in progress and prepayments, are stated at cost less accumulated
     depreciation. Equipment held under capital leases and related obligations
     are stated at the lower of the fair value of the equipment at the
     beginning of the lease period or the present value of the total rental
     payments and the purchase price at the end of the lease period. Machinery
     in transit, construction in progress and prepayments mainly pertain to the
     purchase of packaging and testing equipment or properties under
     construction and are stated at cost. These include cost of machinery,
     construction, down payments and other direct costs plus interest charges
     attributable to the borrowings used to finance these assets. Major
     renewals and betterments are capitalized, while maintenance and repairs
     are expensed currently.

     Long leasehold land is depreciated over the 60 year period of the lease.
     Depreciation for other fixed assets is provided on the straight-line
     method over estimated service lives which range as follows: Building and
     improvements, 5 to 40 years; machinery and equipment, 3 to 5 years;
     furniture and fixtures, 5 to 10 years; leased assets, 5 years. Building
     improvements are depreciated on a straight-line basis over the shorter of
     the useful life of the improvement or the life of the building. Leasehold
     improvements are depreciated on a straight-line basis over the shorter of
     the useful life of the improvement or the lease term.

     Consolidated debits

     The consolidated debits as shown in the balance sheet represent goodwill
     arising from the excess of the acquisition costs of investments over the
     Company's proportionate equity in the net assets of the consolidated
     subsidiaries at the time of acquisitions or investments and are amortized
     on the straight-line method over five to ten years.

     Revenue recognition

     Revenue from sales of semiconductor product and testing services is
     recognized upon shipment of the product or completion of the services,
     provided that no significant obligations remain and that collection of
     accounts receivable is reasonably assured.

     Income taxes

     Tax effects of deductible temporary differences, unused tax credits and
     loss carryforward are recognized as deferred income tax assets, while
     those of taxable temporary differences are recognized as deferred income
     tax liabilities. 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
     approved by the ROC government. Capital allowances of ASE Test Malaysia
     from investment in industrial buildings, machinery and equipment are
     recognized in the year which they are acquired.


                                     -11-
<PAGE>


     Adjustments of income taxes of prior years are included in the current
     year's provision.

     Annual earnings of ASE Test, Inc. shall be appropriated by its annual
     shareholders' meeting in the following year. The unappropriated balance,
     as determined based on the tax regulations, shall be subject to 10% income
     tax. Such tax is recorded as expense when the shareholders have resolved
     that the earnings shall be retained.

     Research and development costs

     Research and development costs are charged to expenses as incurred.

     Pension plan

     Pension cost is recorded based on actuarial calculations.

     Foreign-currency transactions

     The functional and reporting currency of the Company is US dollar, while
     the functional currencies of its major subsidiaries, ASE Test Inc. and ASE
     Test Malaysia are their local currency, namely New Taiwan dollar and
     Malaysia Ringgit, 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 were translated into US
     dollars at the following rates: All assets and liabilities - current
     exchange rate; shareholders' equity - historical exchange rates; income,
     cost and expenses - average exchange rate for the period. The net
     resulting translation adjustment is reported as a separate component of
     shareholders' equity.

     Derivative financial instruments

     Forward exchange contracts for hedging purposes are recorded at the spot
     rates on the contract dates. The foreign-currency amounts of the contracts
     multiplied by the differences between such spot rates and the contracted
     forward rates are amortized on the straight-line method over the contract
     periods. Exchange differences on settlement dates are credited or charged
     to current income. At year-end, the balances of forward exchange
     receivables or payables are translated based on prevailing exchange rates
     and the resulting differences are credited or charged to current 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 purchases 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.
     The outstanding written option contracts are marked to market with the
     difference charged to income.


<PAGE>


     Use of estimates

     The preparation of consolidated financial statements in conformity with
     generally accepted accounting principles both in the ROC and the United
     States requires management to make estimates and assumptions that affect
     certain reported amounts and disclosures. Accordingly, actual results
     could differ from those estimates.

 3.  ACCOUNTS RECEIVABLE - OTHER, NET
                                                        1999           2000
                                                     ----------     ----------

     Accounts receivable                             $   61,495     $   88,063
     Allowance for sales discounts and doubtful
       accounts                                          (3,029)        (4,775)
                                                     ----------     ----------

                                                     $   58,466     $   83,288
                                                     ==========     ==========

 4.  INVENTORIES - NET
                                                        1999           2000
                                                     ----------     ----------

     Raw materials                                   $    6,490     $    9,312
     Work in process                                        514            618
     Finished goods                                       1,070          1,397
     Supplies                                             3,438          6,340
     Materials in transit                                     5            891
                                                     ----------     ----------
                                                         11,517         18,558
     Allowance for obsolescence                          (1,102)          (994)
                                                     ----------     ----------

                                                     $   10,415     $   17,564
                                                     ==========     ==========

 5.  LONG-TERM INVESTMENT
<TABLE>
                                                        1999                     2000
                                                ---------------------    --------------------
                                                              % of                     % of
                                                 Carrying    Owner-       Carrying    Owner-
                                                  Value       ship         Value       ship
                                                ----------  ---------    ----------  --------
<S>                                             <C>         <C>          <C>         <C>
     Shares of stock
     Equity method
           ASE Material Inc.                    $    3,271       10.0    $   2,724        6.7
           ASE (Chung-Li) Inc.                      41,077       30.0       53,059       30.0
           ASE Investment (Labuan) Inc.             21,798       30.0       30,539       30.0
     Cost method
           ASE, Inc.                                 1,062          -        1,008          -
           Allowance for valuation losses
            (Note 2)                                     -                    (519)
                                                ----------               ----------
                                                    67,208                  86,811
     (Forward)


                                     -13-
<PAGE>


     Bond
     Corporate bond - APP Global
       Finance Ltd. (APP), due October 4,
       2001 and bear interest at 9.75% and
       payable semiannually                     $    3,500               $   3,500
     Allowance for loss (Note 2)                         -                  (3,150)
                                                ----------               ----------
                                                     3,500                      350
                                                ----------               ----------
                                                $   70,708               $   87,161
                                                ==========               ==========
</TABLE>

     The Company had net investment income of $133 in 1998, $4,842 in 1999 and
     $16,127 in 2000. The investments in ASE (Chung Li) Inc. and ASE Investment
     (Labuan) Inc. represent the investments made in connection with the
     acquisitions of Motorola's SPS Businesses.

     Gross realized gain on sale of long-term stock investments for the year
     ended December 31, 1999 was $6,588.

     In 2000, the Company provided an allowance for loss of $3,150 for the bond
     investment in APP because APP incurred financial difficulties.

 6.  FIXED ASSETS - NET
                                                       1999           2000
                                                    ----------     ----------
     Cost
           Land                                     $    4,105     $    3,892
           Long leasehold land                           1,789          1,789
           Building and improvements                    42,940         41,658
           Machinery and equipment                     464,786        804,545
           Furniture and fixtures                        6,188          9,937
           Leased assets - equipment                     5,357          5,364
           Leasehold improvements                        2,651          8,193
           Machinery in transit and construction
             in progress                                31,353         38,936
           Prepayments                                   2,277          3,048
                                                    ----------     ----------
                                                       561,446        917,362
                                                    ----------     ----------

     Accumulated depreciation
           Long leasehold land                             157            188
           Building and improvements                     8,436         12,270
           Machinery and equipment                     181,245        256,908
           Furniture and fixtures                        2,458          3,863
           Leased assets - equipment                       700          3,286
           Leasehold improvement                         1,542          1,765
                                                    ----------     ----------
                                                       194,538        278,280
                                                    ----------     ----------
                                                    $  366,908     $  639,082
                                                    ==========     ==========

     Capitalized interest costs were $1,146, $715 and $888 for the years ended
     December 31, 1998, 1999 and 2000, respectively.


                                     -14-
<PAGE>


 7.  CONSOLIDATED DEBITS

     These represent goodwill arising from the purchases of stock shares of:

                                                    1999           2000
                                                 ----------     ----------
     ISE Labs                                    $   67,971     $   71,872
     Digital Testing Services, Inc.                   1,082          1,082
                                                 ----------     ----------
                                                     69,053         72,954
                                                 ----------     ----------
     Less: Accumulated amortization
            ISE Labs                                  4,460         11,193
            Digital Testing Services, Inc.              214            534
                                                 ----------     ----------
                                                      4,674         11,727
                                                 ----------     ----------
                                                 $   64,379     $   61,227
                                                 ==========     ==========

     Amortization of above-mentioned goodwill for consolidated subsidiaries
     were $4,674 and $7,053 for the years ended December 31, 1999 and 2000.

 8.  ACCRUED EXPENSES AND OTHER

     Accrued expenses and other current liabilities consist of:

                                                    1999           2000
                                                 ----------     ----------
     Accrued bonuses and salary                  $    3,265     $    5,860
     Accrual for inventories, factory
       suppliers, miscellaneous tools and
       equipment                                      4,922            610
     Commission payable                                 751          1,538
     Deferred revenue                                     -          1,361
     Temporary and advance received                     627            807
     Utilities payable                                  496            670
     Import and export expenses payable                 456            345
     Other                                            4,129          5,655
                                                 ----------     ----------
                                                 $   14,646     $   16,846
                                                 ==========     ==========

 9.  SHORT-TERM BORROWINGS

     These represents the bank acceptance and revolving loans bearing interest
     rates ranging from 3.54% to 4.20%, and are secured by a letter of
     awareness of $6,579 from its ultimate parent company, ASE, Inc.

     Unused credit lines for short-term borrowings amounted to approximately
     $104,044 and $130,186 as of December 31, 1999 and 2000, respectively.


                                     -15-
<PAGE>


10.  LONG-TERM DEBTS
                                                    1999           2000
                                                 ----------     ----------

     Convertible notes                           $  165,051     $  176,286
     Mortgage bank loans                             74,514         72,308
     Negotiable instruments under a
       long-term facility                            47,007         35,732
     Capital lease obligation (Note 19)               3,546          1,893
     Notes payable                                    2,461          1,278
                                                 ----------     ----------
                                                    292,579        287,497
     Less:  Portion due within one year (Note 18)   (27,707)       (22,008)
                                                 ----------     ----------
                                                 $  264,872     $  265,489
                                                 ==========     ==========

     Following are information on the long-term debts:

     a.  Convertible notes
                                                    1999           2000
                                                 ----------     ----------
         Convertible notes                       $  160,000     $  159,890
         Accrued interest                             5,051         16,396
                                                 ----------     ----------
                                                 $  165,051     $  176,286
                                                 ==========     ==========

     In June 1999, ASE Test Finance Limited, in connection with the
     acquisitions of ISE Labs, Inc. and Motorola's SPS Businesses (Note 1),
     issued US$160 million of 1% guaranteed convertible notes (the Convertible
     Notes), due July 1, 2004.

     The holders of the Convertible Notes are entitled to convert the
     Convertible Notes into the common shares of ASE Test Limited at the
     specified conversion price (US$24.75 per share currently, subject to
     adjustment) at any time after December 29, 1999 and before or on July 1,
     2004.

     The Convertible Notes may be redeemed under the following circumstances:

          1) Redemption for taxation reasons

          If a tax law or treaty is unfavorably revised, ASE Test Finance
          Limited or ASE Test Limited may redeem the Convertible Notes in whole
          at the 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 the early redemption
          price.

     As of December 31, 2000, the Convertible Notes aggregating $110 has been
     converted into shares of ASE Test Limited.


                                     -16-
<PAGE>


     b.  Mortgage bank loans (Note 18)

<TABLE>
                                                                                                    1999          2000
                                                                                                 ----------     ----------
<S>                                                                                              <C>            <C>
         ASE Test, Inc. - Mortgage bank loans on machinery and equipment
               Denominated in New Taiwan dollar
                     Repayable in quarterly installments through January 2001,
                       interest at 6.765%-6.975% in 1999 and 6.755%-6.765% in
                       2000                                                                      $    3,674     $      697
                     Repaid in July 2000, interest at 8.27%-8.30%                                     1,598              -
                     Repaid in July 2000, interest at 6.74%-8.00%                                     5,984              -
                     Repayable in quarterly installments through October 2002,
                       interest at 6.765%-6.975% in 1999 and 6.755%-6.765% in
                       2000                                                                           9,602          6,073
                     Repayable in monthly installments through November
                       2003, interest at 8.075%-8.25% in 1999 and 8.075% in
                       2000                                                                             792            560
                     Repayable in quarterly installments through March 2003,
                       interest at 6.35%                                                             11,079          7,884
                     Repayable in quarterly installments through December
                       2004, interest at 6.35%                                                            -          9,062
                     Repayable in quarterly installments through March 2004,
                       interest at 6.35%-6.45%                                                            -          9,817
                     Repayable in semi-annually installments through June
                       2005, interest at 6.35%-6.45%                                                      -          3,021
                                                                                                 ----------     ----------
                                                                                                     32,729         37,114
                                                                                                 ----------     ----------
               Denominated in US dollar
                     Repayable in 12 equal quarterly installments through May
                       2001, interest at 6.26%-7.00%, early repaid in July, 2000                      3,475              -
                     Repayable in semi-annually installments through June
                       2001, interest at 5.52%-6.5599%, early repaid in July, 2000                    3,004              -
                     Repayable in quarterly installments through March 2003,
                       interest at 6.21%-7.56%, early repaid in July, 2000                            3,538              -
                     Repayable in semi-annually installments through
                       December 2003, interest at 6.25%-6.87%, early repaid in
                       July, 2000                                                                     4,918              -
                                                                                                 ----------     ----------
                                                                                                     14,935              -
                                                                                                 ----------     ----------

         ISE Labs - Denominated in US Dollar bank loans
               Borrowings under line of credit of $10 million, which expire in
                 February 2005, at prime rate 8.5% in 1999 and 9.5% in 2000                           9,022          7,022
               Borrowings under line of credit of $14 million
                     Expire in January 2001, at prime rate 8.5% in 1999 and
                       9.5% in 2000                                                                   1,511            116
                     Expire in September 2002, at prime rate 8.5%, early
                       repaid in 2000                                                                 2,030              -
                     Expire in April 2001, at prime rate 8.5% in 1999 and
                     9.5% in 2000                                                                     4,288          4,597
                     Expire in January 2004, at prime rate 7.75%                                      1,679          1,317


(Forward)

                                     -17-
<PAGE>


               Borrowings under line of credit of $15 million, which expire
                 in February 2005, at prime rate 9.0%                                            $        -     $   15,000
               Mortgage loan at prime rate 7.92%, due through May 2009                                5,085          4,545
               Mortgage loan at prime rate 8.5%, due through January 2004                             3,235          2,597
                                                                                                 ----------     ----------
                                                                                                     26,850         35,194
                                                                                                 ----------     ----------
                                                                                                 $   74,514     $   72,308
                                                                                                 ==========     ==========
</TABLE>

     Of the three agreements require that, among other things, ASE Test, Inc.
     to maintain certain financial ratios.

     In addition, the ISE Labs' borrowings agreements require compliance with
     certain financial covenants and ratios, dividend restrictions, capital
     expenditure restrictions and maintenance of working capital requirements.

     c. Negotiable instruments under a long-term syndicate bank loans with
        facility of NT$1.5 billion

<TABLE>
                                                                                                    1999          2000
                                                                                                 ----------     ----------
<S>                                                                                              <C>            <C>
         Principal (denominated in New Taiwan Dollar) - revolving within 5
           years starting from June 1998, interest at 4.66%-5.0375% in 1999
           and 5.223%-5.747% in 2000                                                             $   47,756     $   36,248
         Unamortized discounts                                                                         (749)          (516)
                                                                                                 ----------     ----------
                                                                                                 $   47,007     $   35,732
                                                                                                 ==========     ==========
</TABLE>

         Under the syndicated money market instruments issuing facility
         agreement (the "Agreement"), ASE Test, Inc. is required to, among
         other things:

         1)   Unless with written consent of the majority banks, ASE Test,
              Inc. shall not pledge its assets or assume liability or other
              similar actions.

         2)   Maintenance of 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") provided a guaranty on the
         Agreement entered into by ASE Test, Inc. 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.


                                     -18-
<PAGE>


     Summarized long-term debts by currencies are as follows:

<TABLE>
                                                                                         1999              2000
                                                                                     -------------    -------------
<S>                                                                                  <C>              <C>
     New Taiwan Dollars                                                              NT$ 2,509,999    NT$ 2,411,550
     U.S. Dollars                                                                    US$   212,668    US$   214,651
</TABLE>

     Future maturity of long-term debts outstanding as of December 31, 2000 are
     as follows:

     Within the following year                        $  22,008
     During the second year                              20,892
     During the third year                               49,492
     During the fourth year                             184,746
     During the fifth year and thereafter                10,359
                                                      ---------
                                                      $ 287,497
                                                      =========

     Unused long-term credit facilities totaled approximately $38,963 and
     $22,612 as of December 31, 1999 and 2000, respectively.

11.  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.

     The Articles of Incorporation of ASE Test, Inc. provide that the following
     shall be appropriated from its annual net income (as determined under ROC
     GAAP) less any gain on disposal of fixed assets (net of applicable income
     tax):

     a.  Offset against deficit; if any;

     b.  Legal reserve equal to 10% of remainder;

     c.  Compensation 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 resolved by the shareholders in the following
     year and given effect to in the financial statements of such year.

     The aforementioned legal reserve shall be appropriated until the reserve
     equals the paid-in capital. Under the ROC Company Law, this reserve may be
     used to offset a deficit. In addition, when the reserve has reached 50% of
     the paid-in capital, up to 50% thereof may be transferred to capital. This
     legal reserve amounted to $12,345 as of December 31, 2000 and is included
     in the consolidated capital surplus and retained earnings.


                                     -19-
<PAGE>


12.  INCOME TAX

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

<TABLE>
                                                               1998           1999           2000
                                                            ----------     ----------     ----------
<S>                                                         <C>            <C>            <C>
         Currently payable                                  $     (581)    $   (3,997)    $   (4,130)
         Income taxes (10%) on undistributed earnings                -              -         (2,939)
         Deferred                                                6,036          2,951          4,872
         Adjustment of prior year's income tax                   1,390            368              -
                                                            ----------     ----------     ----------
                                                            $    6,845     $     (678)    $   (2,197)
                                                            ==========     ==========     ==========
</TABLE>

     b.  Reconciliation of income taxes attributable to continuing operations
         for the years ended December 31, 1998, 1999 and 2000 calculated at the
         statutory rate and the income tax benefit (expense) is as follows:

<TABLE>
                                                               1998           1999           2000
                                                            ----------     ----------     ----------
<S>                                                         <C>            <C>            <C>
         ASE Test, Inc.
         Tax based on pretax accounting income at statutory
           rate                                             $   (4,909)    $   (8,471)    $   (12,873)
         Add (deduct) tax effect of :
               Permanent differences
                     Tax-exempt income - tax holiday             4,000          6,145          6,126
                     Tax-exempt income - investment income
                       (loss)                                       33          1,624           (146)
               Temporary differences
                     Loss on long-term bond securities               -              -           (789)
                     Unrealized foreign exchange loss                -           (316)          (363)
                     Bad debts                                       -           (122)          (290)
                     Other                                           -            (30)           135
               Credits for investment in machinery and
                 equipment, and research and development
                 expenditures
                     Deferred                                    7,877          5,257          4,990
                     Reversal of (provision for) valuation
                       allowance                                (2,771)        (3,162)         4,661
                     Utilized                                      438          1,170          8,527
               Adjustment of prior year's income tax             1,390            368              -
               Income taxes (10%) on undistributed earnings          -              -         (2,939)
               Other                                                36              5            (71)
                                                            ----------     ----------     ----------
         Income tax benefit                                      6,094          2,468          6,968
                                                            ----------     ----------     ----------
(Forward)


                                     -20-
<PAGE>


         ASE Test Malaysia
         Tax based on pretax accounting income at
           statutory rate                                   $   (7,678)    $   (8,545)    $  (13,780)
         Add (deduct) tax effects of:
               Permanent differences
                     Tax-exempt income                          10,891          8,545          8,881
                     Others                                     (3,392)             -           (156)
               Temporary differences
                     Depreciation and capital allowance              -              -          4,636
                     Provisions and deferred assets                  -              -            219
               Deferred                                          1,395          1,044         (4,855)
               Provision for valuation allowance                  (465)             -              -
                                                            ----------     ----------     ----------
               Income tax benefit (expense)                        751          1,044         (5,055)
                                                            ----------     ----------     ----------

         ISE Labs
         Tax based on pretax accounting income at
            statutory rate (federal tax rate 35%
            and state tax rate 6%)                                   -         (4,254)        (7,121)
         Add (deduct) tax effects of:
               Permanent differences
                     Penalty                                         -           (393)        (1,339)
                     Amortization and expenses                       -           (105)          (250)
               Utilization of loss carryforward                      -              -          1,087
               Utilization of tax credit for capital
                 expenditure                                         -            679              -
               Deferred                                              -           (188)            76
               Lower foreign tax rate adjustment and other           -             71          3,437
                                                            ----------     ----------     ----------
               Income tax expense                                    -         (4,190)        (4,110)
                                                            ----------     ----------     ----------
         Income tax benefit (expense)                       $    6,845     $     (678)    $   (2,197)
                                                            ==========     ==========     ==========
</TABLE>

         ASE Test, Inc. was approved for exemption from income tax for its
         income generated from testing of integrated circuits that is
         attributable to its expansion project in 1994 and 1998, for five years
         starting January 1996 and 2001, respectively.

         ASE Test Malaysia has been further granted pioneer status under the
         Investment Incentives Act, 1968 and was exempt from income taxes for a
         period of five years through June 1999. ASE Test Malaysia has been
         granted approval of "hi-tech prioneer" status from the government
         under the Promotion of Investment Act of 1986 for additional five
         years and is expected to commence the tax holiday retroactively from
         July 1, 1999. The per share effect (primary earnings per share) of tax
         holiday is US$0.17 in 1998, US$0.17 in 1999 and US$0.16 in 2000.

         Undistributed earnings of ASE Test Limited's subsidiaries amounted to
         approximately $311,000 as at December 31, 2000. Those earnings are
         considered to be indefinitely reinvested and, accordingly, no
         provision for income tax has been provided thereon.


                                     -21-
<PAGE>


     c. Deferred income tax assets and liabilities as of December 31, 1999 and
       2000 are summarized as follows:

                                                         1999          2000
                                                      ----------    ----------
         Current assets
               ISE Labs
                    Receivable allowance and deferred
                      revenue                         $      883    $     1,609
                    Net operating loss carryforward            -            923
                    Amortization and other                   904            641
                                                      ----------     ----------
                                                           1,787          3,173
               ASE Test, Inc.                              2,913          6,702
                                                      ----------     ----------
                                                           4,700          9,875
               Valuation allowance                        (1,321)        (1,937)
                                                      ----------     ----------
                                                      $    3,379     $    7,938
                                                      ==========     ==========

         Non-current assets (liabilities)
               ASE Test, Inc.                         $   19,527     $   19,209
               ASE Test Malaysia                           4,855              -
                                                      ----------     ----------
                                                          24,382         19,209
               Valuation allowance                        (6,092)          (781)
                                                      ----------     ----------
                                                          18,290         18,428
                                                      ----------     ----------
               ISE Labs
                    Depreciation                          (3,977)        (4,257)
                    Excess of purchase cost (Note 1)      (4,990)        (2,288)
                    From foreign subsidiaries             (1,822)        (2,023)
                    Other                                   (395)             -
                                                      ----------     ----------
                                                         (11,184)        (8,568)
                                                      ----------     ----------
                                                      $    7,106     $    9,860
                                                      ==========     ==========

         Deferred income tax assets consists of ASE Test, Inc. of tax credits
         arising from investments in machinery and equipment and research and
         development expenditures; while those of ASE Test Malaysia are from
         the pre-pioneer period loss carryforward and capital allowances.

         Due to new tax rulings effective in 2000, ASE Test, Inc. is allowed to
         utilize a greater proportion of its tax credits. As a result, the
         valuation allowance for non-current deferred tax asset is reversed and
         credited to income tax benefits.

     d.  As of December 31, 2000, ASE Test, Inc. has unused tax credits which
         can be utilized to offset its future income tax are listed as follows:

         Year of Expiry
         --------------
         2001                                            $    6,702
         2002                                                 4,555
         2003                                                 6,680
         2004                                                 7,974
                                                         ----------
                                                         $   25,911
                                                         ==========


                                     -22-
<PAGE>


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

     The credits of ASE Test Malaysia will be available to reduce its entire
     amount of income taxes payable after the pioneer period ended on June 30,
     1999 without expiration date.

     ISE Labs' available Federal and State net operating loss carryforward are
     approximately $2.5 million and $1.0 million with expiration period to 2020
     and 2005, respectively.

     Income tax return of ASE Test, Inc. has been examined by the ROC tax
     authorities through 1999. No additional taxes were required based on the
     examination.

13.  PENSION PLAN

     ASE Test, Inc. has a defined benefit pension plans for its regular
     employees. Retirement benefits are based on the length of service and
     average salaries or wages of the last six months before retirement. ASE
     Test, Inc. makes monthly contributions, at 2% of salaries and wages to
     pension funds which are in the name of, and are administered by, the
     employees pension plan committee and is deposited in the Central Trust of
     China, a government agency, which may invest such fund in stocks, bonds
     and other securities. Information relating to such investments is
     unavailable to ASE Test, Inc. The changes in the retirement funds are
     summarized as follows:

<TABLE>
                                                                    1998           1999           2000
                                                                 ----------     ----------     ----------
<S>                                                              <C>            <C>            <C>
     Balance, beginning of year                                  $      526     $      740     $    1,015
     Contributions                                                      181            207            325
     Payments                                                           (21)            (6)            (6)
     Interest income                                                     40             48             84
     Exchange difference                                                 14             26            (77)
                                                                 ----------     ----------     ----------
     Balance, end of year                                        $      740     $    1,015     $    1,341
                                                                 ==========     ==========     ==========
</TABLE>

     Pension costs for ASE Test, Inc. consist of:

<TABLE>
                                                                    1998           1999           2000
                                                                 ----------     ----------     ----------
<S>                                                              <C>            <C>            <C>
     Service costs                                               $      261     $      287     $      491
     Interest                                                            63             86            120
     Projected return on pension assets                                 (47)           (55)           (52)
     Amortization of prior period service cost, gain or loss
       on plan assets, etc.                                              17             10            (13)
                                                                 ----------     ----------     ----------
                                                                 $      294     $      328     $      546
                                                                 ==========     ==========     ==========
</TABLE>


                                     -23-
<PAGE>


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

<TABLE>
                                                                    1998           1999           2000
                                                                 ----------     ----------     ----------
<S>                                                              <C>            <C>            <C>
     a.  Benefit obligations
               Accumulated benefit obligation                    $      505     $      878     $    1,144
               Additional benefits based on future salaries             816            969          1,345
                                                                 ----------     ----------     ----------
               Projected benefit obligation                           1,321          1,847          2,489
               Fair value of assets                                    (778)        (1,064)        (1,341)
                                                                 ----------     ----------     ----------
               Funded status                                            543            783          1,148
               Unrecognized net transition obligation                  (227)          (221)          (200)
               Unrecognized gain (loss) of pension assets               (82)          (200)          (380)
                                                                 ----------     ----------     ----------

               Accrued pension cost                              $      234     $      362     $      568
                                                                 ==========     ==========     ==========

     b.  Vested obligation                                       $        -     $       26     $       30
                                                                 ==========     ==========     ==========

     c.  Actuarial assumption

               Discount rate                                           6.5%           6.5%           6.0%
               Increase in future salary level                         5.0%           4.0%           4.0%
               Expected rate of return on plan assets                  6.5%           6.5%           6.0%
</TABLE>

     In addition, ISE Labs, Inc. has a defined contribution savings plan (401
     (k) plan) for eligible employees. This plan permits employees to make
     contributions up to the maximum limits allowable under Internal Revenue
     Code Section 401 (k). All employees who have completed three months of
     employment with ISE Labs, Inc. may contribute pretax dollars to the 401
     (k) plan, and ISE Labs, Inc. provides no matching contributions for a
     portion of the employees' contributions.

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

14.  STOCK OPTION PLANS

     ASE Test Limited has six stock option plans, the 1996 Option Plan (the
     "Pre-IPO Plan"), 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 stock of ASE Test
     Limited based on a vesting schedule over five years until the options
     expire. Because the exercise price is equal to the stock's market price on
     the date of grant, no compensation cost was recognized.

15.  INTEREST - NET
                                   1998           1999           2000
                                ----------     ----------     ----------
     Interest expense           $    4,765     $   13,537     $   20,575
     Interest income                (1,498)        (1,834)        (5,835)
                                ----------     ----------     ----------
     Net                        $    3,267     $   11,703     $   14,740
                                ==========     ==========     ==========


                                     -24-
<PAGE>


16.  RELATED PARTY TRANSACTIONS

     Related party transactions with Advanced Semiconductor Engineering, Inc.
     ("ASE, Inc."), parent company, and five affiliates, ASE Material Inc.
     ("ASE Material"), ASE Technologies, Inc. ('ASE Technologies"), ASE
     (Chung-Li) Inc. ("ASE Chung-Li"), ASE (Korea) Inc. ("ASE Korea") and ASE
     Holding Electronics (Philippine) Inc. ("ASE Philippine") are as follows:

                                         1998           1999           2000
                                      ----------     ----------     ----------
     For the year
     Revenues
           ASE, Inc.                  $    2,302     $      713     $       87
           ASE Philippine                      1              -              -
                                      ----------     ----------     ----------
                                      $    2,303     $      713     $       87
                                      ==========     ==========     ==========

     Processing expense
           ASE Technologies           $      133     $        7     $        -
                                      ==========     ==========     ==========

     Purchase of fixed assets
           ASE Philippine             $      124     $        -     $        -
           ASE, Inc.                         269             30            937
           ASE Korea                           -              -            487
                                      ----------     ----------     ----------
                                      $      393     $       30     $    1,424
                                      ==========     ==========     ==========

     Purchase of raw materials
           ASE, Inc.                  $    1,416     $      475     $      730
           ASE Material                      260            328          1,594
           ASE Philippine                      -              -            127
           ASE Chung-Li                        -              4             38
                                      ----------     ----------     ----------
                                      $    1,676     $      807     $    2,489
                                      ==========     ==========     ==========

     Sale of fixed assets
           ASE Philippine             $      116     $      659     $       25
           ASE, Inc.                         440            124             75
           ASE Korea                           -              -             72
           ASE Chung-Li                        -              -          1,044
                                      ----------     ----------     ----------
                                      $      556     $      783     $    1,216
                                      ==========     ==========     ==========


                                     -25-
<PAGE>


                                                        1999           2000
                                                     ----------     ----------
     At year-end
     Accounts receivable
           ASE, Inc.                                 $      518     $    2,176
           ASE Chung-Li                                       -          1,002
           ASE Technologies                                   -              -
           ASE Philippine                                   663              -
                                                     ----------     ----------
                                                     $    1,181     $    3,178
                                                     ==========     ==========
     Accounts payable
           ASE, Inc.                                 $    1,188     $      793
           ASE Korea                                          -            487
           ASE Material                                       -            230
           ASE Chung-Li                                       -             36
           ASE Philippine                                     -             11
                                                     ----------     ----------
                                                     $    1,188     $    1,557
                                                     ==========     ==========

     These transactions were conducted at prices and terms comparable to those
     applied in transactions with unrelated companies, except for the purchases
     and sales of fixed assets which were recorded at net book values.

17.  EARNINGS PER SHARE

     The Convertible Notes are not considered in the calculation of primary and
     fully diluted earnings per share because they have anti-dilutive effect.
     Earnings per share are calculated based on the weighted average number of
     shares of common share and common share equivalents outstanding. Primary
     and fully diluted earnings per share consider the effect for the common
     share equivalent of outstanding stock options using treasury stock method.
     Common share equivalent of employees' stock options of ASE Test Limited
     are included in the earnings per share calculation.

18.  ASSETS PLEDGED OR MORTGAGED

     The following assets of ASE Test, Inc. are pledged or mortgaged as
     collateral for mortgage bank loans and as guarantees for recruitment of
     foreign laborers:

                                                        1999           2000
                                                     ----------     ----------
     Time deposits                                   $      227     $      295
     Machinery and equipment - net                       78,044         87,495
                                                     ----------     ----------
                                                     $   78,271     $   87,790
                                                     ==========     ==========


                                     -26-
<PAGE>


     Total assets of ISE Labs amounting to $94,663 and $209,270 as of December
     31, 1999 and 2000 are secured under long-term debts.

19.  COMMITMENTS AS OF DECEMBER 31, 2000

     a.  The land on which the buildings of ASE Test, Inc. is situated is
         leased under two agreements with the government expiring on various
         dates from February to December 2006. The agreements grant ASE Test,
         Inc. options to renew the leases, and reserve the right for the lessor
         to adjust the lease charges upon increase in the assessed value of the
         land and to terminate the leases under certain conditions. ISE Labs
         also leased office space and equipment under non-cancellable operating
         lease agreements. The rental expenses for the years ended December 31,
         1998, 1999 and 2000 were $37, $1,489 and $2,945, respectively. The
         future minimum lease payments under above-mentioned operating leases
         are as follows:

         2001                                           $    7,694
         2002                                                6,788
         2003                                                6,701
         2004                                                6,612
         2005 and thereafter                                29,513
                                                        ----------
                                                        $   57,308
                                                        ==========

         In addition, ASE Test, Inc. and ISE Labs, also lease equipment under
         non-cancellable capital lease agreements. As of December 31, 2000, the
         net book value of the equipment acquired under the lease obligations
         amounted to $2,070. The future minimum lease payments under
         above-mentioned capital leases for equipment are as follows:

         2001                                           $      922
         2002                                                  922
         2003                                                  230
                                                        ----------
         Total minimum lease payments                        2,074
         Less:  Amount representing interest                  (181)
                                                        ----------
         Present value of future lease obligations           1,893
         Capital lease obligation, current                    (799)
                                                        ----------
         Capital lease obligation, long-term            $    1,094
                                                        ==========

     b.  ASE Test, Inc. has unused letters of credit of $2,204.

     c.  ASE Test, Inc. and ASE Test Malaysia have commitments to purchase
         machinery and equipment of $35,895 and $24,985, respectively.

     d.  ASE Test Malaysia has construction contracts for buildings and
         improvements of $2,568.


                                     -27-
<PAGE>


     e.  ASE Test, Inc. and ASE Test Malaysia engaged outside sales agencies.
         Commissions and service fees were paid based on monthly incurred
         services associated cost and expenses plus 15% or based on (0.5%-1.5%
         before July 2000; 0.7% thereafter) of net export sales and service
         fees. Such commissions for 1998, 1999 and 2000 were $4,158, $4,571 and
         $6,323, respectively.

20.  DERIVATIVE FINANCIAL INSTRUMENTS

     a.  Information on derivative transactions is as follows:

         Forward exchange contract

         ASE Test Malaysia entered into forward contracts to hedge foreign
         exchange fluctuations associate with foreign currency liabilities. As
         of December 31, 2000, the outstanding contracts are as follows:

<TABLE>
                            Contract
            Forward           Value                          Carrying       Fair
            Contract       (Thousand)     Forward Rate        Value         Value         Maturity Dates
         ---------------  -----------   -----------------   ----------    ----------     ----------------
<S>                       <C>           <C>                 <C>           <C>            <C>
         Purchase         US$      45    3.7909 (US$/RM)    $      0.1    $      0.1     January 4, 2001
         Purchase         US$   3,000    3.7677 (US$/RM)          25.5          25.3     January 4, 2001
         Purchase         JPY  50,000    0.0351 (JPY/RM)          (0.9)        (52.2)    January 4, 2001
         Purchase         US$   3,000    3.7721 (US$/RM)          22.0          15.3     January 31, 2001
         Purchase         JPY  50,000    0.0347 (JPY/RM)           3.5         (29.4)    January 31, 2001
         Purchase         JPY  20,000    0.0333 (JPY/RM)           8.9             -     February 28, 2001
         Purchase         JPY  30,000    0.0346 (JPY/RM)           2.7         (10.7)    February 28, 2001
</TABLE>

         The gain or loss to the Company in the event of nonperformance under
         derivatives financial instruments contracts is the fair value of these
         instruments as at December 31, 2000.

         The gain arising from such contracts based on mark-to-market
         valuation were approximately $2,509 in 2000.

     b.  European options

         Because ASE Test, Inc. expects to receive US dollars from export sales
         and to pay Japanese Yen or New Taiwan dollars for purchasing equipment
         or long-term debt, it entered into foreign currency written option
         contracts to hedge risk of exchange rate fluctuations. As of December
         31, 2000, these is no outstanding European options contract.

     c.  Transaction risk

         1)   Credit risk

              ASE Test Malaysia is exposed to credit risk in the event of
              non-performance of the counterparties to forward contracts on
              maturity. In order to manage this risk, ASE Test Malaysia
              transacts only with financial institutions with good credit
              ratings. As a result, no material losses resulting from
              counterparty defaults are anticipated.


                                     -28-
<PAGE>


         2)   Market risk

              ASE Test Malaysia entered into forward contracts to hedge the
              effects of foreign currency fluctuations on net assets or net
              liabilities. Hence, the impact of market risk was reduced.

         3)   Liquidation risk and cash-flow risk

              ASE Test Malaysia entered into forward contracts to hedge its
              exposure to the effect of exchange rate fluctuations on net
              assets or net liabilities. At the maturity of these contracts,
              ASE Test, Inc. has enough operating capital to meet cash
              requirements, so there are no exposures to liquidation risk and
              cash flow risk.

21.  NON-DERIVATIVE FINANCIAL INSTRUMENT

<TABLE>
                                                                    1999                         2000
                                                          ------------------------     -------------------------
                                                           Carrying         Fair         Carrying        Fair
                  Accounts                                   Value         Value          Value          Value
     --------------------------------------------------   ----------    ----------     ----------     ----------
<S>                                                       <C>           <C>            <C>            <C>
     Assets
           Cash and cash equivalents(including
             pledged time deposits)                       $   45,031    $   45,031     $  157,440     $  157,440
           Short-term investments                             11,860        11,860          9,062          9,062
           Accounts receivable - net                          59,647        59,647         86,466         86,466
           Long-term investments - net                        70,708        70,221         87,161         87,161

     Liabilities
           Short-term borrowings                                   -             -         17,728         17,728
           Accounts payable                                   12,590        12,590         26,345         26,345
           Long-term debts (including current
             portion)                                        292,579       292,579        287,497        287,497
</TABLE>

     The carrying values of cash, accounts receivable, short-term borrowings,
     and accounts payable approximate fair values because of the short
     maturities 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 liabilities are determined based on
     the estimated present values of future cash flows. Discount rates are the
     interest rates of similar long-term debt instruments which the Company is
     able to obtain. Fair value of long-term debts are their carrying values
     because floating interest rates are applied.


                                     -29-
<PAGE>


22.  CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

     A substantial portion of sales is made to a small number of customers on
     credit and generally no collateral is required. Concentration of accounts
     receivable as of December 31, 1999 and 2000 are as follows:

                                               Percentage of
                                           Accounts Receivable
                                           -------------------
                                             1999       2000
                                           --------   --------
     Five largest customers                  24%         36%

     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 expectations.

23.  SEGMENT AND GEOGRAPHICAL INFORMATION

     a.   The Companies belong to a single industry, namely, packaging and
          testing of integrated circuits.

     b.   Geographic information - revenue

<TABLE>
                                            1998                   1999                     2000
                                    --------------------   -------------------    ---------------------
                Area                   Amount        %       Amount        %        Amount          %
         ----------------           ----------     -----   ----------    -----    ----------      -----
<S>                                 <C>            <C>     <C>           <C>      <C>             <C>
         America                    $  153,513       83    $  207,652       77    $  323,658        74
         Asia                           22,569       12        50,652       19        87,897        20
         Europe                          8,573        5        11,945        4        28,730         6
         Australia                           8        -             5        -             -         -
                                    ----------     ----    ----------     ----    ----------      ----
                                    $  184,663      100    $  270,254      100    $  440,285       100
                                    ==========     ====    ==========     ====    ==========      ====
</TABLE>

     c.  Geographic information - long-live assets

<TABLE>
                                                                   1999                     2000
                                                           -------------------    ---------------------
                                                             Amount        %        Amount          %
                                                           ----------    -----    ----------      -----
<S>                                                        <C>           <C>      <C>             <C>
         Asia                                              $  316,549       86    $  548,914        86
         America                                               50,359       14        90,168        14
                                                           ----------     ----    ----------      ----

                                                           $  366,908      100    $  639,082       100
                                                           ==========     ====    ==========      ====
</TABLE>


                                     -30-
<PAGE>


     d.  Major customers

         Customers representing 10% or more of total revenues are as follows:

<TABLE>
                                            1998                   1999                     2000
                                    --------------------   -------------------    ---------------------
                                       Amount        %       Amount        %        Amount          %
                                    ----------     -----   ----------    -----    ----------      -----
<S>                                 <C>            <C>     <C>           <C>      <C>             <C>
         Customer A                 $   30,273       16    $   37,939       14    $   60,219        14
         Customer B                     19,102       10        22,832        8        42,719        10
         Customer C                     17,586       10        23,315        9        27,534         6
         Customer D                     30,421       16        19,118        7        23,863         5
                                    ----------     ----    ----------     ----    ----------      ----
                                    $   97,382       52    $  103,204       38    $  154,335        35
                                    ==========     ====    ==========     ====    ==========      ====
</TABLE>

         ASE Test, Inc.'s revenues from testing services provided to certain of
         ASE Inc.'s customers through ASE Inc. amounted to $2,453, $1,880 and
         $4,493 in 1998, 1999 and 2000, respectively. None of such customers
         individually accounted for more than 10% of ASE Test, Inc.'s revenues
         from testing services in any such period.

     e.  Reported segment information

         The Company has two reportable segments, Testing and Packaging, each
         of which requires different development and production. The testing
         division provides testing services, including front-end engineering
         testing, wafer probing and final testing services. The packaging
         division packages bare semiconductors into finished semiconductors
         with enhanced electrical and thermal characteristics. The accounting
         policies of the segments are the same as those described in Note 2.
         Segment information for the years ended December 31, 1999 and 2000 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 (loss) 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

          1999
               Revenue from external customers                         178,667        91,587              -        270,254
               Interest revenue                                            599           727            508          1,834
               Interest expense                                         (6,940)         (100)        (6,497)       (13,537)
               Net interest revenue (expense)                           (6,341)          627         (5,989)       (11,703)
               Depreciation and amortization                            55,628        10,076          3,065         68,769
               Segment profit (loss) from continuing operation          47,665        18,357           (387)        65,635
               Segment assets                                          404,239        80,372        172,646        657,257
               Expenditures for segment assets                         100,769        17,828         10,093        128,690
</TABLE>


                                     -31-
<PAGE>


24.  PRO FORMA INFORMATION

     The unaudited pro forma consolidated statement of income information are
     presented below (EPS in US Dollars) as if the acquisition of ISE Labs
     shares had occurred at beginning of each year:

                                                  1998           1999
                                               ----------     -----------
     Net revenues                              $  253,237     $  289,931
     Net income                                    36,285         59,143
     Earnings per share
           Primary                                  $0.42          $0.67
                                                    =====          =====
           Fully diluted                            $0.42          $0.67
                                                    =====          =====

     The pro forma results of operations include adjustments to give effect to
     the net increase in depreciation and the amortization of goodwill related
     to the increased value of acquired fixed assets and identifiable
     intangible assets, and interest expense on debt assumed to finance the
     purchases. The unaudited pro forma information is not necessarily
     indicative of the results of operations that would have occurred had the
     purchases been made at the beginning of the periods or the future results
     of the combined operations.

25.  DISCONTINUED OPERATIONS

     During the year ended December 31, 2000, ISE Labs discontinued its
     packaging operation in Manteca, California. The accompanying financial
     statements for 1999 have been restated to be reclassified by packaging
     segment as a discontinued operation as a result of the sale of the segment
     on July 25, 2000.

     Summarized below are the net assets of this discontinued segment as of
     December 31, 1999. All net assets are shown as current due to the current
     sale of the segment:

     Inventory                                              $       309
     Other assets                                                     3
     Fixed assets, net                                            6,362
                                                            -----------
     Net assets of discounted operations                    $     6,674
                                                            ===========

     Summarized below are operating results of the discontinued segment for the
     period from May 5 to December 31, 1999 and for the year ended December 31,
     2000:

                                                  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 from discontinued operations         (1,360)          (758)


                                     -32-
<PAGE>


     The discontinued assets were written down to fair value in accordance with
     SFAS No. 121, accounting for Impairment of Long-Lived Assets and for
     Long-Lived Assets to be Disposed of. Fair value was determined based on
     the intended proceeds from the disposal of the operations. In July 2000,
     ISE Labs sold its packaging operations in Manteca, California, for total
     proceeds of $4.9 million to existing shareholders of ISE Labs and resulted
     in a disposition loss of $1,327, net of tax benefits of $608. As discussed
     in Note 1, this disposition in loss was considered an adjustment of
     purchase price allocation.

26.  SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING
     PRINCIPLES FOLLOWED BY THE COMPANY AND GENERALLY
     ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES

     The accompanying financial statements have been prepared in accordance
     with generally accepted accounting principles in the Republic of China
     ("ROC GAAP"), which differ in the following respects from generally
     accepted accounting principles in the United States ("US GAAP"):

     a.  Pension benefits

         US Statement of Financial Accounting Standards (US FAS) 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. The adoption date of ASE
         Test, Inc. for US FAS 87 is the beginning of 1987. ROC SFAS 18, which
         is substantially similar to US FAS 87, was effective in 1996.
         Therefore, pension expenses due to different adoption dates are
         adjusted.

     b.  Marketable securities

         Under ROC GAAP, marketable equity securities are carried at the lower
         of aggregate cost or market, and debt securities at cost. Under US FAS
         115, "Accounting for Certain Investments in Debt and Equity
         Securities", except for debt securities classified as
         "held-to-maturity securities", investments in debt and equity
         securities, other than those recorded on the equity method, should be
         stated at fair value.

     c.  Bonuses to employees, directors and supervisors

         According to the 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 are 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, because
         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 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:


                                     -33-
<PAGE>


<TABLE>
                                                            1998           1999           2000
                                                         ----------     ----------     ----------
<S>                                                      <C>            <C>            <C>
         Cost of revenues                                $    1,753     $    2,118     $    3,037
         Selling, general and administrative expenses           296            352            507
         Research and development                               295            352            507
                                                         ----------     ----------     ----------
                                                         $    2,344     $    2,822     $    4,051
                                                         ==========     ==========     ==========
</TABLE>

         Aside from the aforementioned regular bonus plan, ASE, Inc., the
         parent of the Company, decided to grant a special stock bonus to ASE
         Test, Inc.'s employees aggregating $5,800 and $6,900 in value of ASE,
         Inc. shares mainly due to excellent profit results for ASE, Inc. 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
         special compensation expenses in the statement of income.

     d.  Depreciation of buildings

         Under ROC GAAP, the estimated life of a building can be as long as 40
         years based on the ROC practices. For US GAAP purposes, an assessment
         for 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 actual
         costs purchased from ASE Technology were based on market value. The
         excess of the payment over 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 from related parties should not be recorded
         by the transferee at stepped-up values.

     f.  Impairment of long-lived assets

         US FAS 121 requires entities to perform separate calculations for
         assets to be held and used to determine whether recognition of an
         impairment loss is required and, if so, to measure the impairment. If
         the sum of expected future cash flows, undiscounted and without
         interest charges, is less than an asset's carrying value, an
         impairment loss is recognized. If the sum of the expected future cash
         flows is greater than an asset's carrying value, an impairment loss
         cannot be recognized. Measurement of an impairment loss is based on
         the fair value of the asset. US FAS 121 also requires long-lived
         assets and certain identifiable intangible assets to be disposed of to
         be reported at the lower of the carrying value or fair value less cost
         to sell. Based on an assessment by the Company of the potential impact
         of US FAS 121, there is no


                                     -34-
<PAGE>


         impairment loss as of December 31, 2000 for the Company except
         for the value decline relating to the long-term investment in
         APP (see Note 5).

     The following reconciles net income and shareholders' equity under ROC
     GAAP as reported in the consolidated financial statements to the
     approximate net income and shareholders' equity amounts as determined
     under US GAAP, giving effect to adjustments for the differences listed
     above.

<TABLE>
                                                                    1998           1999           2000
                                                                 ----------     ----------     ----------
<S>                                                              <C>            <C>            <C>
     Net income
     Net income based on ROC GAAP                                $   53,851     $   62,160     $  107,195
                                                                 ----------     ----------     ----------
     Adjustments:
          a.  Pension benefits (expenses)                                 5             10             53
          c.  Bonuses to employees, director and supervisor:
              -   Regular bonuses                                    (2,816)        (4,651)        (2,790)
              -   Special stock bonuses                              (1,463)        (2,031)        (3,236)
          d.  Depreciation of building                                    -           (149)           (62)
          e.  Excess of book value of building transferred
              between related parties                                    13             13             13
     US GAAP adjustments belonged to minority interest                    -              4              -
                                                                 ----------     ----------     ----------
     Net decrease in net income                                      (4,261)        (6,804)        (6,022)
                                                                 ----------     ----------     ----------
     Approximate - net income based on US GAAP                   $   49,590     $   55,356     $  101,173
                                                                 ==========     ==========     ==========

     Earnings per share (In US Dollars)
          Basic                                                  $     0.63     $     0.69     $     1.18
                                                                 ==========     ==========     ==========
          Diluted                                                $     0.57     $     0.63     $     1.09
                                                                 ==========     ==========     ==========

     Number of shares (Note 27d)
          Basic                                                  78,767,112     80,232,420     85,970,361
                                                                 ==========     ==========     ==========
          Diluted                                                86,660,780     88,359,934     92,673,040
                                                                 ==========     ==========     ==========

     Shareholders' equity
     Shareholders' equity based on ROC GAAP                      $  210,614     $  295,380     $  643,136
     Adjustments:
          a.  Pension benefits                                         (136)          (126)           (73)
          b.  Adjustment for long-term investment in equity
              securities                                                109            513              -
          c.  Bonuses to employees, directors and supervisors        (1,629)        (2,313)        (3,796)
          d.  Effect of adjustments on useful life                        -           (149)          (211)
          e.  Excess of book value of building transferred
              between related parties                                  (597)          (584)          (570)
     Effect of US GAAP adjustment on cumulative transaction
       adjustment                                                      (307)          (427)           264
                                                                 ----------     ----------     ----------
     Net decrease in shareholders' equity                            (2,560)        (3,086)        (4,386)
                                                                 ----------     ----------     ----------
     Approximate shareholders' equity based on US GAAP           $  208,054     $  292,294     $  638,750
                                                                 ==========     ==========     ==========

(Forward)

                                     -35-
<PAGE>


     Changes in shareholders' equity based on US GAAP

     Balance, beginning of year                                  $  155,546     $  208,054     $  292,294
     Net income for the year                                         49,590         55,356        101,173
     Issuance of new shares under stock option plans                  8,009          8,873          7,925
     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         2,650          4,369          4,625
     Cumulative translation adjustment for subsidiaries               2,014          5,356        (20,887)
     Adjustment from changes in ownership percentage of
     investees                                                            -            (91)        (9,616)
     Unrealized holding gain (loss) on equity securities             (9,755)        10,377           (541)
                                                                 ----------     ----------     ----------
     Balance, end of year                                        $  208,054     $  292,294     $  638,750
                                                                 ==========     ==========     ==========
</TABLE>

     A reconciliation of the significant balance sheet accounts to the
     approximate amounts as determined under US GAAP is as follows:

<TABLE>
                                                                 1999           2000
                                                              ----------     ----------
<S>                                                           <C>            <C>
     Buildings and improvement

     As reported                                              $   34,504     $   29,388
     US GAAP adjustments
           Effect of US GAAP adjustments on useful life             (149)          (201)
           Excess of book value of building transferred
             between related parties                                (530)          (489)
                                                              ----------     ----------
     As adjusted                                              $   33,825     $   28,698
                                                              ==========     ==========

     Accrued expenses and other current liabilities

     As reported                                              $   14,646     $   16,846
     US GAAP adjustments
           Bonuses to employees, directors and supervisors         2,313          3,796
           Translation difference                                    263           (221)
                                                              ----------     ----------
     As adjusted                                              $   17,222     $   20,421
                                                              ==========     ==========

     Accrued pension cost

     As reported                                              $      362     $      568
     US GAAP adjustments - pension benefits                          136            121
                                                              ----------     ----------
     As adjusted                                              $      498     $      689
                                                              ==========     ==========
</TABLE>

     As a result of the adjustments presented above, the approximate amounts of
     total assets based on US GAAP are $656,877 and $1,090,965 as of December
     31, 1999 and 2000, respectively.


                                     -36-
<PAGE>


27.  ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

     a.  Significant investee - ASE Chung-Li Inc.

         The summarized financial information of significant investee, ASE
         (Chung-Li) Inc., is as follows:

         1)   Selected balance sheet information

<TABLE>
                                                             1999            2000
                                                          ----------     ----------
<S>                                                       <C>            <C>
              Current assets                              $   44,019     $   59,982
              Non-current assets                             209,351        300,208
              Current liabilities                             69,603        138,933
              Non-current liabilities                         46,843         44,393
</TABLE>

         2)   Selected income statement information

<TABLE>
                                                             1999            2000
                                                          ----------     ----------
<S>                                                       <C>            <C>
              Net sales                                   $   83,533     $  243,501
              Gross profit                                    20,420         76,454
              Pre-tax income from continuing operations       16,132         54,989
              Net income                                      15,745         51,262
</TABLE>

     b.  Pension

         According to US FAS 132, the pension information is disclosed below:

<TABLE>
                                                                1998           1999            2000
                                                              ----------     ----------     ----------
<S>                                                           <C>            <C>            <C>
         Components of net periodic benefit cost
               Service cost                                   $      261     $      287     $      491
               Interest cost                                          63             86            120
               Expected return on plan assets                        (47)           (55)           (52)
               Amortization of prior service cost                     12              -            (21)
                                                              ----------     ----------     ----------
         Net periodic benefit cost                            $      289     $      318     $      538
                                                              ==========     ==========     ==========

         Change in benefit obligation
               Benefit obligation at beginning of year        $      996     $    1,321     $    1,847
               Service cost                                          261            287            491
               Interest cost                                          63             86            120
               Actuarial gain                                          -            113            179
               Benefits paid                                         (21)            (6)            (6)
               Exchange difference                                    22             46           (142)
                                                              ----------     ----------     ----------
               Benefit obligation at end of year                   1,321          1,847          2,489
                                                              ----------     ----------     ----------

(Forward)

                                     -37-
<PAGE>


         Change in plan assets
               Fair value of plan assets at beginning of year $      557     $      778     $    1,064
               Actual return on plan assets                           47             55             52
               Employer contribution                                 182            209            302
               Benefits paid                                         (21)            (6)            (6)
               Exchange difference                                    13             28             (71)
                                                              ----------     ----------     ----------
                                                                     778          1,064          1,341
                                                              ----------     ----------     ----------
         Funded status                                               543            783          1,148
         Unrecognized actuarial loss                                (167)          (285)          (459)
                                                              ----------     ----------     ----------

         Net amount recognized (Recognized as accrued
           pension cost)                                      $      376     $      498     $      689
                                                              ==========     ==========     ==========

         Actuarial assumptions:
                                                                1998           1999            2000
                                                              ----------     ----------     ----------
         Discount rate                                              6.5%           6.5%           6.0%
         Rate of compensation increase                              5.0%           4.0%           4.0%
         Expected return on plan assets                             6.5%           6.5%           6.0%

     c.  Income tax

                                                                1998           1999            2000
                                                              ----------     ----------     ----------
         Current                                              $     (581)    $   (3,997)    $   (4,130)
         Income taxes (10%) on undiscontinued earnings                 -              -         (2,939)
         Deferred                                                  6,036          2,951          4,872
         Adjustment of prior years' income tax                     1,390            368              -
                                                              ----------     ----------     ----------

                                                              $    6,845     $     (678)    $   (2,197)
                                                              ==========     ==========     ==========
</TABLE>

         Reconciliation of income tax for the years ended December 31, 1998,
         1999 and 2000 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>
                                                                1998           1999            2000
                                                              ----------     ----------     ----------
<S>                                                           <C>            <C>            <C>
         ASE Test, Inc.

         Tax based on pretax accounting income at statutory
           rate (25%)                                         $   (3,844)    $   (6,770)    $  (11,367)
         Add (deduct) tax effects of:
               Permanent differences

                     Bonuses to directors, supervisors and
                       employees                                  (1,068)        (1,670)        (1,507)

         (Forward)

<PAGE>


                     Tax-exempt income - tax holiday          $    4,000     $    6,145     $    6,126
                     Tax-exempt income - investment income
                       (loss)                                         33          1,624           (146)
               Temporary differences
                     Loss on long-term bond securities                 -              -           (789)
                     Unrealized foreign exchange loss                  -           (316)          (363)
                     Bad debts                                         -           (122)          (290)
                     Other                                             -            (30)           135
               Credits for investment in machinery and
                 equipment, and research and development
                 expenditures
                     Deferred                                      7,877          5,257          4,990
                     Reversal of (provision for) valuation
                       allowance                                  (2,771)        (3,162)         4,661
                     Utilized                                        440          1,170          8,527
               Adjustment of prior year's income tax               1,390            368              -
               Income taxes (10%) on undistributed earnings            -              -         (2,939)
               Other                                                  37            (26)           (70)
                                                              ----------     ----------     ----------
         Income tax benefits                                       6,094          2,468          6,968
                                                              ----------     ----------     ----------

         ASE Test Malaysia

         Tax based on pretax accounting income at statutory
           rate                                                   (7,678)        (8,545)       (13,780)
         Add (deduct) tax effects of:
               Permanent differences
                     Tax-exempt income                            10,891          8,545          8,881
                     Others                                       (3,392)             -          (156)
               Temporary differences
                     Depreciation and capital allowance                -              -          4,636
                     Provisions and deferred assets                    -              -            219
               Deferred                                            1,395          1,044         (4,855)
               Provision for valuation allowance                    (465)             -              -
                                                              ----------     ----------     ----------
         Income tax benefit (expense)                                751          1,044         (5,055)
                                                              ----------     ----------     ----------

         ISE Labs, Inc.

         Tax based on pretax accounting income at statutory
           rate (federal tax rate 35% and state tax rate 6%)           -         (4,254)        (7,121)
         Add (deduct) tax effects of:
               Permanent differences
                     Penalty                                           -           (393)        (1,339)
                     Amortization and expenses                         -           (105)          (250)
         Utilization of loss carryforward                              -              -          1,087
         Tax credit for capital expenditure                            -            679              -
         Deferred                                                      -           (188)            76
         Lower foreign tax rate adjustments and other                  -             71          3,437
                                                              ----------     ----------     ----------
         Income tax expense                                            -         (4,190)        (4,110)
                                                              ----------     ----------     ----------
         Income tax benefit (expense)                         $    6,845     $     (678)    $   (2,197)
                                                              ==========     ==========     ==========
</TABLE>


                                     -39-
<PAGE>


     d.  Earnings 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. Diluted net income per share include 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>
                                                                    1998           1999           2000
                                                                  ----------     ----------     ----------
<S>                                                               <C>            <C>            <C>
         Net income under US GAAP                                 $  (49,590)    $  (55,356)    $ (101,173)
                                                                  ==========    ===========    ===========

         Weighted average shares-denominator basic computation    78,767,112     80,232,420     85,970,361
         Effect of diluted shares-stock options                    7,893,668      8,127,514      6,702,679
                                                                  ----------   ------------     ----------

         Weighted average shares, as adjusted- denominator        86,660,780     88,359,934     92,673,040
                                                                  ==========     ==========     ==========

         Earnings per share (In US Dollars)
              Basic                                               $     0.63     $     0.69     $     1.18
                                                                  ==========     ==========     ==========
              Diluted                                             $     0.57     $     0.63     $     1.09
                                                                  ==========     ==========     ==========
</TABLE>

     e.  Stock option plans

         ASE Test Limited has six stock option plans, the 1996 Option Plan (the
         "Pre-IPO Plan"), 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. The Pre-IPO Plan provided for grants of
         option, which are currently exercisable, to the ASE Test Limited's
         directors, officers, employees and independent consultants to purchase
         1,500,000 shares at US$2.0625 per share. 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.

         The 1996, 1997, 1998, 1999 and 2000 Option Plans granted the following
         stock options to purchase the ASE Test Limited's shares which are
         exercisable based on a vesting schedule over a period of five years
         until the expiration of options, to directors, officers, key employees
         and independent consultants. If any granted shares are forfeited, the
         shares may be granted again, to the extent of any such forfeiture.


                                     -40-
<PAGE>


<TABLE>
                                                                                                   Weight
                                                                                                   Average
                                                                                                  Remaining
                                                                                                 Life as of
                                              Exercose Price                                     December 31,
             Stock Option Plans               (in US Dollars)   Number of Shares Granted         2000 (Years)
         -----------------------------        --------------    ------------------------         ------------
<S>      <C>                                  <C>               <C>                              <C>
         1996 Option Plan
               I     R&F 2                       $  3                      40,000                    0.7
               II    DIR/R&F                        3.5                 7,750,000                    0.4
               III   R&F 3                          5                      12,000                    1.0
               IV    R&F 4                          5.46875             2,010,000                    1.2
               V     C961                          14                     163,200                    1.9
               VI    C962                          13.4375                 45,800                    2.8
               VII   R&F 5                         20                     187,500                    3.6
               VIII  C963                          25                      34,900                    4.3
         1997 Option Plan
               I     P971                           9.5625              2,720,000                    1.5
               II    C971                          14                      16,000                    1.9
               III   C972                          13.4375                 16,600                    2.8
               IV    P972                          20                     480,000                    3.6
               V     C973                          25                      16,100                    4.3
         1998 Option Plan
               I     P981                          11                   1,269,680                    2.7
               II    P982                          20                     325,000                    3.6
               III   C981                          25                       9,000                    4.3
         1999 Option Plan
               I     P991 and P992                 20                   1,750,000                    8.6
               II    C991 and P994                 25                     352,000                    9.3
         2000 Option Plan                     Not applicable              None                      None
</TABLE>

         Each aforementioned option exercise price was equal to the stock's
         market price on the date of grant. The 1996, 1997 and 1998 Option
         Plans will expire after 5 years and the 1999 and 2000 Option Plan will
         expire after 10 years.

         US FAS No. 123, "Stock-Based Compensation" effective in 1996,
         establishes accounting and disclosure requirements using a fair
         value-based method of accounting for stock-based employee compensation
         plans. Under US FAS 123, the Company has elected to continue using the
         intrinsic value-based method and provide pro forma disclosures of net
         income and earnings per share as if the fair value accounting
         provisions of this statement had been adopted.


                                     -41-
<PAGE>


         The Company has computed for pro forma disclosure purposes the fair
         value of each option grant, as defined by US FAS 123, using the
         Black-Scholes option pricing model with the following assumptions:

<TABLE>
                                     Pre-IPO Plan       1996 Plan        1997 Plan         1998 Plan        1999 Plan
                                     ------------     ---------------- ----------------  ---------------- -----------
<S>                                  <C>              <C>              <C>               <C>              <C>
         Risk free interest rate          5.41%          4.29-6.61%       4.29-6.61%        4.56-6.61%     6.01-6.75%
         Expected dividend
           yield                            0%               0%               0%                0%               0%
         Expected lives                 1.5 years       3.4-4 years      3.4-3.8 years    3.4-3.8 years     5 years
         Volatility                       54.64%        54.64-82.08%     54.64-82.08%      55.53-82.08%     55.53%
</TABLE>

         For purposes of pro forma disclosure, the estimated fair value of the
         options are amortized to expense over the option rights vesting
         periods. Had the Company recorded compensation costs based on the
         estimated grant date fair value, as defined by US FAS 123, the
         Company's net income would have been reduced to the pro forma amounts
         below (EPS in US Dollars).

<TABLE>
                                                       1998           1999           2000
                                                    ----------     ----------     ----------
<S>                                                 <C>            <C>            <C>
         Net income as reported                     $   49,590     $   55,356     $  101,173
         Pro forma net income                           40,949         47,094         86,557
         Pro forma EPS
              Basic                                      $0.52          $0.59          $1.01
                                                         =====          =====          =====
              Diluted                                    $0.47          $0.53          $0.93
                                                         =====          =====          =====
</TABLE>

         The pro forma amounts reflect compensation expense related to 1996,
         1997, 1998 and 1999 options granted and vested only. In future years,
         the annual compensation expense will increase relative to the fair
         value of the options granted and vested in those future years.

         A summary of the transaction of shares under the four plans is
         presented bellows:

         Pre-IPO Plan - Shares

<TABLE>
                                                       1998           1999           2000
                                                    ----------     ----------     ----------
<S>                                                 <C>            <C>            <C>
         Outstanding at beginning of the year          581,776        438,008        387,112
         Granted                                             -              -              -
         Exercised                                    (142,760)       (50,896)       (31,712)
         Forfeited                                      (1,008)             -              -
         Expired                                             -              -              -
                                                    ----------     ----------     ----------
         Outstanding at year - end                     438,008        387,112        355,400
                                                    ==========     ==========     ==========
         Exercisable at year - end                     438,008        387,112        355,400
                                                    ==========     ==========     ==========
</TABLE>


                                     -42-
<PAGE>


<TABLE>
         1996 Plan - Shares

         1998                                                  I             II          III           IV           V
                                                           ----------    ----------   ----------   ----------   ----------
<S>                                                        <C>           <C>          <C>          <C>          <C>
              Outstanding at beginning of the year             40,000     6,663,164       12,000    1,790,400      163,200
              Granted                                               -             -            -            -            -
              Exercised                                             -      (949,444)           -     (225,800)      (8,400)
              Forfeited                                             -       (25,600)           -      (19,200)      (9,000)
              Expired                                               -             -            -            -            -
                                                           ----------    ----------   ----------   ----------   ----------

              Outstanding at year-end                          40,000     5,688,120       12,000    1,545,400      145,800
                                                           ==========    ==========   ==========   ==========   ==========
              Exercisable at year-end                          12,000     2,846,120        7,200      383,800       38,560
                                                           ==========    ==========   ==========   ==========   ==========

         1999                         I           II          III            IV            V           VI           VII
                                 ----------   ----------   ----------    ----------   ----------   ----------   ----------
              Outstanding at
                beginning of
                the year             40,000    5,688,120       12,000     1,545,400      145,800       45,800            -
              Granted                     -            -            -             -            -            -      187,500
              Exercised             (24,000)    (844,300)           -      (297,600)     (18,120)      (3,040)           -
              Forfeited                   -      (36,600)           -        (6,000)      (2,800)     (11,200)           -
              Expired                     -            -            -             -            -            -            -
                                 ----------   ----------   ----------    ----------   ----------   ----------   ----------

              Outstanding
                at year-end          16,000    4,807,220       12,000     1,241,800      124,880       31,560      187,500
                                 ==========   ==========   ==========    ==========   ==========   ==========   ==========

              Exercisable at
                year-end              4,000    2,750,420        8,400       299,800       35,360        5,000            -
                                 ==========   ==========   ==========    ==========   ==========   ==========   ==========

         2000                        I           II        III         IV          V         VI        VII         VIII
                                 --------   ----------   -------   ---------   --------   --------   --------   ---------
              Outstanding at
                year-end           16,000    4,807,220    12,000   1,241,800    124,880     31,560    187,500           -
              Granted                   -           -          -           -          -          -          -      34,900
              Exercised            (8,000)   (553,900)    (5,000)   (243,850)   (17,880)    (2,800)   (11,000)          -
              Forfeited                 -     (42,800)         -      (8,000)    (9,500)    (2,600)         -           -
              Expired                   -           -          -           -          -          -          -           -
                                 --------   ----------   -------   ---------   --------   --------   --------   ---------
              Outstanding at        8,000    4,210,520     7,000     989,950     97,500     26,160    176,500      34,900
                                 ========    =========   =======   =========   ========   ========   ========    ========

              Exercisable at
                year-end            4,000    4,210,520     5,800     438,750     47,820      8,640     26,500       3,490
                                 ========    =========   =======   =========   ========   ========   ========    ========
</TABLE>


                                     -43-
<PAGE>


         1997 Plan - Shares

<TABLE>
         1998                                                                    I                II               III
                                                                            ------------     ------------     ------------
<S>                                                                         <C>              <C>              <C>
              Outstanding at beginning of the year                             2,702,000           16,000                -
              Granted                                                                  -                -           16,600
              Exercised                                                         (318,480)          (1,000)               -
              Forfeited                                                          (14,800)               -                -
              Expired                                                                  -                -                -
                                                                            ------------     ------------     ------------
              Outstanding at year-end                                          2,368,720           15,000           16,600
                                                                            ============     ============     ============

              Exercisable at year-end                                            737,640            3,800                -
                                                                            ============     ============     ============

         1999                                                    I               II              III               IV
                                                            ------------    ------------     ------------     ------------
<S>                                                         <C>             <C>              <C>              <C>
              Outstanding at beginning of the year             2,368,720          15,000           16,600                -
              Granted                                                  -               -                -          480,000
              Exercised                                         (308,700)         (1,200)          (1,242)               -
              Forfeited                                           (7,400)              -             (100)               -
              Expired                                                  -               -                -                -
                                                            ------------    ------------     ------------     ------------
              Outstanding at year-end                          2,052,620          13,800           15,258          480,000
                                                            ============    ============     ============     ============

              Exercisable at year-end                            717,020           4,200            2,058                -
                                                            ============    ============     ============     ============

         2000                                   I               II              III               IV               V
                                           ------------     ------------    ------------     ------------     ------------
<S>                                        <C>              <C>             <C>              <C>              <C>
              Outstanding at
                beginning of the
                year                          2,052,620           13,800          15,258          480,000               -
              Granted                                 -                -               -                -          16,100
              Exercised                        (280,420)          (1,300)         (2,442)         (11,260)              -
              Forfeited                         (55,080)          (4,000)         (1,440)         (29,700)              -
              Expired                                 -                -               -                -               -
                                           ------------     ------------    ------------     ------------    ------------
              Outstanding at year-end         1,717,120            8,500          11,376          439,040          16,100
                                           ============     ============    ============     ============    ============
              Exercisable at year-end           964,360            3,700           2,716           80,640           1,610
                                           ============     ============    ============     ============    ============
</TABLE>


                                     -44-
<PAGE>


         1998 Plan - Shares
<TABLE>
                                              1998                      1999                          2000
                                      ----------------------   ----------------------   ----------------------------------
                                          I            II          I          II            I          II           III
                                      ---------    ---------   ---------   ---------    ---------   ---------    ---------
<S>                                   <C>          <C>         <C>         <C>          <C>         <C>          <C>
         Outstanding at beginning
           of the year                        -            -   1,269,680           -    1,179,624     325,000            -
         Granted                      1,269,680            -           -     325,000            -           -        9,000
         Exercised                            -            -     (78,128)          -      (84,157)     (4,000)           -
         Forfeited                            -            -     (11,928)          -      (19,864)     (3,000)           -
         Expired                              -            -           -           -            -           -            -
                                      ---------    ---------   --------- -----------    ---------   ---------    ---------
         Outstanding at year-end      1,269,680            -   1,179,624     325,000    1,075,603     318,000        9,000
                                      =========    =========   ========= ===========    =========   =========    =========
         Exercisable at year-end              -            -     174,488           -      343,843      60,400          900
                                      =========    =========   ========= ===========    =========   =========    =========

         1999 Plan - Shares
                                                                       1999                             2000
                                                            ----------------------------     ----------------------------
                                                                 I              II                I              II
                                                            ------------    ------------     ------------    ------------
<S>                                                         <C>             <C>              <C>             <C>
         Outstanding at beginning of the year                          -               -        1,750,000               -
         Granted                                               1,750,000               -                -         352,000
         Exercised                                                     -               -           (5,320)              -
         Forfeited                                                     -               -         (111,200)              -
         Expired                                                       -               -                -               -
                                                            ------------    ------------     ------------    ------------
         Outstanding at year-end                               1,750,000               -        1,633,480         352,000
                                                            ============    ============     ============    ============
         Exercisable at year-end                                       -               -          308,240          35,200
                                                            ============    ============     ============    ============
</TABLE>

     f.  Segment information

         Effective July 1, 1998, the Company adopted US FAS No. 131,
         "Disclosure about Segment of Enterprise and Related Information". This
         statement requires enterprises to report information relating to the
         operating segments in financial statements. The information disclosed
         in Note 23d. conforms to the requirement of US FAS No. 131.

     g.  According to US FAS 130, the statement of comprehensive income for the
         years ended December 31, 1998, 1999 and 2000 are present below:

<TABLE>
                                                                    1998           1999           2000
                                                                 ----------     ----------     ----------
<S>                                                              <C>            <C>            <C>
         Current earnings based on US GAAP                       $   49,590     $   55,356     $  101,173
         Other comprehensive income, net of income tax
           expense of $494 in 1998 and $1,339 in 1999,
           and income tax benefit of $5,222 in 2000:
               Translation adjustment on subsidiaries                 1,520          4,017        (15,665)
               Unrealized holding gain (loss) of long-term           (9,755)        10,377           (541)
                                                                 ----------     ----------     ----------
         Comprehensive Income                                    $   41,355     $   69,750     $   84,967
                                                                 ==========     ==========     ==========
</TABLE>


                                     -45-
<PAGE>


     h.  New accounting standards

         The Company is required by SEC Staff Accounting Bulletin No. 74, to
         disclose of the impact recently issued accounting standards will have
         on its financial statements when adopted in a future period, as well
         as make certain disclosure about recently issued accounting standards.

         In June1998, the Financial Accounting Standards Board issued Statement
         of Financial Accounting Standards No. 133 (" US FAS 133"), accounting
         for derivative instruments and hedging activities. US FAS No. 133 has
         been amended by US FAS No. 138, issued in June 2000.

         US FAS 133, as amended, establishes accounting and reporting standards
         of derivative instruments, including certain derivative instruments
         embedded in other contract, and for hedging activities. These
         standards require that all derivatives be measured at fair value and
         recognized as either assets or liabilities in the balance sheet.
         Changes in the fair values of derivative instruments not used as
         hedges will be recognized in earnings immediately. The effective
         portion of changes in the fair value of qualifying hedging derivative
         instruments will be recognized either in earnings for hedges of
         changes in fair value or in other comprehensive income (loss) for
         hedges of changes in cash flows. The ineffective portion of a
         derivative's change in fair value will be immediately recognized in
         earnings. The Company will adopt US FAS 133, as amended, in its fiscal
         year ending December 2001 and does not expect adoption to have a
         material impact on its financial position or results of operations.


                                     -46-
<PAGE>


<TABLE>
                                                                                                              SCHEDULE II

                                                                                        VALUATION AND QUALIFYING ACCOUNTS

                                     Balance at                    Charged to     Charged to                   Balance at
                                     Beginning     Increase by      Costs and       Other                          End
Description                           of Year      Acquisition      Expenses      Accounts      Deductions      of Year
-----------                        -------------   -----------     ----------    ------------   ----------     ----------
<S>                                <C>             <C>            <C>            <C>            <C>            <C>
2000
Allowance for sales discounts and
  doubtful accounts                  $    3,029     $        -     $    2,226     $     (103)   $     (377)    $    4,775
Allowance for obsolescence                1,102              -            563             (3)         (668)           994

1999
Allowance for sales discounts and
  doubtful accounts                         645          2,162            780             21          (579)         3,029
Allowance for obsolescence                  724          2,739            377              1        (2,739)         1,102

1998
Allowance for sales discounts and
  doubtful accounts                         562              -             59             24              -           645
Allowance for obsolescence                  617              -            111             (4)             -           724
</TABLE>


<PAGE>


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).

          (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 of 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 of 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.

     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)  Resale Registration Rights Agreement dated June 29, 1999 among
               ASE Test Finance Limited, ASE Test Limited and Lehman Brothers
               International (Europe) (incorporated by reference to Exhibit
               2(h) to the Company's annual report on Form 20-F for the year
               ended December 31, 1998).

          (e)  License Agreement dated as of January 16, 2001 between 1st
               Silicon (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd.

          (f)  Service Agreement dated as of July 1, 2000 between ASE
               Electronics (M) Sdn. Bhd. and ASE (U.S.) Inc.

          (g)  Service Agreement dated as of July 1, 2000 between ASE Test Inc.
               and ASE (U.S.) Inc.

          (h)  Commission Agreement dated as of July 1, 2000 between ASE
               Electronics (M) Sdn. Bhd. and Gardex International Limited.

          (i)  Commission Agreement dated as of July 1, 2000 between ASE Test
               Inc. and Gardex International Limited.


<PAGE>


          (j)  First Amendment to Lease Agreement dated June 7, 2000 between
               ISE Labs, Inc. and RND Funding Company, Inc.

          (k)  Sub-lease Agreement dated October 3, 2000 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd.

          (l)  Sub-lease Agreement dated June 3, 1999 between ISE Labs
               Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd.

          (m)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
               Cirrus Logic, Inc.

          (n)  Sublease Agreement dated June 2000 between ISE Labs, Inc. and
               Cirrus Logic, Inc.

          (o)  Tenancy Agreement dated April 1, 1999 between ISE Labs (HK)
               Limited and Hing Seng Plastic Factory Limited

          (p)  Lease dated September 28, 2000 between ISE Labs Hong Kong
               Limited and Shinano Kenshi (HK) Co., Ltd.

          (q)  Lease dated October 20, 2000 between ISE Labs Hong Kong and
               Bless Silver Development Limited

          (r)  Lease Agreement for Factory Building dated September 18, 2000
               between ASE Inc. and ASE Test Inc.

          (s)  Sale and Purchase Agreement between Afasia Knitting Factory
               (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd. dated
               February 24, 1997

     8.   List of Subsidiaries

     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.


<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                            ASE TEST LIMITED


                                            By: /s/ JOSEPH TUNG
                                               --------------------------------
                                               Joseph Tung
                                               Director


Date: June 28, 2001


<PAGE>


                                 EXHIBITS INDEX

                                                                   Sequentially
Exhibit                                                              Numbered
Number                             Description                         Page
-------                            -----------                     ------------

1(h)        Resolutions of an Extraordinary General Meeting of the
            shareholders passed on October 14, 1999.

4(e)        License Agreement dated as of January 16, 2001 between 1st Silicon
            (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd.

4(f)        Service Agreement dated as of July 1, 2000 between ASE Electronics
            (M) Sdn. Bhd. and ASE (U.S.) Inc.

4(g)        Service Agreement dated as of July 1, 2000 between ASE Test Inc. and
            ASE (U.S.) Inc.

4(h)        Commission Agreement dated as of July 1, 2000 between ASE
            Electronics (M) Sdn. Bhd. and Gardex International Limited.

4(i)        Commission Agreement dated as of July 1, 2000 between ASE Test Inc.
            and Gardex International Limited.

4(j)        First Amendment to Lease Agreement dated June 7, 2000 between ISE
            Labs, Inc. and RND Funding Company, Inc.

4(k)        Sub-lease Agreement dated October 3, 2000 between ISE Labs
            Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd.

4(l)        Sub-lease Agreement dated June 3, 1999 between ISE Labs
            Singapore Pte Ltd and Wan Tien Realty (Pte) Ltd.

4(m)        Sublease Agreement dated June 2000 between ISE Labs, Inc. and Cirrus
            Logic, Inc.

4(n)        Sublease Agreement dated June 2000 between ISE Labs, Inc. and Cirrus
            Logic, Inc.

4(o)        Tenancy Agreement dated April 1, 1999 between ISE Labs (HK) Limited
            and Hing Seng Plastic Factory Limited

4(p)        Lease dated September 28, 2000 between ISE Labs Hong Kong Limited
            and Shinano Kenshi (HK) Co., Ltd.

4(q)        Lease dated October 20, 2000 between ISE Labs Hong Kong and Bless
            Silver Development Limited

4(r)        Lease Agreement for Factory Building dated September 18,
            2000 between ASE Inc. and ASE Test Inc.

4(s)        Sale and Purchase Agreement between Afasia Knitting Factory
            (Malaysia) Sdn. Bhd. and ASE Electronics (M) Sdn. Bhd. dated
            February 24, 1997.

8           List of Subsidiaries.