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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, 2001

                                       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: 96,647,199 Ordinary Shares

     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.........................................................................1
     Item 1.  Identity of Directors, Senior Management and Advisers............1
     Item 2.  Offer Statistics and Expected Timetable..........................1
     Item 3.  Key Information..................................................1
                SELECTED FINANCIAL DATA........................................1
                CAPITALIZATION AND INDEBTEDNESS................................3
                REASON FOR THE OFFER AND USE OF PROCEEDS.......................3
                RISK FACTORS...................................................3
     Item 4.  Information on the Company......................................13
                HISTORY AND DEVELOPMENT OF THE COMPANY........................13
                BUSINESS OVERVIEW.............................................14
                ORGANIZATIONAL STRUCTURE......................................29
                PROPERTIES....................................................30
     Item 5.  Operating and Financial Review and Prospects....................30
                OPERATING RESULTS AND TREND INFORMATION.......................30
                LIQUIDITY AND CAPITAL RESOURCES...............................44
                RESEARCH AND DEVELOPMENT......................................45
     Item 6.  Directors, Senior Management and Employees......................46
                DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICES...........46
                COMPENSATION..................................................48
                EMPLOYEES.....................................................49
                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...........................................53
     Item 9.  Listing Details.................................................53
                MARKET PRICE INFORMATION AND MARKETS..........................53
     Item 10.  Additional Information.........................................55
                MEMORANDUM AND ARTICLES OF ASSOCIATION........................55
                MATERIAL CONTRACTS............................................58
                EXCHANGE CONTROLS.............................................59
                TAXATION......................................................60
                DOCUMENTS ON DISPLAY..........................................63
     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.........64
PART II.......................................................................64
     Item 13.  Defaults, Dividend Arrearages and Delinquencies................64
     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......................................................................64
     Item 17.  Financial Statements...........................................64
     Item 18.  Financial Statements...........................................64
     Item 19.  Exhibits.......................................................65



<PAGE>


                              USE OF CERTAIN TERMS

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


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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


                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisers

     Not applicable.

Item 2.  Offer Statistics and Expected Timetable.

     Not applicable.

Item 3.  Key Information

SELECTED FINANCIAL DATA

     The following table sets forth our selected historical consolidated
financial data. You should read this information together with our consolidated
financial statements, the notes to those financial statements and "Item 5.
Operating and Financial Review and Prospects" included herein. The selected
consolidated balance sheet data as of December 31, 2000 and 2001 and selected
consolidated statement of income data and statement of cash flow data for each
of the years ended December 31, 1999, 2000 and 2001 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, 1997, 1998 and 1999 and selected consolidated statement of income
data and statements of cash flow data for each of the years ended December 31,
1997 and 1998 have been derived from our audited consolidated financial
statements not included herein.



<PAGE>

<TABLE>
                                                              Year Ended and as of December 31,
                                           -----------------------------------------------------------------------
                                              1997            1998           1999          2000           2001
                                           -----------    -----------    -----------    -----------    -----------
                                              (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.............................. $   176,541    $   184,663    $   270,254    $   440,285    $   298,466
Cost of revenues..........................     112,824        117,743        173,758        263,513        265,271
Gross profit..............................      63,717         66,920         96,496        176,772         33,195
Operating expenses:
   Selling, general and                         13,837
       administrative(1)..................                     13,165         23,091         42,807         35,335
   Research and development...............       3,084          2,384          3,837         12,059         14,397
   Goodwill amortization(2)...............           -              -          4,674          7,054          7,530
Income (loss) from operations.............      46,796         51,371         64,894        114,852        (24,067)
Non-operating income (expense):
   Interest-net...........................        (489)        (3,267)       (11,703)       (14,740)       (13,783)
Income (loss) from equity
   investees(3)...........................          28            133          4,842         16,127         (7,344)
Gain on sale of long-term investments in
   shares of stock........................           -              -          6,588              -              -
  Loss on long-term investments in bonds..           -              -              -         (3,157)          (345)
  Foreign exchange gain (loss)-net........       1,759         (1,835)           151          3,280          2,382
  Other-net...............................        (201)           609            863         (2,719)         1,393
Income before income taxes and minority
  interest ...............................      47,893         47,011         65,635        113,643        (41,764)
Income tax benefit (expense)..............         945          6,845           (678)        (2,197)        (6,522)
Loss from discontinued operations - net...           -              -         (1,360)          (758)             -
Minority interest.........................          (4)            (5)        (1,437)        (3,493)         2,527
Net income (loss)......................... $    48,834    $    53,851    $    62,160    $   107,195    $   (45,759)
Earnings (loss) per share: Primary........ $      0.58    $      0.62    $      0.71    $      1.16    $     (0.48)
  Fully diluted........................... $      0.57    $      0.62    $      0.70    $      1.16    $     (0.48)
Operating income per share................ $      0.55    $      0.59    $      0.73    $      1.24    $     (0.25)
Income from continuing operations......... $    48,838    $    53,856    $    64,957    $   111,446    $   (48,286)

Income from continuing operations
   per share.............................. $      0.57    $      0.62    $      0.74    $      1.20    $     (0.51)
Shares used in earnings per share
   calculation:(4)
   Primary................................  83,985,076     86,660,780     87,795,711     92,673,040     94,921,412
   Fully diluted..........................  85,169,212     86,660,780     88,359,934     92,673,040     94,921,412
U.S. GAAP:
Major adjustments:
  Compensation expense(5).................     (2,875)         (4,279)        (6,682)        (6,026)            47
  Stock option compensation(6)............          -               -              -              -        (26,710)
Net income (loss)......................... $   45,948     $    49,590    $    55,356    $   101,173    $   (72,928)
Earnings per share:
   Basic.................................. $     0.60     $      0.63    $      0.69    $      1.18    $     (0.77)
   Diluted................................ $     0.54     $      0.57    $      0.63    $      1.09    $     (0.77)
Shares used in earnings per share
  calculation:
   Basic................................... 77,166,836     78,767,112     80,232,420     85,970,361     94,921,412
   Diluted................................. 85,169,212     86,660,780     88,359,934     92,673,040     94,921,412

Consolidated Balance Sheet Data:
ROC GAAP:
Current assets............................ $    67,291    $    60,439    $   142,625    $   290,458    $   217,962
Long-term investments.....................       6,596         24,303         70,708         87,161         95,042
Fixed assets..............................     188,094        231,673        366,908        639,082        586,834
Total assets..............................     271,009        332,286        657,257      1,091,655        959,406
Current liabilities.......................      67,730         47,904         85,059        158,304         90,157
Long-term debts...........................      45,401         73,499        264,872        265,489        248,371
Total liabilities.........................     113,247        121,647        350,303        424,756        340,679

                                                        2
<PAGE>

<CAPTION>
                                                              Year Ended and as of December 31,
                                           -----------------------------------------------------------------------
                                              1997            1998           1999          2000           2001
                                           -----------    -----------    -----------    -----------    -----------
                                              (in thousands, except shares, per share data, operating data and
                                                                        percentages)
<S>                                        <C>            <C>            <C>            <C>            <C>
Shareholders' equity......................     157,742        210,614        295,380        643,136        597,523

U.S. GAAP:
Shareholders' equity...................... $   155,546    $   208,054    $   292,294    $   638,750    $   596,252

Consolidated Statement of Cashflow
  Data:
ROC GAAP:
Depreciation and amortization............. $    30,614    $    38,751    $    68,769    $   117,506    $   144,860
Capital expenditure.......................     128,938         80,971        128,690        413,197        104,216
Net cash provided by (used in)
     operating activities.................      80,161         84,496         95,075        203,557        147,020
Net cash used in investing
     activities...........................    (109,639)      (104,618)      (237,203)      (367,354)      (144,208)
   Net cash provided by (used in)
        financing activities..............      25,999          29,982        166,238        277,801        (52,827)
Net cash inflow (outflow).................      (1,935)          9,239         24,472        112,341        (51,080)

Segment Net Revenues:
   Testing................................ $    82,931   $      98,210   $   178,667    $   316,158    $   223,193
   Packaging..............................      93,610          86,453        91,587        124,127         75,273
   Testing................................        47.0%          53.2%          66.1%          71.8%          74.8%
   Packaging..............................        53.0%          46.8%          33.9%          28.2%          25.2%

Operating Data:
Gross margin..............................        36.1%          36.2%          35.7%          40.1%          11.1%
Operating margin..........................        26.5%          27.8%          24.0%          26.1%          (8.1)%
ROC GAAP net margin.......................        27.7%          29.2%          23.0%          24.3%         (15.3)%
U.S. GAAP net margin......................        26.0%          26.9%          20.5%          23.0%         (24.4)%
---------
(1)  Excludes goodwill amortization.

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

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

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

(6)  See "Item 5.  Operating and Financial Review and Prospects - U.S. GAAP Reconciliation".
</TABLE>

CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

REASON FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

                                       3
<PAGE>



RISK FACTORS

     Risks Relating to Our Business

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

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

      Market conditions in the semiconductor industry depend to a large degree
on conditions in the markets for the end use applications of semiconductor
products, such as communications, personal computer and consumer electronic
products. Any deterioration of conditions in the markets for the end use
applications of the semiconductors we test and package would reduce demand for
our services, and would likely have a material adverse effect on our financial
condition and results of operations. In 2001, the substantial majority of our
sales was attributable to the testing and packaging of semiconductors used in
communications, consumer electronic and personal computer products. These
industries are subject to intense competition and significant shifts in demand
which could put pricing pressure on our testing and packaging services and
adversely affect our earnings.

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

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

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

     The semiconductor testing and packaging markets are very competitive. We
face competition from a number of sources, including other independent
semiconductor testing and packaging companies, especially those which offer
turnkey testing and packaging services. We believe that the principal
competitive factors in the testing and packaging market are:

     o    ability to provide total solutions to our customers;

     o    technological expertise;

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

     o    production yield;


                                       4
<PAGE>


     o    software conversion program capability;

     o    responsiveness and flexibility;

     o    production cycle time;

     o    capacity;

     o    range of testing platforms and package 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:

     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.


                                       5
<PAGE>


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

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

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

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

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

     The semiconductor testing and packaging businesses are capital intensive
and require significant investment in expensive equipment manufactured by a
limited number of suppliers. The market for semiconductor testing and packaging
equipment is characterized, from time to time, by intense demand, limited
supply and long delivery cycles. Our operations and expansion plans depend on
our ability to obtain a significant amount of such equipment from a limited
number of suppliers, including, in the case of testers, Advantest Corporation,
Agilent Technologies, Inc., Credence Systems Corporation, LTX Corporation,
Schlumberger Limited and Teradyne, Inc., and in the case of wire bonders, ASM
Pacific Technology Ltd. and 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.

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 2002, 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


                                       6
<PAGE>


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

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

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

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

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

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

     We depend on the continued service of our executive officers and skilled
technical and other personnel. Our business could suffer if we lose the
services of any of these personnel and cannot adequately replace them. Although
some of these management personnel have entered into employment agreements with
us, they may 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


                                       7
<PAGE>


with us by our customers. Our customer service agents provide customer service
and after-sales support to our customers.

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

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

     Although we have over 200 customers, due in part to the concentration of
market share in the semiconductor industry, we have derived and expect to
continue to derive a large portion of our revenues from a small group of
customers during any particular period. Our five largest customers together
accounted for approximately 43%, 41% and 39% of our net revenues in 1999, 2000,
2001, respectively. There has been significant variation in the composition of
our largest five customers over time. This variation is due primarily to the
high level of competition in the semiconductor industry in which our customers
operate. The demand for our services from a customer is directly dependent upon
that customer's level of business activity, which could vary significantly from
year to year. As a result, we have been less dependent on any particular
customer over time.

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

     All of our key customers operate in the cyclical semiconductor business
and have in the past, and may in the future, vary order levels significantly
from period to period. Some of these companies are relatively small, have
limited operating histories and financial resources, and are highly exposed to
the cyclicality of the industry. We cannot assure you that these customers or
any other customers will continue to place orders with us in the future at the
same levels as in prior periods. The loss of one or more of our significant
customers, or reduced orders by any 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 50.5% 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, companies within
the ASE group of companies, and our Chairman and four other directors hold
similar positions at ASE, Inc. Accordingly, ASE, Inc. or its affiliates may
take actions that are not in our or our shareholders' best interest.

     ASE, Inc. and we have had, and will continue to have, some common
customers. These customers conduct separate qualification procedures of ASE,
Inc.'s and our facilities based on their own evaluation of various factors,
including geographic location of the facilities, range and quality of testing
platforms available, technical expertise,


                                       8
<PAGE>


testing capacity and price, and generally indicate which facilities they desire
to use. There are no agreements between ASE, Inc. and us with respect to the
allocation of business from our common customers.

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

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

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

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

     o    adversely affecting the market price of our shares.

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

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

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

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


                                       9
<PAGE>


purchase of testing and packaging equipment, has been, and is expected to
continue to be, denominated in U.S. dollars with much of the remainder in
Japanese yen. Fluctuations in exchange rates, primarily among the U.S. dollar,
the NT dollar and the Japanese yen, will affect our costs and operating
margins. In addition, these fluctuations could result in exchange losses and
increased costs in NT dollar and other local currency terms. Despite hedging
and mitigating techniques implemented by us, fluctuations in exchange rates
have affected, and may continue to affect, our financial condition and results
of operations. We recorded foreign exchange gains of $.2 million in 1999, $3.3
million in 2000 and $2.4 million in 2001.

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

     Under currently effective U.S. GAAP, we are required to evaluate our
equipment, goodwill and other long-lived assets for impairment whenever there
is an indication of impairment. If certain criteria are met, we are required to
record an impairment charge. We can give no assurance that impairment charges
will not be required in periods subsequent to December 31, 2001. Please see
Note 27 of Notes to Consolidated Financial Statements for a discussion of the
criteria which, if met, may require impairment charges.

     As a result of new standards under U.S. GAAP that became effective on
January 1, 2002, we are no longer permitted to amortize remaining goodwill.
Total goodwill amortization expenses amounted to US$7.8 million under ROC GAAP
for the year ended December 31, 2001. Starting from January 2002, all goodwill
must be periodically tested for impairment. As of December 31, 2001, the
goodwill under U.S. GAAP amounted to US$56.9 million. We currently are not able
to estimate the extent and timing of any goodwill impairment charge for future
years. Any goodwill impairment charge required under U.S. GAAP may have a
material adverse effect on our net income for periods subsequent to December
31, 2001 on a U.S. GAAP reconciled basis. Please see Note 28 of Notes to
Consolidated Financial Statements for a discussion of the new standards under
U.S. GAAP.

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

   Risks Relating to Countries in Which We Conduct Operations

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

     Our current testing and packaging facilities are located in Taiwan,
Malaysia, the United States, Hong Kong and Singapore. We also have a 30.0%
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; and

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

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


                                      10
<PAGE>


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 40.2% of our net revenues in 2001 were
derived from our operations in Taiwan. Taiwan is under control of the
government of the Republic of China and has a unique international political
status. The People's Republic of China asserts sovereignty over all of China,
including Taiwan. The People's Republic of China government does not recognize
the legitimacy of the Republic of China government. Although significant
economic and cultural relations have been established in recent years between
the Republic of China and the People's Republic of China, the People's Republic
of China government has indicated that it may use military force to gain
control over Taiwan in some circumstances, such as the declaration of Taiwan's
independence by the Republic of China. Relations between the Republic of China
and the People's Republic of China have been particularly strained in recent
years. Past developments in relations between the Republic of China and the
People's Republic of China have on occasion depressed the market price of the
shares of Taiwanese companies. Relations between the Republic of China and the
People's Republic of China and other factors affecting the political or
economic conditions in Taiwan could have a material adverse effect on our
financial condition and results of operations, as well as the market price and
the liquidity of our shares.

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, 1999, on May 17 and
June 11, 2000 and on March 31, 2002, Taiwan experienced severe earthquakes,
some of which caused significant property damage and loss of life, particularly
in the central and eastern parts of Taiwan. These earthquakes damaged
production facilities and adversely affected the operations of many companies
involved in the semiconductor and other industries. We experienced no
structural damage to our facilities and no damage to our machinery and
equipment as a result of these earthquakes. There were, however, interruptions
to our production schedule primarily as a result of power 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 testing and packaging 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.


                                      11
<PAGE>


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

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

   Risks Relating to the Shares

Our shareholders may have difficulty protecting their shareholder rights.

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

The volatility in the markets for our shares may result in 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 automatically
enforceable in Singapore courts. Allen & Gledhill has also advised us that
there is doubt as to whether Singapore courts will enter judgments in original
actions brought in Singapore courts based solely upon the civil liability
provisions of the federal securities laws of the United States.

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

     Provisions of the Securities and Futures Act 2001 and the Singapore Code
on Take-Overs and Mergers may delay, deter or prevent a future takeover or
change in control of our company. Anyone acquiring an interest, either
individually or together with parties acting in concert, in 30.0% or more of
our voting shares must extend a takeover offer for the remaining voting shares
in accordance with the Singapore Code on Take-Overs and Mergers. A person


                                      12
<PAGE>


holding between 30.0% and 50.0% (both inclusive) of our voting shares either
individually or together with parties acting in concert must also make a
takeover offer if that person acquires an additional 1.0% of our voting shares
in any six month period. In addition, the offeror must make an appropriate
offer or proposal to holders of our convertible securities and may also be
required to make such offer to holders of securities of our subsidiaries, which
are convertible into shares. These provisions may discourage or prevent some
types of transactions involving an actual or threatened change of control of
our company. This could harm our shareholders because a transaction of that
kind might otherwise provide an opportunity for our shareholders to sell shares
at a price above the prevailing market price.

Item 4.  Information on the Company.

HISTORY AND DEVELOPMENT OF THE COMPANY

     ASE Test Limited is a Singapore holding company incorporated on December
1, 1995 as Jarich Test Private Limited, which changed its name to ASE Test
Private Limited on February 13, 1996 and to ASE Test Limited on April 23, 1996.
We have, through an exchange of shares with our parent company, Advanced
Semiconductor Engineering, Inc. and other individuals, acquired substantially
all of the shares of ASE Test, Inc. in May 1996. The exchange was accounted for
as a reorganization of companies under common control. Our 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 Taiwan and is engaged in the testing of semiconductors. It
has a wholly-owned subsidiary in the United States, ASE Test (U.S.A.) Inc.,
which was incorporated in 1996 and is engaged in after-sales service to
customers of ASE Test, Inc.

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

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

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

   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.

     In April, July and November, 2000, we purchased additional shares of ISE
Labs at an aggregate purchase price of $70.9 million. As a result of these
purchases, we owned 80.4% of the outstanding shares of ISE Labs as of December
31, 2000. In January 2002, we purchased the remaining portion of the shares of
ISE Labs for an aggregate purchase price of $50.1 million. As a result, ISE
Labs is now our wholly-owned subsidiary.

   ASE Chung Li and ASE Korea

     In July 1999, we and our parent company, ASE, Inc., jointly acquired
Motorola's semiconductor businesses in Chung Li, Taiwan and Paju, South Korea
for the testing and packaging of semiconductors with principally
communications, consumer and automotive applications. Under the acquisition
agreements, ASE, Inc. acquired a 70.0% interest in each of the two businesses,
and we acquired the remaining 30.0% interest. This division of the investment
reflected in part our estimate of the relative testing and packaging values at
the facilities. The businesses are now operated by ASE Chung Li and ASE Korea.
Substantially all of the assets of ASE Chung Li were acquired


                                      13
<PAGE>


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 were met. These targets were met for the first
two years. The third year to determine such a target will be complete on June
30, 2002.

     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 many of the major semiconductor design houses in the
          United States;

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

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

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

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

     We focus primarily on testing complex, high-performance logic/mixed-signal
semiconductors and packaging high pin-count semiconductors. In 2001,
approximately 98% of our net testing revenues were derived from testing
complex, high-performance logic/mixed-signal semiconductors and approximately
60% of our net packaging revenues were derived from packaging high pin-count
semiconductors. Semiconductors tested and packaged by us are used in diverse
end-use markets, including 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, in conjunction with our parent company, ASE,
          Inc., a broad range of advanced packaging services;

     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


                                      14
<PAGE>


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

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

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

     We provide semiconductor testing and packaging services both separately
and on a turnkey basis. Our turnkey services include testing and packaging
services and drop shipment of the tested and packaged semiconductors to end
users designated by our customers. Through the strategic alliance ASE, Inc. and
we entered into in 1998 with TSMC, we, in conjunction with ASE, Inc., 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, consumer electronics and personal
computers, and has experienced increased growth in additional markets such as
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.

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

Front-End Engineering    Throughout and following the design process, prototype
  Test                   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.


                                      15
<PAGE>


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 each
                         device meets performance specifications.

   Outsourcing Trends in Semiconductor Manufacturing

     Historically, semiconductor companies designed, manufactured, tested and
packaged 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.

      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. As a result,
new investments in in-house testing, packaging and fabrication facilities are
becoming less desirable for integrated device manufacturers because of the high
investment costs as well as their inability to achieve sufficient economies of
scales and utilization rates in order to be competitive with the independent
service providers. Independent testing, packaging and foundry companies, on the
other hand, are able to realize the benefits of specialization and achieve
economies of scale by providing services to a large base of customers across a
wide range of products. This enables them to reduce costs and shorten
production cycles through high capacity utilization and process expertise.

     In addition, the outsourcing trend is affected by the cyclical nature of
the semiconductor industry as semiconductor companies reduce capital
investments during industry downturns. During the recent industry downturn
commencing in the fourth quarter of 2000 that continued through 2001,
semiconductor companies significantly reduced their investment in in-house
testing and packaging technologies and capacity. As a result, some
semiconductor companies may have limited in-house expertise and capacity to
accommodate large orders following a recovery in demand, particularly in the
area of advanced technology. We expect them to increasingly outsourcing their
testing and packaging requirements to take advantage of the advanced technology
and scale of operations of independent testing and packaging companies.

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

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


                                      16
<PAGE>


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

     Gartner Dataquest forecasts that the total outsourced semiconductor
testing market will grow from US$0.9 billion in 2001 to US$3.0 billion in 2005.
Gartner Dataquest also forecasts that the total outsourced semiconductor
packaging market will grow from US$6.4 billion in 2001 to US$17.0 billion in
2005.

Strategy

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

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

     We believe that an important factor in our ability to attract leading
semiconductor companies as our customers has been our ability, working in
conjunction with ASE, Inc., to provide turnkey services on a large scale.
Turnkey services consist of the integrated packaging, testing and direct
shipment of semiconductors to end users designated by our customers. As a
result of our technical expertise and, combined with ASE, Inc., large
production capacity in both testing and packaging, we are able to provide
turnkey services on a large scale. As product lives and production cycles
shorten and testing and packaging technologies advance more rapidly, our
customers increasingly value our ability, as a downstream service provider, to
work with them as an integral and strategic partner in the upstream development
of their products. We intend to enhance and expand our expertise in both the
upstream and downstream semiconductor manufacturing processes in order to
better serve our customers in providing our core services of testing and
packaging. The front-end engineering testing expertise of ISE Labs has greatly
enhanced our ability to participate in the earlier stages of circuit design and
the semiconductor manufacturing process.

     Continue to Focus on Advanced Technological and Processing Capabilities

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

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

     Strategically Expand Production Capacity

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

     We evaluate acquisition opportunities on the basis of access to new
markets and technology, the enhancement of our production capacity, economies
of scale and management resources, and closer proximity to existing and
potential customers. In 1999, we acquired ISE Labs, an independent testing
company with operations in California,


                                      17
<PAGE>


Hong Kong and Singapore. ISE Labs also recently commenced operations in Austin,
Texas. Through combining the front-end engineering testing capabilities of ISE
Labs with our existing final testing capabilities, we are able to provide our
customers with complete semiconductor testing solutions.

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

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

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

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

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

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

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

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

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

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

Principal Products and Services

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

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


                                      18
<PAGE>


                                               Year Ended December 31,
                                       --------------------------------------
                                        1999             2000            2001
                                       -----            -----           -----
                                             (percentage of net revenues)
Testing revenues....................    66.1%            71.8%           74.8%
Packaging revenues..................    33.9             28.2            25.2
                                       -----            -----           -----
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 as well as the
testing equipment utilized. We believe that our testing services employ
technology and expertise that are among the most advanced in the semiconductor
industry. In addition to maintaining different types of testing equipment,
which enables us to test a variety of semiconductor functions, we work closely
with our customers to design effective testing and conversion programs on
multiple equipment platforms for particular semiconductors.

     In recent years, complex, high-performance logic/mixed-signal
semiconductors have accounted for an increasing portion of our overall net
testing revenues. As the testing of complex, high-performance semiconductors
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    Customized Software Development. Test engineers develop customized
          software to test the semiconductor on advanced testing equipment.
          Customized software, developed on specific testing platforms, is
          required to test the conformity of each particular semiconductor type
          to its unique functionality and specification.

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

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

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

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

     Logic/Mixed-Signal Final Testing. We conduct final tests of a wide variety
of logic/mixed-signal semiconductors, with a number of leads ranging from the
single digits to over one thousand and operating frequencies of up to 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.


                                      19
<PAGE>


     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 erasable programmable read-only memory, or EPROM,
semiconductors and flash memory semiconductors.

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

     o    Burn-in Testing. 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.

     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,
                                       --------------------------------------
                                        1999             2000            2001
                                       -----            -----           -----
                                        (percentage of net testing revenues)
Logic/mixed-signal testing..........    94.7%            97.5%           97.9%
Memory testing......................     5.3              2.5             2.1
                                       -----            -----           -----
Total net testing revenues..........   100.0%           100.0%          100.0%
                                       =====            =====           =====

   Packaging

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

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



                                      20
<PAGE>


     The following table sets forth our principal packaging products.
<TABLE>
                               Number of
      Package Format             Leads                  Description                    End Use Applications
---------------------------    ----------   ----------------------------------  --------------------------------------
<S>                            <C>          <C>                                 <C>
Ball Grid Array (BGA)          100-928      Designed for semiconductors which   Cellular phones, pagers, wireless
                                            require the enhanced performance    communications, DSPs, micro-controller
                                            provided by BGA, including          applications and high performance disk
                                            personal computer chipsets,         drives.
                                            graphic controllers and
                                            microprocessors, ASICs, digital
                                            signal processors, also called
                                            DSPs, and memory devices.

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

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

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

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


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

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

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

Quad Flat Non-Leaded           24-48        Designed for applications that      Cellular phones, computer servers
package (QFN)                               require low profile packages and    and audio/visual equipment.
                                            high electricity consumption.
</TABLE>


                                      21
<PAGE>


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

                                                Year Ended December 31,
                                       ---------------------------------------
                                        1999             2000             2001
                                       -----            -----            -----
                                        (percentage of net packaging revenues)
BGA ................................     6.4%            13.8%            26.3%
QFP/TQFP............................    52.6             52.9             43.1
PLCC ...............................    23.8             15.6             11.8
SOJ/SOP/TSOP........................     8.1             10.4              4.0
PDIP ...............................     9.0              7.2             14.1
Other...............................     0.1              0.1              0.7
                                       -----            -----            -----
Total net packaging revenues........   100.0%           100.0%           100.0%
                                       =====            =====            =====

   Drop Shipment Services

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

Pricing

     We price our front-end engineering testing services principally on the
basis of hourly test rates and the cost of engineering resources. We price our
final testing services principally on the basis of the amount of time, measured
in central processing unit 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 central processing unit 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    current market landscape of each testing platform;

     o    labor cost;

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

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

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

     In general, the price per central processing unit 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 central processing unit 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 central processing unit second for using such
machines decline, resulting in the gradual decline of revenues for such
machines.


                                      22
<PAGE>


     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, 2001, we operated 680
testers, of which 140 were consigned by our customers. We generally seek to
purchase testers from different suppliers with similar functionality and the
ability to test a variety of different semiconductors. We purchase testing
equipment from major international manufacturers, including Advantest
Corporation, Agilent Technologies, Inc., Credence Systems Corporation, LTX
Corporation, Schlumberger Limited and Teradyne, Inc. We may consider purchasing
additional advanced testers depending on market demand for our testing services
and the availability of testers. Upon acquisition of new testing equipment, we
install, configure, calibrate, perform burn-in diagnostic tests on and
establish parameters for the testing equipment based on anticipated
requirements of existing and potential customers and considerations relating to
market trends. In addition to testers, we maintain a variety of other types of
testing equipment, such as automated handlers and probers (special handlers for
wafer probing), scanners, reformers and computer workstations for use in
software development. Handlers attached to testers and transport individual
packaged semiconductors to the tester interface. Probers similarly attach to
the tester and align each individual die on a wafer with the interface to the
tester.

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

   Packaging

     The 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., a United States
supplier of a substantial portion of our new wire bonders and from the
Singapore division of ASM Pacific Technology Limited, a Hong Kong supplier of
wire bonders. As of May 31, 2002, we operated 371 wire bonders of which 212
were fine pitch wire bonders. In addition to wire bonders, we maintain a
variety of other types of packaging equipment, such as wafer grind, wafer
mount, wafer saw, die bonders, automated molding machines, laser markers,
solder plates, pad printers, dejunkers, trimmers, formers, substrate saws and
scanners.

Software Development and Engineering/Conversion Program

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


                                      23
<PAGE>


Seasonality

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

Sales and Marketing

   Sales and Marketing Offices

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

   Sales and Customer Service Agents

     Under commission agreements, ASE Test Taiwan and ASE Test Malaysia have
appointed Gardex International Limited, or Gardex, as the non-exclusive sales
agent for the sale of their services and products worldwide, excluding Asia.
Gardex helps us identify customers, monitor delivery acceptance and payment by
customers and, within parameters set by us, negotiate price, delivery and other
terms with our customers. Purchase orders are placed directly with us by our
customers. We pay Gardex a commission of 0.56% of our sales outside of Asia,
payable monthly, depending on the amount of these sales. In 2001, we paid $1.0
million in commissions to Gardex.

     Under service agreements, ASE Test Taiwan and ASE Test Malaysia have
appointed ASE (U.S.) Inc. as our non-exclusive agent to provide customer
service and after-sales support to our customers in Europe and North America.
We pay ASE (U.S.) Inc. a monthly fee based on its monthly services associated
costs and expenses. In 2001, we paid $5.3 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.






                                      24
<PAGE>


   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:

Agilent Technology                                   LSI Logic Corporation
Altera Corporation                                   Marvell Technology Group
ATI Technologies, Inc.                               Motorola, Inc.
Cirrus Logic, Inc.                                   NVIDIA Corp.
Conexant Systems, Inc.                               Oak Technology
ESS Technology                                       ON Semiconductor
Genesis Microchip                                    Qualcomm Incorporated
                                                     VIA Technologies, Inc.

     Our five largest customers together accounted for approximately 39% of our
sales in 2001. 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 and industrial sectors.

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

                                                Year Ended December 31,
                                       -------------------------------------
                                        1999             2000           2001
                                       -----             ----           ----
                                            (percentage of net revenues)
Communications.......................     24%              24%            32%
Personal computers...................     31               32             29
Consumer electronics/
  industrial/automotive..............     35               32             37
Other................................     10               13              2
                                         ---              ---            ---
Total net revenues...................    100%             100%           100%
                                         ===              ===            ===

     Many of our customers are leaders in their respective end use markets. For
example, we provide Motorola, an industry leader in automotive and wireless
communications semiconductor products, with most of its outsourced testing and
packaging requirements.

     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,
                                        -------------------------------------
                                        1999             2000            2001
                                        ----             ----            ----
                                            (percentage of net revenues)
North America....................         77%              74%             76%
Asia ............................         19               20              21
Europe...........................          4                7               3
                                         ---              ---             ---
Total net revenues...............        100%             100%            100%
                                         ===              ===             ===


                                      25
<PAGE>


   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.

     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 available; and
(9) price. In packaging services, we primarily compete on the basis of: (1)
production yield; (2) cycle time; (3) process technology; (4) quality of
service; (5) capacity; (6) location; (7) range and quality of packaging types
available; and (8) price.

     Integrated device manufacturers that use our services continuously
evaluate our performance against their own in-house testing and packaging
capabilities. These integrated device manufacturers may have access to more
advanced technologies, and greater financial and other resources than we do. We
believe, however, that we can offer greater efficiency and lower costs while
maintaining equivalent or higher quality for several reasons. First, as we
benefit from specialization and economies of scale by providing services to a
large base of customers across a wide


                                      26
<PAGE>


range of products, we are better able to reduce costs and shorten production
cycles through high capacity utilization and process expertise. Second, as a
result of our customer base and product offerings, our equipment generally has
a longer useful life. Third, as a result of the continuing reduction of
investments in in-house testing and packaging capacity and technology at
integrated device manufacturers, we are better positioned to meet the advanced
testing and packaging requirements on a large scale.

Material Effects of Government Regulations

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

     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.

     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 slightly over 10% in
2001.

     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


                                      27
<PAGE>


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 property damage and damage to our
production facilities, buildings and machinery, as well as business
interruption losses, due to fire and flood. We are in the process of obtaining
insurance policies for our Taiwan operations covering property damage and
damage to our production facilities, buildings and machinery, as well as
business interruption losses, due to typhoons. Significant damage to any of our
production facilities, whether as a result of fire or other causes, would have
a material adverse effect on our results of operations. We are not insured
against the loss of key personnel.











                                      28
<PAGE>

ORGANIZATIONAL STRUCTURE

     The following chart illustrates our corporate structure and effective
ownership interest in each of our principal operating subsidiaries and
affiliates as of June 14, 2002. The following chart does not include
wholly-owned intermediate holding companies.

<TABLE>
<S>             <C>            <C>                <C>        <C>        <C>     <C>
------------------------------ ASE, INC. ---------------------------------------|
|                                 |50.5%--------------------------------        |
|                                 |                                     |       |
|                          ----------------                             |       |
|70%                       ASE TEST LIMITED                             |70%    |
|                          ----------------                             |       |
|                                 |                                     |       |56.2%
|                                 |                                     |       |
|   ---------------------------------------------------------------     |       |
|    |30%           |100%         |100%           |100%           |30%  |       |
|    |              |             |               |               |     |       |
---------       ---------     -----------     ----------     -------------      |
ASE             ISE LABS,     ASE             ASE TEST,      ASE (KOREA)        |
(CHUNG LI)      INC.          ELECTRONICS     INC.              INC.            |
INC.                          (M) SDH, BHD.                                     |
---------       ---------     --------        ----------     -------------      |
                                                  |                             |
                                                  | 4.0%                        |
                                              ---------                         |
                                              ASE                               |
                                              MATERIAL -------------------------
                                              INC. (1)
                                              ---------
</TABLE>
----------
(1)  The remaining shares of ASE Material Inc. are owned by the management and
     employees of ASE Material Inc., management and employees of ASE, Inc. and
     its affiliates as well as a strategic investor.


                                      29
<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 approximately
521,000 square feet, which includes a total clean-room space of approximately
183,000 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 also
lease approximately 52,000 square feet from ASE Chung Li. 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 testing and packaging facilities in Bayan Lepas Free
Trade Zone, Penang, Malaysia, with a total floor space of approximately 606,000
square feet, which includes a front-end clean-room of approximately 40,000
square feet, a back-end packaging area of approximately 66,000 square feet and
a final test clean-room of approximately 114,000 square feet.

     ISE Labs maintains an approximately 58,000 square foot testing facility in
Santa Clara, California, an approximately 174,000 square foot testing facility
in Fremont, California, an approximately 21,000 square foot testing facility in
Singapore, an approximately 23,000 square foot testing facility in Hong Kong,
and an approximately 13,000 square foot testing facility in Austin, Texas.

     Item 5.  Operating and Financial Review and Prospects.

OPERATING RESULTS AND TREND INFORMATION

Overview

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

     Beginning in the fourth quarter of 2000 and continuing through 2001, we
experienced a significant downturn in the semiconductor industry. During this
downturn we saw a material decline in our business caused by a decline in
average selling prices and a curtailment in overall business demand for our
services. We expect the average selling prices for our products to continue to
decline for the foreseeable future. The decrease in our net revenues during
2001 was across each of the principal end use applications for the products
which we tested and packaged - communication, personal computer and consumer
electronics. In the fourth quarter of 2001, we experienced a gradual
improvement in our net revenues compared to the preceding quarter. This
improvement was generally concentrated in the packaging of more advanced
package types and the testing of more complex, high-performance semiconductors.

Sale of Manteca Packaging Facility

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


                                      30
<PAGE>


Net Revenues and Pricing

     We recorded net revenues of $270.3 million, $440.3 million and $298.5
million in 1999, 2000 and 2001, respectively. Our net revenues are primarily
affected by the volume of units tested and packaged, the selling prices for
these units, and currency fluctuations. The volume of units tested and packaged
has been primarily affected by upturns and slowdowns in the semiconductor
industry. Our increase in net revenues from 1999 to 2000 was the result of an
upturn, and our net loss in 2001 was the result of a slowdown. Currency
fluctuations affect our net revenues by increasing or decreasing the revenue we
receive per unit when sales are translated into local currency.

     In 1999, 2000 and 2001, our packaging revenues accounted for 33.9%, 28.2%
and 25.2% while testing revenues accounted for 66.1%, 71.8% and 74.8%
respectively, of our net revenues. In 2001, approximately 97.9% of our net
testing revenues were derived from testing complex, high-performance
logic/mixed-signal semiconductors, as compared to 97.5% in 2000. High pin-count
semiconductor packages are package types with pin-counts of greater than 100
leads. In 2001, approximately 60.0% of our net packaging revenues were derived
from packaging high pin-count semiconductors, as compared to 66.8% in 2000. We
have expanded testing capabilities and a broad geographic presence in the
United States, Taiwan, Malaysia and Singapore in close proximity to key centers
for outsourced semiconductor manufacturing and semiconductor designing. In
2001, 59.8% of our net revenues were derived from operations outside of Taiwan,
as compared to 62.6% in 2000.

     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 2001, the selling prices
in our testing and packaging services experienced a quickened rate of decline
relative to the price declines experienced in 2000, due to the downturn in the
semiconductor industry.

     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. We plan to continue to develop and
offer new technology in packaging services and more advanced testing platforms
in testing 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) current market
landscape of each testing platform, (5) labor cost, (6) ability of the machine
to parallel-test, which involves testing multiple semiconductors
simultaneously, and (7) cost of testers used to perform the testing services.
The testing of complex, high-performance semiconductors requires more complex
equipment, the use of which is priced at significantly higher levels per
central processing unit second than the use of equipment employed in the
testing of less complex or lower-performance semiconductors.

Cost of Revenues

     Our operations are capital intensive and are characterized by relatively
high fixed costs. High-end testers can cost several million dollars each.
Testing equipment has become more expensive in recent years because the growing
technological complexity of semiconductors has required increasingly complex
testing services. Increases or decreases in capacity utilization rates can have
a significant effect on gross profit margins, as the unit cost of testing
services generally decreases as fixed charges, such as equipment depreciation
expense, are allocated over a larger number of units. Depreciation and
amortization are the principal components of our testing costs as testing
requires minimal raw materials. In 1999, 2000 and 2001, our testing
depreciation expense as a percentage of net testing revenues was approximately
30%, 25% and 46%, 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 in 2001, 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.


                                      31
<PAGE>


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

     As our testing operations require minimal raw materials, substantially all
of our raw material costs are accounted for by our packaging operations. Raw
material costs as a percentage of our packaging revenues were 41.2%, 39.9% and
45.6% in 1999, 2000 and 2001, respectively. We expect raw materials to become
an increasingly important component of the cost of our packaging revenues and
we plan to continue our development and production of interconnect material
through ASE Material in order to help ensure an adequate supply of raw
materials at competitive prices and reduce production time.

Operating Expenses

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

Non-Operating Income and Expenses

     Our non-operating income and expenses are primarily composed of interest
income and expenses, goodwill amortization, gain or loss on long term
investments, and foreign exchange gain or loss. Our interest income is
primarily derived from fixed return deposits and investment funds. For more
information concerning goodwill amortization, see "- Goodwill Amortization".
Our long term investments include ASE Korea, ASE Chung Li and ASE Material. The
year-end restatement of our foreign exchange assets and liabilities according
to the prevailing exchange rate has a large impact on our foreign exchange gain
or loss.

     Our loss on long term investments in equity investees was $7.3 million in
2001 compared to a gain of $16.1 million in 2000. This was composed of the
results of operations of ASE Chung Li and ASE Korea and the results of
operations of ASE Material. We own a 30.0% interest in each of ASE Chung Li and
ASE Korea. Therefore, we account for ASE Chung Li and ASE Korea as affiliates
under the equity method and record their gains and losses to us as gain or loss
on long term investment. Although we only own 4.0% of ASE Material, ASE, Inc.
owns 56.2%, therefore we account for ASE Material under the equity method,
recording their gains and losses to us as gain or loss on long term investment.


                                      32
<PAGE>


Goodwill Amortization

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

Critical Accounting Policies and Estimates

     Preparation of our consolidated financial statements requires us to make
estimates and judgments that affect the amounts of our assets, liabilities,
revenues and expenses. We continually evaluate these estimates, including those
related to allowances for doubtful accounts, inventories, useful lives of
properties, consolidated debits, income tax valuation allowances, pension plans
and the fair value of financial instruments. We base our estimates on
historical experience and other assumptions, which we believe to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions and conditions. We have identified below the accounting
policies that are critical to our consolidated financial statements.

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

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

     Useful Lives of Properties. Our operations are capital intensive and we
have significant investment in expensive testing and packaging equipment.
Properties represented 58% and 61% of our total assets as of December 31, 2000
and 2001, respectively. We depreciate our properties based on our estimate of
their economic useful lives to us based on our judgment, historical experience
and the potential obsolescence of our existing equipment brought about by the
introduction of more sophisticated testing and packaging technologies and
processes. If we subsequently determine that the actual useful life of
a property is shorter than what we had estimated, we will depreciate the
remaining undepreciated value of that asset over its remaining economic useful
life. This would result in increased depreciation expense and decreased net
income during those periods. Similarly, if the actual lives of properties are
longer than what we had estimated, we would have a smaller depreciation expense
and higher net


                                      33
<PAGE>


income in subsequent periods. As a result, if our estimations of the useful
lives of our properties are not accurate, our net income in future periods
would be affected.

Results of Operations

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

<TABLE>
                                                                      Year Ended December 31,
                                                        ---------------------------------------------------
                                                           1999                 2000                 2001
                                                        ---------            ---------            ---------
                                                                           (in thousands)
<S>                                                     <C>                  <C>                  <C>
Net revenues:
   Testing..........................................    $ 178,667            $ 316,158            $ 223,193
   Packaging........................................       91,587              124,127               75,273
                                                        ---------            ---------            ---------
   Total net revenues...............................      270,254              440,285              298,466
Cost of revenues....................................      173,758              263,513              265,271
                                                        ---------            ---------            ---------
Gross profit........................................       96,496              176,772               33,195
Operating expenses:
   Selling, general and administrative..............       23,091               42,807               35,335
   Research and development.........................        3,837               12,059               14,397
   Goodwill amortization............................        4,674                7,054                7,530
                                                        ---------            ---------            ---------
     Total operating expenses.......................       31,602               61,920               57,262
                                                        ---------            ---------            ---------
Income (loss) from operations.......................       64,894              114,852              (24,067)
Non-operating income (expense):
   Interest -- net..................................      (11,695)             (14,740)             (13,783)
   Investment income (loss) under equity
     method -- net..................................        4,842               16,127               (7,344)
   Gain on sale of long-term investments in
     shares of stock................................        6,588                    -                    -
   Loss on long-term investments in bonds...........            -               (3,157)                (345)
   Foreign exchange gain -- net.....................          151                3,280                2,382
   Other non-operating income (expense).............          863               (2,719)               1,393
                                                        ---------            ---------            ---------
     Total non-operating income (expense) -- net....          741               (1,209)             (17,697)
                                                        ---------            ---------            ---------
Income (loss) from continuing operations before
   income taxes and minority interest...............       65,635              113,643              (41,764)
Income tax expenses.................................         (678)              (2,197)              (6,522)
Income (loss) from continuing operations............       64,957              111,446              (48,286)
Loss from discontinued operations...................       (1,360)                (758)                   -
Minority interest in net loss (income) of
  subsidiaries......................................       (1,437)              (3,493)               2,527
                                                        ---------            ---------            ---------
Net income (loss) (ROC GAAP)........................    $  62,160            $ 107,195            $ (45,759)
                                                        =========            =========            =========
Net income (loss) (U.S. GAAP).......................    $  55,356            $ 101,173            $ (72,928)
                                                        =========            =========            =========

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

                                                                       Year Ended December 31,
                                                        ---------------------------------------------------
                                                           1999                 2000                2001
                                                        ---------            ---------            ---------
                                                                    (percentage of net revenues)
<S>                                                     <C>                  <C>                  <C>
Net revenues.....................................           100.0%               100.0%               100.0%
   Testing.......................................            66.1                 71.8                 74.8
   Packaging.....................................            33.9                 28.2                 25.2
                                                        ---------            ---------            ---------
Cost of revenues.................................            64.3                 59.9                 88.9
                                                        ---------            ---------            ---------
Gross profit.....................................            35.7                 40.1                 11.1
Operating expenses:
   Selling, general and administrative...........             8.6                  9.7                 11.9
   Research and development......................             1.4                  2.7                  4.8
   Goodwill amortization.........................             1.7                  1.6                  2.5
                                                        ---------            ---------            ---------
     Total operating expenses....................            11.7                 14.0                 19.2
Operating income (loss)..........................            24.0                 26.1                 (8.1)
Non-operating income (expense):
   Interest -- net...............................            (4.3)                (3.3)                (4.6)
   Investment income (loss) under equity
     method -- net...............................             1.8                  3.7                 (2.5)
   Gain on sale of long-term
     investments in shares of stock..............             2.4                    -                    -


                                                     34
<PAGE>

<CAPTION>
                                                                       Year Ended December 31,
                                                        ---------------------------------------------------
                                                           1999                 2000                2001
                                                        ---------            ---------            ---------
                                                                    (percentage of net revenues)
<S>                                                     <C>                  <C>                  <C>
   Loss on long-term investments in bonds........               -                 (0.7)                (0.1)
   Foreign exchange gain -- net..................               -                  0.7                  0.8
   Other non-operating income (expense)..........             0.4                 (0.7)                 0.5
                                                        ---------            ---------            ---------
     Total non-operating income (expense)--net...             0.3                 (0.3)                (5.9)
                                                        ---------            ---------            ---------
Income (loss) before income taxes and minority               24.3                 25.8                (14.0)
  interest.......................................
Income tax benefit (expense).....................            (0.3)                (0.5)                (2.2)
Income (loss) from continuing operations.........            24.0                 25.3                (16.2)
Loss from discontinued operations in net income
  (loss) of subsidiaries.........................            (0.5)                (0.2)                   -
                                                        ---------            ---------            ---------
Minority interest in net income
  (loss) of subsidiaries.........................            (0.5)                (0.8)                 0.9
Net income (loss) (ROC GAAP).....................            23.0                 24.3                (15.3)
                                                        =========            =========            =========
Net income (loss) (U.S. GAAP)....................            20.5                 23.0                (24.4)
                                                        =========            =========            =========

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

<CAPTION>
                                                                  Year Ended December 31,
                                                        ---------------------------------------------------
                                                          1999                 2000                  2001
                                                        ---------            ---------            ---------
<S>                                                     <C>                  <C>                  <C>

Net revenues:
   Testing.......................................       $ 178,667            $ 316,158            $ 223,193
   Packaging.....................................          91,587              124,127               75,273
                                                        ---------            ---------            ---------
   Total ........................................         270,254              440,285              298,466
Gross profit.....................................          96,496              176,772               33,195
Gross margin.....................................            35.7%                40.1%                11.1%
</TABLE>

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

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

     Gross Profit. Our gross profit decreased 81.2% to $33.2 million in 2001
from $176.8 million in 2000 and our gross margin decreased to 11.1% in 2001
from 40.1% in 2000. This decrease was primarily a result of increased
depreciation expense, partially offset by a decrease in raw materials costs.
Depreciation expense increased 24.4% to $130.1 million in 2001 from $104.6
million in 2000, primarily because new equipment was placed in service in 2001
and 2000. Depreciation expense as a percentage of net revenues increased to
43.6% in 2001 from 23.8% in 2000. Raw materials costs decreased 30.7% to $34.3
million in 2001 from $49.5 million in 2000 primarily as a result of decreased
sales. As a percent of net revenues, however, raw materials costs increased
slightly to 11.5% in 2001 from 11.2% in 2000.

     Operating Income and Loss. We incurred an operating loss of $24.1 million
in 2001 compared to operating income of $114.9 million in 2000. Operating
margin decreased to (8.1)% in 2001 from 26.1% in 2000, primarily as a result of
lower gross margins, increased research and development expenses and increased
selling, general and administrative expenses expressed as a percentage of net
revenues. Research and development expenses increased 19.4% to $14.4 million in
2001 from $12.1 million in 2000. As a percentage of net revenues, research and
development expenses increased to 4.8% in 2001 from 2.7% in 2000. The increase
was primarily due to increased depreciation of equipment dedicated to research
and development uses, increased expenditures on factory supplies


                                      35
<PAGE>


and an increase in the numbers of employees employed in research and
development. Selling, general and administrative expenses, including goodwill
amortization, decreased 14.0% to $42.9 million in 2001 from $49.9 million in
2000. The decrease was primarily due to decreased expenses for salaries and
bonuses achieved by our implementation of cost-cutting measures, partially
offset by an increase in goodwill amortization in relation to the recalculation
of goodwill amortization due to the disposal of Manteca. Goodwill is amortized
using the straight-line method over five to ten years. As a percentage of net
revenues, selling, general and administrative expenses, including goodwill
amortization, increased to 14.4% in 2001 from 11.3% in 2000, primarily as a
result of diseconomies of scale from decreased sales volume.

     Net Non-Operating Income and Expense. Net non-operating expense increased
1,375.0% to $17.7 million in 2001 from $1.2 million in 2000, primarily as a
result of a loss from equity investees and a decrease in net foreign exchange
gain, partially offset by a decreased loss on long term investments in bonds.
We had a loss from equity investees of $23.4 million in 2001 as compared to an
income from equity investees of $16.1 million in 2000, primarily as a result of
a net loss from our affiliate, ASE Korea. Our net foreign exchange gain
decreased 27.3% to $2.4 million in 2001 from $3.3 million in 2000, primarily as
a result of gains produced by certain foreign exchange contracts in 2000. Our
loss on long-term investments in bonds decreased 90% to $0.3 million in 2001
from $3.2 million in 2000, primarily as a result of a provision in 2000 for
loss on the bonds of APP Global Finance Limited.

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

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

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 a 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


                                      36
<PAGE>


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 investments in bonds 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 shares of stock 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 investments in bonds 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 and ASE Chung Li. Our
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.

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.

<TABLE>
                                                                    Quarter Ended
                         ----------------------------------------------------------------------------------------------
                         Mar. 31,    Jun. 30,    Sep. 30,     Dec. 31,    Mar. 31,    Jun. 30,    Sep. 30,     Dec. 31,
                           2000        2000         2000        2000        2001        2001         2001        2001
                         --------    --------    --------    ---------    --------    --------    --------     --------
                                                                   (unaudited)
                                                                 (in thousands)
<S>                      <C>         <C>         <C>         <C>          <C>         <C>         <C>          <C>
Net revenues:
   Testing...............$ 66,037    $ 73,993    $ 85,617    $  90,511    $ 77,921    $ 51,558    $ 44,072     $ 49,642
   Packaging.............  26,123      28,684      35,161       34,159      25,255      15,799      16,455       17,763
                         --------    --------    --------    ---------    --------    --------    --------     --------
   Total net revenues....  92,160     102,677     120,778      124,670     103,176      67,357      60,527       67,406
Cost of revenues.........  54,623      60,747      71,712       76,430      73,585      63,292      61,868       66,525
                         --------    --------    --------    ---------    --------    --------    --------     --------


                                                           37
<PAGE>

<CAPTION>

                                                                    Quarter Ended
                         ----------------------------------------------------------------------------------------------
                         Mar. 31,    Jun. 30,    Sep. 30,     Dec. 31,    Mar. 31,    Jun. 30,    Sep. 30,     Dec. 31,
                           2000        2000         2000        2000        2001        2001         2001        2001
                         --------    --------    --------    ---------    --------    --------    --------     --------
                                                                   (unaudited)
                                                                 (in thousands)
<S>                      <C>         <C>         <C>         <C>          <C>         <C>         <C>          <C>
Gross profit.............  37,537      41,930      49,066       48,240      29,591       4,065       1,341          881
                         --------    --------    --------    ---------    --------   ---------    --------     --------

Operating expenses:
   Selling, general and
     administrative......   8,994       9,076      11,127       13,610       9,635       9,872       8,085        7,743
   Research and
     development.........   2,029       3,199       3,248        3,584       3,975       3,086       3,455        3,882
 Goodwill amortization...   1,699       1,795       1,795        1,765       1,896       1,896       1,855        1,882
                         --------    --------    --------    ---------    --------   ---------    --------     --------
 Total operating
     expenses ...........  12,722      14,070      16,170       18,959      15,506      14,854      13,395       13,507
                         --------    --------    --------    ---------    --------   ---------    --------     --------
Income (loss) from
     operations..........  24,815      27,860      32,896       29,281      14,085     (10,789)    (14,736)     (12,626)
Non-operating income
     (expense)...........    (957)     (2,983)      1,175        1,556      (2,856)     (4,586)     (6,918)      (3,337)
                         ========    ========    ========    =========    ========   =========    ========     ========

Income (loss) from
   continuing operations
   before income taxes
   and minority interest.  23,858      24,877      34,071       30,837      11,229     (15,375)    (21,654)     (15,964)
Income tax benefit
   (expense).............     (67)       (166)        (21)      (1,943)     (1,578)      3,767         202         (975)
Loss from discontinued
   operations............    (475)         (9)       (115)        (159)          -           -           -            -
Minority interest in net
   loss (income) of
   subsidiaries..........    (468)     (1,386)     (1,001)        (638)       (478)        423       1,008        1,574
                         --------    --------    --------    ---------    --------   ---------    --------     --------
Net income (loss) (ROC
     GAAP)...............$ 22,848    $ 23,316    $ 32,934    $  28,097    $  9,173   $ (18,718)   $(20,848)    $(15,365)
                         ========    ========    ========    =========    ========   =========    ========     ========
Net income (loss) (U.S.
     GAAP)...............$ 21,270    $ 24,047    $ 30,363    $  25,493    $  7,085   $ (44,441)   $(22,498)    $(13,074)
                         ========    ========    ========    =========    ========   =========    ========     ========

Net revenues (ROC GAAP):
   Testing...............    71.7%       72.1%       70.9%        72.6%       75.5%       76.5%       72.8%        74.8%
   Packaging.............    28.3%       27.9%       29.1%        27.4%       24.5%       23.5%       27.2%        25.2%

Gross margin.............    40.7%       40.8%       40.6%        38.7%       28.7%        6.0%       (2.2)%        1.3%
Operating margin.........    26.9%       27.1%       27.2%        23.5%       13.7%      (16.0)%     (24.3)%      (18.7)%

Net income margin:
   ROC GAAP..............    24.8%       22.7%       27.3%        22.5%        8.9%      (27.9)%     (34.4)%      (22.8)%
   U.S. GAAP.............    23.1%       23.4%       25.1%        20.4%        6.9%      (66.0)%     (37.2)%      (19.4)%
</TABLE>

     Our results of operations have been adversely affected by the global
semiconductor industry downturn which commenced in the fourth quarter of 2000
and continued through 2001. 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".

     Our testing operations historically have higher gross margins than our
packaging operations. However, during periods of lower-than-normal capacity
utilization, such as the last three quarters of 2001, our testing operations
have experienced lower gross margins than our packaging operations.

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


                                      38
<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. We recorded a foreign exchange gain of $.2
million in 1999, $3.3 million in 2000 and $2.4 million in 2001.

Taxation

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

     Based on its status as a "pioneer" company, ASE Test Malaysia was granted
exemptions from Malaysian income taxes for a period of five years from July 1,
1994 to June 30, 1999. Losses accumulated before the commencement of this
period may be used to offset taxable income after the period ends. ASE Test
Malaysia's tax holiday in Malaysia expired on June 30, 1999 and ASE Test
Malaysia has received approval to be a "pioneer high technology" company in
Malaysia, which entitles us to a five-year tax holiday substantially similar to
our previous tax holiday. This tax holiday began retroactively on July 1, 1999
and will extend to June 30, 2004. See Note 12 of Notes to Consolidated
Financial Statements.

     As of December 31, 2001, we had net deferred income tax assets, after
valuation allowance, of $12.9 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 $6.5 million, $2.2 million and $0.7
million in 2001, 2000 and 1999, respectively. 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.

     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.


                                      39
<PAGE>


   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 (or which would have been payable but for any reduction or
exemption of tax granted to promote economic development) 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) 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
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 June 27, 2001. ASE Test Taiwan
paid dividends of NT$0.01 per share to us in January 2002.

     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. It has been proposed by the Minister for Finance of
Singapore in the recent Financial Year 2002 Budget that the Singapore corporate
tax rate be reduced from 24.5% to 22% with effect from the year of assessment
2003 (financial year ending in 2002). The Singapore-Taiwan Tax Treaty provides
that Singapore tax residents 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 any 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 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, as long as the requirements specified in the Singapore-Taiwan Tax
Treaty are satisfied.

   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


                                      40
<PAGE>


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), but the tax paid by the Malaysian company effectively becomes
available to its shareholders as a tax credit to offset their Malaysia income
tax liability on the gross amount of dividends received. Therefore, no further
Malaysia income tax will be imposed on the net dividends received by the
shareholders of the Malaysian company. 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 and remitted into Singapore. Subject
to the provisions of the Tax Treaty 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., which we refer to as ASE Holdings Singapore. Based on its
pioneer company status, ASE Test Malaysia was granted exemptions from Malaysian
income taxes for a period of five years from July 1, 1994 to June 30, 1999. ASE
Test Malaysia has been granted substantially similar tax exemptions for high
technology pioneer status, which began retroactively from July 1, 1999, and
will extend to June 30, 2004. The Malaysian dividends paid out of profits
exempt under the abovementioned incentives, and received or deemed received in
Singapore by ASE Holdings Singapore are subject to Singapore tax at the
prevailing Singapore corporate tax rate. Technically, 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 pioneer 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 such pioneer income from Malaysia.

     Currently, Singapore adopts an imputation system with respect to the
payment of dividends by Singapore tax 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 due to the administrative concession). This may
result in ASE Holdings Singapore being liable to incur a Section 44 charge at
the prevailing Singapore corporate tax rate.

     To avoid the Section 44 charge, ASE Holdings Singapore may consider the
Singapore-Malaysia Tax Treaty which allows a resident Singapore company to
declare itself to be a Malaysian tax resident company for purposes of paying
the dividends out of the Malaysian dividend income. This treatment is subject
to the Singapore-Malaysia Tax Treaty. Under this provision in the
Singapore-Malaysia Tax Treaty, we will not be subject to any additional
Singapore tax upon receipt of such Malaysian dividend from ASE Holdings
Singapore. However, when we on-pay the said dividend received from ASE Holdings
Singapore to our shareholders, we will have to pay a Section 44 charge of
28.21% on the amount of dividend paid.

     On May 3, 2002, the Minister for Finance announced in the Financial Year
2002 Budget that Singapore will move to a "one-tier" corporate taxation system
with effect from January 1, 2002. Under this proposed system, the tax collected
from corporate profits is final and Singapore dividends are tax exempt in the
hands of the shareholder, regardless of whether this is a corporate or
individual shareholder and whether the shareholder is a Singapore tax resident.
Thus, under this proposed new taxation system, ASE Holdings Singapore would be
able to pay dividends out the Malaysian pioneer dividends paid by us free of
any Section 44 charge, without the requirement to declare itself as a Malaysian
tax resident as provided under the Singapore-Malaysia Tax Treaty. Further, we
would also be able to on-pay such dividends without any Singapore tax to our
shareholders.

   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%.


                                      41
<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, and
since there is no Cayman Islands tax imposed on such income, no foreign tax
credit will be available to offset against the Singapore tax payable on such
dividends. Under the current imputation system, there is no further Singapore
tax on payment of dividends by us of our previously taxed profits to our
shareholders. Under the proposed "one-tier" corporate taxation system, there
will also be no additional Singapore tax when we on-pay such dividends received
and taxed in Singapore to our shareholders. See "-- Singapore Taxation --
Dividend Distributions."

   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 carryback or carryforward 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        2001
                                               ------      ------     ------
                                                       (in millions)
Net income:
ROC GAAP.....................................  $ 62.2      $107.2     $(45.8)
U.S. GAAP....................................    55.4       101.2      (72.9)
Shareholders' equity:
ROC GAAP.....................................  $295.4      $643.1     $597.5
U.S. GAAP....................................   292.3       638.8      596.2

     Note 27 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 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. We did not, however, pay such a bonus in 2001.
Under ROC GAAP, cash bonuses are charged against retained earnings after such
appropriations are approved by the board of directors and the shareholders in
the following year. In addition to ASE Test Taiwan's regular bonus plan,
employees of ASE Test Taiwan are eligible to participate in our parent company
ASE, Inc.'s share bonus plan. Under ASE, Inc.'s share bonus plan, ASE, Inc.
grants bonuses in the form of its common shares which are issued from the
capitalization of its retained earnings to employees.

     Under U.S. GAAP, we would be required to charge the market value of the
employee bonus shares to employee compensation expense in the period for which
they relate, correspondingly reducing our net income and income per share
calculated in accordance with U.S. GAAP. However, since the amount and form of
the payment of the compensation is subject to board of directors and
shareholder approval and only determinable at the annual shareholders' meeting,
which is generally held after the issuance of our financial statements, under
U.S. GAAP the


                                      42
<PAGE>


compensation expense is initially accrued based on management's estimate
regarding the amount to be paid and the market value of the ordinary shares
issued as payment of all or any part of the bonus is recorded. Any difference
between the initially accrued amount and the fair market value of the bonus
shares paid is recognized in the year approved by the board of directors and
shareholders. We estimate that the regular annual employees' bonuses, including
cash and shares, will be approximately three to four months' salaries and
wages.

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

     In May 2001, the Company's directors exercised certain stock options for
2,480,000 shares at $3.5 per share under the 1996 stock option plan. ASE, Inc.
was concerned about potential dilution caused by the sales of these shares into
the marketplace and decided, based on a resolution of its board of directors,
to purchase these shares from the directors at the approximate market price of
$14.27 per share on the day the options were exercised. Under ROC GAAP, such a
share purchase is accounted for as additional investment in our shares by ASE,
Inc. However, under U.S. GAAP, when shares are purchased from employees within
six months after the exercise of vested options, the compensation expense shall
be measured as the difference between the market price of the shares on the
date of purchase and the market price on the date the options were issued.
Consequently, the difference amounting to $26,710,000 arising from such share
purchase by ASE, Inc. was recorded by the Company as compensation expenses and
credited to capital surplus. See Note 27(h) of Notes to Consolidated Financial
Statements.

Recent U.S. GAAP Accounting Pronouncements

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

     In June 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 141, "Accounting for Business Combinations", and SFAS No. 142, "Goodwill
and Other Intangible Assets". We were required to adopt these standards on
January 1, 2002, which may affect accounting for business combinations
consummated after June 30, 2001 and that for existing goodwill and other
intangible assets upon adoption. The standards require, among other things,
companies to review for possible impairment of goodwill existing at the date of
adoption and perform subsequent impairment tests on an annual basis. In
addition, existing goodwill and intangible assets must be reassessed and
classified consistently in accordance with the criteria set forth in SFAS No.
141 and SFAS No. 142. Under the new standards, we will no longer amortize
goodwill but intangible assets will continue to be amortized over their
estimated useful lives, which, if supportable, may be a period that exceeds the
current maximum period of 40 years. As of December 31, 2000 and 2001, we had
unamortized goodwill of approximately $61.2 million. Total goodwill
amortization expenses of goodwill under ROC GAAP incurred for the years ended
December 31, 1999, 2000 and 2001 were $4.7 million, $7.1 million and $7.1
million respectively. We have not yet completed our assessment of the impact
that these new standards may have on the accompanying financial statements and
cannot estimate whether the related impact would be material or not.

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

     In August 2001, the U.S. Financial Accounting Standards Board issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of", and the accounting and reporting provisions of APB Opinion
No. 30, "Reporting the Results of Operations-Reporting the Effects of a Segment
of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". SFAS No. 144 is


                                      43
<PAGE>


effective for years beginning after December 15, 2001. The impact of adopting
this accounting standard is not expected to have a material effect on our
financial position and results of operations.

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 $147.0 million in 2001, $203.6 million in 2000 and
$95.1 million in 1999. Our cash and cash equivalents are primarily held in U.S.
dollars.

     Our net cash provided by operating activities amounted to $147.0 million
for 2001, partly as a result of adjusting for non-cash depreciation and
amortization of $144.9 million. Our net cash provided by operating activities
amounted to $203.6 million for 2000, partly as a result of adjusting for
non-cash depreciation and amortization of $117.5 million. The decline in net
cash generated by operating activities was primarily a result of our net loss
of $45.8 million in 2001, compared to a net profit of $107.2 million in 2000.
Depreciation and amortization increased in 2001 compared to 2000 primarily due
to the full year effect of our capacity expansion in 2000. In 1999, our net
cash provided by operating activities amounted to $95.1 million, partly as a
result of adjusting for non-cash depreciation and amortization expenses of
$68.8 million. The increase in net cash generated by operating activities in
2000 compared to 1999 was primarily due to an increase in depreciation and
amortization and an increase in net income to $107.2 million in 2000 from $62.2
million in 1999. The increase in depreciation and amortization in 2000 compared
to 1999 was primarily due to increased capital investment for the expansion of
our production capacity.

     Net cash used in investing activities decreased to $144.2 million in 2001
from $367.4 million in 2000. This decrease was primarily due to a significant
decrease in the acquisition of machinery and equipment for our testing and
packaging operations to $102.5 million in 2001 from $372.6 million in 2000. Net
cash used in investing activities was $237.2 million in 1999. The most
significant components of this were the acquisition of ISE Labs and the
acquisition of $110.7 million of machinery and equipment in connection with our
testing and packaging operations.

     Net cash used in financing activities in 2001 amounted to $52.8 million.
This amount primarily reflects a decrease in payables for fixed assets of $39.3
million. Net cash provided by financing activities in 2000 amounted to $277.8
million, primarily reflecting proceeds of $271.8 million from our offering of
capital shares in July 2000. Net cash provided by financing activities in 1999
was $166.2 million, primarily reflecting the proceeds from long-term debt of
$191.9 million, including proceeds received from our issuance of convertible
notes.

      We incurred capital expenditures of $105 million in 2001, $413 million in
2000 and $129 million in 1999. These expenditures were incurred primarily for
the acquisition of new testing and packaging equipment and the expansion of
existing facilities. As of December 31, 2001, we had no material commitments
for capital expenditures. We have projected capital expenditures in 2002 of
approximately $120 million, primarily in connection with the acquisition of
additional testing and packaging equipment and facility improvement. However,
the actual amount of capital expenditures may vary from those budgeted for a
variety of reasons, including changes in market conditions, unavailability or
changes in scheduled delivery of specific equipment, changes in interest rates
and other factors. In addition, we expect to continue to expand capacity in
future periods. We expect to finance these expenditures from cash flow from
operations and, when necessary, through debt or equity financing.

     As of December 31, 2001, we had total outstanding indebtedness of $279.0
million, of which approximately $9.9 million was short-term indebtedness
(including the current portion of long-term debt), and $269.1 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 December
31, 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 $20.7 million and $46.8
million of our long-term indebtedness (excluding accrued interest) is scheduled
to be repaid in 2002 and 2003. We expect to be able to meet such repayments
from cash


                                      44
<PAGE>


generated from operations and, if necessary, the incurrence of additional
indebtedness. As of December 31, 2001, we had total available unused short-term
lines of credit of $130.2 million and unused long-term facilities of $21.1
million. See Notes 9 and 10 of Notes to Consolidated Financial Statements.

     The following tables set forth our contractual obligations and commitments
with definitive payment terms which will require significant cash outlays in
the future, as of December 31, 2001:

<TABLE>
                                                                     Payments Due by Period
                                            ------------------------------------------------------------------------
                                                                          (in million)
                                            ------------------------------------------------------------------------
                                                                                                         2006 and
    Contractual Obligations                 Total        2002         2003         2004         2005      thereafter
-------------------------------             -----        ----         ----         ----         ----      ----------
<S>                                         <C>          <C>          <C>         <C>            <C>          <C>
Long-term Debt....................          269.1        20.7         46.8        195.3          4.2          2.1
Capital Lease Obligations.........            1.1         0.9          0.2          0.0          0.0          0.0
Operating Leases..................           52.9         8.2          7.5          7.4          7.4         22.4
Unconditional Purchase Obligations           40.0        40.0          0.0          0.0          0.0          0.0
</TABLE>

     We believe that our existing cash and cash equivalents, short-term
investments, expected cash flow from operations and existing credit lines under
our short-term loan facilities will be sufficient to meet our capital
expenditures, working capital, cash obligations under our existing debt and
lease arrangements, and other requirements through the end of 2002. We have
contractual obligations of $327 million due in the next three years. We intend
to meet our payment obligations through the expected cash flow from operations,
long-term debt and the issuance of additional equity or equity-linked
securities. We will continue to evaluate our capital structure and may decide
from time to time to increase or decrease our financial leverage through equity
offerings or debt borrowings. The issuance of additional equity or
equity-linked securities may result in additional dilution to our shareholders.

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

Off-Balance Sheet Arrangements

     We have, from time to time, entered into interest rate swap transactions
to hedge our interest rate exposure. As of December 31, 2001, there were no
outstanding interest rate swap transactions. In addition, we have entered into
foreign currency option contracts to hedge our existing assets and liabilities
denominated in foreign currencies and identifiable foreign currency purchase
commitments. As of December 31, 2001, we had $14 million outstanding in foreign
currency option contracts. See "Item 11. Quantitative and Qualitative
Disclosures About Market Risk".

Inflation

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

RESEARCH AND DEVELOPMENT

     Our research and development efforts have focused primarily on improving
the efficiency and technology of our testing services. 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 December 31, 2001, we employed 349 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 $3.8 million, $12.1 million and $14.4 million in
1999, 2000 and 2001, representing approximately


                                      45
<PAGE>


1.4%, 2.7% and 4.8% of our net revenues, respectively. We have historically
expensed all research and development costs as incurred and none is currently
capitalized. ASE, Inc. has historically shared its research and development
relating to our packaging operations with ASE Test Malaysia at no cost. While
such arrangements are expected to continue in the future, no assurances can be
given that ASE, Inc. will continue providing research and development at no
cost, or at all.

Item 6.  Directors, Senior Management and Employees.

DIRECTORS AND SENIOR MANAGEMENT AND BOARD PRACTICES

Directors

     The following table sets forth information with respect to our directors
as of December 31, 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, Mr. Raymond Lo, who was first appointed in May 2001, Mr.
Kanapathi A/L Kuppusamy, who was first appointed in August 2000, and Mr. Alan
Tien-Cheng Cheng, who was first appointed in June 1999, all of our directors
were first appointed in June 1996. Except for Mr. Jeffrey Chen and Mr. Joseph
Tung, whose terms have no expiration date, the current term of our directors
expires on the date of the annual general shareholders' meeting in 2002. As of
April 30, 2002, our directors and executive officers as a group held options
covering an aggregate of 4,318,000 shares, of which options with respect to
1,740,500 shares were exercisable as of that date.

<TABLE>
                 Name                                 Age                     Position
---------------------------------------------         ---      -------------------------------------------
<S>                                                    <C>     <C>
 Richard H.P. Chang..........................          55      Chairman
 Leonard Y. Liu..............................          60      Director and Chief Executive Officer
 David Pan...................................          57      Director and President
 Jeffrey Chen................................          38      Director and Chief Financial Officer
 Chin Ko-Chien...............................          56      Director
 Wang Yung-Kang..............................          61      Director
 Alan Tien-Cheng Cheng.......................          56      Director
 Joseph Tung.................................          43      Director
 Albert C.S. Yu..............................          50      Director
 David D.H. Tsang............................          60      Director
 Sim Guan Seng...............................          42      Director
 Raymond Lo..................................          48      Director and President of ASE Test Taiwan
 Kanapathi A/L Kuppusamy.....................          50      Director and President of ASE Test Malaysia
</TABLE>

     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. 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.


                                      46
<PAGE>


     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
and chairman of the China Times, a Chinese language newspaper in Taiwan, since
1984. He holds a masters degree in business administration from San Francisco
University.

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

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

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

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

Executive Officers

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


                                      47
<PAGE>

                 Name                    Age                 Position
-------------------------------------    ---      ------------------------------
 Richard H.P. Chang..................     55      Chairman
 Leonard Y. Liu......................     60      Chief Executive Officer
 David Pan...........................     57      President
 Jeffrey Chen........................     38      Chief Financial Officer
 Raymond Lo..........................     48      President of ASE Test Taiwan
 Kanapathi A/L Kuppusamy.............     50      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.

COMPENSATION

     The aggregate compensation paid in 2001 to our directors and our executive
officers, including cash and share bonuses, was approximately $1.26 million. In
addition, options in respect of an aggregate of 2,280,000 shares were granted
to these persons in 2001. Such options have an exercise price of $8.875 to
$11.50 and an expiration date of January 15, 2011 to November 13, 2011. We did
not set aside for pension, retirement or similar benefits for these persons in
2001. 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 $1.4 million, $1.9 million and $1.4 million in 2001, 2000 and
1999, 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 $2.6 million, 2.1 million and $1.4 million in 2001, 2000 and 1999,
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 and $2.8 million to this bonus plan in 2000
and 1999, respectively. We did not contribute to the plan in 2001. 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 4,147,594 shares, 4,045,230
shares and 875,000 shares in 2001, 2000 and 1999, respectively, as share awards
to our employees with a fair market value at the date of grant of $3.3 million,
$9.3 million and $2.1 million, respectively. We expect this practice to
continue in future periods. In


                                      48
<PAGE>


addition to bonus shares granted under ASE, Inc.'s regular bonus plan, ASE,
Inc. granted a special bonus to ASE Test Taiwan's employees in 2000 of shares
of ASE, Inc. We record a compensation charge in our consolidated financial
statements under U.S. GAAP based on the fair market value of the ASE, Inc.
shares awarded, calculated at the date of the relevant board of directors
meeting granting such awards. Because these were shares of ASE, Inc., the
issuance of these shares will not have a dilutive effect on our shareholders.
See "Item 5. Operating and Financial Review and Prospects -- Operating Results
and Trend Information -- U.S. GAAP Reconciliation" and Note 27 of Notes to
Consolidated Financial Statements.

Pension Plan

     ASE Test Taiwan has a defined benefit pension plan covering our regular
employees. Retirement benefits are based on length of service and average
salaries or wages in the last six months before retirement. ASE Test Taiwan
makes monthly contributions, at 2% of salaries and wages, to a pension fund
which is deposited in the name of, and administered by, the employees' pension
plan committee. Our accrued pension cost as of December 31, 2001 was $0.8
million. See Note 13 of Notes to Consolidated Financial Statements.

EMPLOYEES

Employees

     We had 4,469, 5,707 and 4,882 employees as of December 31, 1999, 2000 and
2001, respectively. The following table sets forth certain information
concerning our employees as of the dates indicated:

                                                As of December 31,
                                        ------------------------------
                                         1999        2000         2001
                                        -----       -----        -----

Total................................   4,469       5,707        4,882
Function
Direct labor.........................   2,796       3,448        2,726
Indirect labor.......................   1,171       1,291        1,280
Selling, general and administrative..     392         582          527
Research and development.............     110         386          349
Location
Taiwan...............................   1,199       1,549        1,468
Malaysia.............................   2,625       3,407        2,854
United States........................     472         523          438
Hong Kong............................     137         124           54
Singapore............................      36         104           68

     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 April 30, 2002.

<TABLE>

                                                   Percentage of
                                      Number of   Total Ordinary     Number of   Exercise Price
                                       Ordinary   Shares Issued       Options      of Options      Expiration Date
         Officer or Director        Shares Held  and Outstanding      Held(1)         (US$)           of Options
         -------------------      -------------  ----------------    ---------   --------------   ------------------
<S>                                   <C>            <C>              <C>           <C>           <C>
 Richard H.P. Chang..............     1,046,276          1.06        1,080,000       8.9 - 20     6/16/02 - 11/13/11
 Leonard Y. Liu..................        40,000          0.04        1,420,000       8.9 - 20     6/16/02 - 11/13/11
 David Pan.......................         4,700          0.01          280,000       8.9 - 20     6/16/02 - 11/13/11
 Jeffrey Chen....................             -          -             227,000       5.5 - 25      3/3/02 - 11/13/11
 Chin Ko-Chien...................        36,000          0.04          258,000       8.9 - 20     6/16/02 - 11/13/11
 Wang Yung-Kang..................        20,000          0.02          166,000       8.9 - 20     6/16/02 - 11/13/11
 Alan Tien-Cheng Cheng...........             -          -              40,000         9 - 20     8/10/04 - 11/13/11
 Joseph Tung.....................       153,000          0.16          260,000       8.9 - 20     6/16/02 - 11/13/11


                                                          49
<PAGE>

<CAPTION>
                                                   Percentage of
                                      Number of   Total Ordinary     Number of   Exercise Price
                                       Ordinary   Shares Issued       Options      of Options      Expiration Date
         Officer or Director        Shares Held  and Outstanding      Held(1)         (US$)           of Options
         -------------------      -------------  ----------------    ---------   --------------   ------------------
<S>                                   <C>            <C>              <C>           <C>           <C>

 Albert C.S. Yu...................     45,176            0.05          120,000         9 - 20     6/16/02 - 11/13/11
 David D.H. Tsang.................          -               -           92,000         9 - 20     6/16/02 - 11/13/11
 Sim Guan Seng....................          -               -                -              -                  -
 Raymond Lo.......................          -               -          220,000       8.9 - 25     6/16/02 - 11/13/11
 Kanapathi A/L Kuppusamy..........          -               -          155,000       8.9 - 25     9/17/03 - 11/13/11
------------------------------
(1) Each option covers one ordinary share.
</TABLE>

Share Option Plans

     We currently maintain six option plans which include an option plan
adopted prior to the initial public offering, also known as the pre-IPO plan,
and plans adopted in each year from 1996 to 2000. Under our share option plans,
our directors, employees, advisors and consultants and those of our affiliates
may, at the discretion of a committee of our directors administering the plan,
be granted options to purchase our shares at an exercise price of no less than
their market value on the date of grant. The committee has complete discretion
to determine which eligible individuals are to receive option grants, the
number of shares subject to each grant, the vesting schedule to be in effect
for each option grant and the maximum term for which each granted option is to
remain outstanding, up to a maximum term of five years, or in the case of the
1999 and 2000 option plans, ten years. Our board of directors may amend or
modify the plans at any time. As of December 31, 2001, an aggregate of
30,300,000 our shares had been reserved for issuance and 16,308,585 options to
purchase our shares remained outstanding under our various option plans. An
aggregate of 7,030,000 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 $2.06 to $25.00 per share. Options granted
under the pre-IPO, 1996, 1997 and 1998 option plans will expire five years from
the date of grant, and in the case of the 1999 and 2000 plans, ten years from
the date of grant.

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 June 14, 2002, ASE, Inc. indirectly owned approximately 50.52% of
our outstanding shares through two wholly-owned Bermuda subsidiaries, J&R
Holding Limited and ASE Holding Limited. ASE, Inc. is in a position to control
actions that require shareholders' approval, including the timing and payment
of dividends and the election of our entire board of directors.

     There have been no changes in our major shareholders or significant
changes in the amount of shares each major shareholder holds since January 1,
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 April 30, 2002.

<TABLE>
                                                                        Number of
                     Identity of Person or Group                       Shares Owned          Percent Owned
---------------------------------------------------------------------  -------------------   -------------
<S>                                                                     <C>                      <C>
ASE, Inc.............................................................   50,050,740(1)(2)(3)          50.5%
Capital Group International, Inc., Capital International, Inc.,
  Capital International Limited, Capital International S.A. and
  Capital International Research and Management, Inc. (together,
  "Capital International")...........................................    5,833,300                    6.0
Directors and executive officers as a group(4).......................    1,345,152                    1.4
---------------
</TABLE>


                                                     50
<PAGE>


(1)  As of June 14, 2002.

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

(3)  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.

(4)  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.

     As of May 31, 2002, approximately 99.0 million of our shares were
outstanding. We believe that, of such shares, approximately 22.5 million were
held by approximately 1,800 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 4,147,594 shares in 2001, 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 $3.3 million, $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$177.8 million (US$5.1 million), NT$142.7 million and
NT$81.5 million in 2001, 2000 and 1999, respectively. ASE, Inc. sold to ASE
Test Taiwan at book value a building at an aggregate price of NT$18.4 million
in 2000.

     ASE Test Malaysia has historically purchased a portion of the raw
materials used in its packaging operations, principally leadframes, from ASE,
Inc. when it faced a shortage in the supply of these types of raw materials.
These types of raw materials are typically sold by ASE, Inc. to ASE Test
Malaysia at book value. Purchases of raw materials by ASE Test Malaysia
amounted to NT$17.2 million (US$0.5 million), NT$3.6 million and NT$14.6
million in 2001, 2000 and 1999, respectively. In addition, ASE, Inc. purchased
raw materials, principally leadframes, from ASE Test Malaysia in an amount of
NT$12.8 million (US$0.4 million), NT$11.9 million and NT$4.3 million for 2001,
2000 and 1999, respectively.

     In 2001, ASE Test Malaysia purchased raw materials, primarily leadframes
and substrates, from ASE Material in the aggregate amount of NT$79.3 million
(US$2.3 million). These types of raw materials are typically sold by ASE
Material to ASE Test Malaysia through ASE Test Malaysia's relationship with
ASE, Inc.

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


                                      51
<PAGE>


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

     In January 2000, ASE Chung Li and Hung Ching Development & Construction
Co. Ltd. ("Hung Ching"), an affiliate of ASE, Inc., entered into an agreement
for the development of buildings on land currently owned by ASE Chung Li. Under
the agreement, Hung Ching will bear all costs relating to the development. Upon
completion of the development, floor space in the buildings will be sold by
Hung Ching at prices to be negotiated between Hung Ching and the buyers. ASE
Chung Li and its affiliates will have priority in the purchase of the floor
space. In the event that floor space is sold to persons other than ASE Chung
Li, ASE Chung Li will receive 25% of the selling price. The first phase of the
development project was the construction of a building with aggregate floor
space of approximately 800,000 square feet, which was completed in September
2000. The total value of the first phase of the project, including land and the
completed building, is estimated at NT$2.0 billion. The new building is
expected to house ASE Chung Li's testing operations as well as part of the
operations of other ASE Group companies.

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

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

     We have based the above translations from NT dollars to U.S. dollars on
the noon buying rate certified by the Federal Reserve Bank of New York on
December 31, 2001, which was NT$35.00 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".

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 benefited Jason C.S. Chang to the detriment of Hung Ching. Hung
Ching at that time was a privately owned company whose principal shareholders
were members of the Chang family. Ancillary charges were brought against Jason
C.S. Chang, Chang Yao Hung-ying and another for alleged forgery of Hung Ching
board resolutions relating to that transaction. On January 2002, the High Court
of Taipei rendered a judgment relating to the appeal of a judgment in the
matter by the District Court of Taipei in January 2001. In its judgment, the
High Court found Jason C.S. Chang and Chang Yao Hung-ying guilty and Richard
H.P. Chang not guilty and reduced the sentences rendered by the District Court
relating to Mr. Chang and Mdm. Chang from six years to four years and three
years, respectively. 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.


                                      52
<PAGE>


     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 Supreme 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 Supreme Court of Taiwan, the ROC, one or two years may elapse until they
are fully resolved.

SIGNIFICANT CHANGES

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

Item 9.  Listing Details.

MARKET PRICE INFORMATION AND MARKETS

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

                                                 Ordinary Share Price(1)
                                                 -----------------------
                                                     High            Low
                                                 --------       --------
Year Ended December 31,
   1997 .........................................  23.000          4.750
   1998 .........................................  28.250         10.000
   1999 .........................................  26.938         24.375
   2000 .........................................  36.250          8.500
   2001 .........................................  17.438          6.800

Year Ended December 31, 2000
   First Quarter.................................  36.250         21.500
   Second Quarter ...............................  30.375         23.125
   Third Quarter ................................  31.938         21.000
   Fourth Quarter ...............................  21.750          8.500

Year Ended December 31, 2001
   First Quarter.................................  17.438          8.000
   Second Quarter ...............................  15.450         10.250
   Third Quarter ................................  12.910          6.800
   Fourth Quarter ...............................  14.130          7.300

Year Ended December 31, 2002
   First Quarter.................................  16.680         10.350
   Second Quarter (through June 27, 2002)........  16.500          8.750

   Monthly
   October 2001..................................   9.400          7.300
   November 2001.................................  11.320          8.170
   December 2001.................................  14.350         11.050
   January 2002..................................  15.920         10.350
   February 2002.................................  13.690         11.090
   March 2002....................................  16.680         13.100
   April 2002....................................  16.500         13.000
   May 2002......................................  14.110         11.580
   June 2002 (through June 27, 2002).............  12.740          8.750
---------------
(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


                                      53
<PAGE>


     The last reported sale price of the shares on the Nasdaq National Market
as of June 27, 2002 was $9.43. As of December 31, 2001, there were 30 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. As of March 15,
2002, there were 847.1 million TDSs representing 10.6 million shares.

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

                                                       TDS Prices(1)
                                                 -----------------------
                                                     High            Low
                                                 --------       --------
Year Ended December 31,
1998 ........................................    NT$25.50        NT$7.20
1999 ........................................       20.50          12.20
2000 ........................................       26.00           4.04
2001 ........................................        8.40           3.10

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 Ended December 31, 2001
First Quarter....................................    8.40           4.05
Second Quarter ..................................    7.35           5.20
Third Quarter ...................................    5.60           3.10
Fourth Quarter...................................    6.35           3.11

Year Ended December 31, 2002
First Quarter....................................    7.35           4.95
Second Quarter...................................    7.20           4.30

Monthly
October 2001.....................................    4.28           3.11
November 2001....................................    4.79           3.69
December 2001....................................    6.35           4.25
January 2002.....................................    6.80           5.15
February 2002....................................    5.80           4.95
March 2002.......................................    7.35           5.55
April 2002 ......................................    7.20           6.00
May 2002.........................................    6.25           5.30
June 2002........................................    5.60           4.30

(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$4.57 per TDS on June 28, 2002.


                                      54
<PAGE>


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.

Directors

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

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

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

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

Shares

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

     As of May 31, 2002, 99,021,840 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.


                                      55
<PAGE>


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, 2001, there were 30 members who
were holders of record of our shares. We will not, except as required by law,
recognize any equitable, contingent, future or partial interest in our shares
or any other rights in respect of our shares other than the rights of a member.
We may, on giving not less than 14 days' notice to the Registrar of Companies
and Businesses of Singapore, close our register of members for any time or
times except that we may not close the register for more than 30 days in the
aggregate in any calendar year.

Transfer of Shares

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

General Meetings of Members

     We are required to hold an annual general meeting each year not later than
fifteen months following the preceding annual general meeting. Our fifth annual
general meeting was held on June 28, 2001. 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.


                                      56
<PAGE>


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.

Dividends

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

Stock Dividends and Rights Issue

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

Takeovers

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

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

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


                                      57
<PAGE>


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.

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


                                      58
<PAGE>


     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 August 1, 2001 between ASE Electronics (M) Sdn.
Bhd. and ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test
Malaysia's non-exclusive sales service and sales support agent in Europe and
North America for its products and services. For such services, our subsidiary
pays ASE (U.S.) 14% of their monthly incurred services associated costs and
expenses plus 10% or $161,700, whichever is lower. ASE (U.S.) agreed to
reimburse our subsidiary for expenses for any employee traveling to the U.S. or
Europe if such travel was necessary to ASE (U.S.)'s services. This agreement
will expire on July 31, 2002.

Service Agreement dated as of August 1, 2001 between ASE Test Inc. and
ASE (U.S.) Inc.

     This contract established ASE (U.S.) as our subsidiary, ASE Test Inc.'s
non-exclusive sales service and sales support agent in Europe and North America
for its products and services. For such services, our subsidiary pays ASE
(U.S.) 17% of their monthly incurred services associated costs and expenses
plus 5% or $196,350, whichever is lower. ASE (U.S.) agreed to reimburse our
subsidiary for expenses for any employee traveling to the U.S. or Europe if
such travel was necessary to ASE (U.S.)'s services. This agreement will expire
on July 31, 2002.

Commission Agreement dated as of August 1, 2001 between ASE Electronics (M) Sdn,
Bhd. and Gardex International Limited.

     This contract established Gardex as our subsidiary, ASE Test Malaysia's
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Malaysia, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2002.

Commission Agreement dated as of August 1, 2001 between ASE Test Inc. and Gardex
International Limited.

     This contract established Gardex as our subsidiary, ASE Test Inc.'s
non-exclusive worldwide sales agent for all its products and services. For such
services, our subsidiary pays Gardex monthly, in respect of net export sales
outside Taiwan, 0.56% of the sales amount for monthly sales. This agreement
will expire on July 31, 2002.

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


                                      59
<PAGE>


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.

     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."


                                      60
<PAGE>


   Taxation of Capital Gains

     You will recognize capital gain or loss for U.S. federal income tax
purposes on a sale or other disposition of shares. 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 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.

Singapore Taxation

     The following discussion is a summary of the material Singapore income
tax, stamp duty and estate duty consequences of the purchase, ownership and
disposition of the shares to a holder of the shares that is not resident in
Singapore. This discussion does not purport to be a comprehensive description
of all of the tax considerations that may be relevant to a decision to
purchase, own or dispose of the shares and does not purport to deal with the
tax consequences applicable to all categories of investors. Shareholders and
prospective purchasers of our shares should consult their own tax advisors
concerning the tax consequences of their particular situations.

     This summary is based on laws, regulations, treaty provisions and
interpretations now in effect and available as of the date of this annual
report. The laws, regulations, treaty provisions and interpretations, however,
may change at any time, and any change could be retroactive to the date of
issuance of our shares. These laws, regulations and treaty provisions are 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 Singapore corporate tax rate is 24.5% for the year of assessment 2002
(financial year ending in 2001). In addition, three quarters of up to the first
S$10,000 of a company's chargeable income, and one half of up to the next
S$90,000 will be exempt from corporate tax with effect from the year of
assessment 2002. The remaining chargeable income (after the tax exemption) will
be taxed at 24.5%. As a temporary measure to cushion the impact of economic
slow-down, Singapore has also granted certain tax rebates for the Years of
Assessment 2001 and 2002. For the Year of Assessment 2002, pursuant to the
second off-budget measures announced on October 12, 2001, a tax rebate of 5%
(excluding tax on Singapore dividends and tax on income subject to final
withholding tax) is granted. In relation to dividends paid out of such
non-tax-exempt income, the tax imputed to, and deemed paid on behalf of, our
shareholders is currently at the rate of 22%. We would also be allowed to
distribute, as exempt dividends, an amount of income that is effectively not
subject to tax as a result of the tax rebate.

     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 22% on certain types of income derived from
Singapore (or generally 15.0% in the case of interest, royalty and rental of
movable property).

     A company will be regarded as being resident in Singapore if the control
and management of its business is exercised there, for example, if the
company's board of directors meets and conducts the business of the company 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 - current taxation system

     Under Singapore's current 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


                                      61
<PAGE>


our shareholders as a tax credit to offset their Singapore income tax liability
on the gross amount of dividends paid by us.

     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. Please also take note of the proposed tax changes as outlined below.

     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 payable 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.

   Dividend Distributions - proposed taxation system

     On May 3, 2002, the Minister for Finance announced in the Financial Year
2002 Budget that Singapore will move to a "one-tier" corporate taxation system
with effect from January 1, 2003. Under this proposed system, the tax collected
from corporate profits is final and Singapore dividends are tax exempt in the
hands of the shareholder, regardless of whether this is a corporate or
individual shareholder and whether the shareholder is a Singapore tax resident.
To enable companies to make full use of the utilized dividend franking credits
as of December 31, 2002, the Minister for Finance proposed to introduce a
5-year transition period from January 1, 2003 to December 31, 2007 for such
companies to pay franked dividends out of their unutilized dividend franking
credits. During this period, the shareholders will continue to receive these
dividends with credits attached as mentioned above under the current taxation
system. As we do not have significant unutilized dividend franking credits, it
is expected that any dividend payments by us with effect from January 1, 2003
will be made under the proposed "one-tier" taxation system, and thus will be
considered tax exempt dividends to the shareholders.

   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 if they arise from
activities which the Inland Revenue Authority of Singapore regard as the
carrying on of a trade 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 (or S$1.40
for transfers executed between October 13, 2001 and December 31, 2001, both
dates inclusive) 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 immovable properties situated in
Singapore owned by such individual, subject to specific exemption limits.
Previously, movable assets of non-domiciles were also included. On May 3, 2002,
the Minister for Finance


                                      62
<PAGE>


announced in the Financial Year 2002 Budget that the movable assets of
non-domiciles will be exempt from estate duty. Therefore, an individual holder
of shares who is not domiciled in Singapore at the time of his or her death
will not be subject to Singapore estate duty on the value of shares in the
Company. Individuals should consult their own tax advisors regarding the
Singapore estate duty consequences of their ownership of our shares.

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.

FOREIGN CURRENCY EXCHANGE RATE RISK

     Our foreign currency exposures give rise to market risk associated with
exchange rate movements against the NT dollar, U.S. dollar and Malaysian
ringgit. Our liabilities as of December 31, 2001 include liabilities
denominated in U.S. dollars, NT dollars, Malaysian ringgit and other
currencies. As of December 31, 2001, approximately 80.7% of our cash and
accounts receivable and receivable from related parties were denominated in
U.S. dollars, approximately 17.1% in NT dollars, approximately 2.1% in
Malaysian ringgit and approximately 0.1% in other currencies. As of December
31, 2001, approximately 73.7% of our accounts payable and payable for fixed
assets were denominated in U.S. dollars, approximately 13.1% in NT dollars,
approximately 5.4% in Malaysian ringgit and approximately 7.8% 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. For information on our
derivative contracts for foreign exchange outstanding as of December 31, 2001,
please see Note 21 of Notes to Consolidated Financial Statements.

INTEREST RATE RISK

     Our exposure to interest rate risks relates primarily to our long-term
debt, which is normally incurred to support our corporate activities, primarily
for capital expenditures. We currently do not enter into derivative
transactions with regard to interest rates, but we would consider engaging in
currency interest rate swaps to lock in currency and interest rate levels from
time to time, if available, on terms considered attractive by us. No derivative
contract for interest rates was outstanding as of December 31, 2001.

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

<TABLE>
                                                           As of December 31, 2001
                          --------------------------------------------------------------------------------------------
                                                            Expected Maturity Date
                          --------------------------------------------------------------------------------------------
                                                                                 2007 and
                            2002       2003       2004       2005       2006    Thereafter        Total     Fair Value
                          ------     ------     ------     ------     ------    ----------      -------     ----------
                                                                (in millions)
<S>                       <C>        <C>        <C>        <C>        <C>       <C>              <C>        <C>
Short-term debt:
  Variable rate (NT$)       70.0          -          -          -          -           -           70.0          70.0
    Average interest rate   3.65%         -          -          -          -           -              -             -
  Variable rate (US$)        2.6          -          -          -          -           -            2.6           2.6
    Average interest rate   3.35%         -          -          -          -           -              -             -
  Variable rate (MYR)       20.5          -          -          -          -           -
    Average interest rate   3.36%         -          -          -          -           -              -             -
Long-term debt:
  Variable rate (NT$)      396.4    1,402.4      135.0       22.5        7.5           -        1,965.6       1,965.6


                                                                    63
<PAGE>


<CAPTION>

                                                           As of December 31, 2001
                          --------------------------------------------------------------------------------------------
                                                            Expected Maturity Date
                          --------------------------------------------------------------------------------------------
                                                                                 2007 and
                            2002       2003       2004       2005       2006    Thereafter        Total     Fair Value
                          ------     ------     ------     ------     ------    ----------      -------     ----------
                                                                (in millions)
<S>                       <C>        <C>        <C>        <C>        <C>       <C>              <C>        <C>
    Average interest rate   4.98%      3.83%      5.71%      7.38%      7.94%          -              -             -
  Fixed rate (US$)           1.0        0.2      136.6          -          -           -          137.8         137.8
    Average interest rate   8.56%      8.79%      7.28%         -          -           -              -             -
  Variable rate (US$)        8.4        6.4        4.7        3.5        0.5         1.3           24.8          24.8
    Average interest rate   6.32%      7.46%      8.25%      8.75%     11.11%      11.82%             -             -

</TABLE>

Item 12.  Description of Securities Other Than Equity Securities.

     Not applicable.


                                    PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies.

     Not applicable.

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

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

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

     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
2001 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 May 17, 2002
          (page F-1).

     (b)  Consolidated Balance Sheets of the Company and subsidiaries as of
          December 31, 2000 and 2001 (page F-3).


                                      64
<PAGE>


     (c)  Consolidated Statements of Income of the Company and subsidiaries for
          the years ended December 31, 1999, 2000 and 2001 (page F-4).

     (d)  Consolidated Statements of Changes in Stockholders' Equity of the
          Company and subsidiaries for the years ended December 31, 1999, 2000
          and 2001 (page F-6).

     (e)  Consolidated Statements of Cash Flows of the Company and subsidiaries
          for the years ended December 31, 1999, 2000 and 2001 (page F-7).

     (f)  Notes to Consolidated Financial Statements of the Company and
          subsidiaries (page F-9).


                                      65



<PAGE>


     ASE Test Limited and Subsidiaries




     Consolidated Financial Statements as of December 31, 1999, 2000 and 2001

     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, 2000 and 2001, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the years in the three-year period ended December
31, 2001, all prepared in accordance with accounting principles generally
accepted in the Republic of China and expressed in US dollars. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2000 and 2001 and the consolidated results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the Republic of China.


                                      F-1
<PAGE>


Accounting principles generally accepted in the Republic of China vary in
certain significant respects from accounting principles generally accepted in
the United States of America. The application of the latter would have affected
the determination of net income for each of the three years in the period ended
December 31, 2001 and the determination of stockholders' equity and financial
position at December 31, 2001 and 2000, to the extent summarized in Note 27 to
the financial statements.






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


May 17, 2002


                                      F-2
<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                                                                  2000             2001
-----------                                                               ----------       ----------
<S>                                                                       <C>              <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2)                                        $  157,145       $  106,065
Pledged time deposits (Note 18)                                                  295              274
Short-term investments (Note 2)                                                9,062           31,503
Accounts receivable:
    Related companies - net (Note 16)                                          3,178            7,835
    Other - net (Notes 2 and 3)                                               83,288           38,738
Inventories - net (Notes 2 and 4)                                             17,564           13,439
Deferred income tax assets - net (Notes 2 and 12)                              7,938            9,784

Prepaid expenses and other current assets                                     11,988           10,324
                                                                          ----------       ----------
Total Current Assets                                                         290,458          217,962
                                                                          ----------       ----------

LONG-TERM INVESTMENTS (Notes 2 and 5)
Shares of stock                                                               86,811           95,042
Bonds                                                                            350                -
                                                                          ----------       ----------
                                                                              87,161           95,042
                                                                          ----------       ----------

PROPERTIES - NET (Notes 2, 6, 16, 18 and 24)                                 639,082          586,834
                                                                          ----------       ----------

DEFERRED INCOME TAX ASSETS - NET (Notes 2 and 12)                              9,860            3,148
                                                                          ----------       ----------

OTHER ASSETS                                                                   3,867            2,723
                                                                          ----------       ----------

CONSOLIDATED DEBITS (Notes 1, 2 and 7)                                        61,227           53,697
                                                                          ----------       ----------

TOTAL ASSETS                                                              $1,091,655       $  959,406
                                                                          ==========       ==========
</TABLE>

<TABLE>
                                                                               As of December 31
                                                                          ---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                         2000             2001
------------------------------------                                      ----------       ----------
<S>                                                                       <C>              <C>
CURRENT LIABILITIES
Short-term borrowings (Notes 9 and 18)                                    $   17,728       $    9,946
Accounts payable
    Related companies (Note 16)                                                1,557            6,013
    Other                                                                     24,788           11,794
Payable for properties                                                        68,412           24,961
Income tax payable                                                             6,965            3,545
Current portion of long-term debts (Notes 10 and 18)                          22,008           20,730
Accrued expenses and other current liabilities (Note 8)                       16,846           13,168
                                                                          ----------       ----------
Total Current Liabilities                                                    158,304           90,157

LONG-TERM DEBTS (Notes 10 and 18)                                            265,489          248,371

ACCRUED PENSION COST (Notes 2 and 13)                                            568              810

OTHER LIABILITIES                                                                395            1,341
                                                                          ----------       ----------

Total Liabilities                                                            424,756          340,679
                                                                          ----------       ----------

COMMITMENTS AND CONTINGENCIES (Note 19)

MINORITY INTEREST IN CONSOLIDATED

SUBSIDIARIES (Note 2)                                                         23,763           21,204
                                                                          ----------       ----------

SHAREHOLDERS' EQUITY (Notes 1, 2, 11 and 14)
Share capital - $0.25 par value
    Authorized - 600,000,000 ordinary shares
    Issued and outstanding - 91,425,691 ordinary shares in 2000 and
       96,647,199 ordinary shares in 2001                                     22,856           24,162
Capital surplus                                                              409,677          428,205
Retained earnings                                                            266,526          220,767
Unrealized loss on long-term investments in shares of stock                     (541)            (442)
Cumulative translation adjustments                                           (55,382)         (75,169)
                                                                          ----------       ----------
Total Shareholders' Equity                                                   643,136          597,523
                                                                          ----------       ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $1,091,655       $  959,406
                                                                          ==========       ==========
</TABLE>

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


                                                  F-3
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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


<TABLE>
                                                                               Year Ended December 31
                                                                     -------------------------------------------
                                                                        1999             2000             2001
                                                                     ---------        ---------        ---------
<S>                                                                  <C>              <C>              <C>
NET REVENUES (Notes 2, 16 and 24)                                    $ 270,254        $ 440,285        $ 298,466

COST OF REVENUES (Note 16)                                             173,758          263,513          265,271
                                                                     ---------        ---------        ---------

GROSS PROFIT                                                            96,496          176,772           33,195
                                                                     ---------        ---------        ---------

OPERATING EXPENSES
Selling, general and administrative                                     27,765           49,861           42,865
Research and development (Note 2)                                        3,837           12,059           14,397
                                                                     ---------        ---------        ---------
Total Operating Expenses                                                31,602           61,920           57,262
                                                                     ---------        ---------        ---------

INCOME (LOSS) FROM OPERATIONS                                           64,894          114,852          (24,067)
                                                                     ---------        ---------        ---------

NON-OPERATING INCOME (EXPENSES)
Interest - net (Notes 2, 6 and 15)                                     (11,703)         (14,740)         (13,783)
Investment income (loss) under equity method - net
  (Notes 2 and 5)                                                        4,842           16,127           (7,344)
Gain on sale of long-term investments in shares of stock
  (Notes 2 and 5)                                                        6,588                -                -
Loss on long-term investments in bonds (Notes 2 and 5)                       -           (3,157)            (345)
Foreign exchange gain - net (Note 2)                                       151            3,280            2,382
Other - net                                                                863           (2,719)           1,393
                                                                     ---------        ---------        ---------
Total Non-Operating Income (Expenses)                                      741           (1,209)         (17,697)
                                                                     ---------        ---------        ---------

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAX AND
MINORITY INTEREST                                                       65,635          113,643          (41,764)

INCOME TAX EXPENSES (Notes 2 and 12)                                      (678)          (2,197)          (6,522)
                                                                     ---------        ---------        ---------

INCOME (LOSS) FROM CONTINUING
OPERATIONS                                                              64,957          111,446          (48,286)

LOSS FROM DISCONTINUED OPERATIONS - NET
OF INCOME TAX BENEFIT OF $934 IN 1999 AND
$388 IN 2000 (Note 26)                                                  (1,360)            (758)               -
                                                                     ---------        ---------        ---------

INCOME (LOSS) BEFORE MINORITY INTEREST                                  63,597          110,688          (48,286)
</TABLE>

(Forward)


                                                        F-4
<PAGE>


<TABLE>
<S>                                                        <C>                  <C>                  <C>
MINORITY INTEREST IN NET LOSS (INCOME) OF
SUBSIDIARIES (Note 2)                                      $       (1,437)      $       (3,493)      $        2,527
                                                           --------------       --------------       --------------

NET INCOME (LOSS)                                          $       62,160       $      107,195       $      (45,759)
                                                           ==============       ==============       ==============

EARNINGS (LOSS) PER SHARE (Note 17)

Simple
      Continued operations                                 $         0.79       $         1.26       $        (0.48)
      Discontinued operations                                       (0.02)               (0.01)                   -
                                                           --------------       --------------       --------------
                                                           $         0.77       $         1.25       $        (0.48)
                                                           ==============       ==============       ==============

Primary
      Continued operations                                 $         0.72       $         1.16       $        (0.48)
      Discontinued operations                                       (0.01)                   -                    -
                                                           --------------       --------------       --------------
                                                           $         0.71       $         1.16       $        (0.48)
                                                           ==============       ==============       ==============
Fully diluted
      Continued operations                                 $         0.71       $         1.16       $        (0.48)
      Discontinued operations                                       (0.01)                   -                    -
                                                           --------------       --------------       --------------
                                                           $         0.70       $         1.16       $        (0.48)
                                                           ==============       ==============       ==============

NUMBERS OF SHARES INFORMATION:
Simple                                                         80,232,420           85,970,361           94,921,412
                                                           ==============       ==============       ==============
Primary                                                        87,795,711           92,673,040           94,921,412
                                                           ==============       ==============       ==============
Fully diluted                                                  88,359,934           92,673,040           94,921,412
                                                           ==============       ==============       ==============
</TABLE>

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


                                      F-5
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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


<TABLE>

                                                                                                                     LONG-TERM
                                                                                                                    INVESTMENTS
                                                                  SHARE CAPITAL          CAPITAL                     IN SHARES
                                                                                         SURPLUS       RETAINED      OF STOCK
                                                                Shares       Amount     (Note 11)      EARNINGS    (Notes 2 and 5)
                                                              ----------   ----------   ----------    ----------    ----------
<S>                                                           <C>          <C>          <C>           <C>           <C>
BALANCE, JANUARY 1, 1999                                      79,330,980   $   19,833   $  131,951    $  108,483    $   (9,864)

Issuance of new shares under stock option plans (Note 14)      1,627,226          407        8,466             -             -
Appropriations of 1998 earnings:
       Remuneration to directors and supervisors                       -            -            -          (477)            -
       Bonus to employees                                              -            -            -        (1,199)            -
Reclassification 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 loss on long-term investments in
     shares of stock                                                   -            -            -             -         9,864
Translation adjustments (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             -             -
Reclassification 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 loss on long-term investments in
     shares of stock                                                   -            -            -             -          (541)
Translation adjustments (Note 2)                                       -            -            -             -             -
                                                              ----------   ----------   ----------    ----------    ----------

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

Issuance of new shares under stock option plans (Note 14)      5,221,508        1,306       18,548             -             -
Adjustment from changes in ownership percentage of investee            -            -          (20)            -             -
Net loss for 2001                                                      -            -            -       (45,759)            -
Reversal of unrealized loss on long-term investments
     in shares of stock                                                -            -            -             -            99
Translation adjustments (Note 2)                                       -            -            -             -             -
                                                              ----------   ----------   ----------    ----------    ----------

BALANCE, DECEMBER 31, 2001                                    96,647,199   $   24,162   $  428,205    $  220,767    $     (442)
                                                              ==========   ==========   ==========    ==========    ==========

<CAPTION>
                                                              CUMULATIVE      TOTAL
                                                              TRANSLATION  SHAREHOLDERS'
                                                              ADJUSTMENTS     EQUITY
                                                              ----------    ----------
<S>                                                           <C>           <C>
BALANCE, JANUARY 1, 1999                                      $  (39,789)   $  210,614

Issuance of new shares under stock option plans (Note 14)              -         8,873
Appropriations of 1998 earnings:
       Remuneration to directors and supervisors                       -          (477)
       Bonus to employees                                              -        (1,199)
Reclassification 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 loss on long-term investments in
     shares of stock                                                   -         9,864
Translation adjustments (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
Reclassification of net gain on disposal of properties                 -             -
Adjustment from changes in ownership percentage of investee            -        (9,616)
Net income for 2000                                                    -       107,195
Unrealized loss on long-term investments in shares of stock            -          (541)
Translation adjustments (Note 2)                                 (20,984)      (20,984)
                                                              ----------    ----------

BALANCE, DECEMBER 31, 2000                                       (55,382)      643,136

Issuance of new shares under stock option plans (Note 14)              -        19,854
Adjustment from changes in ownership percentage of investee            -           (20)
Net loss for 2001                                                      -       (45,759)
Reversal of unrealized loss on long-term investments
     in shares of stock                                                -            99
Translation adjustments (Note 2)                                 (19,787)      (19,787)
                                                              ----------    ----------

BALANCE, DECEMBER 31, 2001                                    $  (75,169)   $  597,523
                                                              ==========    ==========
</TABLE>

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


                                      F-6
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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

<TABLE>
                                                                         Year Ended December 31
                                                                -----------------------------------------
                                                                   1999           2000             2001
                                                                ---------       ---------       ---------
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                               $  62,160       $ 107,195       $ (45,759)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Minority interest                                                 1,437           3,493          (2,527)
  Depreciation and amortization                                    68,769         117,506         144,860
  Accrued interest on convertible bonds                             5,051          11,350          10,526
  Provision (reversal of allowance) for doubtful
    accounts and sales discounts                                      780           2,226             (39)
  Provision for loss on idle assets                                     -             738             456
  Investment loss (income) under equity method                     (4,842)        (16,127)          7,344
  Provision for loss on long-term investments in bonds                  -           3,157             345
  Gain on disposal of properties                                   (1,013)            (30)           (154)
  Gain on sale of long-term investments in shares of stock         (6,588)              -               -
  Deferred income taxes                                            (2,758)         (4,872)          4,375
  Loss from discontinued operations (Note 26)                       1,360             758               -
  Other                                                                 -           1,397             218
  Changes in operating assets and liabilities:
      Accounts receivable                                         (19,766)        (34,096)         39,536
      Inventories                                                  (2,762)         (7,178)          3,988
      Prepaid expenses and other current assets                    (1,170)         (2,183)           (465)
      Accounts payable                                                683          16,534         (11,913)
      Income tax payable                                           (2,371)          3,144            (965)
      Accrued pension cost                                            128             238             282
      Accrued expenses and other current liabilities               (4,187)          1,226          (3,088)
      Changes in net assets of discontinued
        operations                                                    164            (919)              -
                                                                ---------       ---------       ---------
Net Cash Provided by Operating Activities                          95,075         203,557         147,020
                                                                ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of properties                                       (110,733)       (372,561)       (102,490)
Acquisitions of ISE Labs, Inc.                                    (95,833)              -               -
Increase in long-term investments in shares of stock              (56,875)         (7,100)        (18,670)
Increase in consolidated debits                                         -            (428)              -
Proceeds from disposal of long-term
  investments in shares of stock                                   34,042               -               -
Decrease (increase) in pledged time deposits                          (15)            (86)              6
Proceeds from sale of properties                                    5,441           9,868           3,107
Proceeds from disposal of discontinued operations
  (Note 26)                                                             -           4,900               -
Increase in other assets                                           (1,370)         (4,325)         (3,180)
Decrease (increase) in short-term investments                     (11,860)          2,378         (22,981)
                                                                ---------       ---------       ---------
Net Cash Used in Investing Activities                            (237,203)       (367,354)       (144,208)
                                                                ---------       ---------       ---------
</TABLE>

(Forward)


                                                    F-7
<PAGE>

<TABLE>
<S>                                                            <C>          <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares                      $   9,029    $ 271,762    $  19,593
Increase (decrease) in short-term borrowings                      (5,594)      18,230       (7,707)
Increase in long-term debts                                      191,865       55,089          889
Decrease in payable for properties                                     -            -      (39,252)
Repayments of long-term debts and capital lease
  obligations                                                    (27,386)     (66,814)     (26,357)
Remuneration paid to directors and supervisors and
  bonus paid to employees                                         (1,676)           -            -
Increase (decrease) in minority interest                               -         (466)           7
                                                               ---------    ---------    ---------
Net Cash Provided by (Used in) Financing Activities              166,238      277,801      (52,827)
                                                               ---------    ---------    ---------

TRANSLATION ADJUSTMENTS                                              362       (1,663)      (1,065)
                                                               ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              24,472      112,341      (51,080)

CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR                                                           20,332       44,804      157,145
                                                               ---------    ---------    ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                         $  44,804    $ 157,145    $ 106,065
                                                               =========    =========    =========

SUPPLEMENTAL INFORMATION
Interest paid (excluding amounts capitalized)                  $   7,870    $   8,647    $   8,533
Income tax paid                                                $   6,652    $   3,387    $   3,274
Cash paid for acquisitions of properties:
      Purchase price                                           $ 128,690    $ 413,197    $ 104,216
      Increase in payable                                        (17,650)     (40,636)      (1,726)
      Increase in obligation under long-term lease                  (307)           -            -
                                                               ---------    ---------    ---------
                                                               $ 110,733    $ 372,561    $ 102,490
                                                               =========    =========    =========
Cash received for sales of properties:
      Sales price                                              $   5,535    $   9,868    $   5,978
      Increase in receivable                                         (94)           -       (2,871)
                                                               ---------    ---------    ---------
                                                               $   5,441    $   9,868    $   3,107
                                                               =========    =========    =========

Cash received for issuance of ordinary shares (net of
  issuance expense)                                            $   8,873    $ 271,587    $  19,854
Decrease (increase) in receivable for issuance of
  ordinary shares                                                    156          175         (261)
                                                               ---------    ---------    ---------
                                                               $   9,029    $ 271,762    $  19,593
                                                               =========    =========    =========

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.


                                                 F-8
<PAGE>


                       ASE TEST LIMITED AND SUBSIDIARIES

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

1.   GENERAL

     ASE Test Limited ("ASE Test" or the "Company") is a Singapore holding
     company which through an exchange of its shares with its parent company,
     Advanced Semiconductor Engineering, Inc. ("ASE, Inc.") and other
     individuals, acquired substantially all of the shares of ASE Test, Inc. in
     May 1996. The exchange was accounted for as a reorganization of companies
     under common control.

     ASE Test, Inc. is located in Taiwan, Republic of China (ROC) and is
     engaged in the testing of semiconductors. It has a wholly-owned
     subsidiary in the United States, ASE Test (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
     semiconductors.

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

     J & R Holding Limited, a shareholder of the Company, sold 6,000,O00 shares
     and 5,000,000 shares in December 1997 and February 1999, respectively, in
     the form of Taiwan Depositary Receipts (the "TDR"). The TDRs were listed
     on the Taiwan Stock Exchange.

     The Company acquired, on May 5,1999, a 70% equity interest in ISE Labs,
     Inc. through ASE Test Holding Ltd, a newly incorporated wholly owned
     holding company. The acquisition transaction was accounted for using the
     purchase method. ISE Labs, Inc. and its wholly owned subsidiaries [ISE
     Labs Hong Kong Limited, ISE Labs Singapore Pte. Limited, ISE Technology,
     Inc., and Digital Tasting Services Inc.] (together "ISE Labs") provide
     semiconductor testing and packaging services. The acquisition cost was
     $100.1 million and the net book value of ISE Labs at the time of
     acquisition was $23.60 million. The excess of the purchase cost over the
     net book value of ISE Labs of $76.5 million was allocated as of May 5,
     1999 as shown below. The allocation of the purchase price was adjusted in
     the first quarter of 2000 because of the impairment loss incurred arising
     from the disposition of the packaging operation of ISE Labs, which was a
     preacquisition contingency at the date of acquisition (see Note 26). The
     original allocation and the adjustments made is as follows (amounts in
     millions US dollars):


A                                  As of
                                May 5, 1999   Adjustment  Adjusted
                                -----------   ----------  --------
Write-up of land                   $ 2.5        ($0.2)      $2.3
Write-up in buildings                2.7         (2.3)       0.4
Write-up in machinery                9.0         (2.3)       6.7
Deferred tax liabilities            (5.7)         1.9       (3.8)
Goodwill (see Note 7)               68.0          3.8       71.8
                                   -----        -----       ----
                                   $76.5        $ 0.9       $77.4
                                   =====        =====       =====


                                      F-9
<PAGE>

     The Company's equity interest in ISE Labs increased to 80.4% as a result
     of the following: (i) subscription to 8,750,000 new shares at $8.00 per
     share (or at an aggregate subscription price of $70 million) on April
     27,2000 and July 27, 2000, and (ii) acquisition of 100,000 shares, on
     November 20, 2000, from minority shareholders at $8.94 per share (or at an
     aggregate value of $0.9 million).

     The Company, in June 1999, established ASE Test Finance Limited (a wholly
     owned subsidiary) in Mauritius as a corporate vehicle used in the issuance
     of the convertible notes (see Note 10).


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 consolidated financial statements
     -------------------------------------------------

     The Company prepared its consolidated financial statements using
     accounting principles generally accepted in the United States (US GAAP) in
     previous years. Effective 1999, the Company changed such basis into ROC
     GAAP and made reconciliation to US GAAP. The change was made to be
     consistent with the basis of presentation of the consolidated financial
     statements of ASE, Inc.. The major adjustment applicable to the Company as
     a result of change from US GAAP to ROC GAAP is the accounting for employee
     bonuses (see Note 27).

     Consolidation
     -------------

     The consolidated financial statements include the financial statements 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 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.


                                    F-10
<PAGE>


     Use of Estimates
     ----------------

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

     Cash and cash equivalents
     -------------------------

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

     Short-term investments
     ----------------------

     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 exercises significant
     influence over the operating and financial policy decisions of the
     investee companies are accounted for using the equity method. Under the
     equity method, the investments are initially carried at cost and
     subsequently adjusted for the Company's proportionate share in the net
     income or net loss of the investee companies. Such proportionate share in
     net income or net loss are recognized as investment income or losses while
     cash dividends declared 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 fair value
     of the net assets of the investees at the time of investments or at the
     time the equity method of accounting is first applied to a particular
     investment, is amortized over ten years. Changes in the Company's
     ownership percentage of investees accounted for by equity method are
     recorded as adjustments in 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 shareholders'
     equity and current earnings, respectively. Stock dividends declared are
     accounted for only as increases in number of shares held. Cash dividends
     declared are recognized as income. The sales of ASE, Inc. common shares
     are reflected as gain from sales of long-term investment in shares of
     stock in the statement of income.


                                    F-11
<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.

     Properties
     ----------

     Properties, except for leased equipment, are stated at cost. Equipment
     held under capital leases are recorded as an asset and an obligation at an
     amount equal to the lower of: (i) the present value at the beginning of
     the lease term of the minimum lease payments during the lease term
     (including the payment called for under any bargain purchase option); or
     (ii) fair value of the leased equipment at the inception of the lease.
     Machinery in transit, construction in progress and advances related to
     acquisitions of equipment are stated at cost. The cost of properties, also
     include other direct costs related to the acquisition and interest charges
     attributable to the borrowings used to finance the acquisitions of these
     assets. Major renewals and improvements are capitalized, while maintenance
     and repairs are expensed currently.

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

     When properties are retired or disposed of, their costs and accumulated
     depreciation are removed from the accounts and any gain or loss is credited
     or charged to income. Prior to January 1, 2001, the gain, after
     deducting applicable income tax, was reclassified to capital surplus at
     the end of the year.

     Consolidated debits
     -------------------

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


                                    F-12
<PAGE>


     Revenue recognition
     -------------------

     Revenues from semiconductor packaging services that the Company provides
     are recognized upon shipment. Revenues from semiconductor testing services
     that the Company provides are recognized upon completion of the services.
     The Company does not take ownership of:(i) bare semiconductor wafers
     received from customers that the Company packages into finished
     semiconductors, and (ii) packaged semiconductors received from customers
     that the Company tests as to whether they meet certain performance
     specifications. The title and risk of loss remains with the customer for
     those bare semiconductors and/or packaged semiconductors. Accordingly, the
     cost of customer-supplied semiconductors materials is not included in the
     accompanying consolidated financial statements. Other criteria that the
     Company uses to determine when to recognize revenue are:(i) existence of
     persuasive evidence of the services provided,(ii)the selling price is
     fixed or determinable and (iii) collectibility is reasonably assured. The
     Company does not provide warranties to its customers except only in cases
     of defects in the packaging services provided and deficiencies in testing
     services provided. An appropriate sales allowance is recognized in the
     period the sale is recognized.

     Income taxes
     ------------

     Deferred income tax assets are recognized for the tax effects of
     deductible temporary differences, unused tax credits and loss carryforward
     while deferred income tax liabilities are recognized for the tax effects
     of taxable temporary differences. Valuation allowance is provided for
     deferred income tax assets based on the estimated realizability.

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

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

     Annual earnings of ROC companies 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
     ------------

     Provisions for pension costs are accrued based on actuarially determined
     amounts which include service costs, interests, amortisation of
     unrecognised net obligation and expected return on pension assets, in
     accordance with ROC SFAS No.18, "Accounting for Pensions".


                                    F-13
<PAGE>


     Foreign-currency transactions
     -----------------------------

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

     The financial statements of the subsidiaries 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.

     Foreign currencies option contracts are entered into for hedging purposes.
     The amounts of the options 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 option contracts as at year-end are
     marked to market wth charges to current income.

3.   ACCOUNTS RECEIVABLE - OTHER, NET

                                                             2000        2001
                                                          ---------   ---------

     Accounts receivable                                  $  88,063   $  42,954
     Less-allowance for sales discounts
       and doubtful accounts                                 (4,775)     (4,216)
                                                          ---------   ---------

                                                          $  83,288   $  38,738
                                                          =========   =========


                                    F-14
<PAGE>


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

     Balance, January 1, 1999                                   $     645
     Increase by acquisition                                        2,162
     Additions                                                        801
     Deductions                                                      (579)
                                                                ---------
     Balance, December 31, 1999                                     3,029
     Additions                                                      2,123
     Deductions                                                      (377)
                                                                ---------
     Balance, December 31, 2000                                     4,775
     Additions                                                      1,463
     Deductions                                                    (2,022)
                                                                ---------
     Balance, December 31, 2001                                 $   4,216
                                                                =========

4.   INVENTORIES - NET

                                                     2000          2001
                                                  ---------     ---------

     Raw materials                                $   9,312     $   6,412
     Work in process                                    618           648
     Finished goods                                   1,397           678
     Supplies                                         6,340         6,493
     Materials in transit                               891           298
                                                  ---------     ---------
                                                     18,558        14,529
     Less-allowance for obsolescence                   (994)       (1,090)
                                                  ---------     ---------

                                                  $  17,564     $  13,439
                                                  =========     =========

     The movement of allowance for obsolescence is as follows:


     Balance, January 1, 1999                                 $       724
     Increase by acquisition                                        2,739
     Additions                                                        378
     Deductions                                                    (2,739)
                                                                ---------
     Balance, December 31, 1999                                     1,102
     Additions                                                        560
     Deductions                                                      (668)
                                                                ---------
     Balance, December 31, 2000                                       994
     Additions                                                        105
     Deductions                                                        (9)
                                                                ---------
     Balance, December 31, 2001                                 $   1,090
                                                                =========


                                    F-15
<PAGE>


5.   LONG-TERM INVESTMENT

<TABLE>
                                                                         2000                       2001
                                                                -----------------------     ----------------------
                                                                                 % of                      % of
                                                                Carrying        Owner-      Carrying      Owner-
                                                                  Value          ship         Value        ship
                                                                ---------     ---------     ---------    ---------
<S>                                                             <C>                <C>      <C>               <C>
     Shares of stock
     ---------------
     Equity method
           ASE Material Inc.                                    $   2,724           6.7     $   2,897          4.0
           ASE (Chung-Li) Inc.                                     53,059          30.0        67,402         30.0
           ASE Investment (Labuan) Inc.                            30,539          30.0        23,180         30.0
                                                                ---------                   ---------
                                                                   86,322                      93,479
                                                                ---------                   ---------
     Cost method
           ASE, Inc.                                                1,008             -           954            -
           UC Fund II                                                   -             -         1,000            -
           Less-allowance for valuation losses (Note 2)              (519)                       (391)
                                                                ---------                   ---------
                                                                      489                       1,563
                                                                ---------                   ---------
                                                                   86,811                      95,042
                                                                ---------                   ---------
     Bond
     ----
     Corporate bond - APP Global Finance Ltd. (APP)                 3,500                           -
     Less-allowance for loss (Note 2)                              (3,150)                          -
                                                                ---------                   ---------
                                                                      350                           -
                                                                ---------                   ---------

                                                                $  87,161                   $  95,042
                                                                =========                   =========
</TABLE>

     The investments in ASE (Chung Li) Inc. [established in ROC] and ASE
     Investment (Labuan) Inc. represent the investments made in connection with
     the acquisition of the Semiconductor Products Sector Business of Motorola.

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

     APP failed, in view of its financial difficulties, to redeem the bond when
     they matured on October 4, 2001. Accordingly, the Company wrote off the
     carrying amount of its investment in APP bond in 2001 as management did
     not believe it would be able to recover its investment.

6.   PROPERTIES - NET

                                                         2000         2001
                                                      ---------    ---------
     Cost
           Land                                       $   3,892    $   3,892
           Long-term land leasehold right                 1,789        1,789
           Building and improvements                     41,658       84,224
           Machinery and equipment                      804,545      801,118
           Furniture and fixtures                         9,937       11,263
           Leased assets - equipment                      5,364        5,337
           Leasehold improvements                         8,193        5,236

(Forward)


                                    F-16
<PAGE>


           Machinery in transit                          23,946       30,076
           Construction in progress                      14,990        2,107
           Advances related to acquisitions of
             equipment                                    3,048        1,939
                                                      ---------    ---------
                                                        917,362      946,981
     Accumulated depreciation
           Long-term land leasehold right                   188          220
           Building and improvements                     12,270       18,005
           Machinery and equipment                      256,908      331,255
           Furniture and fixtures                         3,863        5,512
           Leased assets - equipment                      3,286        4,185
           Leasehold improvement                          1,765          970
                                                      ---------    ---------
                                                        278,280      360,147
                                                      ---------    ---------
                                                      $ 639,082    $ 586,834
                                                      =========    =========

<TABLE>
     Capitalized Interest Information                           1999          2000          2001
     --------------------------------                        ---------     ---------     ---------
<S>                                                          <C>           <C>           <C>
     Total interest expense including amounts capitalized    $  14,252     $  21,463     $  19,190
     Capitalized interest cost                                     715           888           161
     Interest rate for capitalization                               7%            7%            9%
</TABLE>

7.   CONSOLIDATED DEBITS

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

                                                        2000          2001

                                                      ---------    ---------
     ISE Labs                                         $  71,872    $  71,872
     Digital Testing Services, Inc.                       1,082        1,082
                                                      ---------    ---------
                                                         72,954       72,954
                                                      ---------    ---------
     Less: Accumulated amortization
            ISE Labs                                     11,193       18,402
            Digital Testing Services, Inc.                  534          855
                                                      ---------    ---------
                                                         11,727       19,257
                                                      ---------    ---------

                                                      $  61,227    $  53,697
                                                      =========    =========

     Amortization of above-mentioned goodwill for consolidated subsidiaries
     were $4,674, $7,053 and $7,530 for the years ended December 31, 1999, 2000
     and 2001.


                                    F-17
<PAGE>


8.   ACCRUED EXPENSES AND OTHER

     Accrued expenses and other current liabilities consist of:

                                                            2000         2001
                                                         ---------    ---------

     Accrued bonuses and salary                          $   5,860    $   4,192
     Commission payable                                      1,538        1,286
     Deferred revenue                                        1,361          214
     Utilities payable                                         670          590
     Accrued shipping and other expenses                       345          225
     Other                                                   7,072        6,661
                                                         ---------    ---------

                                                         $  16,846    $  13,168
                                                         =========    =========

9.   SHORT-TERM BORROWINGS

     These represent the bank acceptance and revolving loans bearing interest
     rates from 2.65% to 4.05%.

     Unused credit lines for short-term borrowings amounted to approximately
     $181,033 as of December 31, 2001.


10.  LONG-TERM DEBTS

                                                            2000         2001
                                                         ---------    ---------

     Convertible notes                                   $ 176,286    $ 186,812
     Bank loans                                             72,308       47,501
     Commercial paper                                       35,732       33,515
     Capital lease obligation (Note 19)                      1,893        1,094
     Notes payable                                           1,278          179
                                                         ---------    ---------
                                                           287,497      269,101
     Less - portion due within one year                    (22,008)     (20,730)
                                                         ---------    ---------

                                                         $ 265,489    $ 248,371
                                                         =========    =========


     Following are information on the long-term debts:

     a.   Convertible notes

                                                            2000         2001
                                                         ---------    ---------

         Principal                                       $ 159,890    $ 159,890
         Accrued interest                                   16,396       26,922
                                                         ---------    ---------

                                                         $ 176,286    $ 186,812
                                                         =========    =========

     The convertible notes were issued on June 29, 1999 by ASE Test Finance
     Limited (see Note 1). The proceeds from the issuance of the convertible
     notes were used to finance the acquisitions of ISE Labs, Inc. and the
     Semiconductor Products Sector Businesses of Motorola in Taiwan and Korea.
     The interests on the convertible notes accrue at 1% per annum on their
     principal amount. ASE Test Finance Limited will redeem each convertible
     note that has not been previously redeemed, converted or purchased and
     cancelled at 136.92% of its principal amount in US dollars on July 1,
     2004.


                                    F-18
<PAGE>


     The holders of the convertible notes are entitled to convert the
     convertible notes into ordinary shares of ASE Test Limited at the
     specified conversion price ($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.

     The convertible notes aggregating $110 have been converted into shares of
     ASE Test Limited in 2000. No convertible notes were converted in 2001.

     b.   Bank loans (Note 18)
<TABLE>
                                                                                      2000         2001
                                                                                   ---------    ---------
<S>                                                                               <C>           <C>
          ASE Test, Inc. -Denominated in New Taiwan Dollar
                Repayable in quarterly installments through July 2006,
                  interest at 6.475%-6.755%                                       $        -    $     857
                Repayable in quarterly installments through October 2002,
                  interest at 6.755%-6.765% in 2000 and 6.475%-6.755% in 2001          6,073        2,299
                Repayable in quarterly installments through March 2003,
                  interest at 6.35% in 2000 and 4.0% in 2001                           7,884        4,144
                Repayable in quarterly installments through December
                  2004, interest at 6.35% in 2000 and 4.0%-8.075% in 2001              9,062        6,430
                Repayable in quarterly installments through March 2004,
                  interest at 6.35%-6.45% in 2000 and 4.0%-6.45% in 2001               9,817        6,430
                Repayable in semi-annually installments through June
                  2005, interest at 6.35%-6.45% in 2000 and 6.11%-6.611%
                  in 2001                                                              3,021        2,501
                Repayable in monthly installments through November
                  2003, interest at 7.975%, early repaid in March 2001                   560            -
                Repaid in January 2001, interest at 6.755%-6.765% in 2000                697            -
                                                                                   ---------    ---------
                                                                                      37,114       22,661
                                                                                   ---------    ---------

          ISE Labs - Denominated in US Dollar
                Borrowing under line of credit of $10 million, expire in
                  February 2005, at prime rate 9.5% in 2000 and 5.5% in 2001           7,022        5,022
                Borrowings under line of credit of $14 million
</TABLE>

(Forward)


                                    F-19
<PAGE>


<TABLE>
<S>                                                                               <C>           <C>
                      Repaid in January 2001, at prime rate 9.0%                         116            -
                      Expire in May 2002, at prime rate 9.5% in 2000 and 5.5%
                        in 2001                                                        4,597        1,373
                      Expire in January 2004, at prime rate less 0.75 percent,
                        7.75% in 2000 and 2001                                         1,317          889
                Equipment loan at prime rate 9.0% in 2000 and 5.5% in 2001, due
                  through December 2005                                               15,000       12,000
                Mortgage loan at prime rate 7.92% in 2000 and 2001, due
                  through May 2009                                                     4,545        4,005
                Mortgage loan at prime rate 9.0%, due through January 2004,
                  early repaid in 2001                                                 2,597            -
                Equipment loan at prime rate 5.5%, due through January 2004                -        1,551
                                                                                   ---------    ---------
                                                                                      35,194       24,840
                                                                                   ---------    ---------

                                                                                   $  72,308    $  47,501
                                                                                   =========    =========
</TABLE>

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

          In addition, the ISE Labs' loan agreements require compliance with
          certain financial covenants and ratios, dividend restrictions,
          capital expenditure restrictions and maintenance of working capital
          requirements. ISE Labs did not meet the minimum quick ratio
          requirement on one of these agreements as of December 31, 2001 and
          has received a waiver from the bank.

     c.   Commercial paper secured by a money market instruments
          issuing facility agreement (the "Agreement") of NT$1.5 billion

<TABLE>
                                                                                        2000          2001
                                                                                     ---------     ---------
<S>                                                                                  <C>           <C>
          Principal (denominated in New Taiwan Dollar) - revolving within 5
            years starting from June 1998, interest at 5.223%-5.747% in 2000
            and 2.905%-5.745% in 2001                                                $  36,248     $  34,295
          Less-unamortized discounts                                                      (516)         (780)
                                                                                     ---------     ---------

                                                                                     $  35,732     $  33,515
                                                                                     =========     =========
</TABLE>

          Under the Agreement, ASE Test, Inc. is required that, 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.


                                    F-20
<PAGE>


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

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

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

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

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

     Summarized long-term debts by currencies are as follows:

                                                      2000            2001
                                                  ------------    ------------

     New Taiwan Dollars                           NT$2,411,550    NT$1,965,613
     U.S. Dollars                                 US$  214,651    US$  212,925

     Future maturity of long-term debts outstanding as of December 31, 2001 are
     as follows:

     Within the following year                                      $   20,730
     During the second year                                             46,798
     During the third year                                             195,331
     During the fourth year                                              4,183
     During the fifth year and thereafter                                2,059
                                                                    ----------

                                                                    $  269,101
                                                                    ==========

     Unused long-term credit facilities totaled approximately $21,148 as of
     December 31, 2001.

11.  SHAREHOLDERS' EQUITY

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

     Management, in 2001, propose to retain its earnings to finance the
     development and expansion of its business and operations and does not
     intend to pay dividends for the foreseeable future. Such proposal will be
     submitted to shareholders meeting for approval in 2002.

     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:

     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.


                                    F-21
<PAGE>


     The appropriations shall be resolved by the shareholders in the following
     year and given effect to 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 $16,048 as of December 31, 2001 and is included
     in the consolidated capital surplus and retained earnings.


12.  INCOME TAX

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

<TABLE>
                                                                1999        2000        2001
                                                              -------     -------     -------
<S>                                                           <C>         <C>         <C>
          Income tax benefit (expense) - current              $(3,997)    $(4,130)    $ 2,927
          Income taxes (10%) on undistributed earnings              -      (2,939)     (4,119)
          Income tax benefit (expense) - deferred               2,951       4,872      (4,375)
          Adjustment of prior year's income tax                   368           -        (955)
                                                              -------     -------     -------

                                                              $  (678)    $(2,197)    $(6,522)
                                                              =======     =======     =======
</TABLE>

     b.   Reconciliation of income taxes attributable to continuing operations
          for the years ended December 31, 1999, 2000 and 2001 calculated at
          the statutory rate and the income tax benefit (expense) is as
          follows:

<TABLE>
                                                                                    1999          2000          2001
                                                                                 ---------     ---------     ---------
<S>                                                                              <C>           <C>           <C>
         ASE Test, Inc.

          Tax based on pretax accounting income at statutory rate
           (25%)                                                                 $  (8,471)    $ (12,873)    $  (1,407)
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income - tax holiday                                6,145         6,126           659
                      Tax-exempt income - investment income
                        (loss)                                                       1,624          (146)          212
                Temporary differences
                      Loss on long-term bond securities                                  -          (789)          (49)
                      Unrealized foreign exchange gain (loss)                         (316)         (363)           17
                      Bad debts                                                       (122)         (290)          (37)
                      Other                                                            (30)          135           (28)
                Credits for investment in machinery and
                  equipment, and research and development
                  expenditures
                      Deferred                                                       5,257         4,990        (2,745)
                      Reversal of (provision for) valuation allowance               (3,162)        4,661        (9,033)
                      Utilized                                                       1,170         8,527         4,752
</TABLE>

(Forward)


                                                          F-22
<PAGE>

<TABLE>
<S>                                                                              <C>           <C>           <C>
                Adjustment of prior year's income tax                                  368             -          (955)
                Income taxes (10%) on undistributed earnings                             -        (2,939)       (4,119)
                Other                                                                    5           (71)          151
                                                                                 ---------     ---------     ---------
          Income tax benefit (expense)                                               2,468         6,968       (12,582)
                                                                                 ---------     ---------     ---------

          ASE Test Malaysia

          Benefit (tax) based on pretax accounting loss (income) at
           statutory rate (28%)                                                     (8,545)      (13,780)          391
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income                                              8,545         8,881             -
                      Others                                                             -          (156)          (83)
                Temporary differences
                      Depreciation and capital allowance                                 -         4,636         4,371
                      Provisions and deferred assets                                     -           219          (441)
                      Unabsorbed capital allowances                                      -             -        (4,380)
                Deferred                                                             1,044        (4,855)        1,737
                                                                                 ---------     ---------     ---------
                Income tax benefit (expense)                                         1,044        (5,055)        1,595
                                                                                 ---------     ---------     ---------
          ISE Labs

          Benefit (tax) based on pretax accounting loss (income) at
           statutory rate (federal tax rate 35% and state tax rate 6%)           $  (4,254)    $  (7,121)    $   6,636
          Add (deduct) tax effects of:
                Permanent differences
                      Penalty                                                         (393)       (1,339)            -
                      Amortization and expenses                                       (105)         (250)         (128)
                      Others                                                             -             -           (18)
                Utilization of loss carryforward                                         -         1,087             -
                Loss to be carryforward                                                  -             -        (5,283)
                Utilization of tax credit for capital expenditure                      679             -             -
                Deferred                                                              (188)           76         5,666
                Lower foreign tax rate adjustment and other                             71         3,437        (2,408)
                                                                                 ---------     ---------     ---------
                Income tax benefit (expense)                                        (4,190)       (4,110)        4,465
                                                                                 ---------     ---------     ---------

          Income tax expense                                                     $    (678)    $  (2,197)    $  (6,522)
                                                                                 =========     =========     =========
</TABLE>

          The income of ASE Test, Inc. attributable to the capital increase (in
          1994 and 1998) for the purpose of purchasing machinery and equipment
          is exempt from income taxation. The exemption is for five years
          starting when the installation of the machinery and equipment is
          completed. The Company completed the installation in respect to the
          foregoing capital increases in January 1996 and in January 2001,
          respectively. Also, ASE Test Malaysia has received approval as a
          "pioneer high technology" company in Malaysia under the Promotion of
          Investment Act of 1986 that entitles it to five years exemption from
          income taxes from July 1, 1999. The per share effect (primary
          earnings per share) of the tax holiday is US$0.17 in 1999, US$0.16 in
          2000 and US$0.01 in 2001.

          Undistributed earnings of ASE Test Limited's subsidiaries amounted to
          $295,940 as at December 31, 2001. Those earnings are considered to be
          indefinitely reinvested and, accordingly, no provision for income tax
          has been provided thereon.


                                    F-23
<PAGE>


     c.   Deferred income tax assets and liabilities as of December 31, 2000
          and 2001 are summarized as follows:

<TABLE>
                                                                        2000          2001
                                                                     ---------     ---------
<S>                                                                  <C>           <C>
          Current assets
                ISE Labs
                     Receivable allowance and deferred revenue       $   1,609     $   1,315
                     Net operating loss carryforward                       923         5,541
                     Amortization and other                                641         1,925
                                                                     ---------     ---------
                                                                         3,173         8,781
                ASE Test, Inc.                                           6,702         4,337
                                                                     ---------     ---------
                                                                         9,875        13,118
                Valuation allowance                                     (1,937)       (3,334)
                                                                     ---------     ---------

                                                                     $   7,938     $   9,784
                                                                     =========     =========


          Non-current assets (liabilities)
                ASE Test, Inc.                                       $  19,209     $  17,531
                ASE Test Malaysia                                            -         1,737
                ISE Labs                                                     -           442
                                                                     ---------     ---------
                                                                        19,209        19,710
                Valuation allowance                                       (781)       (7,949)
                                                                     ---------     ---------
                                                                        18,428        11,761
                                                                     ---------     ---------
                ISE Labs
                     Depreciation                                       (4,257)       (5,635)
                     Excess of purchase cost (Note 1)                   (2,288)       (1,604)
                     From foreign subsidiaries                          (2,023)       (1,374)
                                                                     ---------     ---------
                                                                        (8,568)       (8,613)
                                                                     ---------     ---------

                                                                     $   9,860     $   3,148
                                                                     =========     =========
</TABLE>

          Deferred income tax assets consists of unused tax credits arising
          from investments in machinery and equipment and research and
          development expenditures in ASE Test Inc.; while those of ASE Test
          Malaysia are from capital allowances.

     d.   As of December 31, 2001, ASE Test, Inc. has unused tax credits which
          can be utilized to offset its future income tax are listed as
          follows:

          Year of Expiry

          2002                                                       $   4,337
          2003                                                           6,916
          2004                                                           8,573
          2005                                                           2,042
                                                                     ---------

                                                                     $  21,868
                                                                     =========

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


                                    F-24
<PAGE>

     The credits of ASE Test Malaysia will be available to reduce its entire
     amount of income taxes payable even after the end of the tax holiday period
     on June 30, 2004. The tax credit also has no expiration date.

     ISE Labs' available Federal and State net operating loss carryforward are
     approximately $15 million and $7.8 million with expiration period to 2021
     and 2006, respectively.

     Income tax return of ASE Test, Inc. has been examined by the ROC tax
     authorities through 1999. No additional taxes were assessed as a result of
     those examinations.

13.  PENSION PLAN

     ASE Test, Inc. has a defined benefit pension plan for its regular
     employees. Retirement benefits are based on the length of service and
     average salaries or wages of the last six months before retirement. 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 are 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>
                                                                          1999          2000          2001
                                                                       ---------     ---------     ---------
<S>                                                                    <C>           <C>           <C>
     Balance, beginning of year                                        $     740     $   1,015     $   1,341
     Contributions                                                           207           325           247
     Payments                                                                 (6)           (6)          (21)
     Interest income                                                          48            84            57
     Exchange difference                                                      26           (77)          (82)
                                                                       ---------     ---------     ---------

     Balance, end of year                                              $   1,015     $   1,341     $   1,542
                                                                       =========     =========     =========

<CAPTION>
     Pension costs for ASE Test, Inc. consist of:
                                                                          1999          2000          2001
                                                                       ---------     ---------     ---------
<S>                                                                    <C>           <C>           <C>
     Service costs                                                     $     287     $     491     $     479
     Interest                                                                 86           120           146
     Projected return on pension assets                                      (55)          (52)          (86)
     Amortization of prior period service cost, gain or loss on
       plan assets, etc                                                       10           (13)           16
                                                                       ---------     ---------     ---------

                                                                       $     328     $     546     $     555
                                                                       =========     =========     =========
</TABLE>

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


                                    F-25
<PAGE>

<TABLE>
                                                                   1999           2000           2001
                                                                ---------      ---------      ---------
<S>                                                             <C>            <C>            <C>
     a.  Benefit obligations
            Accumulated benefit obligation                      $     878      $   1,144      $   2,014
            Additional benefits based on future salaries              969          1,345          1,600
                                                                ---------      ---------      ---------
            Projected benefit obligation                            1,847          2,489          3,614
            Fair value of assets                                   (1,064)        (1,341)        (1,542)
                                                                ---------      ---------      ---------
            Funded status                                             783          1,148          2,072
            Unrecognized net transition obligation                   (221)          (200)          (178)
            Unrecognized loss of pension assets                      (200)          (380)        (1,084)
                                                                ---------      ---------      ---------

            Accrued pension cost                                $     362      $     568      $     810
                                                                =========      =========      =========

     b.  Vested obligation                                      $      26      $      30      $      10
                                                                =========      =========      =========

     c.  Actuarial assumption
            Discount rate                                             6.5%           6.0%           5.0%
            Increase in future salary level                           4.0%           4.0%           3.0%
            Expected rate of return on plan assets                    6.5%           6.0%           5.0%
</TABLE>

     In addition, ISE Labs, 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, may contribute pretax dollars to the 401
     (k) plan, and ISE Labs, Inc. provides no matching contributions related to
     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

                                            1999          2000          2001
                                         ---------     ---------     ---------

     Interest expense                    $  13,537     $  20,575     $  19,029
     Interest income                        (1,834)       (5,835)       (5,246)
                                         ---------     ---------     ---------

     Net                                 $  11,703     $  14,740     $  13,783
                                         =========     =========     =========


                                      F-26
<PAGE>


16.  RELATED PARTY TRANSACTIONS


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

<TABLE>
                                                                        1999         2000         2001
                                                                     ---------    ---------    ---------
<S>                                                                  <C>          <C>          <C>
     For the year

     Revenues - ASE, Inc.                                            $     713    $      87    $      12
                                                                     =========    =========    =========
     Processing expense - ASE Technologies                           $       7   $        -   $        -
                                                                     =========    =========    =========
     Purchase of machinery and equipment:
           ASE, Inc.                                                 $      30    $     937    $     973
           ASE Korea, Inc.                                                   -          487          569
           ASE Chung-Li, Inc.                                                -            -        2,353
                                                                     ---------    ---------    ---------
                                                                     $      30    $   1,424    $   3,895
                                                                     =========    =========    =========

     Purchase of buildings - HCDC                                   $        -   $        -    $  12,503
                                                                     =========    =========    =========

     Purchase of raw materials:
           ASE, Inc.                                                 $     475    $     730    $     774
           ASE Material, Inc.                                              328        1,594        2,647
           ASE Philippine                                                    -          127            -
           ASE Chung-Li, Inc.                                                4           38            -
                                                                     ---------    ---------    ---------

                                                                     $     807    $   2,489    $   3,421
                                                                     =========    =========    =========

     Sale of properties:
           ASE Philippine                                            $     659    $      25    $     657
           ASE, Inc.                                                       124           75           32
           ASE Korea, Inc.                                                   -           72        3,373
           ASE Chung-Li, Inc.                                                -        1,044        2,092
           J&R                                                               -            -        1,341
                                                                     ---------    ---------    ---------

                                                                     $     783    $   1,216    $   7,495
                                                                     =========    =========    =========
</TABLE>


                                                   F-27
<PAGE>



                                                            2000         2001
                                                         ---------    ---------
     At year-end

     Accounts receivable:
           ASE, Inc.                                     $   2,176    $   3,311
           ASE Chung-Li, Inc.                                1,002        2,115
           J&R                                                   -        1,293
           ASE Philippine                                        -          917
           Other                                                 -          199
                                                         ---------    ---------

                                                         $   3,178    $   7,835
                                                         =========    =========

     Accounts payable:
           ASE, Inc.                                     $     793    $   3,704
           ASE Korea                                           487            -
           ASE Material, Inc.                                  230          404
           ASE Chung-Li, Inc.                                   36        1,905
           ASE Philippine                                       11            -
                                                         ---------    ---------

                                                         $   1,557    $   6,013
                                                         =========    =========

     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 (machinery and equipment) which were recorded at
     net book values.


17.  EARNINGS (LOSS) PER SHARE

     Simple earnings per share were presented for all periods presented since,
     in 2001, the Company had no ordinary share equivalent that has dilutive
     effect. Primary earnings per share and fully dilutive earnings per share
     were presented for all periods since the Company had ordinary share
     equivalent with dilutive effect in 2000 and 1999. The ordinary share
     equivalent in 2000 and 1999 were the outstanding stock options held by the
     employees of ASE Test Limited (see Note 14 and Note 27). The convertible
     notes (see Note 10) has antidilutive effect on earnings per share on all
     periods presented and, accordingly, not considered an ordinary share
     equivalent. The primary and fully diluted earnings per share consider the
     effect on the ordinary share equivalents of the outstanding stock options
     using the treasury stock method.


18.  ASSETS PLEDGED OR MORTGAGED

     The following assets of ASE Test, Inc. are pledged or mortgaged as
     collateral for bank loans (see Note 10) and as guarantees for hiring of
     foreign laborers:


                                                         2000            2001
                                                      ----------     ----------

     Time deposits                                    $      295     $      274
     Machinery and equipment - net                        87,495         38,268
                                                      ----------     ----------

                                                      $   87,790     $   38,542
                                                      ==========     ==========


                                    F-28
<PAGE>


     Total assets of ISE Labs amounting to $207,647 and $155,990 as of December
     31, 2000 and 2001 are secured under long-term debts.


19.  COMMITMENTS AS OF DECEMBER 31, 2001

     a.   The land on which the buildings of ASE Test, Inc. is situated is
          leased under six agreements with the government expiring on various
          dates from February 2006 to December 2012. 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, 1999, 2000 and 2001 were $1,489, $2,945
          and $10,656, respectively. The future minimum lease payments under
          above-mentioned operating leases are as follows:

          2002                                                      $   8,219
          2003                                                          7,502
          2004                                                          7,427
          2005                                                          7,364
          2006 and thereafter                                          22,391
                                                                    ---------

                                                                    $  52,903
                                                                    =========

          In addition, ASE Test, Inc. and ISE Labs, also leased equipment under
          non-cancellable capital lease agreements. As of December 31, 2001,
          the net book value of the equipment acquired under the lease
          obligations amounted to $1,000. The future minimum lease payments
          under above-mentioned capital leases for equipment are as follows:

          2002                                                      $     922
          2003                                                            230
                                                                    ---------
          Total minimum lease payments                                  1,152
          Less:  Amount representing interest                             (58)
                                                                    ---------
          Present value of future lease obligations                     1,094
          Capital lease obligation, current                              (867)
                                                                    ---------

          Capital lease obligation, long-term                       $     227
                                                                    =========

     b.   ASE Test, Inc. has unused letters of credit of $7,839.

     c.   ASE Test, Inc., ASE Test Malaysia and ISE Labs have commitments to
          purchase machinery and equipment of $28,960, $5,752 and $5,315,
          respectively.

     d.   ASE Test, Inc. and ASE Test Malaysia engage outside sales agencies.
          Commissions and service fees were paid based on monthly cost and
          expenses incurred associated to the services provided plus 15% in
          1999, 10% in 2000 and 5%-10% in 2001 (starting August 2001, a limit
          on the cost and expenses that can be incurred was set) or based
          on 0.5%-1.5% in 1999 and 2000, 0.56%-0.7% in 2001 of net export
          sales. Such commissions and service fees for 1999, 2000 and 2001 were
          $4,571, $6,323 and $6,248, respectively.


                                    F-29
<PAGE>


20.  SIGNIFICANT SUBSEQUENT EVENTS

     The Company acquired, in January 2002, the remaining 20% equity interest in
     ISE Labs for $50 million. ISE Labs has become a wholly-owned subsidiary of
     the Company following such acquisition.


21.  DERIVATIVE FINANCIAL INSTRUMENTS

     Information on derivative transactions is as follows:

     a.   Foreign currency options

          Since ASE Test, Inc. expects to receive US dollars from its export
          sales, it entered into foreign currency option contracts to manage
          the effects of foreign currency rate fluctuations. As of December
          31, 2001, the open contracts are as follows:

<TABLE>
                                                          Strike Price
               Contract                   Amount             US$/NT$         Maturity Dates
          ---------------------       -------------       -------------     -----------------
<S>                                   <C>                 <C>               <C>
          Sell USD Call/TWD Put       USD 4 million       US$1:NT$34.61     January 10, 2002
          Sell USD Call/TWD Put       USD 4 million       US$1:NT$34.61     February 15, 2002
          Sell USD Call/TWD Put       USD 4 million       US$1:NT$34.61     March 11, 2002
          Buy USD Put/TWD Call        USD 2 million       US$1:NT$34.50     January 29, 2002
</TABLE>

          The loss arising from such contracts based on mark-to-market
          valuation were approximately $187 in 2001. The gain (loss) arising
          from settled option contracts were immaterial in 2000 and 2001.

     b.   Forward exchange contract

          ASE Test Malaysia entered into forward contracts to hedge foreign
          exchange fluctuations associated with foreign currency liabilities. As
          of December 31, 2001, there is no open forward contract. The
          gain arising from settled forward contracts were $2,062 and $942 in
          2000 and 2001, respectively.

     c.   Transaction risk

          1)   Credit risk

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

          2)   Market risk

               This is the risk associated to potential exchange rate movements
               of foreign-currency-denominated assets and/or liabilities.


                                    F-30
<PAGE>


          3)   Liquidity risk and cash flow risk

               At the maturity of these contracts, ASE Test, Inc. has
               sufficient operating capial to meet cash requirements, hence,
               there are no exposures to liquidity risk and cash flow risk.

22.  NON-DERIVATIVE AND DERIVATIVE FINANCIAL INSTRUMENTS

<TABLE>
                                                                           2000                         2001
                                                                 -----------------------      -----------------------
                                                                  Carrying       Fair          Carrying       Fair
        Non-Derivative Financial Instruments                       Value         Value          Value         Value
     -------------------------------------------------           ---------     ---------      ---------     ---------
<S>                                                              <C>           <C>            <C>           <C>
     Assets
           Cash and cash equivalents (including
             pledged time deposits)                              $ 157,440     $ 157,440      $ 106,339     $ 106,339
           Short-term investments                                    9,062         9,105         31,503        31,527
           Accounts receivable - net                                86,466        86,466         46,573        46,573
           Long-term investments - net                              87,161        87,161         95,042        95,019
     Liabilities
           Short-term borrowings                                    17,728        17,728          9,946         9,946
           Accounts payable                                         26,345        26,345         17,807        17,807
           Long-term debts (including current
             portion)                                              287,497       287,497        269,101       269,101

           Derivative Financial Instruments

     Forward exchange contracts                                  $      62     $     (52)     $       -     $       -
     Foreign currency options                                            -             -              -          (183)
</TABLE>

     The carrying values of cash, and cash equivalents, 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 debts 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. The fair
     values of derivative financial instruments are based on the information of
     mark-to-market valuation.


23.  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, 2000 and 2001 are as follows:

                                                          Percentage of
                                                       Accounts Receivable
                                                       2000           2001
                                                     --------       --------

     Five largest customers                            36%            34%


                                    F-31
<PAGE>


     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.


24.  SEGMENT AND GEOGRAPHICAL INFORMATION

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

     b.   Geographic information - revenue

<TABLE>
                                                                 1999                   2000                   2001
                                                         -------------------    -------------------    -------------------
              Area                                         Amount          %      Amount          %      Amount          %
          ------------                                   ----------     ----    ----------     ----    ----------     ----
<S>                                                      <C>             <C>    <C>             <C>    <C>             <C>
          America                                        $  207,652       77    $  323,658       74    $  225,657       76
          Asia                                               50,652       19        87,897       20        62,952       21
          Europe                                             11,945        4        28,730        6         9,850        3
          Australia                                               5        -             -        -             7        -
                                                         ----------     ----    ----------     ----    ----------     ----

                                                         $  270,254      100    $  440,285      100    $  298,466      100
                                                         ==========     ====    ==========     ====    ==========     ====
</TABLE>

     c.   Geographic information - long-live assets

<TABLE>
                                                                                        2000                   2001
                                                                                -------------------    -------------------
                                                                                  Amount          %      Amount          %
                                                                                ----------     ----    ----------     ----
<S>                                                                             <C>             <C>    <C>             <C>
          Asia                                                                  $  548,914       86    $  491,143       84
          America                                                                   90,168       14        95,691       16
                                                                                ----------     ----    ----------     ----

                                                                                $  639,082      100    $  586,834      100
                                                                                ==========     ====    ==========     ====
</TABLE>

     d.   Major customers

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

<TABLE>
                                                                 1999                   2000                   2001
                                                         -------------------    -------------------    -------------------
              Area                                         Amount          %      Amount          %      Amount          %
          ------------                                   ----------     ----    ----------     ----    ----------     ----
<S>                                                      <C>             <C>    <C>             <C>    <C>             <C>
          Customer A                                     $   37,939       14    $   60,219       14    $   48,940       16
          Customer B                                         22,832        8        42,719       10        14,428        5
                                                         ----------     ----    ----------     ----    ----------     ----

                                                         $   60,771       22    $  102,938       24    $   63,368       21
                                                         ==========     ====    ==========     ====    ==========     ====
</TABLE>

          ASE Test, Inc.'s revenues from testing services provided to certain
          of ASE Inc.'s customers through ASE Inc. amounted to $1,880, $4,493
          and $5,354 in 1999, 2000 and 2001, respectively. None of such
          customers individually accounted for more than 10% of ASE Test,
          Inc.'s revenues from testing services in any such period.


                                    F-32
<PAGE>


     e.   Reported segment information

          The Company has two reportable segments, Testing and Packaging, each
          of which requires different development and production. The types of
          services provided by the testing segment are front-end engineering
          testing, wafer probing, and final testing services. The packaging
          segment 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, 2000 and
          2001 is as follows:

<TABLE>
                                                                Testing        Packaging       All other         Totals
                                                              -----------     -----------    ------------     -----------
<S>                                                           <C>             <C>            <C>              <C>
          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                 47,665          18,357            (387)         65,635
               operation
             Segment assets                                       404,239          80,372         172,646         657,257
             Expenditures for segment assets                      100,769          17,828          10,093         128,690

          2000
             Revenue from external customers                      316,158         124,127               -         440,285
             Interest revenue                                       1,222             527           4,086           5,835
             Interest expense                                      (7,814)           (110)        (12,651)        (20,575)
             Net interest revenue (expense)                        (6,592)            417          (8,565)        (14,740)
             Depreciation and amortization                        103,943          12,894             669         117,506
             Segment profit from continuing
               operation                                           84,406          26,915           2,322         113,643
             Segment assets                                       762,811          84,414         244,430       1,091,655
             Expenditures for segment assets                      365,054          32,522          15,621         413,197

          2001
             Revenue from external customers                      223,193          75,273               -         298,466
             Interest revenue                                         756             182           4,308           5,246
             Interest expense                                      (5,909)           (195)        (12,925)        (19,029)
             Net interest expense                                  (5,153)            (13)         (8,617)        (13,783)
             Depreciation and amortization                        127,617          16,463             780         144,860
             Segment profit (loss) from continuing
               operation                                          (23,258)          2,269         (20,775)        (41,764)
             Segment assets                                       647,774          73,777         237,855         959,406
             Expenditures for segment assets                       94,631           9,585               -         104,216
</TABLE>


                                    F-33
<PAGE>


25.  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:

                                                                       1999
                                                                    ---------
     Net revenues                                                   $ 289,931
     Net income                                                        59,143
     Earnings per share
           Primary                                                      $0.67
                                                                        =====
           Fully diluted                                                $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.


26.  DISCONTINUED OPERATIONS

     ISE Labs sold, on July 25, 2000, its packaging operation in Manteca,
     California to existing shareholders of ISE Labs for $4.9 million. ISE Labs
     recognized disposition loss of $1,327, net of tax benefits of $608. As
     discussed in Note 1, this disposition loss was considered an
     adjustment on the purchase price allocation. The accompanying financial
     statements for 1999 have been restated to reclassify the packaging
     operation of ISE Labs in Manteca, California as a discontinued segment.

     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 discontinued operations                        $  6,674
                                                                  ========

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

                                                       1999          2000
                                                    ---------     ---------

     Net sales                                      $   6,079     $   5,024
     Gross profit                                         112           414
     Loss before income taxes                          (2,294)       (1,146)
     Income tax benefit                                   934           388
     Net loss                                          (1,360)         (758)


                                    F-34
<PAGE>


     The discontinued assets were written down to fair value in accordance with
     US FAS 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.


27.  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) No. 87,
          "Accounting for Pensions", was effective no later than the beginning
          of the first period for which a US GAAP reconciliation is required. A
          portion of the unrecognized net transition obligation at the adoption
          date is to be allocated directly to equity. 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


                                    F-35
<PAGE>

          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:

<TABLE>
                                                               1999         2000         2001
                                                             --------     --------     --------
<S>                                                          <C>          <C>          <C>
          Cost of revenues                                   $  2,118     $  3,037     $      -
          Selling, general and administrative expenses            352          507            -
          Research and development                                352          507            -
                                                             --------     --------     --------

                                                             $  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-36
<PAGE>


     f.   Impairment of long-lived assets

          Under US GAAP, impairment losses are recorded in current period
          earnings, create a new cost basis for related assets going forward
          and cannot be reversed subsequently. Under US GAAP, in accordance
          with US FAS 121,long-lived assets held and used by the Corporation
          are reviewed for impairment whenever events or changes in
          circumstances indicate that the carrying amount of an asset may not
          be recoverable. For purposes of evaluating the recoverability of
          long-lived assets, the recoverability test is performed by comparing
          undiscounted net cash flows of the assets against the net book value
          of the assets. If the recoverability test indicates that an
          impairment has occurred, the impairment loss is the amount of the
          asset's net book value in excess of the related fair value. Under ROC
          GAAP, there is no requirement to provide for impairment of fixed
          assets. Based on an assessment by the Company of the potential impact
          of US FAS 121, there is no impairment loss as of December 31, 2001
          for the Company except for the value decline relating to the
          long-term investment in APP (see Note 5).

     g.   Derivative financial instruments

          There are no specific rules under ROC GAAP related to accounting for
          derivative financial instruments other than foreign currency forward
          exchange contracts (the "forward contracts"). The accounting of
          forward contracts and other derivatives is disclosed in Note 2. The
          accounting and reporting standards for derivative financial
          instruments under US GAAP are established in FAS 133 and FAS 138;
          which were adopted by the Corporation effective January 1, 2001. The
          adoption of US FAS 133 and US FAS 138 had no material impact on the
          consolidated financial statements for all periods presented. Under US
          GAAP, the Corporation did not apply hedge accounting and derivatives
          have historically been, and continue to be, recorded on the balance
          sheets at fair value, with the changes in fair values recorded
          through current period earnings.

     h.   Stock option compensation

          In May 2001, the Company's directors exercised their stock options
          for 2,480,000 shares at $3.5 per share under the 1996 option plan.
          ASE Inc. was concerned about potential dilution caused by the sales
          of these shares into the marketplace and decided, based on resolution
          of its Board of Directors, to purchase these shares from the
          directors at the approximate market price of $14.27 per share at the
          same day of option exercised. Under ROC GAAP, such share purchase is
          accounted for as additional investments of ASE Test Limited's shares
          by ASE Inc. However, under US GAAP, according to APB Opinion 25 and
          FIN 44, the purchase of shares from employees within six months after
          the exercise of vested options, the compensation expense shall be
          measured for the difference between the market price of the share on
          the date of purchase and the market price on the date the options
          were issued. Consequently, the difference amounting to $26,710
          arising from such share purchase by ASE Inc. was recorded by the
          Company as compensation expenses and credited to capital surplus.

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


                                    F-37
<PAGE>

<TABLE>
                                                                          1999            2000             2001
                                                                     ------------     ------------     ------------
<S>                                                                  <C>              <C>              <C>
     Net income (loss)
     -----------------

     Net income (loss) based on ROC GAAP                             $     62,160     $    107,195     $    (45,759)
                                                                     ------------     ------------     ------------
     Adjustments:
          a.  Pension benefits                                                 10               53                7
          c.  Bonuses to employees, director and supervisor:
              - Regular bonuses                                            (4,651)          (2,790)           2,666
              - Special stock bonuses                                      (2,031)          (3,236)          (2,619)
          d.  Depreciation of building                                       (149)             (62)            (526)
          e.  Excess of book value of building transferred
              between related parties                                          13               13               13
          h.  Stock option compensation                                         -                -          (26,710)
     US GAAP adjustments belonged to minority interest                          4                -                -
                                                                     ------------     ------------     ------------
     Net decrease in net income (loss)                                     (6,804)          (6,022)         (27,169)
                                                                     ------------     ------------     ------------

     Net income (loss) based on US GAAP                              $     55,356     $    101,173     $    (72,928)
                                                                     ============     ============     ============

     Earnings per share (In US Dollars)
          Basic                                                      $       0.69     $       1.18     $      (0.77)
                                                                     ============     ============     ============
          Diluted                                                    $       0.63     $       1.09     $      (0.77)
                                                                     ============     ============     ============

     Number of shares (Note 28d)
          Basic                                                        80,232,420       85,970,361       94,921,412
                                                                     ============     ============     ============
          Diluted                                                      88,359,934       92,673,040       94,921,412
                                                                     ============     ============     ============

     Shareholders' equity
     --------------------

     Shareholders' equity based on ROC GAAP                          $    295,380     $    643,136     $    597,523
     Adjustments:
          a.  Pension benefits                                               (126)             (73)             (66)
          b.  Adjustment for long-term investment in equity
              securities                                                      513                -                -
          c.  Bonuses to employees, directors and
              supervisors                                                  (2,313)          (3,796)               -
          d.  Effect of adjustments on useful life                           (149)            (211)            (737)
          e.  Excess of book value of building transferred
              between related parties                                        (584)            (570)            (557)
     Effect of US GAAP adjustment on cumulative
       translation adjustment                                                (427)             264               89
                                                                     ------------     ------------     ------------
     Net decrease in shareholders' equity                                  (3,086)          (4,386)          (1,271)
                                                                     ------------     ------------     ------------

     Shareholders' equity based on US GAAP                           $    292,294     $    638,750     $    596,252
                                                                     ============     ============     ============
</TABLE>

(Forward)


                                                         F-38
<PAGE>

<TABLE>
<S>                                                                  <C>              <C>              <C>
     Changes in shareholders' equity based on US GAAP
     ------------------------------------------------

     Balance, beginning of year                                      $    208,054     $    292,294     $    638,750
     Net income (loss) for the year                                        55,356          101,173          (72,928)
     Issuance of new shares under stock option plans                        8,873            7,925           19,854
     Capital increase in cash in July 2000                                      -          263,662                -
     Convertible notes converted into ordinary shares                           -              115                -
     ASE, Inc. shares to be distributed as bonus to
       employees                                                            4,369            4,625            3,419
     ASE, Inc. purchased the Company's shares from the
       exercise of stock options                                                -                -           26,710
     Cumulative translation adjustment for subsidiaries                     5,356          (20,887)         (19,632)
     Adjustment from changes in ownership percentage of
       investees                                                              (91)          (9,616)             (20)
     Unrealized holding gain (loss) on equity securities                   10,377             (541)              99
                                                                     ------------     ------------     ------------

     Balance, end of year                                            $    292,294     $    638,750     $    596,252
                                                                     ============     ============     ============
</TABLE>

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

<TABLE>
                                                                                  2000          2001
                                                                               ---------     ---------
<S>                                                                            <C>           <C>
     Buildings and improvement
     -------------------------

     As reported                                                               $  29,388     $  66,219
     US GAAP adjustments
           Effect of adjustments on useful life                                     (201)         (714)
           Excess of adjustments on building transferred between related
             parties                                                                (489)         (450)
                                                                               ---------     ---------

     As adjusted                                                               $  28,698     $  65,055
                                                                               =========     =========

     Accrued expenses and other current liabilities
     ----------------------------------------------

     As reported                                                               $  16,846     $  14,038
     US GAAP adjustments
           Bonuses to employees, directors and supervisors                         3,796             -
           Translation difference                                                   (221)            -
                                                                               ---------     ---------

     As adjusted                                                               $  20,421     $  14,038
                                                                               =========     =========

     Accrued pension cost
     --------------------

     As reported                                                               $     568     $     810
     US GAAP adjustments - pension benefits                                          121           107
                                                                               ---------     ---------

     As adjusted                                                               $     689     $     917
                                                                               =========     =========
</TABLE>


                                                   F-39
<PAGE>


     As a result of the adjustments presented above, the amounts of total
     assets based on US GAAP are $1,090,965 and $958,242 as of December 31,
     2000 and 2001, respectively.


28.  ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

     a.   Significant investees - ASE (Chung-Li) Inc. and ASE Investment
          (Labuan) Inc.

          The summarized financial information of significant investees, both
          ASE (Chung-Li) Inc. and ASE Investment (Labuan) Inc., is as follows:

          ASE (Chung-Li) Inc.
          -------------------

          1)   Selected balance sheet information

<TABLE>
                                                                                     2000           2001
                                                                                  ----------     ----------
<S>                                                                               <C>            <C>
               Current assets                                                     $   59,982     $   87,177
               Non-current assets                                                    300,208        275,878
               Current liabilities                                                   138,933         76,326
               Non-current liabilities                                                44,393         62,054
</TABLE>

          2)   Selected income statement information

<TABLE>
                                                                       1999          2000           2001
                                                                    ----------    ----------     ----------
<S>                                                                 <C>           <C>            <C>
               Net sales                                            $   83,533    $  243,501     $  145,305
               Gross profit                                             20,420        76,454         20,807
               Pre-tax income from continuing operations                16,132        54,989          4,275
               Net income                                               15,745        51,262          1,274
</TABLE>

          ASE Investment (Labuan) Inc.
          ----------------------------

          1)   Selected balance sheet information

<TABLE>
                                                                                      2000           2001
                                                                                  ----------     ----------
<S>                                                                               <C>            <C>
               Current assets                                                     $      114     $      106
               Non-current assets                                                    182,847        161,096
               Current liabilities                                                         3          4,127
               Non-current liabilities                                               176,923         78,876
</TABLE>

          2)   Selected income statement information

<TABLE>
                                                                       1999          2000           2001
                                                                    ----------    ----------     ----------
<S>                                                                 <C>           <C>            <C>
              Net sales                                             $        -    $        -     $        -
              Gross profit                                                   -             -              -
              Pre-tax income (loss) from continuing operations           1,968         5,468        (24,531)
              Net income (loss)                                            568         5,468        (24,531)
</TABLE>


                                                            F-40
<PAGE>


     b.   Pension

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

<TABLE>
                                                                     1999           2000           2001
                                                                  ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>
          Components of net periodic benefit cost
              Service cost                                        $     287      $     491      $     479
              Interest cost                                              86            120            146
              Expected return on plan assets                            (55)           (52)           (86)
              Amortization of prior service cost                          -            (21)             9
                                                                  ---------      ---------      ---------

          Net periodic benefit cost                               $     318      $     538      $     548
                                                                  =========      =========      =========

          Change in benefit obligation
              Benefit obligation at beginning of year             $   1,321      $   1,847      $   2,489
              Service cost                                              287            491            479
              Interest cost                                              86            120            146
              Actuarial gain                                            113            179            702
              Benefits paid                                              (6)            (6)           (21)
              Exchange difference                                        46           (142)          (181)
                                                                  ---------      ---------      ---------
              Benefit obligation at end of year                       1,847          2,489          3,614
                                                                  ---------      ---------      ---------

          Change in plan assets
              Fair value of plan assets at beginning of year            778          1,064          1,341
              Actual return on plan assets                               55             52             32
              Employer contribution                                     209            302            273
              Benefits paid                                              (6)            (6)           (21)
              Exchange difference                                        28            (71)           (83)
                                                                  ---------      ---------      ---------
                                                                      1,064          1,341          1,542
                                                                  ---------      ---------      ---------
          Funded status                                                 783          1,148          2,072
          Unrecognized actuarial loss                                  (285)          (459)        (1,155)
                                                                  ---------      ---------      ---------

          Net amount recognized (Recognized as accrued pension
            cost)                                                 $     498      $     689      $     917
                                                                  =========      =========      =========
</TABLE>

          Actuarial assumptions:

<TABLE>
                                                                     1999           2000           2001
                                                                  ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>
          Discount rate                                                 6.5%           6.0%           5.0%
          Rate of compensation increase                                 4.0%           4.0%           3.0%
          Expected return on plan assets                                6.5%           6.0%           5.0%
</TABLE>

     c.   Income tax

<TABLE>
                                                                     1999           2000           2001
                                                                  ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>
          Tax benefits (current payable)                          $  (3,997)     $  (4,130)     $   2,927
          Income taxes (10%) on undistributed earnings                    -         (2,939)        (4,119)
          Deferred                                                    2,951          4,872         (4,375)
          Adjustment of prior years' income tax                         368              -           (955)
                                                                  ---------      ---------      ---------

                                                                  $    (678)     $  (2,197)     $  (6,522)
                                                                  =========      =========      =========
</TABLE>


                                                   F-41
<PAGE>


          Reconciliation of income tax for the years ended December 31, 1999,
          2000 and 2001 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>
                                                                                  1999          2000         2001
                                                                                ---------    ---------    ---------
<S>                                                                             <C>          <C>          <C>
         ASE Test, Inc.
         --------------

          Benefit (tax) based on pretax accounting income or loss at
            statutory rate (25%)                                                $  (6,770)   $ (11,367)   $   5,268
          Add (deduct) tax effects of:
                Permanent differences
                      Bonuses to directors, supervisors and
                        employees                                                  (1,670)      (1,507)          12
                      Stock option compensation                                         -            -       (6,677)
                      Tax-exempt income - tax holiday                               6,145        6,126          659
                      Tax-exempt income - investment income
                        (loss)                                                      1,624         (146)         212
                Credits for investment in machinery and
                  equipment, and research and development
                  expenditures
                      Deferred                                                      5,257        4,990       (2,745)
                      Reversal of (provision for) valuation allowance              (3,162)       4,661       (9,033)
                      Utilized                                                      1,170        8,527        4,752
                Adjustment of prior year's income tax                                 368            -         (955)
                Income taxes (10%) on undistributed earnings                            -       (2,939)      (4,119)
                Other                                                                (494)      (1,377)          44
                                                                                ---------    ---------    ---------
          Income tax benefit (expense)                                              2,468        6,968      (12,582)
                                                                                ---------    ---------    ---------

          ASE Test Malaysia
          -----------------

          Benefit (tax) based on pretax accounting loss (income) at
            statutory rate (28%)                                                   (8,545)     (13,780)         508
          Add (deduct) tax effects of:
                Permanent differences
                      Tax-exempt income                                             8,545        8,881            -
                      Others                                                            -         (156)         (83)
                Deferred                                                            1,044            -        1,170
                                                                                ---------    ---------    ---------
          Income tax benefit (expense)                                              1,044       (5,055)       1,595
                                                                                ---------    ---------    ---------

          ISE Labs, Inc.
          --------------

          Benefit (tax) based on pretax accounting loss (income) at
            statutory rate (federal tax rate 35% and state tax rate 6%)         $  (4,254)   $  (7,121)   $   6,636
          Add (deduct) tax effects of:
                Permanent differences
                      Penalty                                                        (393)      (1,339)           -
                      Amortization and expenses                                      (105)        (250)        (128)
                      Other                                                             -            -          (18)
</TABLE>

(Forward)


                                                        F-42
<PAGE>

<TABLE>
<S>                                                                             <C>          <C>          <C>
          Utilization of loss carryforward                                              -        1,087            -
          Utilization of tax credit for capital expenditure                           679            -            -
          Deferred                                                                   (188)          76          383
          Lower foreign tax rate adjustments and other                                 71        3,437       (2,408)
                                                                                ---------    ---------    ---------
          Income tax benefit (expense)                                             (4,190)      (4,110)       4,465
                                                                                ---------    ---------    ---------

          Income tax expense                                                    $    (678)   $  (2,197)   $  (6,522)
                                                                                =========    =========    =========
</TABLE>

     d.   Earnings (Loss) per share

          US SFAS 128 requires the presentation of basic and diluted earnings
          per share. Basic net income per share is computed based on the
          weighted average number of common shares outstanding during the
          period. 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>
                                                                          1999           2000           2001
                                                                      ------------   ------------   ------------
<S>                                                                   <C>            <C>            <C>
          Net income (loss) under US GAAP                             $     55,356   $    101,173   $    (72,928)
                                                                      ============   ============   ============

          Weighted average shares-denominator basic
            computation                                                 80,232,420     85,970,361     94,921,412
          Effect of diluted shares-stock options                         8,127,514      6,702,679              -
                                                                      ------------   ------------   ------------

          Weighted average shares, as adjusted- denominator             88,359,934     92,673,040     94,921,412
                                                                      ============   ============   ============

          Earnings (loss) per share (In US Dollars)
               Basic                                                  $       0.69   $       1.18   $      (0.77)
                                                                      ============   ============   ============
               Diluted                                                $       0.63   $       1.09   $      (0.77)
                                                                      ============   ============   ============

          Number of shares to be potentially issued from:
               Stock options                                            12,624,374     11,486,149     16,308,585
                                                                      ============   ============   ============
               Convertible notes                                         6,464,646      6,460,202      6,460,202
                                                                      ============   ============   ============
</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 has expired as
          of December 31, 2001. 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
          and key employees. If any granted shares are forfeited, the shares
          may be granted again, to the extent of any such forfeiture.


                                    F-43
<PAGE>


          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.

          A summary of the transaction of shares under the six plans is
          presented below:

<TABLE>
                                                                       WEIGHTED
                                                                        AVERAGE        WEIGHTED
                                                                       EXERCISE         AVERAGE
                                                        NUMBER OF        PRICE        GRANT DATE
                                                          SHARES       PER SHARE      FAIR VALUES
                                                       -----------    -----------     -----------
<S>                                                     <C>            <C>            <C>
          Beginning balance - January 1, 1999           11,585,128     $      5.97
          Option granted                                 2,742,500              20    $     10.65
          Option exercised                              (1,627,226)           5.47    ===========
          Option forfeited                                 (76,028)           7.29
                                                       -----------    -----------
          Ending balance - December 31, 1999            12,624,374            9.07
          Option granted                                   412,000              25    $     13.44
          Option exercised                              (1,263,041)           6.31    ===========
          Option forfeited                                (287,184)          14.14
                                                       -----------    -----------
          Ending balance - December 31, 2000            11,486,149            9.82
          Option granted                                10,158,650            8.94    $      4.24
          Option exercised                              (5,221,508)           3.81    ===========
          Option forfeited                                (114,706)          17.11
                                                       -----------    -----------
          Ending balance - December 31, 2001            16,308,585     $     11.15
                                                       ===========    ===========

          Options exercisable at:
          December 31, 1999                              4,387,858     $      4.91
          December 31, 2000                              6,902,529            6.13
          December 31, 2001                              6,233,453           11.89
</TABLE>

          Significant option groups outstanding at December 31, 2001 and the
          related weighted average exercise price and remaining contractual
          life information are as follows (in US dollars):

<TABLE>
                                                    OUTSTANDING                        EXERCISABLE
                                            ----------------------------      ----------------------------
                                                                                                                 WEIGHTED
                                                              WEIGHTED                          WEIGHTED         AVERAGE
                                                               AVERAGE                           AVERAGE        REMAINING
                                               SHARES           PRICE            SHARES           PRICE        LIFE (YEARS)
                                            ------------    ------------      ------------    ------------     ------------
<S>                                           <C>            <C>                 <C>               <C>               <C>
          Options with exercise price of:
          $25                                    397,000     $    25.00            158,800         25.00             7.5
          $13.4375 - $20.15625                 2,640,706          19.69          1,449,886         19.54             5.6
          $8.875 - $13.3125                   12,728,479           9.18          4,082,367          9.52             7.4
          $5 - $7.5                              542,400           5.46            542,400          5.46             0.2
                                            ------------                      ------------

          Options outstanding at
            December 31, 2001                 16,308,585                         6,233,453
                                            ============                      ============
</TABLE>

          US FAS 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


                                    F-44
<PAGE>

          earnings per share as if the fair value accounting provisions of this
          statement had been adopted.

          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>
                                                   1999                2000                2001
                                             ----------------    ----------------    ----------------
<S>                                             <C>                 <C>                 <C>
          Risk free interest rate               5.76-6.01%           6.61-6.75%         3.62-4.66%
          Expected dividend yield                   0%                   0%                 0%
          Expected lives                        3.4-5 years         3.4-5 years         3.4 years
          Volatility                              55.53%               55.53%             62.14%
</TABLE>

          For purposes of the 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 pro
          forma net income, basic EPS and diluted EPS would have been as shown
          below (EPS in US Dollars).

<TABLE>
                                                               1999           2000           2001
                                                            ----------     ----------    ----------
<S>                                                         <C>            <C>           <C>
          Net income (loss) under US GAAP    As reported    $   55,356     $  101,173    $  (72,928)
                                             Pro forma          47,094         86,557       (90,325)

          Basic EPS                          As reported         $0.69          $1.18        $(0.77)
                                             Pro forma           $0.59          $1.01        $(0.95)

          Diluted EPS                        As reported         $0.63          $1.09        $(0.77)
                                             Pro forma           $0.53          $0.93        $(0.95)

</TABLE>

          The pro forma amounts reflect compensation expense related to 1996,
          1997, 1998, 1999 and 2000 option plans 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.

     f.   Segment information

          Effective July 1, 1998, the Company adopted US FAS 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 23e. conforms to the requirement of US FAS 131.

     g.   According to US FAS 130, the statement of comprehensive income for
          the years ended December 31, 1999, 2000 and 2001 are present below:

<TABLE>
                                                                              1999          2000           2001
                                                                           ---------     ---------      ---------
<S>                                                                        <C>           <C>            <C>
          Current earnings (loss) based on US GAAP                         $  55,356     $ 101,173      $ (72,928)
          Other comprehensive income, net of income tax
            expenses of $1,339 in 1999, and income tax benefit of
            $5,222 in 2000 and $4,908 in 2001:
                Translation adjustment on subsidiaries                         4,017       (15,665)       (14,724)
                Unrealized holding gain (loss) of long-term
                  investments in shares of stock                              10,377          (541)            99
                                                                           ---------     ---------      ---------

          Comprehensive (loss) income                                      $  69,750     $  84,967      $ (87,553)
                                                                           =========     =========      =========
</TABLE>


                                    F-45
<PAGE>


     h.   New accounting standards

          The Company is required by SEC Staff Accounting Bulletin No. 74, to
          disclose the impact of 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 July 2001, the US Financial Accounting Standards Board
          issued FAS 141, "Accounting for business combinations", and US FAS
          142, "Goodwill and other intangible assets". The Company must adopt
          these standards on January 1, 2002, which may affect accounting for
          business combinations consummated after June 30, 2001 and that for
          existing goodwill and other intangible assets of the Company upon
          adoption. The standards require, among other provisions, companies to
          review for possible impairment of goodwill existing at the date of
          adoption and perform subsequent impairment tests on an annual basis.
          Additionally, existing goodwill and intangible assets must be
          reassessed and classified consistently in accordance with the
          Statements' criteria. Under the new standards, the Company will no
          longer amortize goodwill while the other intangible assets will
          continue to be amortized over its estimated useful lives, which, if
          supportable, may be a period that exceeds the current maximum period
          of 40 years. As of December 31, 2000 and 2001, the Company has
          unamortized goodwill of approximately US$61,227 and US$53,697,
          respectively. Total amortization expenses of goodwill incurred for
          the years ended December 31, 1999, 2000, and 2001 are US$4,674,
          US$7,053, and US$7,053, respectively. The Company has not yet
          completed its assessment of the impact these new standards may have
          on the accompanying financial statements and cannot estimate whether
          related impact would be material or not.

          In June 2001, the US Financial Accounting Standards Board issued US
          FAS 143, "Accounting for Asset Retirement Obligations". The Statement
          requires, among other provisions, retirement obligations to be
          recognized when they are incurred and displayed as liabilities, with
          a corresponding amount capitalized as part of the related long-lived
          asset. The capitalized element is required to be expensed using a
          systematic and rational method over its useful life. US FAS 143 will
          be adopted by the Company on January 1, 2003 and is not expected to
          have a material impact on its financial information relating to US
          GAAP.

          In August 2001, the US Financial Accounting Standards Board issued
          FAS 144, "Accounting for the Impairment or Disposal of Long-lived
          Assets", which addresses financial accounting and reporting for the
          impairment or disposal of long-lived assets. US FAS 144 supersedes US
          FAS 121, "Accounting for the Impairment of Long-lived Assets and for
          Long-lived Assets to be Disposed of", and the accounting and
          reporting provisions of APB Opinion No. 30, "Reporting the Results of
          Operations for a disposal of a segment of a business". US FAS 144 is
          effective for years beginning after December 15, 2001, with earlier
          application encouraged. The impact of adopting this accounting
          standard is not expected to have a material effect on the Company's
          financial position and results of operations.


                                    F-46

<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 or Form 20-F for the year
          ended December 31, 1999).

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

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

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

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

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

     (d)  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. (incorporated
          by reference to Exhibit 4(e) to the Company's annual report on Form
          20-F for the year ended December 31, 2000).


<PAGE>


     (f)  Service Agreement dated as of July 1, 2000 between ASE Electronics
          (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by reference to
          Exhibit 4(f) to the Company's annual report on Form 20-F for the year
          ended December 31, 2000).

     (g)  Service Agreement dated as of July 1, 2000 between ASE Test Inc. and
          ASE (U.S.) Inc. (incorporated by reference to Exhibit 4(g) to the
          Company's annual report on Form 20-F for the year ended December 31,
          2000).

     (h)  Commission Agreement dated as of July 1, 2000 between ASE Electronics
          (M) Sdn. Bhd. and Gardex International Limited. (incorporated by
          reference to Exhibit 4(h) to the Company's annual report on Form 20-F
          for the year ended December 31, 2000).

     (i)  Commission Agreement dated as of July 1, 2000 between ASE Test Inc.
          and Gardex International Limited. (incorporated by reference to
          Exhibit 4(i) to the Company's annual report on Form 20-F for the year
          ended December 31, 2000).

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

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

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

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

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

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

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

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

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

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

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


<PAGE>


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

     (v)  Service Agreement dated as of August 1, 2001 between ASE Electronics
          (M) Sdn. Bhd. and ASE (U.S.) Inc. (incorporated by reference to
          Exhibit 10.21 to the Registration Statement on Form F-3 filed by ASE,
          Inc. on May 30, 2002).

     (w)  Service Agreement dated as of August 1, 2001 between ASE Test Inc.
          and ASE (U.S.) Inc. (incorporated by reference to Exhibit 10.22 to
          the Registration Statement on Form F-3 filed by ASE, Inc. on May 30,
          2002).

     (x)  Commission Agreement dated as of August 1, 2001 between ASE
          Electronics (M) Sdn. Bhd. and Gardex International Limited.
          (incorporated by reference to Exhibit 10.26 to the Registration
          Statement on Form F-3 filed by ASE, Inc. on May 30, 2002).

     (y)  Commission Agreement dated as of August 1, 2001 between ASE Test Inc.
          and Gardex International Limited. (incorporated by reference to
          Exhibit 10.27 to the Registration Statement on Form F-3 filed by ASE,
          Inc. on May 30, 2002).

     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: JEFFREY CHEN
                                               ----------------------
                                               Jeffrey Chen
                                               Chief Financial Officer


Date: June 28, 2002




<PAGE>


                           EXHIBITS INDEX

   Exhibit
   Number                                         Description
   -------                                    --------------------
      8                                       List of Subsidiaries