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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 20-F
  o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934.
 OR
 þ
    
    Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.For the fiscal year ended December 31, 2007.
 OR
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.For the transition period from
 to
.
 OR
 o
    
    Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.Date of event requiring this shell company report
 Commission File Number 000-27811
 CHARTERED SEMICONDUCTORMANUFACTURING LTD.
  
 
  Title of Each Class 
American Depositary Shares, 
each represented by ten Ordinary Shares
    
    Name of Each Exchange on Which Registered
NASDAQ Global Select Market
 
 
   þ o
  o þ
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
  o þ
  o þ




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TABLE OF CONTENTS
 Certain Definitions and Conventions
    
    
    2Presentation of Certain Financial Information
    
    
    2PART IITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    3ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3.
    
    KEY INFORMATION
    
    
    3ITEM 4.
    
    INFORMATION ON OUR COMPANY
    
    
    20ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
    
    
    36ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    36ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    63ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    79ITEM 8.
    
    FINANCIAL INFORMATION
    
    
    81ITEM 9.
    
    THE OFFER AND LISTING
    
    
    81ITEM 10.
    
    ADDITIONAL INFORMATION
    
    
    83ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    100ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    102PART IIITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    102ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    103ITEM 15.
    
    CONTROLS AND PROCEDURES
    
    
    103ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    105ITEM 16B.
    
    CODE OF ETHICS
    
    
    105ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    105ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    105ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    106PART IIIITEM 17.
    
    FINANCIAL STATEMENTS
    
    
    106ITEM 18.
    
    FINANCIAL STATEMENTS
    
    
    106ITEM 19.
    
    EXHIBITS
    
    
    107SIGNATURESIndex to Financial StatementsEX-4.7 Credit Agreement dated January 28,2008 by and among the company as Borrower,Societe Generale as Arranger,Lender and Facility Agent,and The Bank of New York,as Security Trustee and Account Bank.EX-4.20 Stock Purchase Agreement dated February 15, 2008 by and amongst the company, Hitachi, Ltd and Hitachi Asia, Ltd for the purchase 100 percent of the shares in Hitachi SemiconductorEX-12.1 Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.EX-12.2 Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.EX-13.1 Certification of the President and Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.EX-13.2 Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.EX-15.1 Consent of KPMG
  1




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Certain Definitions and Conventions
 
  
 Presentation of Certain Financial Information
   2




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PART I
 
 ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3.
    
    KEY INFORMATION
 A.
    
    SELECTED FINANCIAL DATA
  Year Ended December 31,2003(9)
    
    
    2004(9)
    
    
    2005(9)
    
    
    2006(9)
    
    
    2007(in thousands, except per share data and ratios)Consolidated Statement
of Operations Data:Net revenue
    
    $
    551,911
    
    
    $
    932,131
    
    
    $
    1,032,734
    
    
    $
    1,414,525
    
    
    $
    1,355,486Cost of revenue
    
    
    645,195
    
    
    
    763,826
    
    
    
    915,281
    
    
    
    1,070,512
    
    
    
    1,095,830Gross profit (loss)
    
    
    (93,284
    )
    
    
    168,305
    
    
    
    117,453
    
    
    
    344,013
    
    
    
    259,656Other revenue(1)
    
    
    16,956
    
    
    
    17,927
    
    
    
    20,685
    
    
    
    21,030
    
    
    
    22,930Operating expenses:Research and development
    
    
    115,478
    
    
    
    93,818
    
    
    
    122,073
    
    
    
    152,756
    
    
    
    159,764Sales and marketing
    
    
    39,010
    
    
    
    37,270
    
    
    
    42,503
    
    
    
    55,007
    
    
    
    58,013General and administrative
    
    
    41,540
    
    
    
    34,951
    
    
    
    40,025
    
    
    
    42,558
    
    
    
    39,648Fab start-up costs
    
    
    9,219
    
    
    
    33,199
    
    
    
    22,697
    
    
    
    
    
    
    
    Other operating expenses (income), net(2)
    
    
    2,292
    
    
    
    (139
    )
    
    
    14,202
    
    
    
    13,766
    
    
    
    13,030Total operating expenses, net
    
    
    207,539
    
    
    
    199,099
    
    
    
    241,500
    
    
    
    264,087
    
    
    
    270,455Equity in income of associated companies, net
    
    
    23,194
    
    
    
    27,563
    
    
    
    6,486
    
    
    
    36,040
    
    
    
    33,836Other income (loss), net(3)
    
    
    9,241
    
    
    
    16,416
    
    
    
    (6,744
    )
    
    
    (2,689
    )
    
    
    (2,418
    )Interest income
    
    
    12,168
    
    
    
    11,530
    
    
    
    28,625
    
    
    
    44,591
    
    
    
    27,031Interest expense and amortization of debt discount
    
    
    (42,222
    )
    
    
    (30,093
    )
    
    
    (69,839
    )
    
    
    (87,950
    )
    
    
    (60,325
    )
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Year Ended December 31,2003(9)
    
    
    2004(9)
    
    
    2005(9)
    
    
    2006(9)
    
    
    2007(in thousands, except share and per share data and ratios)Income (loss) before Income taxes and minority interest
    
    
    (281,486
    )
    
    
    12,549
    
    
    
    (144,834
    )
    
    
    90,948
    
    
    
    10,255Income tax expense (benefit)
    
    
    11,671
    
    
    
    4,774
    
    
    
    13,111
    
    
    
    23,924
    
    
    
    (91,433
    )(4)Income (loss) before minority interest
    
    
    (293,157
    )
    
    
    7,775
    
    
    
    (157,945
    )
    
    
    67,024
    
    
    
    101,688Minority interest in loss of CSP
    
    
    9,491
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) prior to cumulative effect adjustment
    
    
    (283,666
    )
    
    
    7,775
    
    
    
    (157,945
    )
    
    
    67,024
    
    
    
    101,688Cumulative effect adjustment for change in accounting policy(5)
    
    
    (6,421
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    (290,087
    )
    
    
    7,775
    
    
    
    (157,945
    )
    
    
    67,024
    
    
    
    101,688Less:Accretion to redemption value of convertible redeemable preference shares
    
    
    
    
    
    
    
    
    
    
    3,196
    
    
    
    9,476
    
    
    
    9,663Net Income (loss) available to ordinary shareholders
    
    $
    (290,087
    )
    
    $
    7,775
    
    
    $
    (161,141
    )
    
    $
    57,548
    
    
    $
    92,025Basic and diluted net earnings (loss) per ordinary share(6)
    
    $
    (0.12
    )
    
    $
    0.00
    
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    0.04Number of shares used in computing net earnings (loss) per ordinary share:Basic
    
    
    2,502,294
    
    
    
    2,508,376
    
    
    
    2,511,428
    
    
    
    2,528,056
    
    
    
    2,538,357Diluted
    
    
    2,502,294
    
    
    
    2,516,942
    
    
    
    2,511,428
    
    
    
    2,534,065
    
    
    
    2,868,617Basic net earnings (loss) per ADS(6)
    
    $
    (1.16
    )
    
    $
    0.03
    
    
    $
    (0.64
    )
    
    $
    0.23
    
    
    $
    0.36Diluted net earnings (loss) per ADS(6)
    
    $
    (1.16
    )
    
    $
    0.03
    
    
    $
    (0.64
    )
    
    $
    0.23
    
    
    $
    0.35Number of ADSs used in computing net earnings (loss) per ADS:Basic
    
    
    250,229
    
    
    
    250,838
    
    
    
    251,143
    
    
    
    252,806
    
    
    
    253,836Diluted
    
    
    250,229
    
    
    
    251,694
    
    
    
    251,143
    
    
    
    253,407
    
    
    
    286,862Other Data(7):Ratio of earnings to combined fixed charges and preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.77X
    
    
    
    Deficiency of earnings available to cover combined fixed charges and preferred dividends
    
    $
    300,296
    
    
    $
    18,064
    
    
    $
    131,026
    
    
    
    
    
    
    $
    17,149
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As of December 31,2003(9)
    
    
    2004(9)
    
    
    2005(9)
    
    
    2006(9)
    
    
    2007(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    905,472
    
    
    $
    539,399
    
    
    $
    819,856
    
    
    $
    718,982
    
    
    $
    743,173Working capital(8)
    
    
    686,238
    
    
    
    167,387
    
    
    
    551,177
    
    
    
    570,661
    
    
    
    677,822Total assets
    
    
    3,022,152
    
    
    
    3,091,616
    
    
    
    3,520,665
    
    
    
    3,621,936
    
    
    
    4,025,561Long-term obligations
    
    
    1,049,837
    
    
    
    960,660
    
    
    
    1,187,004
    
    
    
    1,329,908
    
    
    
    1,552,664Convertible redeemable preference shares
    
    
    
    
    
    
    
    
    
    
    250,663
    
    
    
    246,174
    
    
    
    255,837Long-term obligations and convertible redeemable preference shares
    
    
    1,049,837
    
    
    
    960,660
    
    
    
    1,437,667
    
    
    
    1,576,082
    
    
    
    1,808,501Ordinary share capital
    
    
    2,678,661
    
    
    
    2,682,638
    
    
    
    2,682,050
    
    
    
    2,704,215
    
    
    
    2,710,006Total shareholders equity
    
    
    1,495,680
    
    
    
    1,507,960
    
    
    
    1,350,356
    
    
    
    1,433,109
    
    
    
    1,541,149
 
 Notes:(1)
    
    Other revenue consists of rental income and management fees.(2)
    
    Other operating expenses (income), net, included rental expenses, foreign exchange
gains and losses, accretion on asset retirement obligations and gains and losses on sale of
and impairment charges relating to property, plant and equipment. In addition, other
operating expenses (income), net in 2003 also included a gain of $27.5 million associated
with the cancellation of our employee bonus award plan and a restructuring charge of $12.4
million relating to the phase out of Fab 1. Other operating expenses (income), net in 2004
also included a gain of $4.9 million associated with the resolution of a goods and services
tax matter and a restructuring charge of $4.6 million relating to the closing of Fab 1.(3)
    
    Other income (loss), net included other-than-temporary impairment losses, gains and
losses from changes in fair value of our derivative instruments and gains from the sale of
technology in 2003 and 2004. In addition, other loss, net, in 2005 also included an expense of $7.0 million
related to the termination of hedging transactions and other costs as a result of the cash
tender offer for and repurchase of any and all of our $575.0 million original principal
amount of 2.5% senior convertible notes due 2006.(4)
    
    Income tax benefit in 2007 included an income tax benefit of $119.5 million resulting
from the revocation of the pioneer status previously granted to Fab 3. Refer to Note 13 of
the consolidated financial statements for more details.(5)
    
    Effective January 1, 2003, we adopted the provisions of Statement of Financial
Accounting Standards, or SFAS, No. 143, Accounting for Asset Retirement Obligations,
which addresses financial accounting and reporting for obligations associated with the
retirement of long-lived assets and associated asset retirement costs. This resulted in a
cumulative effect loss of $6.4 million, after a reduction in minority interest of $0.5
million, for 2003. The cumulative effect loss represents the depreciation and accretion
expense that would have been recorded previously if SFAS No. 143 had been in effect in
prior years.(6)
    
    For 2003, basic and diluted net loss per ordinary share prior to the cumulative effect
adjustment was $(0.11) and basic and diluted net loss per ADS prior to the cumulative
effect adjustment was $(1.13).(7)
    
    For purposes of calculating the ratio of earnings to combined fixed charges and
preferred dividends and the deficiency of earnings available to cover combined fixed
charges and preferred dividends, if any, earnings consists of income (loss) before income taxes and minority interest, adjusted
to remove equity in income (loss) of equity affiliates and to add fixed charges,
amortization of capitalized interest and distributed income of equity affiliates, less
interest capitalized. Fixed charges consist of interest expensed, interest capitalized,
amortization of capitalized expenses related to indebtedness, plus an estimated interest
portion of rental expenses on operating leases. Preferred dividends consist of accretion
charges relating to our convertible redeemable preference shares.(8)
    
    Working capital is calculated as the excess of current assets over current liabilities.(9)
    
    Certain immaterial corrections have been made to prior years financial statements.
Refer to Note 1(c) of the consolidated financial statements for more details. 5




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B.
    
    CAPITALIZATION AND INDEBTEDNESS
  C.
    
    REASONS FOR THE OFFER AND USE OF PROCEEDS
  D.
    
    RISK FACTORS
  Risks Related to Our Financial Condition
 We have a history of losses and we may not be profitable in the future.
   We have a high level of debt. If we are unable to make interest and principal payments on our debt,
it could seriously harm our company.
  
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    limit our ability to pursue our growth plan and technology upgrades or migrations;
    
    require us to seek lenders consent prior to paying dividends on our ordinary shares;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, thereby reducing the availability of our cash flow to fund capital
expenditures, working capital and other general corporate purposes. The term capital
expenditures means the amount we paid or will pay during a particular period for property,
plant and equipment;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
semiconductor industry; and
    
    limit our ability to incur additional borrowings or raise additional financing through
equity or debt instruments.
  We expect to incur substantial capital expenditures, research and development costs, operational
and related costs in connection with our growth plans and may require additional financing that may
not be available.
  6




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Failure to maintain high capacity utilization, optimize the technology mix of our semiconductor
wafer production, continuously improve our device yields and downward pricing pressure of our
products would seriously harm our prospects and financial condition.
  
    
    maintain high capacity utilization;
    
    optimize the technology mix of our semiconductor wafer production;
    
    continuously improve our device yields; and
    
    maintain our average selling prices of our products.
      We have received grants from various agencies of the Government of Singapore. Such grants may not
be disbursed to us if the conditions attached to these grants are not complied with.
  7




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Our
investments in private enhanced cash funds are subject to risks which may affect liquidity of these
investments and cause losses.
  Risks Related to Our Operations
 The cyclical nature of the semiconductor industry and the periodic overcapacity that results from this, as well as any rapid change in the end markets we serve, may seriously harm our company.
   We depend on our technology partners to advance our portfolio of process technologies.
  8




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We depend on a small number of customers for a significant portion of our revenue.
  We may not be able to implement new technology as it becomes available which may affect our ability
to produce advanced products at competitive prices.
  A decrease in demand and average selling prices for end-use applications of semiconductor products
such as communications equipment, personal computers, computer peripherals and consumer products
may significantly decrease the demand for our services and may result in a decrease in our revenue
and gross profit margin.
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Our ability to successfully collaborate with electronic design automation, intellectual property
and design service providers to meet customers design needs depends on the availability and
quality of the relevant services, tools and technologies and our ability to meet our customers
schedule and budget requirements.
  Our customers generally do not place purchase orders far in advance. Therefore, we do not have any
significant backlog.
  Our growth, technology capabilities, planned capacity expansion and our competitive position depend
on the success of our more advanced manufacturing facilities.
  We depend on our strategic business alliances relating to our fabs. Termination or modification of
these alliances could seriously harm our company.
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We may not be able to compete successfully in our industry.
    We
may not be successful in our acquisitions of companies and may face
difficulties in integrating our acquisitions, which could adversely
affect our business, operating results and financial condition.
  Our operating results fluctuate from quarter to quarter, which makes it difficult to predict our
future performance.
  
    
    the cyclical nature of both the semiconductor industry and the markets served by our
customers;
    
    pricing pressure from competitors in the foundry industry;
    
    changes in the economic conditions of geographical regions where our customers and their
markets are located;
    
    shifts by IDMs between internal and outsourced production;
    
    changes in demand for products that incorporate semiconductors that we produce;
    
    inventory and supply chain management of our customers;
    
    the loss of a key customer or the postponement or reduction
of an order from a key customer or the failure of a
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key customer to pay accounts receivable in a timely manner;
    
    the rescheduling or cancellation of large orders;
    
    the rescheduling or cancellation of planned capital expenditures;
    
    our inability to qualify new processes or customer products in a timely manner;
    
    the return of wafers due to quality or reliability issues;
    
    malfunction of our wafer production equipment;
    
    unforeseen delays or interruptions in our plans for expansion of our existing
fabrication facilities;
    
    the timing and volume of orders relative to our available production capacity;
    
    our ability to obtain raw materials and equipment on a timely and cost effective basis;
    
    environmental events or industrial accidents such as fires or explosions;
    
    our susceptibility to intellectual property rights disputes;
    
    our ability to continue with existing, and to enter into new, technology and supply
alliances on mutually beneficial terms;
    
    actual capital expenditures differing from planned capital expenditures;
    
    currency and interest rate fluctuations that may not be adequately hedged; and
    
    technological changes.
  Our business depends in part on our ability to obtain and preserve intellectual property rights.
  We may be subject to intellectual property rights disputes.
  
    
    discontinue using certain process technologies which could cause us to stop manufacturing
certain semiconductor products;
    
    pay substantial monetary damages;
    
    seek to develop non-infringing technologies, which may not be feasible; or
    
    seek to acquire licenses to the infringed technology which may not be available on
commercially reasonable terms, if at all.
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We are subject to the risk of increased income taxes
   We may experience difficulty in obtaining insurance coverage without incurring increased costs.
  Risks Related to Manufacturing
 We may experience difficulty in achieving acceptable device yields, product performance and product delivery times as a result of manufacturing problems.
  We depend on our vendors of raw materials, supplies and equipment and do not generally have
long-term supply contracts with them.
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We depend on assembly and test subcontractors for our semiconductor assembly and testing
requirements.
  As we migrate to more advanced technologies which may require access to advanced packaging and
wafer bumping services, we may experience difficulties in securing such access in a timely manner
due to the limited number of vendors providing such services.
  We are subject to the risk of loss due to fire because the materials we use in our manufacturing
processes are highly flammable.
  Our failure to comply with certain environmental regulations could seriously harm our company.
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Risks Related to Our Infrastructure
 We face risks in expanding, constructing and equipping our fabrication plants.
  
    
    a major design and/or construction change caused by changes to the initial building
space utilization plan or equipment layout;
    
    technological, capacity and other changes to our expansion plans necessitated by changes
in market conditions;
    
    shortages and late delivery of building materials and facility equipment;
    
    delays in the installation, commissioning and qualification of our facility equipment;
    
    a long and intensive wet season that limits construction;
    
    a shortage of skilled foreign construction workers or a change in immigration laws
preventing such workers from entering Singapore;
    
    strikes and labor disputes;
    
    on-site construction problems such as industrial accidents, fires and structural
collapse;
    
    delays in securing the necessary governmental approvals and land lease;
    
    delays arising from modifications in capacity expansion plans as a result of uncertainty
in economic conditions; and
    
    delays arising from shortages and long lead times for delivery of equipment during
periods of growth in the industry.
 We depend on key personnel and skilled and qualified employees for our business and operations and
we may have difficulty attracting and retaining sufficient numbers of skilled employees.
    Risks Related to Covenants in Our Agreements
 Many of our loans contain financial and other covenants which may restrict our operational and
financing activities in ways that restrict our growth or are otherwise not in the best interests of
our company or holders of our securities.
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Risks Related to Investments in a Controlled Corporation
 Temasek controls our company and its interests may conflict with the interests of our other
shareholders.
   Risks Related to Investment in a Corporation with International Operations
 We operate internationally and the economic, political and social conditions in countries in which
our customers and their markets are located may have a negative impact on our revenue.
   
    
    subprime mortgage issue;
    
    fluctuations in the values of currencies;
    
    changes in labor conditions;
    
    burdens and costs of compliance with a variety of foreign laws;
    
    political and economic instability;
    
    increases in duties and taxation;
    
    imposition of restrictions on currency conversion or the transfer of funds;
    
    limitations on imports or exports;
    
    expropriation of private enterprises;
    
    reversal of the current policies (including favorable tax and lending policies)
encouraging foreign investment or foreign trade by our host countries;
    
    longer payment cycles; and
    
    greater difficulty in collecting accounts receivable.
 Terrorist attacks or a war could adversely affect our business, results of operations and financial
condition.
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Outbreak of an infectious disease or any other serious public health concerns in Asia (including
Singapore) and elsewhere could adversely impact our business, results of operations and financial
condition.
  Exchange rate fluctuations may increase our costs and capital expenditures, which could affect our
operating results and financial position.
  We may be a passive foreign investment company.
  Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a U.S. corporation.
  It may be difficult for you to enforce any judgment obtained in the U.S. against us or our
affiliates.
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Singapore law contains provisions that could discourage a take-over of our company.
  Risks Related to Our Securities and Our Trading Market
 The future sales of securities by our company or existing shareholders may hurt the price of our
securities.
  The market prices of our securities fluctuate widely and may be more volatile as the Singapore
securities market is relatively smaller than the U.S. markets.
   Your voting rights with respect to the ADSs are limited by the terms of the deposit agreement for
the ADSs.
   
    
    the notice of such meeting;
    
    voting instruction forms; and
 18




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##### Table of Contents




    
    a statement as to the manner in which instructions may be given by holders.
   Your ability to participate in any rights offering of our company is limited.
  FORWARD-LOOKING STATEMENTS
  
    
    our business strategy;
    
    our outlook for 2008;
    
    our capacity utilization rate, production capacity and production capacity mix;
    
    our acquisition of HNS and the proposed funding for the
transaction;
    
    our plans to expand our production capacity for 90nm and smaller process geometry
technologies to meet the anticipated needs of our customers;
    
    our 2008 planned capital expenditures, research and development expenditures,
depreciation and amortization and wafer capacity; and
    
    our sources of liquidity, cash flow, funding needs and financings.
  
    
    changes in the demands from our major customers, excess inventory, life cycle, market
outlook and trends or specific products;
    
    manufacturing capacity constraints;
    
    changes to the schedule for the closing of our acquisition of
HNS;
    
    proposed funding and liquidity position of our company in
relation to our acquisition of HNS;
    
    successful integration of HNS facility operations into our
operations;
    
    competition from other foundries;
    
    unforeseen delays, interruptions, performance level and technology mix in our
fabrication facilities;
    
    our progress on leading-edge products;
    
    changes in capacity plans, changes in allocation and process technology mix, and the
unavailability of materials, equipment, manpower and expertise;
    
    access to or delays in technological advances or our development of process
technologies;
    
    the successful implementation of our technology and supply alliances (including our
joint development agreements with IBM, Infineon, Samsung, Freescale, Toshiba and
STMicroelectronics);
    
    the growth rate of fabless companies, the outsourcing strategy of IDMs and our
expectation that IDMs will utilize foundry capacity more extensively;
    
    demand and supply outlook in the semiconductor market and the economic conditions in the
United States as well as globally;
    
    the availability of financings and the terms thereof; and
    
    terrorist attacks, acts of war, or the possibility of an outbreak of Bird Flu or any
other infectious disease in Singapore, as well as other parts of the world.
  19




---



##### Table of Contents



ITEM 4.
    
    INFORMATION ON OUR COMPANY
 A.
    
    HISTORY AND DEVELOPMENT OF OUR COMPANY
 However,
information contained in our website does not constitute a part of this document.
     
 
 B.
    
    BUSINESS OVERVIEW
 Overview
    20




---



##### Table of Contents



Industry Background
    The Growth of the Semiconductor Foundry Industry
    The Requirements of a Full-Service Foundry
  Systems Integration Expertise.
 Leading-Edge Process Technologies and Mature Technologies.
 21




---



##### Table of Contents



Comprehensive Prefabrication Services.
 Long-Term Relationships.
 Security.
 The Chartered Solution
      22




---



##### Table of Contents



Business Strategy
  Leverage improved technology position and improve revenue and margins
  Align manufacturing capacity with technology position, optimize capacity utilization and improve
cost structure
   Leading-edge Technologies.
 23




---



##### Table of Contents



Mature Technologies.
 Focus on solutions that support the growing trend of product convergence
  Provide complete product support for customers
  Offer leading process technology
      Enhance and expand alliances
  24




---



##### Table of Contents



Overview of Wafer Fabrication Services
  Pre-Fabrication Services
 Circuit Design.
  Mask Making.
 Wafer Fabrication
 Wafer Manufacturing.
  
    
    Logic.All digital electronic systems, such as computing devices, are controlled by
logic semiconductor devices which process data. Microcontrollers, microprocessors, digital
signal processors and graphics chipsets are all logic devices. We manufacture logic
semiconductor wafers primarily for the communication, computer and consumer markets.
    
    Mixed-Signal.Mixed-signal semiconductor devices combine analog and digital devices on
a single semiconductor device to process both analog signals and digital data. Mixed-signal
semiconductor devices are used in applications including wireless equipment, fiber optic
communications and data networking. We make mixed-signal semiconductor wafers using both
CMOS and BiCMOS processes.
    
    Memory.Memory devices store data and can be manufactured as stand-alone devices or
embedded in system semiconductor devices that combine a number of functions, such as logic
and memory components. We manufacture stand-alone memory devices including EPROM, EEPROM,
SRAM and Flash memory and embedded memory including eSRAM, eEEPROM, and eFLASH memories.
For more information on what these
 25




---



##### Table of Contents



mean, please see  Manufacturing Facilities. Memory devices are used in a range of products from computers and mobile phones to smart chip cards.
 Wafer Probe.
 Other Services
 Assembly and Test.
  Manufacturing Facilities
  Production Capacity and Utilization
  Quarterly Shipments and Capacity
 1Q
    
    2Q
    
    3Q
    
    4Q
    
    1Q
    
    2Q
    
    3Q
    
    4QData Including Chartereds Share of SMP
    
    2006
    
    2006
    
    2006
    
    2006
    
    2007
    
    2007
    
    2007
    
    2007Thousand eight-inch equivalent wafers:Total wafers shipped
    
    
    349.4
    
    
    
    355.7
    
    
    
    337.0
    
    
    
    322.9
    
    
    
    325.6
    
    
    
    381.6
    
    
    
    426.1
    
    
    
    415.5Total capacity
    
    
    427.5
    
    
    
    436.4
    
    
    
    458.2
    
    
    
    461.7
    
    
    
    462.4
    
    
    
    483.0
    
    
    
    502.2
    
    
    
    512.4Utilization
    
    
    82%
    
    
    
    82%
    
    
    
    74%
    
    
    
    70%
    
    
    
    70%
    
    
    
    79%
    
    
    
    85%
    
    
    
    81%1Q
    
    2Q
    
    3Q
    
    4Q
    
    1Q
    
    2Q
    
    3Q
    
    4QCapacity by Fab
    
    2006
    
    2006
    
    2006
    
    2006
    
    2007
    
    2007
    
    2007
    
    2007Thousand eight-inch equivalent wafers:Fab 2
    
    
    142.6
    
    
    
    144.1
    
    
    
    145.7
    
    
    
    145.7
    
    
    
    142.6
    
    
    
    153.8
    
    
    
    155.5
    
    
    
    155.5Fab 3
    
    
    69.5
    
    
    
    70.3
    
    
    
    71.0
    
    
    
    71.0
    
    
    
    69.5
    
    
    
    70.3
    
    
    
    70.4
    
    
    
    70.4Fab 5(1)
    
    
    34.3
    
    
    
    34.6
    
    
    
    35.0
    
    
    
    35.0
    
    
    
    34.6
    
    
    
    34.9
    
    
    
    35.3
    
    
    
    35.3Fab 6
    
    
    114.5
    
    
    
    115.8
    
    
    
    117.0
    
    
    
    117.0
    
    
    
    114.5
    
    
    
    115.8
    
    
    
    117.0
    
    
    
    120.0Fab 7
    
    
    66.6
    
    
    
    71.6
    
    
    
    89.5
    
    
    
    93.0
    
    
    
    101.2
    
    
    
    108.2
    
    
    
    124.0
    
    
    
    131.2Total
    
    
    427.5
    
    
    
    436.4
    
    
    
    458.2
    
    
    
    461.7
    
    
    
    462.4
    
    
    
    483.0
    
    
    
    502.2
    
    
    
    512.4
 
 Notes:(1)
    
    49% of total capacity, based on Chartereds equity ownership. Wafer Capacity
  26




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##### Table of Contents



Fab 2
    
    Fab 3
    
    Fab 5 (SMP)(1)
    
    Fab 6 (CSP)(1)
    
    Fab 7Production commenced
    
    1995
    
    1997
    
    1999
    
    2000
    
    2005Estimated full capacity(2)
    
    50,000 wafers per month
    
    28,000 wafers per month
    
    26,000 wafers per month
    
    45,000 wafers per month
    
    45,000 wafers per month(3)Wafer size
    
    Eight-inch (200-mm)
    
    Eight-inch (200-mm)
    
    Eight-inch (200-mm)
    
    Eight-inch (200-mm)
    
    Twelve-inch (300-mm)Process technologies
    
    0.6 to 0.3um(4)
    
    0.35 to 0.18um(4)
    
    0.25 to 0.13um(4)
    
    0.25 to 0.11um(4)
    
    0.13um and smaller process geometry technologies including 90nm, 65nm and 45nmManufacturing technologies(5)
    
    Digital; Mixed Signal; RF CMOS; SRAM; Flash Memory; HVCMOS; EEPROM; DMOS; BiCMOS, BiPolar; OTP; PowerMos
    
    Digital; Mixed Signal; RF CMOS; SRAM
    
    Digital; RF CMOS; BiCMOS; Mixed Signal; eSRAM
    
    High performance, high-density CMOS; high density SRAM Mixed Signal; RF CMOS
    
    High performance, high-density CMOS; Mixed Signal; SOIClean room
    
    111,700 sq. ft. Class-1 SMIF(6)
    
    82,300 sq. ft. Class-1 SMIF(6)
    
    97,800 sq. ft. Class-1 SMIF(6)
    
    139,800 sq. ft. Class-1 SMIF(6)
    
    238,200 sq. ft. Class-1 SMIF(6)
 
 Notes:(1)
    
    With respect to Fab 5 and Fab 6, the information includes capacity of our strategic partners.(2)
    
    Estimated full capacity is the production output capability based on our current and
anticipated process technology mix, which may vary. Our projections of estimated full capacity
have varied from previous projections in terms of number of wafers because of revisions to our
earlier plans, including changes to our capacity expansion plans and capacity allocation in
process technology mix. Such changes reflect developments in market conditions and demand.(3)
    
    Equivalent to 101,250 eight-inch wafers per month. A conversion rate of 2.25 is utilized in
determining the number of eight-inch wafer equivalent to that of twelve-inch wafers. We are
taking a phased approach to the full equipping of Fab 7 to 45,000 300-mm wafers per month, and
this is expected to take a number of years and will be paced by customer demand and industry
conditions.(4)
    
    Some of these manufacturing processes are preliminary and their successful implementation
depends on various factors, including our ability to achieve advances in process technology or
to obtain access to advanced process technology developed by others, or in the case of our
0.18um capability in Fab 3, our ability to leverage on certain tool capacities in SMP. These
fabs can be retrofitted to achieve smaller process geometry technologies than those shown
above.(5)
    
    Some of these manufacturing technologies are preliminary and their successful implementation
depends on various factors, including our ability to achieve advances in manufacturing
technology or to obtain access to advanced manufacturing technology developed by others.
EEPROMs are electrically erasable programmable read-only memory devices. SRAMs are static
random access memory devices. eSRAMs are embedded static random access memory devices. CMOS
means complementary metal oxide silicon. RFCMOS means radio frequency complementary metal
oxide silicon. BiCMOS means bipolar complementary metal oxide silicon. HVCMOS refers to high
voltage complementary metal oxide silicon. DMOS refers to double diffused vertical 27




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##### Table of Contents



MOSFET (metal oxide semiconductor field effect transistor). OTP refers to one time programmable
memory. SOI refers to Silicon-On-Insulator. PowerMos refers to discrete metal oxide silicon
transistor to control high power.(6)
    
    Class 1 is a measurement of air cleanliness in which the amount of particles is controlled to
no more that one particle at 0.5um per cubic foot of air. SMIF means standard mechanical
interface.   Year Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(in thousands)Total Output
    
    
    722
    
    
    
    1,035
    
    
    
    1,052
    
    
    
    1,365
    
    
    
    1,549
 Quality Assurance Programs
    Strategic Business and Technology Alliances
 IBM, Infineon, Samsung, Freescale, Toshiba and STMicroelectronics
   28




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Chartered Silicon Partners
     29




---



##### Table of Contents



Silicon Manufacturing Partners
      30




---



##### Table of Contents



Customers and Markets
   Customer
    
    Representative Products or ApplicationsBroadcom
    
    Local area network switches/routers, set-top boxes, cable modems, ethernet transceivers, network processors, bluetooth and high definition TV.Advanced Micro Devices
    
    Central processing units (CPUs) for computers.
  31




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##### Table of Contents



2005
    
    2006
    
    2007Americas
    
    
    75
    %
    
    
    77
    %
    
    
    72
    %Europe
    
    
    9
    
    
    
    9
    
    
    
    8Asia-Pacific Singapore
    
    
    1
    
    
    
    3
    
    
    
    3 Others
    
    
    12
    
    
    
    9
    
    
    
    16Japan
    
    
    3
    
    
    
    2
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  2005
    
    
    2006
    
    
    2007Americas
    
    $
    774,950
    
    
    $
    1,089,068
    
    
    $
    972,773Europe
    
    
    91,844
    
    
    
    129,619
    
    
    
    114,178Asia-Pacific Singapore
    
    
    8,995
    
    
    
    37,716
    
    
    
    39,434 Others
    
    
    123,449
    
    
    
    134,261
    
    
    
    220,268Japan
    
    
    33,496
    
    
    
    23,861
    
    
    
    8,833Total
    
    $
    1,032,734
    
    
    $
    1,414,525
    
    
    $
    1,355,486
    Customer Service
    Research and Development
  32




---



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Equipment and Materials
   33




---



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Intellectual Property
      Competition
    Environmental Matters and Compliance
  34




---



##### Table of Contents



Insurance
    C.
    
    ORGANIZATIONAL STRUCTURE
   Proportion ofCountry of
    
    Date of
    
    OwnershipName of Subsidiary
    
    Incorporation
    
    Incorporation
    
    InterestChartered Silicon Partners Pte Ltd
    
    Singapore
    
    March 1997
    
    
    51
    %Chartered Semiconductor Manufacturing Incorporated
    
    U.S.
    
    June 1991
    
    
    100
    %Chartered Semiconductor Japan Kabushiki Kaisha
    
    Japan
    
    October 2000
    
    
    100
    %Chartered Semiconductor Taiwan Ltd
    
    Taiwan
    
    August 2000
    
    
    100
    %Chartered Semiconductor Europe Limited
    
    England and Wales
    
    March 2001
    
    
    100
    %
 D.
    
    PROPERTY, PLANT AND EQUIPMENT
 Leases
   35




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##### Table of Contents



Production Capacity and Utilization
  
 ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion of our financial condition and results of operations should be
read in conjunction with the consolidated financial statements and the related notes included
elsewhere in this document. The following also includes a discussion of our share of SMP
revenue. SMP meets certain significance tests pursuant to Rule 3-09 of Regulation S-X.
Accordingly, separate financial statements of SMP are required to be filed by us and we intend
to file an amendment to this annual report on Form 20-F to include the separate financial
statements of SMP as soon as available but not later than June 30, 2008. Further, this
discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from those projected in the forward-looking statements. Factors
that might cause future results to differ significantly from those projected in the
forward-looking statements include, but are not limited to, those discussed below and elsewhere
in this document particularly in the cautionary risk factors described in Item 3. Key
Information  D. Risk Factors above.
 EXECUTIVE OVERVIEW
  36




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INDUSTRY OVERVIEW
 Cyclicality of the Semiconductor Industry
  Substantial Capital Expenditures
  Pricing, Change in Product Mix and Technology Migration
  37




---



##### Table of Contents



Capacity Utilization Rates (based on total shipments and total capacity, both of which include our
share of SMP)
   2003
    
    2004(2)
    
    2005(3)
    
    2006
    
    2007Average capacity utilization (1)
    
    
    58
    %
    
    
    80
    %
    
    
    70
    %
    
    
    77
    %
    
    
    79
    %
 
 Notes:(1)
    
    Based on total shipments and total capacity, both of which include our share of SMP.(2)
    
    Fab 1 ceased operations at the end of March 2004 and some of its operations moved to Fab 2.(3)
    
    Fab 7 started commercial shipment in June 2005. 2007 OVERVIEW
      38




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##### Table of Contents



2008 OUTLOOK AND PLANS
  2008 Outlook
  2008 Acquisition
  2008 Planned Capacity
  2008 Planned Capital Expenditures
  39




---



##### Table of Contents



2008 Planned Research and Development Expenditures
  CRITICAL ACCOUNTING POLICIES
  Depreciation and Amortization of Long-lived Assets
      Recoverability of Long-lived Assets
   40




---



##### Table of Contents




    
    A significant decrease in the market price of a long-lived asset group;
    
    A significant adverse change in the extent or manner in which a
long-lived asset group is being used or in its physical condition;
    
    A significant adverse change in legal factors or in the business climate that could
affect the value of a long-lived asset group, including an adverse action or
assessment by a regulator;
    
    An accumulation of costs significantly in excess of the amount originally expected for
the acquisition or construction of a long-lived asset group;
    
    A current-period operating or cash flow loss combined with a history of operating or
cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset group; and
    
    A current expectation that, more likely than not, a long-lived asset group will be
sold or otherwise disposed of significantly before the end of its previously estimated
useful life.
      Valuation of Inventory
  Cost
 Market
 41




---



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Revenue Recognition
     Sales Credits and Returns Allowances
   42




---



##### Table of Contents



Collectibility of Accounts Receivable
  Income Taxes
       43




---



##### Table of Contents



Share-Based Compensation
      Grants for Research and Development and Training
   44




---



##### Table of Contents



Other Investments
      CHANGE IN ACCOUNTING POLICIES
 SFAS No. 123(R), Share-Based Payments
  45




---



##### Table of Contents



Staff Accounting Bulletin No. 108, or SAB 108, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements
   Prior Period Adjustments
  46




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##### Table of Contents



RESULTS OF OPERATIONS
  Year ended December 31,2005
    
    2006
    
    2007Consolidated Statements of Operations data:Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    88.6
    
    
    
    75.7
    
    
    
    80.8Gross profit
    
    
    11.4
    
    
    
    24.3
    
    
    
    19.2Other revenue
    
    
    2.0
    
    
    
    1.5
    
    
    
    1.7Operating expenses:Research and development
    
    
    11.8
    
    
    
    10.8
    
    
    
    11.8Sales and marketing
    
    
    4.1
    
    
    
    3.9
    
    
    
    4.3General and administrative
    
    
    3.9
    
    
    
    3.0
    
    
    
    2.9Fab start-up costs
    
    
    2.2
    
    
    
    
    
    
    
    Other operating expenses, net
    
    
    1.4
    
    
    
    1.0
    
    
    
    1.0Total operating expenses, net
    
    
    23.4
    
    
    
    18.7
    
    
    
    20.0Equity in income of associated companies, net
    
    
    0.6
    
    
    
    2.5
    
    
    
    2.5Other loss, net
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    (0.2
    )Interest income
    
    
    2.8
    
    
    
    3.2
    
    
    
    2.0Interest expense and amortization of debt discount
    
    
    (6.8
    )
    
    
    (6.2
    )
    
    
    (4.4
    )Income (loss) before income tax
    
    
    (14.0
    )
    
    
    6.4
    
    
    
    0.8Income tax expense (benefit)
    
    
    1.3
    
    
    
    1.7
    
    
    
    (6.7
    )Net income (loss)
    
    
    (15.3
    )%
    
    
    4.7
    %
    
    
    7.5
    %Less: Accretion to redemption value of convertible
redeemable preference shares
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.7Net income (loss) available to ordinary shareholders
    
    
    (15.6
    )%
    
    
    4.0
    %
    
    
    6.8
    %
  Year ended December 31,2005
    
    2006
    
    2007Communications
    
    
    35
    %
    
    
    30
    %
    
    
    41
    %Computer
    
    
    25
    
    
    
    31
    
    
    
    28Consumer
    
    
    35
    
    
    
    37
    
    
    
    28Other *
    
    
    5
    
    
    
    2
    
    
    
    3Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Year ended December 31,2005
    
    2006
    
    2007Americas
    
    
    75
    %
    
    
    77
    %
    
    
    72
    %Europe
    
    
    9
    
    
    
    9
    
    
    
    8Asia-Pacific
    
    
    13
    
    
    
    12
    
    
    
    19Japan
    
    
    3
    
    
    
    2
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 47




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##### Table of Contents



Year ended December 31,2005
    
    2006
    
    20070.065 and smaller
    
    
    
    %
    
    
    
    %
    
    
    9
    %Up to 0.09
    
    
    19
    
    
    
    29
    
    
    
    12Up to 0.13
    
    
    23
    
    
    
    28
    
    
    
    34Up to 0.18
    
    
    10
    
    
    
    8
    
    
    
    9Up to 0.25
    
    
    10
    
    
    
    9
    
    
    
    12Up to 0.35
    
    
    23
    
    
    
    16
    
    
    
    14Above 0.35
    
    
    12
    
    
    
    10
    
    
    
    10Other *
    
    
    3
    
    
    
    
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 Note:*
    
    Includes revenue from generation of customers mask sets Years ended December 31, 2006 and December 31, 2007
 Net revenue
      48




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Cost of revenue
       Gross profit
    Other revenue
  49




---



##### Table of Contents



Research and development expenses
    Sales and marketing expenses
   General and administrative expenses
  Other operating expenses, net
  Equity in income of associated companies, net
   50




---



##### Table of Contents



Year ended December 31,2006
    
    2007(In millions)Net revenue (U.S. GAAP)
    
    $
    1,414.5
    
    
    $
    1,355.5Chartereds share of SMP revenue
    
    $
    112.1
    
    
    $
    102.5Net revenue including Chartereds share of SMP
    
    $
    1,526.6
    
    
    $
    1,458.0
  Year ended December 31,2006
    
    2007Excluding
    
    Including
    
    Excluding
    
    IncludingChartereds
    
    Chartereds
    
    Chartereds
    
    CharteredsShare
    
    Share
    
    Share
    
    Shareof SMP
    
    of SMP
    
    of SMP
    
    of SMPShipments (in thousands)*
    
    
    1,248.6
    
    
    
    1,365.0
    
    
    
    1,419.7
    
    
    
    1,548.9ASP per wafer
    
    $
    1,112
    
    
    $
    1,099
    
    
    $
    930
    
    
    $
    918
 
 
 Note:*
    
    Eight-inch equivalent wafers  Other loss, net
  Interest income
  Interest expense and amortization of debt discount
  Income tax expense (benefit)
   51




---



##### Table of Contents



Minority interest in CSP
  Accretion to redemption value of convertible redeemable preference shares
  Years ended December 31, 2005 and December 31, 2006
 Net revenue
      52




---



##### Table of Contents



Cost of revenue and gross profit
       Other revenue
  Research and development expenses
  Sales and marketing expenses
  53




---



##### Table of Contents



General and administrative expenses
  Fab start-up costs
  Other operating expenses, net
  Equity in income of SMP
   Year ended December 31,2005
    
    2006(In millions)Net revenue (U.S. GAAP)
    
    $
    1,032.7
    
    
    $
    1,414.5Chartereds share of SMP revenue
    
    $
    99.2
    
    
    $
    112.1Net revenue including Chartereds share of SMP
    
    $
    1,131.9
    
    
    $
    1,526.6
 54




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##### Table of Contents



Year ended December 31,2005
    
    2006Excluding
    
    Including
    
    Excluding
    
    IncludingChartereds
    
    Chartereds
    
    Chartereds
    
    CharteredsShare
    
    Share
    
    Share
    
    Shareof SMP
    
    of SMP
    
    of SMP
    
    of SMPShipments (in thousands)*
    
    
    965.0
    
    
    
    1,051.8
    
    
    
    1,248.6
    
    
    
    1,365.0ASP per wafer
    
    $
    1,036
    
    
    $
    1,045
    
    
    $
    1,112
    
    
    $
    1,099
 
 
 Note:*
    
    Eight-inch equivalent wafers Other loss, net
  Interest income
  Interest expense and amortization of debt discount
  Income tax expense
  Minority interest in CSP
  Accretion to redemption value of convertible redeemable preference shares
  55




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Current and expected liquidity
         56




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##### Table of Contents




    
    Ability to Increase Revenue and Margins  If our revenues and
margins were to decline, our ability to generate net cash from
operating activities in a sufficient amount to meet our cash needs
could be adversely affected.
    
    Debt Ratings  Our ability to obtain external financing and the
related cost of borrowing are affected by our debt ratings.
 57




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##### Table of Contents



Historic cash flows
  Year ended December 31,2005
    
    
    2006
    
    
    2007(In thousands)Net cash provided by operating activities
    
    $
    406,408
    
    
    $
    521,149
    
    
    $
    478,873Net cash used in investing activities
    
    $
    570,277
    
    
    $
    420,384
    
    
    $
    845,550Net cash provided by (used in) financing activities
    
    $
    444,753
    
    
    $
    (204,987
    )
    
    $
    386,528
 Historic operating cash flows
   Historic investing cash flows and capital expenditures
     58




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##### Table of Contents



Historic financing cash flows
       Grants for research and development and training
   59




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##### Table of Contents



Off-balance sheet arrangements
  Outstanding indebtedness
  As ofDecember 31,2007(In thousands)Short-term debt consists of:Bank of America Short-Term Credit Facility
    
    
    70,000Bank of America Revolving Facility
    
    
    50,000Sumitomo Mitsui Banking Corporation Revolving Facility
    
    
    150,000$
    270,000Long-term debt consists of:EXIM Guaranteed Loan
    
    
    543,5016.00% amortizing bonds due 2010
    
    
    29,6595.75% senior notes due 2010
    
    
    372,7006.25% senior notes due 2013
    
    
    297,7526.375% senior notes due 2015
    
    
    247,092Others
    
    
    9,633$
    1,500,337Total outstanding loans
    
    $
    1,770,337
  Loan covenant compliance
     60




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##### Table of Contents



Contractual obligations
  Payments due by period (in thousands)Less than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsShort-term and long-term debt including principal and
interest (1)
    
    $
    2,113,000
    
    
    $
    428,125
    
    
    $
    775,748
    
    
    $
    256,449
    
    
    $
    652,678Capital lease obligations including principal and interest
    
    
    123,409
    
    
    
    9,912
    
    
    
    19,823
    
    
    
    19,823
    
    
    
    73,851Capacity deposits(2)
    
    
    5,407
    
    
    
    5,407
    
    
    
    Operating lease obligations
    
    
    94,513
    
    
    
    7,029
    
    
    
    9,920
    
    
    
    8,546
    
    
    
    69,018Purchase obligationsunder (3):Capital expenditures
    
    
    450,463
    
    
    
    448,837
    
    
    
    1,626
    
    
    
    
    
    
    
    Technology agreements
    
    
    269,000
    
    
    
    121,500
    
    
    
    147,500
    
    
    
    
    
    
    
    Other
    
    
    282,701
    
    
    
    281,327
    
    
    
    775
    
    
    
    357
    
    
    
    242FIN 48 liability (4)
    
    
    5,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
    
    
    19,304
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,304Total
    
    $
    3,363,787
    
    
    $
    1,302,137
    
    
    $
    955,392
    
    
    $
    285,175
    
    
    $
    815,093
 
 Notes:(1)
    
    These amounts represent the expected principal and interest repayments at each of the periods indicated and do not include the unamortized debt discount relating
to the senior notes. The 5.75% senior notes due 2010, the 6.25% senior notes due 2013 and the 6.375% senior notes due 2015 were issued at a price of 98.896%,
99.053% and 98.573%, respectively, of the principal amount. As of December 31, 2007, the carrying amounts of the 5.75% senior notes due 2010, the 6.25% senior
notes due 2013 and the 6.375% senior notes due 2015 were $372.7 million, $297.8 million and $247.1 million, respectively, as the unamortized debt discount was
reported as a direct reduction to the carrying amounts of the senior notes. The estimated interest repayments on floating-rate obligations were calculated using
the prevailing floating interest rates related to these obligations as of December 31, 2007. Actual payments could differ from these estimates.(2)
    
    These amounts relate to our contractual obligation to refund deposits placed with us to secure wafer capacity for one of our more advanced technologies.(3)
    
    We have included purchase obligations that have been recorded on our consolidated balance sheet as of December 31, 2007 in the above table. These obligations
amounted to $169.9 million, $7.6 million and $204.9 million for capital expenditures, technology agreements and other purchase obligations primarily relating to
operating expenses, respectively.(4)
    
    As at December 31, 2007, our FIN 48 liability was $6.0 million. We were unable to reasonably estimate the timing of FIN 48 liability payments due to uncertainties in the timing of the effective settlement of tax positions.   61




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Special tax status
  
    
    the manufacture of integrated circuits using submicron technology at
Fab 2 for a ten-year period beginning July 1, 1996. The pioneer status
expired on June 30, 2006;
    
    the wafer fabrication of Application Specific Integrated Circuits, or
ASICs, and other advanced semiconductor devices at Fab 6 for a
ten-year period beginning September 1, 2003; and
    
    the wafer fabrication of integrated circuits at Fab 7 for a
fifteen-year period beginning October 1, 2005.
  
    
    post-pioneer status for the manufacture of integrated circuits using
submicron technology at Fab 2 for a five-year period beginning July 1,
2006;
    
    development and expansion status for the manufacture of integrated
circuits using submicron technology at Fab 3 for a five-year period
beginning July 1, 2009; and
    
    development and expansion status for the wafer fabrication of ASICs
and other advanced semiconductor devices at Fab 6 for a five-year
period beginning September 1, 2013.
      62




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##### Table of Contents



Foreign currency risk
  RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
       
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A.
    
    DIRECTORS AND SENIOR MANAGEMENT
  63




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##### Table of Contents



Board of Directors
 Name
    
    Age
    
    PositionJames A. Norling(1)(2)(4)
    
    
    65
    
    
    Chairman of the BoardChia Song Hwee(1)
    
    
    45
    
    
    DirectorAndre Borrel(2)(4)
    
    
    71
    
    
    DirectorCharles E. Thompson(2)(4)
    
    
    78
    
    
    DirectorTsugio Makimoto, PhD
    
    
    70
    
    
    DirectorTay Siew Choon(1)(2)(4)
    
    
    60
    
    
    DirectorPeter Seah Lim Huat(1)(2)(4)
    
    
    61
    
    
    DirectorPhilip Tan Yuen Fah(3)
    
    
    63
    
    
    DirectorPasquale Pistorio
    
    
    72
    
    
    DirectorSteven H. Hamblin (3)
    
    
    59
    
    
    DirectorMaurizio Ghirga (3)
    
    
    69
    
    
    Director
 Senior Management
 Name
    
    Age
    
    PositionChia Song Hwee
    
    
    45
    
    
    President and Chief Executive OfficerGeorge Thomas
    
    
    54
    
    
    Senior Vice President and Chief Financial OfficerAng Kay Chai
    
    
    48
    
    
    Senior Vice President, Worldwide Sales and MarketingHsia Liang Choo, PhD
    
    
    59
    
    
    Senior Vice President, Technology DevelopmentSimon Yang, PhD
    
    
    48
    
    
    Senior Vice President, Fab Operations and Chief Technology OfficerBaskara Rao Paidithali(5)
    
    
    42
    
    
    Vice President, Chief Information OfficerLeow Kim Keat
    
    
    45
    
    
    Vice President, Customer Support Operations and Supply Management OrganizationKevin Meyer(6)
    
    
    55
    
    
    Vice President, Industry Marketing and Platform AlliancesNg Seng Huwi
    
    
    50
    
    
    Vice President, Human ResourcesTony Tsai
    
    
    58
    
    
    Vice President, Quality and Reliability Assurance
 
 Notes:(1)
    
    Member of the Executive Committee.(2)
    
    Member of the Executive Resource and Compensation Committee, or the ERCC.(3)
    
    Member of the Audit Committee.(4)
    
    Member of the Nominating Committee.(5)
    
    Appointed as Vice President, Chief Information Officer in July 2007.(6)
    
    Appointed as Vice President, Industry Marketing and Platform Alliances, in June 2007. 64




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##### Table of Contents



Biographical Information
 James A. Norling
  Chia Song Hwee
  Andre Borrel
  Charles E. Thompson
  Tsugio Makimoto, PhD
  Tay Siew Choon
  65




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##### Table of Contents



Peter Seah Lim Huat
  Philip Tan Yuen Fah
  Pasquale Pistorio
  Steven H. Hamblin
  Maurizio Ghirga
  66




---



##### Table of Contents



George Thomas
  Ang Kay Chai
  Hsia Liang-Choo, PhD
  Simon Yang, PhD
  67




---



##### Table of Contents



Baskara Rao Paidithali
  Leow Kim Keat
  Kevin Meyer
  Ng Seng Huwi
  Tony Tsai
  68




---



##### Table of Contents



B.
    
    COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT
       .
    69




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##### Table of Contents



Cash-Based Compensation($ in thousands)Salary(1)
    
    Bonus
    
    Others(2)
    
    DirectorsFees(3)
    
    TotalChia Song Hwee
    
    
    542
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    619James A. Norling
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    101Andre Borrel
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    57Charles E. Thompson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    56Tsugio Makimoto
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Tay Siew Choon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    43Peter Seah Lim Huat
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Philip Tan Yuen Fah
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Pasquale Pistorio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41Steven H. Hamblin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    61Maurizio Ghirga
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    61Total as of December 31, 2007
    
    
    542
    
    
    
    
    
    
    
    77
    
    
    
    570
    
    
    
    1,189Total as of December 31, 2006
    
    
    490
    
    
    
    469
    
    
    
    149
    
    
    
    591
    
    
    
    1,699
 
 Notes:(1)
    
    Base salary (inclusive of employers Central Provident Fund, or CPF).(2)
    
    Allowances (inclusive of employers CPF) and others.(3)
    
    Shareholders approval will be sought at our annual general meeting to be held in April 2008
for the payment of our directors fees of approximately $570,000 for the fiscal year ended
December 31, 2007. Share-Based Compensation Granted in 2007Options
    
    Exercise Price
    
    Exercise Period of
    
    Number of
    
    Number ofGranted(1)
    
    S$
    
    Options Granted
    
    RSUs(2)
    
    PSUs(3)Chia Song Hwee
    
    
    470,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    325,230
    
    
    
    240,320James A. Norling
    
    
    60,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    25,450
    
    
    Andre Borrel
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Charles E. Thompson
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Tsugio Makimoto
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Tay Siew Choon
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Peter Seah Lim Huat
    
    
    47,500
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    20,190
    
    
    Philip Tan Yuen Fah
    
    
    47,500
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    20,190
    
    
    Pasquale Pistorio
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Steven H. Hamblin
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Maurizio Ghirga
    
    
    35,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    Total as of December 31, 2007
    
    
    870,000
    
    
    
    
    
    
    
    
    
    494,940
    
    
    
    240,320
 
 Notes:(1)
    
    In number of ordinary shares.(2)
    
    Restricted Share Units, or RSUs granted under the Chartered Semiconductor Manufacturing Ltd
Restricted Share Unit Plan 2007. One RSU entitles the holder thereof to one ordinary share
upon vesting. RSUs awarded under the RSU Plan are subject to time-based vesting conditions as
well as other conditions as may be determined by the ERCC in accordance with the provisions of
the RSU Plan. 70




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##### Table of Contents



(3)
    
    Performance Share Units, or PSUs granted under the Chartered Semiconductor Manufacturing Ltd
Performance Share Unit Plan 2007. One PSU entitles the holder thereof to one ordinary share
upon vesting. PSUs granted under the PSU Plan are subject to certain pre-determined
conditions and time-based vesting conditions, which are determined by
the ERCC at the grant date. The
final number of PSUs awarded, if any, will depend on the achievement of those conditions and
the PSUs awarded will vest after the third anniversary of the date of grant.  Cash-Based Compensation($ in thousands)Salary(1)
    
    Bonus(2)
    
    Others(3)
    
    Total$450,000  $649,999Chia Song Hwee
    
    
    542
    
    
    
    
    
    
    
    77
    
    
    
    61988%
    
    
    
    
    
    
    
    12%
    
    
    
    100%Aggregate of top four senior executives for 2007
    
    
    1,529
    
    
    
    
    
    
    
    686
    
    
    
    2,215Average per person for 2007
    
    
    382
    
    
    
    
    
    
    
    172
    
    
    
    554Ang Kay Chai
    
    
    88%
    
    
    
    0%
    
    
    
    12%
    
    
    
    100%George Thomas
    
    
    72%
    
    
    
    0%
    
    
    
    28%
    
    
    
    100%Hsia Liang Choo
    
    
    58%
    
    
    
    0%
    
    
    
    42%
    
    
    
    100%Yang Simon Shi-Ning
    
    
    64%
    
    
    
    0%
    
    
    
    36%
    
    
    
    100%Aggregate of top four senior executives for 2006
    
    
    1,344
    
    
    
    516
    
    
    
    559
    
    
    
    2,419Average per person for 2006
    
    
    336
    
    
    
    129
    
    
    
    140
    
    
    
    605
 
 Notes:(1)
    
    Base salary (inclusive of employers Central Provident Fund (CPF)).(2)
    
    Bonus paid in 2007 for services rendered in 2006, inclusive of employer CPF contribution.(3)
    
    Allowances (inclusive of employers CPF) and others. Share-Based Compensation Granted in 2007TotalOptions
    
    Exercise
    
    Exercise period of
    
    Number of
    
    Number ofGranted
    

Price (S$)
    
    Options Granted
    
    RSUs(1)
    
    PSUs(2)Chia Song Hwee
    
    
    470,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    325,230
    
    
    
    240,320Ang Kay Chai
    
    
    187,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    128,970
    
    
    
    148,590George Thomas
    
    
    187,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    128,970
    
    
    
    148,590Hsia Liang Choo
    
    
    127,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    126,160
    
    
    
    148,590Yang Simon Shi-Ning(3)
    
    
    500,000
    
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017
    
    
    128,970
    
    
    
    148,590
 71




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##### Table of Contents



Notes:(1)
    
    Restricted Share Units, or RSUs, granted under the Chartered Semiconductor Manufacturing Ltd Restricted Share Unit Plan 2007. One RSU entitles the holder thereof to
one ordinary share upon vesting. RSUs awarded under the RSU Plan are subject to time-based vesting conditions as well as other conditions as may be determined by the
ERCC in accordance with the provisions of the RSU Plan.(2)
    
    Performance Share Units, or PSUs, granted under the Chartered Semiconductor Manufacturing Ltd Performance Share Unit Plan 2007. One PSU entitles the holder thereof
to one ordinary share upon vesting. PSUs granted under the PSU Plan are subject to certain pre-determined conditions as well as time-based vesting conditions, which
are determined by the ERCC at the grant date. The final number of PSUs awarded, if any, will depend on the achievement of those conditions and the PSUs awarded will vest after the
third anniversary of the date of grant.(3)
    
    Options granted in 2007 per employment contract dated August 26, 2005. C.
    
    BOARD PRACTICES
 BOARD COMPOSITION
    
    
    the requirement that a majority of Board members must be independent;
    
    the requirement that the compensation committee must be comprised solely of independent
directors, or that compensation of our senior management must be determined by a majority
of the independent directors on the full Board; and
    
    the requirement that the nomination committee must be comprised solely of independent directors or that nominations of directors must be made by a majority of the independent
directors on the full Board.
   Committees of the Board of Directors
 Executive Committee
  72




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##### Table of Contents



Audit Committee
   Executive Resource and Compensation Committee
   Nominating Committee
   D.
    
    EMPLOYEES
  As of December 31,Functions
    
    2005
    
    2006
    
    2007Engineering (Modules, Yield Engineering, Process Integration, Product Engineering, Joint Venture Technology, Metrology)
    
    
    1,677
    
    
    
    1,856
    
    
    
    2,054Manufacturing Operations
    
    
    880
    
    
    
    1,011
    
    
    
    1,146Manufacturing Support
    
    
    638
    
    
    
    724
    
    
    
    727Research and Development
    
    
    370
    
    
    
    508
    
    
    
    543Administration, Marketing and Finance
    
    
    508
    
    
    
    582
    
    
    
    655Total
    
    
    4,073
    
    
    
    4,681
    
    
    
    5,125
 73




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##### Table of Contents



As of December 31,Geographical Locations
    
    2005
    
    2006
    
    2007Singapore
    
    
    3,932
    
    
    
    4,540
    
    
    
    4,967Americas
    
    
    104
    
    
    
    103
    
    
    
    119Europe
    
    
    16
    
    
    
    15
    
    
    
    14Asia-Pacific (other than Singapore)
    
    
    21
    
    
    
    23
    
    
    
    25Total
    
    
    4,073
    
    
    
    4,681
    
    
    
    5,125
    E.
    
    SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT
  No. of OrdinaryShares BeneficiallyDirectors
    
    Owned(1)James A. Norling
    
    
    1,658,195
    
    
    öChia Song Hwee
    
    
    7,681,007
    
    
    ÷Andre Borrel
    
    
    336,060
    
    
    ÷Charles E. Thompson
    
    
    325,750
    
    
    ÷Tsugio Makimoto
    
    
    269,000
    
    
    >
    Please see note (2) belowTay Siew Choon
    
    
    250,000
    
    
    ÷Peter Seah Lim Huat
    
    
    350,000
    
    
    ÷Philip Tan Yuen Fah
    
    
    265,000
    
    
    ÷Pasquale Pistorio
    
    
    2,630,000
    
    
    ÷Steven H. Hamblin
    
    
    80,000
    
    
    øMaurizio Ghirga
    
    
    0All directors and senior management(3) as a group (21 persons)(4)
    
    
    24,512,771
 
 Notes:(1)
    
    Gives effect to the ordinary shares issuable within 60 days from December 31, 2007 upon the
exercise of all options and other rights beneficially owned by the indicated shareholders on
that date. Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to ordinary shares. Except for 36,000 shares
held by James A. Norling which are jointly held, the persons named in the table have sole
voting and sole investment control with respect to all ordinary shares beneficially owned. 74




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##### Table of Contents



(2)
    
    Less than 1% of our outstanding ordinary shares as of December 31, 2007.(3)
    
    None of our directors or senior management individually owns 1% or more of our outstanding
ordinary shares.(4)
    
    This includes the number of ordinary shares beneficially owned by Mr Tan Seng Chai, a member
of our senior management, who resigned from our company and whose last day was on January 31,
2008. Equity Awards for Directors
  Directors
    
    Number ofOrdinary SharesIssuable UponExercise ofOptions
    
    Exercise PriceS$
    
    Exercise Period
    
    Number ofRSUs(1)
    
    NumberofPSUs(2)James A. Norling
    
    
    1,172,195
    
    
    
    3.88
    
    
    01/05/2002 to 01/05/2012
    
    
    25,450
    
    
    
    50,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200860,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/2008110,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/2009110,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/2010120,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201160,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Chia Song Hwee
    
    
    61,704
    
    
    
    0.80
    
    
    30/11/1998 to 29/11/2008
    
    
    325,230
    
    
    
    240,32026,444
    
    
    
    0.80
    
    
    30/04/1999 to 29/04/2009234,439
    
    
    
    2.86
    
    
    29/10/1999 to 29/10/200970,331
    
    
    
    2.86
    
    
    29/04/2000 to 29/10/2009410,268
    
    
    
    14.24
    
    
    06/04/2001 to 06/04/2010527,487
    
    
    
    10.12
    
    
    03/10/2001 to 03/10/2010263,743
    
    
    
    4.05
    
    
    28/03/2002 to 28/03/2011263,743
    
    
    
    4.26
    
    
    15/08/2002 to 15/08/2011234,439
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/20122,344,391
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/2012300,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/2013700,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/20131,000,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/2014220,000
    
    
    
    1.02
    
    
    30/07/2004 to 30/07/20141,000,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/20151,000,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016470,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2017Andre Borrel
    
    
    40,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/2008
    
    
    14,840
    
    
    
    45,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/200885,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/200960,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201070,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201135,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
 75




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##### Table of Contents



Directors
    
    Number ofOrdinary SharesIssuable UponExercise ofOptions
    
    Exercise PriceS$
    
    Exercise Period
    
    Number ofRSUs(1)
    
    NumberofPSUs(2)Charles E. Thompson
    
    
    25,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/2008
    
    
    14,840
    
    
    
    35,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/200860,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/200960,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201070,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201135,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Tsugio Makimoto
    
    
    60,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/2009
    
    
    14,840
    
    
    
    60,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201070,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201135,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Peter Seah Lim Huat
    
    
    40,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/2008
    
    
    20,190
    
    
    
    45,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/200885,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/200985,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201095,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201147,500
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Tay Siew Choon
    
    
    25,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/2008
    
    
    14,840
    
    
    
    35,000
    
    
    
    1.10
    
    
    29/08/2004 to 29/08/200860,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/200960,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201070,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201135,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Philip Tan Yuen Fah
    
    
    85,000
    
    
    
    1.70
    
    
    27/02/2005 to 27/02/2009
    
    
    20,190
    
    
    
    85,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201095,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201147,500
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Pasquale Pistorio
    
    
    60,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/2010
    
    
    14,840
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201135,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Steven H. Hamblin
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011
    
    
    14,840
    
    
    
    35,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012Maurizio Ghirga
    
    
    35,000
    *
    
    
    1.07
    
    
    31/08/2008 to 31/08/2012
    
    
    14,840
    
    
    
    
 
 Note:*
    
    Options that were granted in 2007.(1)
    
    Restricted Share Units, or RSUs granted under the Chartered Semiconductor Manufacturing Ltd
Restricted Share Unit Plan 2007. One RSU entitles the holder thereof to one ordinary share
upon vesting. RSUs awarded under the RSU Plan are subject to time-based vesting conditions as
well as other conditions as may be determined by the ERCC in accordance with the provisions of
the RSU Plan.(2)
    
    Performance Share Units, or PSUs granted under the Chartered Semiconductor Manufacturing Ltd
Performance Share Unit Plan 2007. One PSU entitles the holder thereof to one ordinary share
upon vesting. PSUs granted under the PSU Plan are subject to certain pre-determined
conditions and time-based vesting conditions, which are determined by
the ERCC at the grant date. The
final number 76




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##### Table of Contents



Employee Benefit Plans
  Share Option Plan 1999
   
    
    the exercise price of the option is at least 110% of the fair market value of an
ordinary share on the date of grant; and
    
    in the case of an incentive stock option, such option by its terms is not exercisable
after the expiration of five years from the date of grant.
       Employee Share Purchase Plans
  77




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##### Table of Contents



Restricted Share Unit Plan 2007
      78




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##### Table of Contents



Performance Share Unit Plan 2007
       
 ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A.
    
    MAJOR SHAREHOLDERS
  Ordinary Shares(1)Beneficially Owned(2)Shareholders Holding 5% or More(3)
    
    Number
    
    PercentageTemasek Holdings (Private) Limited
    
    
    1,510,324,883
    
    
    
    59.47
    %
 
 Notes:(1)
    
    The number of ordinary shares listed in this table includes ordinary shares held in the form
of ADSs.(2)
    
    Beneficial ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to ordinary shares. Unless otherwise indicated, the
persons named in the table have sole voting and sole investment control with respect to all
ordinary shares beneficially owned. 79




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##### Table of Contents



(3)
    
    The 1,510,324,883 ordinary shares beneficially owned by Temasek consists of the 1,510,324,883
ordinary shares held by ST Semiconductors out of which 215,000,000 ordinary shares are subject
to the terms of a securities lending agreement entered into by ST Semiconductors with a
certain financial institution. ST Semiconductors is a wholly-owned subsidiary of Temasek.
Temasek may therefore be deemed to beneficially own the shares owned by ST Semiconductors.  B.
    
    RELATED PARTY TRANSACTIONS
 The Temasek Group
   Transactions with the Temasek Group
         80




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##### Table of Contents



C.
    
    INTERESTS OF EXPERTS AND COUNSEL
  
 ITEM 8.
    
    FINANCIAL INFORMATION
 A.
    
    CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
  Export Sales
  Dividend Policy
  Legal Proceedings
  B.
    
    SIGNIFICANT CHANGES
  
 ITEM 9.
    
    THE OFFER AND LISTING
 PRICE RANGE OF OUR ADSs AND ORDINARY SHARES
  81




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##### Table of Contents



(a)
    
    Annual high and low market prices
 NasdaqHigh
    
    LowJanuary 1, through December 31, 2003
    
    $
    11.00
    
    
    $
    3.48January 1, through December 31, 2004
    
    $
    11.35
    
    
    $
    5.76January 1, through December 31, 2005
    
    $
    9.01
    
    
    $
    5.52January 1, through December 31, 2006
    
    $
    11.81
    
    
    $
    6.70January 1, through December 31, 2007
    
    $
    10.48
    
    
    $
    6.56
 Singapore ExchangeHigh
    
    LowJanuary 1, through December 31, 2003
    
    
    S$1.93
    
    
    
    S$0.63January 1, through December 31, 2004
    
    
    S$1.89
    
    
    
    S$0.92January 1, through December 31, 2005
    
    
    S$1.44
    
    
    
    S$0.92January 1, through December 31, 2006
    
    
    S$1.84
    
    
    
    S$1.03January 1, through December 31, 2007
    
    
    S$1.61
    
    
    
    S$0.96
 (b)
    
    Quarterly high and low market prices
 NasdaqHigh
    
    LowJanuary 1, through March 31, 2006
    
    $
    9.67
    
    
    $
    7.60April 1, through June 30, 2006
    
    $
    11.81
    
    
    $
    8.16July 1, through September 30, 2006
    
    $
    8.84
    
    
    $
    6.70October 1, through December 31, 2006
    
    $
    9.15
    
    
    $
    7.29January 1, through March 31, 2007
    
    $
    10.48
    
    
    $
    8.08April 1, through June 30, 2007
    
    $
    9.84
    
    
    $
    8.17July 1, through September 30, 2007
    
    $
    8.79
    
    
    $
    6.64October 1, through December 31, 2007
    
    $
    7.80
    
    
    $
    6.56
 Singapore ExchangeHigh
    
    LowJanuary 1, through March 31, 2006
    
    
    S$1.57
    
    
    
    S$1.26April 1, through June 30, 2006
    
    
    S$1.84
    
    
    
    S$1.29July 1, through September 30, 2006
    
    
    S$1.40
    
    
    
    S$1.03October 1, through December 31, 2006
    
    
    S$1.40
    
    
    
    S$1.15January 1, through March 31, 2007
    
    
    S$1.61
    
    
    
    S$1.22April 1, through June 30, 2007
    
    
    S$1.48
    
    
    
    S$1.24July 1, through September 30, 2007
    
    
    S$1.34
    
    
    
    S$1.04October 1, through December 31, 2007
    
    
    S$1.14
    
    
    
    S$0.96
 (c)
    
    Monthly high and low market prices
 NasdaqHigh
    
    LowAugust 1, through August 31, 2007
    
    $
    7.64
    
    
    $
    6.64September 1, through September 30, 2007
    
    $
    7.41
    
    
    $
    6.71October 1, through October 31, 2007
    
    $
    7.74
    
    
    $
    6.78November 1, through November 30, 2007
    
    $
    7.80
    
    
    $
    7.03December 1, through December 31, 2007
    
    $
    7.36
    
    
    $
    6.56January 7, through January 31, 2008
    
    $
    6.59
    
    
    $
    5.40February 1, through February 22, 2008
    
    $
    6.08
    
    
    $
    5.46
 Singapore ExchangeHigh
    
    LowAugust 1, through August 31, 2007
    
    
    S$1.16
    
    
    
    S$1.04September 1, through September 30, 2007
    
    
    S$1.09
    
    
    
    S$1.04October 1, through October 31, 2007
    
    
    S$1.14
    
    
    
    S$1.01November 1, through November 30, 2007
    
    
    S$1.12
    
    
    
    S$0.985December 1, through December 31, 2007
    
    
    S$1.03
    
    
    
    S$0.96January 2, through January 31, 2008
    
    
    S$0.965
    
    
    
    S$0.77February 1, through February 22, 2008
    
    
    S$0.86
    
    
    
    S$0.775
  82




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##### Table of Contents



ITEM 10.
    
    ADDITIONAL INFORMATION
 A.
    
    SHARE CAPITAL
  B.
    
    OUR MEMORANDUM AND ARTICLES OF ASSOCIATION
   Objects and purposes
  Directors
       83




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##### Table of Contents



Shares
  New ordinary shares
   Transfer of ordinary shares
  Convertible redeemable preference shares
  
    
    junior to all our existing and future debt obligations;
    
    junior to each class of our shares the terms of which provide that such class will rank
senior to the preference shares as regards repayment of amounts paid up or credited as
paid up on such class of shares;
    
    on a parity with any class of our shares that has terms which provide that such class
will rank on a parity with the preference shares as regards repayment of amounts paid up
or credited as paid up on such class of shares; and
    
    senior to our ordinary shares (including those represented by ADSs) and to any class of
our shares that has terms which provide that such class will rank junior to the preference shares as regards payment of amounts paid up or credited as paid up on such class of shares.
 General meetings of shareholders
  84




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##### Table of Contents



Voting rights
 1 3
    Dividends
   Bonus and rights issue
  85




---



##### Table of Contents



Liquidation or other return of capital
   Redemption of preference shares
  
    
    Tax callIf we determine that, as a result of:
 
    
    any change in or amendment to the laws or regulations of Singapore or any authority
of or in Singapore having power to tax, or rulings promulgated under any such laws or
regulations by any authority of or in Singapore having power to tax, or
    
    any change in the general application or official or judicial interpretation of any
such laws, regulations or rulings, or
    
    any change in the application or official or judicial interpretation of, or any
execution or amendment to, any treaty or treaties affecting taxation to which
Singapore is a party, which change, execution or amendment, in each case, becomes
effective on or after August 17, 2005, the date on which the preference shares are
first allotted and issued,
 we will be required to pay additional amounts with respect to the preference shares
(notwithstanding the foregoing, we may not redeem those preference shares, the holders of
which have irrevocably waived their rights to such additional amounts at least seven
business days prior to such redemption), we will have the option to redeem in whole, but
not in part, the outstanding preference shares at the early redemption price.
    
    Clean-up callIf at least 95% of the preference shares originally issued have been converted, redeemed or
purchased and cancelled, we will have the option to redeem in whole, but not in part, the
outstanding preference shares at the early redemption price.
    
    Optional call redemptionWe may, at any time on or after August 17, 2007, redeem the preference shares in whole or
in part at any time, at the early redemption price, if the closing sale price of our
ordinary shares on the Singapore Exchange for any 20 trading days (translated in U.S.
dollars at the U.S. dollar / Singapore dollar noon buying rate in New York on each such
day, as certified for customs purposes by the Federal Reserve Bank of New York) in any 45
consecutive calendar day period ending not more than five calendar days prior to the date
on which notice of such redemption is given, is at least 125% of the conversion price per
ordinary share, in each case as adjusted through, and effective on, such notice date.
    86




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##### Table of Contents



Conversion rights of Preference Shareholders
  
    
    commencing from September 26, 2005; and
    
    ending on the date falling seven business days prior to the earlier of:
 
    
    in the case of any preference share called for redemption, the date fixed for such
redemption unless our company shall default in making the redemption payment, provided
that in no event shall any such conversion right extend beyond the maturity date; or
    
    the maturity date.
  Limitations on rights to hold or vote shares
  Provisions discriminating against any existing or prospective holder of shares
  Take-overs
   87




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##### Table of Contents



Indemnity
  Substantial shareholdings
    Minority rights
  
    
    if the affairs of our company are being conducted or the powers of our Board of
Directors are being exercised in a manner oppressive to, or in disregard of the interests
of, one or more of our shareholders; or
    
    if our company takes an action, or threatens to take an action, or our shareholders
pass a resolution, or propose to pass a resolution, which unfairly discriminates against,
or is otherwise prejudicial to, one or more of our shareholders, including the applicant.
  
    
    direct or prohibit any act or cancel or vary any transaction or resolution;
    
    regulate the conduct of our affairs in the future;
    
    authorize civil proceedings to be brought in the name of, or on behalf of, our company
by a person or persons and on such terms as the courts may direct;
    
    provide for the purchase of a minority shareholders shares by the other shareholders
or by our company and, in the case of a purchase of shares by us, a corresponding
reduction of our share capital;
    
    provide that the Memorandum or Articles of Association be amended; or
    
    provide that our company be wound up.
 C.
    
    MATERIAL CONTRACTS
  88




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##### Table of Contents



(a) Loan and financing agreements
 CSP Loan Agreements
     Chartered Loan Agreements
 EXIM Guaranteed Loan
   SMBC/OCBC Term Loan
 th
 BOA Term Loan
  89




---



##### Table of Contents



SMBC Facility Agreement
   Japan Bank for International Cooperation and SMBC Facility Agreement
  Société Générale Term Loan Facility
  Equity Call Option
   90




---



##### Table of Contents



5.75% senior notes due 2010 and 6.375% senior notes due 2015
     Convertible Redeemable Preference Shares and 6% Amortizing Bonds due 2010
  91




---



##### Table of Contents



6.25% senior notes due 2013
     (b) Strategic business alliances
 CSP
    92




---



##### Table of Contents



SMP
   (c) Technology transfer, licenses, joint development and other related agreements
 Agere Systems
    IBM
   93




---



##### Table of Contents



IBM, Infineon and Samsung
  Motorola
  Toshiba
  (d) Leases
  (e) Acquisition of Hitachi Semiconductor Singapore Pte Ltd
  94




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##### Table of Contents



D.
    
    EXCHANGE CONTROLS
  Exchange rates
   Singapore Dollars Per US$1.00Noon Buying RateFiscal Year Ended December 31,
    
    Average(1)
    
    High
    
    Low
    
    Period End2003
    
    
    1.7432
    
    
    
    1.7838
    
    
    
    1.6990
    
    
    
    1.69902004
    
    
    1.6870
    
    
    
    1.7291
    
    
    
    1.6308
    
    
    
    1.63192005
    
    
    1.6648
    
    
    
    1.7058
    
    
    
    1.6180
    
    
    
    1.66282006
    
    
    1.5804
    
    
    
    1.6521
    
    
    
    1.5338
    
    
    
    1.53382007
    
    
    1.5068
    
    
    
    1.5439
    
    
    
    1.4360
    
    
    
    1.4360
 Singapore Dollars Per US$1.00Noon Buying RateMonth
    
    High
    
    LowAugust 2007
    
    
    1.5349
    
    
    
    1.5105September 2007
    
    
    1.5267
    
    
    
    1.4840October 2007
    
    
    1.4836
    
    
    
    1.4485November 2007
    
    
    1.4528
    
    
    
    1.4386December 2007
    
    
    1.4625
    
    
    
    1.4360January 2008
    
    
    1.4381
    
    
    
    1.4165
 
 Note :(1)
    
    The average of the daily noon buying rates on the last business day of each month during the
year. E.
    
    TAXATION
 Singapore Taxation
  95




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##### Table of Contents



Income tax
 General
   Dividend distributions
  Dividends paid out of Tax-Exempt Income or Income subject to Concessionary Tax Rates
  Dividends paid out of income subject to normal corporate taxation
 One-Tier Corporate Tax System
   Imputation System
 96




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##### Table of Contents



Tax on capital gains
  Stamp duty
  Estate duty
   U.S. Federal Taxation
  
    
    citizens or residents of the U.S. for U.S. federal income tax purposes,
    
    corporations or other entities created or organized under the laws of the U.S. or of
any political subdivision thereof,
    
    estates the income of which is subject to U.S. federal income taxation regardless of
source, or
    
    any trust the administration of which is subject to the primary supervision of a U.S.
court and which has one or more U.S. persons who have the authority to control all
substantial decisions of the trust, or, if the trust was in existence on August 20, 1996, has elected
to continue to be treated as a U.S. person.
 97




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##### Table of Contents



Ownership of ADSs
  Dividends
     Sale or exchange of ordinary shares or ADSs
  PFIC rules
  98




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##### Table of Contents



Estate taxes
  Backup withholding tax and information reporting requirements
  The above summary is not intended to constitute a complete analysis of all tax consequences
relating to ownership of ordinary shares or ADSs. You should consult your tax advisor concerning
the tax consequences of your particular situation.
 F.
    
    DIVIDENDS AND PAYING AGENTS
  G.
    
    STATEMENT BY EXPERTS
  H.
    
    DOCUMENTS ON DISPLAY
   I.
    
    SUBSIDIARY INFORMATION
  99




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##### Table of Contents



ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Quantitative and qualitative disclosures about market risk
  Interest rate risk
   As of December 31, 2007Expected Maturity Date(In thousands, except interest rates)Fair2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total
    
    
    ValueLONG-TERM DEBT:Floating rate debt (US$)
    
    $
    64,855
    
    
    $
    121,671
    
    
    $
    121,671
    
    
    $
    121,671
    
    
    $
    56,816
    
    
    $
    56,817
    
    
    $
    543,501
    
    
    $
    544,362Weighted average interest rate
    
    
    5.51
    %
    
    
    5.45
    %
    
    
    5.45
    %
    
    
    5.45
    %
    
    
    5.38
    %
    
    
    5.38
    %
    
    
    5.44
    %(1)Fixed rate debt (US$)
    
    $
    9,308
    
    
    $
    9,875
    
    
    $
    385,476
    
    
    $
    
    
    
    $
    
    
    
    $
    550,000
    
    
    $
    954,659
    
    
    $
    964,842Weighted average interest rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    5.76
    %
    
    
    
    %
    
    
    
    %
    
    
    6.31
    %
    
    
    6.08
    %(1)Total
    
    $
    74,163
    
    
    $
    131,546
    
    
    $
    507,147
    
    
    $
    121,671
    
    
    $
    56,816
    
    
    $
    606,817
    
    
    $
    1,498,160
    
    
    $
    1,509,204
 As ofDecember 31, 2006(In Thousands)Total
    
    
    Fair ValueLONG-TERM DEBTFloating rate debt (US$)
    
    $
    374,277
    
    
    $
    373,905Fixed rate debt (US$)
    
    
    963,433
    
    
    
    962,140Total
    
    $
    1,337,710
    
    
    $
    1,336,045INTEREST RATE DERIVATIVESInterest rate swap contract(2)
    
    $
    300,000
    
    
    $
    3,109
 
 Notes:(1)
    
    Average interest rate under Total are the weighted average interest rates of long-term debt outstanding as of December 31, 2007. 100




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##### Table of Contents



(2)
    
    As of December 31, 2006, we had entered into an interest rate swap to economically swap the fixed-rate interest obligation associated with the 6.25% senior notes due 2013 to a floating-rate interest obligation based on LIBOR for U.S. dollars plus 0.93%. This interest rate swap was terminated in November 2007.(3)
    
    As of December 31, 2007, our short term floating rate debt obligations include the following drawdowns: (a) $150.0 million on our revolving facility agreement with SMBC in March 2007, bearing interest at a floating rate determined by reference to LIBOR; (b) $50.0 million on our revolving facility agreement
with BOA in April 2007, bearing interest at a floating rate determined by reference to LIBOR, and (c) $70.0 million on our short-term credit facility with BOA in December 2007, bearing interest at a floating rate determined by reference to LIBOR. These debt obligations were subsequently fully repaid in January
2008.  Foreign currency risk
     101




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As of December 31, 2007As of December 31,Expected Maturity Date of Notional Amounts
    
    
    2006(In thousands, except exchange rates)
    
    
    (In thousands)2008
    
    
    Thereafter
    
    
    Total
    
    
    Fair Value
    
    
    Total
    
    
    Fair ValueFORWARD FOREIGN
EXCHANGE AGREEMENTS:(Receive Yen/Pay US$)Contract Amount
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    51,264
    
    
    $
    (1,724
    )Average Contractual
Exchange Rate
    
    
    
    
    
    
    (Receive S$/Pay US$)Contract Amount
    
    $
    5,972
    
    
    
    
    
    
    $
    5,972
    
    
    $
    41
    
    
    $
    8,997
    
    
    $
    41Average Contractual
Exchange Rate
    
    
    1.4467
    
    
    
    (Receive Euros/Pay US$)Contract Amount
    
    $
    17,328
    
    
    
    
    
    
    $
    17,328
    
    
    $
    (183
    )
    
    $
    11,997
    
    
    $
    50Average Contractual
Exchange Rate
    
    
    1.4742
    
    
    
    Total Contract Amount
    
    $
    23,300
    
    
    
    
    
    
    $
    23,300
    
    
    $
    (142
    )
    
    $
    72,258
    
    
    $
    (1,633
    )
  As of December 31,2006
    
    2007Denominated in Japanese yen (in thousands)
    
    743,349
    
    44,009Denominated in Euro (in thousands)
    
    29
    
    9
  Equity Price Risk
  
 ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  102




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ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
   
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and members of our board of directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on our
financial statements.
   103




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Changes in Internal Control over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
 ).
     .
  
 104




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##### Table of Contents



ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B.
    
    CODE OF ETHICS
   
 ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit fees
    
    Audit-related fees
    
    Tax fees
    
    All other fees
    
    Total($ in thousands)2006
    
    
    1,612
    
    
    
    21
    
    
    
    150
    
    
    
    6
    
    
    
    1,7892007
    
    
    1,419
    
    
    
    161
    
    
    
    188
    
    
    
    15
    
    
    
    1,783
 Audit-related fees
  Tax fees
   
 ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  105




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ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
  
 PART III
 
 ITEM 17.
    
    FINANCIAL STATEMENTS
  
 ITEM 18.
    
    FINANCIAL STATEMENTS
  Chartered Semiconductor Manufacturing Ltd. Consolidated Financial Statements
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2006 and 2007Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31,
2005, 2006 and 2007Consolidated Statements of Shareholders Equity for the years ended December 31, 2005, 2006
and 2007Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007Notes to Consolidated Financial Statements
 106




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##### Table of Contents



ITEM 19.
    
    EXHIBITS
 1(1)
    
    Memorandum and Articles of Association of the company.2.1(2)
    
    Specimen certificate for ordinary shares issued prior to January 30, 2006.2.2(27)
    
    Specimen certificate for ordinary shares in respect of new issuances of
shares issued on and after January 30, 2006.2.3(27)
    
    Specimen certificate for ordinary shares transferred on and after January
30, 2006 in respect of shares issued before January 30, 2006.2.4 (23)
    
    Specimen certificate for convertible redeemable preference shares.2.5(3)
    
    Deposit Agreement dated November 4, 1999 by and among the company,
Citibank, N.A. and the holders and beneficial owners of American
Depositary Shares evidenced by American Depositary Receipts issued
thereunder (including as an exhibit, the form of American Depositary
Receipt).2.5.1(29)
    
    Letter Agreement dated September 26, 2007 by and between the company and
Citibank, N.A., supplementing the Deposit Agreement dated November 4,
1999 by and among the company, Citibank, N.A. and the holders and
beneficial owners of American Depositary Shares evidenced by American
Depositary Receipts issued thereunder.2.6(19)
    
    Conversion Price Certificate dated August 17, 2005 of the company.Loan Agreements and Indentures4.1.1(6)
    
    Indenture dated as of April 2, 2001 by and between the company and Wells
Fargo Bank Minnesota, National Association.4.1.2(20)
    
    Second Supplemental Indenture dated August 3, 2005 by and between the
company and The Bank of New York.4.1.3(20)
    
    Third Supplemental Indenture dated August 3, 2005 by and between the
company and The Bank of New York.4.1.4(21)
    
    Fourth Supplemental Indenture dated August 17, 2005 by and between the
company and The Bank of New York.4.1.5(24)
    
    Fifth Supplemental Indenture dated April 4, 2006 by and between the
company and The Bank of New York.4.2(21)
    
    Master Agency Agreement dated August 17, 2005 by and between the company
and The Bank of New York.4.3(18)(+)
    
    Facility Agreement dated December 23, 2004 by and among the company as
Borrower, JPMorgan Chase Bank, N.A. as Lender, Export-Import Bank of the
United States as guarantor and JPMorgan Chase Bank, N.A as Facility
Agent.4.3.1(28)
    
    Amendment No. 1 dated May 16, 2007 to Facility Agreement dated December
23, 2004 by and among the company as Borrower, JPMorgan Chase Bank, N.A.
as Lender, Export-Import Bank of the United States as guarantor and
JPMorgan Chase Bank, N.A as Facility Agent.4.3.2(28)(++)
    
    Facility Agreement dated May 16, 2007 by and among the company as
Borrower, JPMorgan Chase Bank, N.A. as Lender, Export-Import Bank of the
United States as guarantor and JPMorgan Chase Bank, N.A as Facility
Agent.4.4(25)(++)
    
    Letter of Confirmation from Goldman Sachs International to the company
dated March 29, 2006 supplementing the ISDA Master Agreement
(Multicurrency-Cross Border) dated August 10, 2004 by and between the
company and Goldman Sachs International, as counter-party together with
the Schedule to the Master Agreement.
 107




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##### Table of Contents



4.5(25)(++)
    
    Facility Agreement dated March 3, 2006 by and between the company as
Borrower and Sumitomo Mitsui Banking Corporation as Arranger and Sumitomo
Mitsui Banking Corporation, Singapore Branch as Agent.4.5.1(26)
    
    Syndication Agreement dated June 30, 2006 relating to the Facility
Agreement dated March 3, 2006 by and between the company as Borrower and
Sumitomo Mitsui Banking Corporation as Arranger and Sumitomo Mitsui
Banking Corporation, Singapore Branch as Agent.4.6(29)(++)
    
    Facility Agreement dated October 5, 2007 by and among the company as
Borrower and Japan Bank for International Cooperation and Sumitomo Mitsui
Banking Corporation, as Lenders.4.7(30)(++)
    
    Credit Agreement dated January 28, 2008 by and among the company as
Borrower, Société Générale as Arranger, Lender and Facility Agent, and
The Bank of New York, as Security Trustee and Account Bank.Strategic AlliancesCSP4.8.1(7)
    
    Deed of Accession and Ratification dated October 22, 2001 by and among
the company, EDB Investments Pte Ltd, Agilent Technologies Europe B.V.
and Singapex Investments Pte Ltd relating to the Joint Venture Agreement
dated March 13, 1997, as amended and restated on October 23, 2001(the
Restated Joint Venture Agreement dated October 23, 2001).4.8.2(7)
    
    Amendment Agreement No. 1 dated January 31, 2002 to Restated Joint
Venture Agreement dated October 23, 2001.4.8.3(23)
    
    Deed of Accession and Ratification dated January 26, 2006 by and among
the company, EDB Investments Pte Ltd, Singapex Investments Pte Ltd,
Agilent Technologies Europe B.V. and Avago Technologies General IP
(Singapore) Pte. Ltd. relating to the Restated Joint Venture Agreement
dated October 23, 2001 and as further amended by an amendment (No. 1)
dated January 31, 2002.SMP4.9.1(2)(+)
    
    Joint Venture Agreement dated December 19, 1997 by and between the
company and Lucent Technologies Microelectronics Pte. Ltd.4.9.2(17)
    
    Supplemental Agreement dated September 17, 2004 to the Joint Venture
Agreement dated December 19, 1997 by and between the company and Agere
Systems Singapore Pte Ltd. (formerly known as Lucent Technologies
Microelectronics Pte. Ltd.).4.9.3(22)
    
    Second Supplemental Agreement dated January 1, 2005 to the Joint Venture
Agreement dated December 19, 1997 by and between the company and Agere
Systems Singapore Pte Ltd.4.9.4(2)(++)
    
    Assured Supply and Demand Agreement dated February 17, 1998 by and among
the company, Silicon Manufacturing Partners Pte Ltd and Lucent
Technologies Microelectronics Pte. Ltd.4.9.5(2)(+)
    
    Supplemental Assured Supply and Demand Agreement dated September 3, 1999
by and among the company, Silicon Manufacturing Partners Pte Ltd and
Lucent Technologies Microelectronics Pte. Ltd.4.9.6(2)(++)
    
    License and Technology Transfer Agreement dated February 17, 1998 by and
among the company, Lucent Technologies Microelectronics Pte. Ltd. and
Silicon Manufacturing Partners Pte Ltd.4.9.7(10)(++)
    
    Amendment Agreement (No. 1) to License and Technology Transfer Agreement
dated July 27, 2000 by and between the company, Lucent Technologies
Microelectronics Pte. Ltd. and Silicon Manufacturing Partners Pte Ltd.
 108




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##### Table of Contents



4.9.8(8)(++)
    
    Amendment Agreement (No. 2) dated March 22, 2001 to License and
Technology Transfer Agreement dated February 17, 1998 by and between the
company, Agere Systems Singapore Pte Ltd (formerly known as Lucent
Technologies Microelectronics Pte. Ltd.) and Silicon Manufacturing
Partners Pte Ltd.4.9.9(9)(++)
    
    Amendment Agreement (No. 3) dated March 28, 2002 to License and
Technology Transfer Agreement dated February 17, 1998 by and among the
company, Agere Systems Singapore Pte Ltd (formerly known as Lucent
Technologies Microelectronics Pte. Ltd.) and Silicon Manufacturing
Partners Pte Ltd.4.9.10(4)(++)
    
    Amendment Agreement (No. 4) dated July 1, 2003 to License and Technology Transfer
Agreement dated February 17, 1998 by and among the company, Agere Systems Singapore Pte
Ltd (formerly known as Lucent Technologies Microelectronics Pte. Ltd.) and Silicon
Manufacturing Partners Pte Ltd.Technology transfer, license, joint development and other related agreementsAgere/Lucent4.10.1(2)(++)
    
    Technology Transfer Agreement dated February 17, 1998 by and between the company and
Lucent Technologies Inc.4.10.2(8)(++)
    
    Amendment Agreement (No. 1) dated July 31, 2000 to Technology Transfer Agreement dated
February 17, 1998 between Lucent Technologies Inc. and the company.4.10.3(8)(++)
    
    Amendment Agreement (No. 2) dated March 20, 2001 to Technology Transfer Agreement dated
February 17, 1998 between Agere Systems Inc. (formerly known as the Microelectronics
Group of Lucent Technologies Inc.) and the company.4.10.4(8)(++)
    
    Amendment Agreement (No. 3) dated March 28, 2002 to Technology Transfer Agreement dated
February 17, 1998 between Agere Systems Inc. (formerly known as the Microelectronics
Group of Lucent Technologies Inc.) and the company.4.10.5(2)(+)
    
    Patent License Agreement dated January 1, 1998 by and between the company and Lucent
Technologies Inc.4.10.6(14)(+)
    
    Patent License Agreement Amendment dated August 3, 2000 by and between the company and
Lucent Technologies Inc.4.10.7(10)
    
    Letter Agreement dated September 26, 2002 by and between the company and Agere Systems
Inc. amending the Patent License Agreement between the parties dated January 1, 1998.Toshiba4.11(2)(+)
    
    Patent Cross License Agreement dated August 12, 1999 by and between the company and
Toshiba Corporation.IBM4.12.1(7)(+)
    
    Patent Cross-License Agreement dated January 1, 2001 by and between the company and
International Business Machines Corporation.4.12.2(11)(+)
    
    Amendment No. 1 dated November 26, 2002 to Patent License Agreement dated January 1,
2001 by and between the company and International Business Machines Corporation.4.12.3(11)(+)
    
    SF Process Development and Cost Sharing Agreement dated November 26, 2002 by and
between the company and International Business Machines Corporation.4.12.4(11)(++)
    
    Copper / Related FEOL Technology License Agreement dated November 26, 2002 by and
between the company and International Business Machines Corporation.
 109




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##### Table of Contents



4.12.5(22)(++)
    
    Amendment No. 1 dated January 19, 2005 to the Copper / Related FEOL Technology License
Agreement dated November 26, 2002 by and between the company and International Business
Machines Corporation.4.12.6(12)(+)
    
    Amendment No. 1 dated June 26, 2003 to SF Process Development and Cost Sharing
Agreement dated November 26, 2002 by and between the company and International Business
Machines Corporation.4.12.7(16)(+)
    
    Amended and Restated Amendment No. 2 dated March 9, 2004 to the SF Process Development
and Cost Sharing Agreement dated November 26, 2002 by and between the company and
International Business Machines Corporation.4.12.8(27)(++)
    
    Third Amended and Restated Amendment No.3 dated November 17, 2006 to SF Process
Development and Cost Sharing Agreement dated November 26, 2002 by and between the
company and International Business Machines Corporation.4.12.9(18)(+)
    
    Amendment No. 4 dated December 15, 2004 to SF Process Development and Cost Sharing
Agreement dated November 26, 2002 by and between the company and International Business
Machines Corporation.4.12.10(11)(++)
    
    Refundable Cross Deposit Agreement dated November 26, 2002 by and between the company
and International Business Machines Corporation.4.12.11(15)(++)
    
    First Supplemental Agreement dated December 19, 2003 to the Refundable Cross Deposit
Agreement dated November 26, 2002 by and between the company and International Business
Machines Corporation.4.12.12(25)(++)
    
    Letter Agreement dated March 27, 2006 to vary the terms of the Refundable Cross Deposit
Agreement dated November 26, 2002, as amended and supplemented, by and between the
company and International Business Machines Corporation.4.12.13(27)(++)
    
    Master IBM Joint Development Terms and Conditions dated December 15, 2006 for joint
development projects with International Business Machines Corporation.4.12.14(27)(++)
    
    Participation Agreement dated January 1, 2007 by and between the company and
International Business Machines Corporation.4.12.15(27)(++)
    
    Joint Development Project Agreement dated December 15, 2006 for 45nm Bulk-Industry
Standard Semiconductor Process Technology by and between the company and International
Business Machines Corporation.4.12.16(27)(++)
    
    Joint Development Project Agreement dated December 15, 2006 for 32nm Bulk-Industry
Standard Semiconductor Process Technology by and between the company and International
Business Machines Corporation.Motorola4.13(4)(+)
    
    Patent License Agreement dated July 1, 2003 by and between the company and Motorola, Inc.Property AgreementsFab 24.14(18)
    
    Sub-Lease dated October 19, 2004 by and between Singapore Technologies Pte Ltd and
the company relating to Private Lots A12787 and A12787(a) Mukim No. 13 Sembawang.Fabs 3 and 54.15.1(5)
    
    Sub-Lease Agreement dated February 17, 1998 by and between the company and Silicon
Manufacturing Partners Pte Ltd.4.15.2(18)
    
    Sub-Lease dated October 19, 2004 by and between Singapore Technologies Pte Ltd and the
 110




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##### Table of Contents



company relating to Private Lot A12787(b) Mukim No. 13.Fabs 2 and 3 Site Slurry Treatment Plant4.16.1(23)
    
    Agreement for Sub-License and Sub-Lease (Private Lot A12787(k)) dated July 8, 2005
by and between Singapore Technologies Pte Ltd and the company.4.16.2(23)
    
    Novation Agreement dated July 8, 2005 by and among Singapore Technologies Pte Ltd,
Terra Investments Pte. Ltd. and the company relating to the Agreement for
Sub-License and Sub-Lease (Private Lot A12787(k)) dated July 8, 2005.4.16.3(27)
    
    Supplemental Agreement dated January 3, 2007 by and between Terra Investments Pte.
Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease
(Private Lot A12787(k) now known as A1964508) dated July 8, 2005.Fab 64.17.1(5)
    
    Building Agreement relating to Private Lot A12787(d) Mukim No. 13 Sembawang dated
September 24, 1999 by and between Jurong Town Corporation and Singapore
Technologies Pte Ltd.4.17.2(5)
    
    Agreement for Sub-License and Sub-Lease (Private Lot A12787(d)) dated September 24,
1999 by and between Singapore Technologies Pte Ltd and Chartered Silicon Partners
Pte Ltd.4.17.3(18)
    
    Novation Agreement dated December 31, 2004 by and among Singapore Technologies Pte
Ltd, Terra Investments Pte. Ltd. and Chartered Silicon Partners Pte Ltd relating to
the Agreement for Sub-License and Sub-Lease (Private Lot A12787(d)) dated September
24, 1999.Fab 74.18.1(13)
    
    Agreement for Sub-License and Sub-Lease (Private Lot A12787(e)) dated July 30, 2001
by and between Singapore Technologies Pte Ltd and the company.4.18.2(13)
    
    Building Agreement relating to Private Lot A12787(e) Woodlands Industrial Park D,
G.S. No. 3696K, Mukim No. 13 dated July 30, 2001 by and between Jurong Town
Corporation and Singapore Technologies Pte Ltd.4.18.3(18)
    
    Novation Agreement dated December 31, 2004 by and among Singapore Technologies Pte
Ltd, Terra Investments Pte. Ltd. and the company relating to the Agreement for
Sub-License and Sub-Lease (Private Lot A12787(e)) dated July 30, 2001.4.18.4(27)
    
    Supplemental Agreement dated January 3, 2007 by and between Terra Investments Pte.
Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease
(Private Lot A12787(e) now known as A1964507) dated July 30, 2001.4.19.1(27)
    
    Offer Letter dated February 16, 2006 from Jurong Town Corporation to Terra
Investments Pte. Ltd. for the lease of land known as Private Lot A1964510 at Plot 6
Woodlands Industrial Park D in Woodlands Wafer Fab Park.4.19.2(27)
    
    Acceptance of Offer dated February 21, 2006 from the company to Terra Investments
Pte Ltd. relating to Private Lot A1964510 at Plot 6 Woodlands Industrial Park D in
Woodlands Wafer Fab Park.4.19.3(27)
    
    Acceptance of Offer dated February 24, 2006 from Terra Investments Pte. Ltd. to
Jurong Town Corporation relating to Private Lot A1964510 at Plot 6 Woodlands
Industrial Park D in Woodlands Wafer Fab Park.Acquisition of Hitachi Semiconductor Singapore Pte Ltd4.20(30)
    
    Stock Purchase Agreement dated February 15, 2008 by and amongst the company,
Hitachi, Ltd and Hitachi Asia, Ltd for the purchase 100 percent of the shares in
Hitachi Semiconductor
 111




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##### Table of Contents



Singapore Pte Ltd.Related Party Agreements4.21(11)
    
    Amended and Restated Turnkey Subcontract Agreement for Sort, Assembly and/or Final
Test Services dated October 30, 2002 by and between the company and ST Assembly
Test Services Ltd.4.22(15)
    
    Mr. Chia Song Hwees, President and Chief Executive Officer, Contract of Employment.8(11)
    
    List of the companys subsidiaries.12.1(30)
    
    Certification of the President and Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.12.2(30)
    
    Certification of the Senior Vice President and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.13.1(30)
    
    Certification of the President and Chief Executive Officer pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2(30)
    
    Certification of the Senior Vice President and Chief Financial Officer pursuant to
18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.15.1(30)
    
    Consent of KPMG.
 
 Notes:(1)
    
    Filed as an exhibit to our companys Registration Statement on Form F-1
(Registration No. 333-88397), as filed with the Securities and Exchange Commission
on October 4, 1999. The Memorandum and Articles of Association were amended by
special resolutions of our shareholders passed on May 30, 2001, May 15, 2002,
August 17, 2005 and April 24, 2007, and by an ordinary resolution of our
shareholders passed on April 28, 2005. A copy of the reprinted version of the
Memorandum and Articles of Association of our company, incorporating all the
amendments made thereto up to April 24, 2007, was filed as an exhibit to our
companys Current Report on Form 6-K (File No. 000-27811), as submitted with the
Securities and Exchange Commission on August 2, 2007, which exhibit is incorporated
herein by reference.(2)
    
    Filed as an exhibit to our companys Amended Registration Statement on Form F-1/A,
as filed with the Securities and Exchange Commission on October 25, 1999, which
exhibit is incorporated herein by reference.(3)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on November
23, 1999, which exhibit is incorporated herein by reference.(4)
    
    Submitted as an exhibit to our companys Third Quarterly Report 2003 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
November 13, 2003, which exhibit is incorporated herein by reference.(5)
    
    Filed as an exhibit to our companys Registration Statement on Form F-1
(Registration No. 333-88397), as filed with the Securities and Exchange Commission
on October 4, 1999.(6)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on April 4,
2001, which exhibit is incorporated herein by reference.(7)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 11, 2002,
which exhibit is incorporated herein by reference.(8)
    
    Submitted as an exhibit to our companys First Quarterly Report 2001 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
May 15, 2001, which exhibit is incorporated herein by reference.(9)
    
    Submitted as an exhibit to our companys First Quarterly Report 2002 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
May 14, 2002, which exhibit is 112




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incorporated herein by reference.(10)
    
    Submitted as an exhibit to our companys Third Quarterly Report 2002 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
November 14, 2002, which exhibit is incorporated herein by reference.(11)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 13, 2003,
which exhibit is incorporated herein by reference.(12)
    
    Submitted as an exhibit to our companys Second Quarterly Report 2003 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
August 13, 2003, which exhibit is incorporated herein by reference.(13)
    
    Submitted as an exhibit to our companys Third Quarterly Report 2001 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
November 14, 2001, which exhibit is incorporated herein by reference.(14)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on November
14, 2000, which exhibit is incorporated herein by reference.(15)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 3, 2004,
which exhibit is incorporated herein by reference.(16)
    
    Submitted as an exhibit to our companys First Quarterly Report 2004 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
May 10, 2004, which exhibit is incorporated herein by reference.(17)
    
    Submitted as an exhibit to our companys Third Quarterly Report 2004 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
November 8, 2004, which exhibit is incorporated herein by reference.(18)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 7, 2005,
which exhibit is incorporated herein by reference.(19)
    
    Submitted as an exhibit to our companys Current Report 2005 on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on August 17,
2005, which exhibit is incorporated herein by reference.(20)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on August 4,
2005, which exhibit is incorporated herein by reference.(21)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on August 18,
2005, which exhibit is incorporated herein by reference.(22)
    
    Submitted as an exhibit to our companys First Quarterly Report on Form 6-K (File
No. 000-27811), as submitted with the Securities and Exchange Commission on May 6,
2005, which exhibit is incorporated herein by reference.(23)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 1, 2006,
which exhibit is incorporated herein by reference.(24)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on April 5,
2006, which exhibit is incorporated herein by reference.(25)
    
    Submitted as an exhibit to our companys First Quarterly Report on Form 6-K (File
No. 000-27811), as submitted with the Securities and Exchange Commission on May 10,
2006, which exhibit is incorporated herein by reference.(26)
    
    Submitted as an exhibit to our companys Current Report on Form 6-K (File No.
000-27811), as submitted with the Securities and Exchange Commission on August 9,
2006, which exhibit is incorporated herein by reference. 113




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##### Table of Contents



(27)
    
    Filed as an exhibit to our companys Annual Report on Form 20-F (File No.
000-27811), as filed with the Securities and Exchange Commission on March 15, 2007,
which exhibit is incorporated herein by reference.(28)
    
    Submitted as an exhibit to our companys Second Quarterly Report on Form 6-K (File
No. 000-27811), as submitted with the Securities and Exchange Commission on August
7, 2007, which exhibit is incorporated herein by reference.(29)
    
    Submitted as an exhibit to our companys Third Quarterly Report 2007 on Form 6-K
(File No. 000-27811), as submitted with the Securities and Exchange Commission on
November 7, 2007, which exhibit is incorporated herein by reference.(30)
    
    Filed herewith.(+)
    
    Certain portions of this exhibit have been omitted pursuant to a confidential
treatment order of the Securities and Exchange Commission. The omitted portions
have been separately filed with the Commission.(++)
    
    Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omitted portions have been separately filed with the Commission. 114




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##### Table of Contents



SIGNATURES
 th
 CHARTERED SEMICONDUCTOR MANUFACTURING LTDBy:
    /s/ George ThomasName:
    George ThomasTitle:
    Senior Vice President and Chief Financial Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ James A. Norling
    
    Chairman of the Board
    
    March 10, 2008James A. Norling/s/ Chia Song Hwee
    
    President and Chief Executive Officer
(principal executive officer)
    
    March 10, 2008Chia Song Hwee/s/ George Thomas
    
    Senior Vice President and Chief
Financial Officer (principal financial
and accounting officer)
    
    March 10, 2008George Thomas/s/ Andre Borrel
    
    Director
    
    March 10, 2008Andre Borrel/s/ Charles E. Thompson
    
    Director
    
    March 10, 2008Charles E. Thompson/s/ Tsugio Makimoto
    
    Director
    
    March 10, 2008Tsugio Makimoto/s/ Tay Siew Choon
    
    Director
    
    March 10, 2008Tay Siew Choon/s/ Peter Seah Lim Huat
    
    Director
    
    March 10, 2008Peter Seah Lim Huat
 115




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##### Table of Contents



SIGNATURE
    
    TITLE
    
    DATE/s/ Philip Tan Yuen Fah
    
    Director
    
    March 10, 2008Philip tan yuen fah/s/ Pasquale Pistorio
    
    Director
    
    March 10, 2008Pasquale Pistorio/s/ Steven H. Hamblin
    
    Director
    
    March 10, 2008Steven H. Hamblin/s/ Maurizio Ghirga
    
    Director
    
    March 10, 2008Maurizio Ghirga
 116




---



##### 



CHARTERED SEMICONDUCTOR MANUFACTURING LTD
AND SUBSIDIARIES
 
 FINANCIAL STATEMENTS INDEX
  
 Page NumberReport of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets
    
    F-2Consolidated Statements of Operations
    
    F-3Consolidated Statements of Comprehensive Income (Loss)
    
    F-4Consolidated Statements of Shareholders Equity
    
    F-5Consolidated Statements of Cash Flows
    
    F-6Notes to the Consolidated Financial Statements
    
    F-7




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Shared-Based Payment
  
 F-1




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS  in US Dollars
 As of December 31
In thousands (except per share data)
 2006
    
    
    2007ASSETSCash and cash equivalents
    
    $
    718,982
    
    
    $
    743,173Restricted cash
    
    
    43,063
    
    
    
    45,092Marketable securities
    
    
    2,283
    
    
    
    2,822Receivables, net
    
    
    243,361
    
    
    
    237,312Inventories
    
    
    158,492
    
    
    
    213,524Other investments
    
    
    
    
    
    
    89,290Prepaid expenses
    
    
    6,978
    
    
    
    6,289Other current assets
    
    
    10,247
    
    
    
    16,231Total current assets
    
    
    1,183,406
    
    
    
    1,353,733Investment in associated companies
    
    
    36,044
    
    
    
    30,112Technology licenses, net
    
    
    84,991
    
    
    
    62,699Property, plant and equipment, net
    
    
    2,275,179
    
    
    
    2,463,789Other non-current assets
    
    
    42,316
    
    
    
    115,228Total assets
    
    $
    3,621,936
    
    
    $
    4,025,561LIABILITIES, CONVERTIBLE REDEEMABLE PREFERENCE SHARES AND SHAREHOLDERS
EQUITYPayables
    
    $
    301,868
    
    
    $
    212,618Short-term debt
    
    
    
    
    
    
    270,000Income tax payable
    
    
    33,394
    
    
    
    5,459Current installments of long-term debt and capital lease obligations
    
    
    127,627
    
    
    
    78,663Other current liabilities
    
    
    149,856
    
    
    
    109,171Total current liabilities
    
    
    612,745
    
    
    
    675,911Long-term debt and capital lease obligations, excluding current installments
    
    
    1,280,972
    
    
    
    1,499,917Other non-current liabilities
    
    
    48,936
    
    
    
    52,747Total liabilities
    
    
    1,942,653
    
    
    
    2,228,575Convertible redeemable preference sharesIssued and outstanding: 28 shares in 2006 and 2007Redemption value at maturity: $10,000 per share
    
    
    246,174
    
    
    
    255,837Ordinary share capitalIssued and outstanding: 2,535,896 shares in 2006 and 2,539,626 shares in 2007
    
    
    2,704,215
    
    
    
    2,710,006Accumulated deficit
    
    
    (1,217,275
    )
    
    
    (1,115,587
    )Accumulated other comprehensive loss
    
    
    (53,831
    )
    
    
    (53,270
    )Total shareholders equity
    
    $
    1,433,109
    
    
    $
    1,541,149Commitments and contingenciesTotal liabilities, convertible redeemable preference shares and
shareholders equity
    
    $
    3,621,936
    
    
    $
    4,025,561
 See accompanying notes to consolidated financial statements.
 F-2




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  in US Dollars
 For the Years Ended December 31
 In thousands (except per share data)
 2005
    
    
    2006
    
    
    2007Net revenue
    
    $
    1,032,734
    
    
    $
    1,414,525
    
    
    $
    1,355,486Cost of revenue
    
    
    (915,281
    )
    
    
    (1,070,512
    )
    
    
    (1,095,830
    )Gross profit
    
    
    117,453
    
    
    
    344,013
    
    
    
    259,656Other revenue
    
    
    20,685
    
    
    
    21,030
    
    
    
    22,930OPERATING EXPENSESResearch and development
    
    
    122,073
    
    
    
    152,756
    
    
    
    159,764Sales and marketing
    
    
    42,503
    
    
    
    55,007
    
    
    
    58,013General and administrative
    
    
    40,025
    
    
    
    42,558
    
    
    
    39,648Fab start-up costs
    
    
    22,697
    
    
    
    
    
    
    
    Other operating expenses, net
    
    
    14,202
    
    
    
    13,766
    
    
    
    13,030Total operating expenses, net
    
    
    241,500
    
    
    
    264,087
    
    
    
    270,455Equity in income of associated companies, net
    
    
    6,486
    
    
    
    36,040
    
    
    
    33,836Other loss, net
    
    
    (6,744
    )
    
    
    (2,689
    )
    
    
    (2,418
    )Interest income
    
    
    28,625
    
    
    
    44,591
    
    
    
    27,031Interest expense and amortization of debt discount
    
    
    (69,839
    )
    
    
    (87,950
    )
    
    
    (60,325
    )Income (loss) before income tax
    
    
    (144,834
    )
    
    
    90,948
    
    
    
    10,255Income tax expense (benefit)
    
    
    13,111
    
    
    
    23,924
    
    
    
    (91,433
    )Net income (loss)
    
    
    (157,945
    )
    
    
    67,024
    
    
    
    101,688Less: Accretion to redemption value of convertible redeemable
preference shares
    
    
    3,196
    
    
    
    9,476
    
    
    
    9,663Net income (loss) available to ordinary shareholders
    
    $
    (161,141
    )
    
    $
    57,548
    
    
    $
    92,025Basic net earnings (loss) per ordinary share
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    0.04Diluted net earnings (loss) per ordinary share
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    0.04Basic net earnings (loss) per ADS
    
    $
    (0.64
    )
    
    $
    0.23
    
    
    $
    0.36Diluted net earnings (loss) per ADS
    
    $
    (0.64
    )
    
    $
    0.23
    
    
    $
    0.35Number of ordinary shares used in computing:Basic net earnings (loss) per ordinary share
    
    
    2,511,428
    
    
    
    2,528,056
    
    
    
    2,538,357Effect of dilutive securities
    
    
    
    
    
    
    6,009
    
    
    
    330,260Diluted net earnings (loss) per ordinary share
    
    
    2,511,428
    
    
    
    2,534,065
    
    
    
    2,868,617Number of ADS used in computing:Basic net earnings (loss) per ADS
    
    
    251,143
    
    
    
    252,806
    
    
    
    253,836Effect of dilutive securities
    
    
    
    
    
    
    601
    
    
    
    33,026Diluted net earnings (loss) per ADS
    
    
    251,143
    
    
    
    253,407
    
    
    
    286,862
 See accompanying notes to consolidated financial statements.
 F-3




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  in US Dollars
 For the Years Ended December 31
 In thousands
 2005
    
    
    2006
    
    
    2007Net income (loss)
    
    $
    (157,945
    )
    
    $
    67,024
    
    
    $
    101,688Net unrealized gains (losses) on change in cash flow hedging fair
values
    
    
    (1,425
    )
    
    
    (1,664
    )
    
    
    1,824Share of cash flow hedging gains of associated companies
    
    
    17
    
    
    
    9
    
    
    
    1Reclassification of cash flow hedging (gains) losses into earnings
    
    
    2,006
    
    
    
    435
    
    
    
    (1,917
    )Foreign currency translation
    
    
    1,721
    
    
    
    568
    
    
    
    (33
    )Unrealized losses on available-for-sale securities
    
    
    (1,390
    )
    
    
    (11
    )
    
    
    (149
    )Reclassification of realized losses on available-for-sale
securities into earnings
    
    
    
    
    
    
    2,350
    
    
    
    835Other comprehensive income, net
    
    
    929
    
    
    
    1,687
    
    
    
    561Comprehensive income (loss), net
    
    $
    (157,016
    )
    
    $
    68,711
    
    
    $
    102,249
 See accompanying notes to consolidated financial statements.
 F-4




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY  in US Dollars
 In thousands
 Accumulated
    
    TotalOther
    
    Share-Ordinary Share
    
    Accumulated
    
    Compre-
    
    holdersCapital
    
    Deficit
    
    hensive Loss
    
    EquityNo.
    
    $
    
    $
    
    $
    
    $Balance at January 1, 2005
    
    
    2,509,238
    
    
    
    2,682,638
    
    
    
    (1,116,325
    )
    
    
    (58,353
    )
    
    
    1,507,960Net loss
    
    
    
    
    
    
    
    
    
    
    (157,945
    )
    
    
    
    
    
    
    (157,945
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    929
    
    
    
    929Accretion to redemption value of
convertible redeemable
preference shares
    
    
    
    
    
    
    (3,196
    )
    
    
    
    
    
    
    
    
    
    
    (3,196
    )Issuance of shares arising from
share-based awards
    
    
    4,146
    
    
    
    2,387
    
    
    
    
    
    
    
    
    
    
    
    2,387Employee stock compensation
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Non-employee share-based
compensation
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    220Balance at December 31, 2005
    
    
    2,513,384
    
    
    
    2,682,050
    
    
    
    (1,274,270
    )
    
    
    (57,424
    )
    
    
    1,350,356Cumulative effect adjustment for
change in accounting policy
(adoption of SAB 108)
    
    
    
    
    
    
    8,114
    
    
    
    (10,029
    )
    
    
    1,906
    
    
    
    (9
    )Balance at January 1, 2006, as
adjusted
    
    
    2,513,384
    
    
    
    2,690,164
    
    
    
    (1,284,299
    )
    
    
    (55,518
    )
    
    
    1,350,347Net income
    
    
    
    
    
    
    
    
    
    
    67,024
    
    
    
    
    
    
    
    67,024Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,687
    
    
    
    1,687Accretion to redemption value of
convertible redeemable
preference shares
    
    
    
    
    
    
    (9,476
    )
    
    
    
    
    
    
    
    
    
    
    (9,476
    )Issuance of shares arising from
conversion of convertible
redeemable preference shares
    
    
    18,924
    
    
    
    13,965
    
    
    
    
    
    
    
    
    
    
    
    13,965Issuance of shares arising from
share-based awards
    
    
    3,588
    
    
    
    2,357
    
    
    
    
    
    
    
    
    
    
    
    2,357Employee share-based compensation
    
    
    
    
    
    
    7,376
    
    
    
    
    
    
    
    
    
    
    
    7,376Non-employee share-based
compensation
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    117Others
    
    
    
    
    
    
    (288
    )
    
    
    
    
    
    
    
    
    
    
    (288
    )Balance at December 31, 2006
    
    
    2,535,896
    
    
    
    2,704,215
    
    
    
    (1,217,275
    )
    
    
    (53,831
    )
    
    
    1,433,109Net income
    
    
    
    
    
    
    
    
    
    
    101,688
    
    
    
    
    
    
    
    101,688Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561
    
    
    
    561Accretion to redemption value of
convertible redeemable
preference shares
    
    
    
    
    
    
    (9,663
    )
    
    
    
    
    
    
    
    
    
    
    (9,663
    )Issuance of shares arising from
share-based awards
    
    
    3,730
    
    
    
    2,576
    
    
    
    
    
    
    
    
    
    
    
    2,576Employee share-based compensation
    
    
    
    
    
    
    4,793
    
    
    
    
    
    
    
    
    
    
    
    4,793Non-employee share-based
compensation
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    25Issuance of
call option
    
    
    
    
    
    
    8,060
    
    
    
    
    
    
    
    
    
    
    
    8,060Balance at December 31, 2007
    
    
    2,539,626
    
    
    
    2,710,006
    
    
    
    (1,115,587
    )
    
    
    (53,270
    )
    
    
    1,541,149
 See accompanying notes to consolidated financial statements.
 F-5




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  in US Dollars
 For the Years Ended December 31
In thousands
 2005
    
    
    2006
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (157,945
    )
    
    $
    67,024
    
    
    $
    101,688Adjustments to reconcile net income (loss) to net cash provided by operating activities:Equity in income of associated companies, net
    
    
    (6,486
    )
    
    
    (36,040
    )
    
    
    (33,836
    )Cash dividends received from associated companies
    
    
    29,460
    
    
    
    38,178
    
    
    
    33,602Depreciation and amortization
    
    
    507,954
    
    
    
    504,454
    
    
    
    494,774Foreign exchange loss, net
    
    
    434
    
    
    
    1,946
    
    
    
    252Gain on disposal of property, plant and equipment, net
    
    
    (1,594
    )
    
    
    (4,822
    )
    
    
    (1,010
    )Loss on derivatives, net
    
    
    5,993
    
    
    
    2,391
    
    
    
    280Impairment loss on investments
    
    
    
    
    
    
    2,698
    
    
    
    2,081Share-based compensation
    
    
    1
    
    
    
    7,376
    
    
    
    4,793Others, net
    
    
    (6,615
    )
    
    
    (1,417
    )
    
    
    10,494Change in assets and liabilities:Receivables
    
    
    (44,280
    )
    
    
    (61,687
    )
    
    
    8,197Inventories
    
    
    (62,081
    )
    
    
    (21,513
    )
    
    
    (55,032
    )Prepaid expenses and other assets
    
    
    853
    
    
    
    (5,716
    )
    
    
    (72,977
    )Payables and other liabilities
    
    
    136,347
    
    
    
    20,219
    
    
    
    3,049Income tax payable
    
    
    4,367
    
    
    
    8,058
    
    
    
    (17,482
    )Net cash provided by operating activities
    
    
    406,408
    
    
    
    521,149
    
    
    
    478,873CASH FLOWS FROM INVESTING ACTIVITIESPayments for property, plant and equipment
    
    
    (630,161
    )
    
    
    (554,771
    )
    
    
    (758,352
    )Payments for technology licenses
    
    
    (9,351
    )
    
    
    (9,667
    )
    
    
    (8,369
    )Increase in other investments
    
    
    
    
    
    
    
    
    
    
    (99,373
    )Refundable deposits placed with vendors
    
    
    
    
    
    
    (15,000
    )
    
    
    Refund of deposits placed with vendors
    
    
    
    
    
    
    111,656
    
    
    
    449Proceeds from sale of property, plant and equipment
    
    
    6,245
    
    
    
    9,975
    
    
    
    5,059Proceeds from redemption, maturity and disposal of marketable securities,
term deposits and other investments
    
    
    45,000
    
    
    
    20,998
    
    
    
    8,837Return of capital from associated companies
    
    
    17,300
    
    
    
    16,913
    
    
    
    7,350Others, net
    
    
    690
    
    
    
    (488
    )
    
    
    (1,151
    )Net cash used in investing activities
    
    
    (570,277
    )
    
    
    (420,384
    )
    
    
    (845,550
    )CASH FLOWS FROM FINANCING ACTIVITIESDebtBorrowings
    
    
    1,128,592
    
    
    
    492,915
    
    
    
    542,848Repayments
    
    
    (990,172
    )
    
    
    (635,010
    )
    
    
    (123,629
    )Capital lease payments
    
    
    
    
    
    
    (3,845
    )
    
    
    (3,981
    )Receipts of refundable customer deposits
    
    
    81,300
    
    
    
    45,183
    
    
    
    202Refund of customer deposits
    
    
    (22,035
    )
    
    
    (72,108
    )
    
    
    (28,559
    )Issuance of ordinary shares
    
    
    2,387
    
    
    
    2,357
    
    
    
    2,576Issuance of convertible redeemable preference shares
    
    
    247,513
    
    
    
    
    
    
    
    Increase in cash restricted for debt repayment
    
    
    (2,832
    )
    
    
    (40,231
    )
    
    
    (2,029
    )Others, net
    
    
    
    
    
    
    5,752
    
    
    
    (900
    )Net cash provided by (used in) financing activities
    
    
    444,753
    
    
    
    (204,987
    )
    
    
    386,528Effect of exchange rate changes on cash and cash equivalents
    
    
    (427
    )
    
    
    3,348
    
    
    
    4,340Net increase (decrease) in cash and cash equivalents
    
    
    280,457
    
    
    
    (100,874
    )
    
    
    24,191Cash and cash equivalents at the beginning of the year
    
    
    539,399
    
    
    
    819,856
    
    
    
    718,982Cash and cash equivalents at the end of the year
    
    $
    819,856
    
    
    $
    718,982
    
    
    $
    743,173Supplemental Cash Flow InformationInterest paid (net of amounts capitalized)
    
    $
    77,510
    
    
    $
    85,585
    
    
    $
    51,276Income tax paid
    
    $
    9,576
    
    
    $
    15,434
    
    
    $
    22,914Non-cash investing and financing activitiesProperty, plant and equipment acquired through capital lease
    
    $
    45,933
    
    
    $
    31,998
    
    
    $
    693Property, plant and equipment acquired on credit
    
    $
    52,280
    
    
    $
    193,742
    
    
    $
    91,644Issuance of ordinary shares arising from conversion of convertible redeemable preference shares
    
    $
    
    
    
    $
    13,965
    
    
    $
    Property, plant and equipment contributed by landlord
    
    $
    
    
    
    $
    858
    
    
    $
    Accrued and deferred debt issuance costs
    
    $
    16,261
    
    
    $
    13,896
    
    
    $
    20,172
 See accompanying notes to consolidated financial statements.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
 In thousands (except per share data)
 1.
    
    Background and Summary of Significant Accounting PoliciesIn this document, unless otherwise indicated, all references to the Company refer to
Chartered Semiconductor Manufacturing Ltd. (Chartered), and its subsidiaries.
 (a)
    
    Business and Organization
 The Company is one of the worlds top dedicated semiconductor foundries providing wafer
fabrication services and technologies. The Company operates in Singapore and has service
operations in nine countries in North America, Europe and Asia, including Singapore. Its
principal markets are the United States of America, Taiwan, Europe and Japan.Chartered was incorporated in Singapore in 1987. As of December 31, 2007, Singapore
Technologies Semiconductors Pte Ltd (ST Semiconductors), a wholly owned subsidiary of
Temasek Holdings (Private) Limited (Temasek), owns a majority of the shares of Chartered.
Temasek is a holding company through which corporate investments of the Government of
Singapore are held.Chartered Silicon Partners Pte Ltd (CSP) was incorporated in 1997. Chartered, EDB
Investments Pte Ltd, Avago Technologies General IP (Singapore) Pte Ltd (Avago Singapore)
(previously Agilent Europe B.V. who transferred its entire shareholding in CSP to Avago
Singapore in 2006) and Singapex Investments Pte Ltd own a 51.0%, 26.5%, 15.0% and 7.5% equity
interest in CSP, respectively. The Company accounts for CSP as a consolidated subsidiary.Silicon Manufacturing Partners Pte Ltd (SMP) was incorporated in 1998. LSI Technology
(Singapore) Pte Ltd (previously known as Agere Systems Singapore Pte Ltd) (LSI) and
Chartered own a 51.0% and 49.0% equity interest in SMP, respectively. The Company accounts
for SMP using the equity method.
 (b)
    
    Basis of Presentation
 The consolidated financial statements have been prepared in accordance with United States of
America (U.S.) generally accepted accounting principles (US GAAP).The consolidated financial statements reflect the accounts of Chartered and its
majority-owned subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. Where losses applicable to the minority interest in a
subsidiary exceed the minority interest in the equity capital of the subsidiary, such excess
and any further losses applicable to the minority interest have been charged to the
consolidated statements of operations, unless the minority interest has a binding obligation,
and is able, to make good the losses. When the subsidiary subsequently reports profits, the
profits applicable to the minority interest are taken to the consolidated statements of
operations until the minority interests share of losses previously taken to the consolidated
statements of operations is fully recovered.Due to cumulative losses, the obligation of the minority shareholders of CSP was reduced to
zero in the first quarter of 2003. Therefore none of CSPs losses from that point forward
have been allocated to the minority interest in the consolidated statements of operations.
The effect of this on the results of operations:
 2005
    
    2006
    
    2007Current year net losses not
allocated to the minority shareholders of CSP according to their
proportionate ownership
    
    $
    64,889
    
    
    $
    12,831
    
    
    $
    5,396
 The cumulative net losses not allocated to the minority shareholders of CSP according to
their proportionate ownership as of December 31, 2006 and 2007 are $207,274 and $212,670
respectively.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (c)
    
    Accounting Changes, Reclassifications and Adjustments
 Cumulative Effect Adjustment  SAB 108In September 2006, the U.S. Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements which requires companies
to evaluate the materiality of identified unadjusted errors on each financial statement and
related financial statement disclosure using both the rollover approach and the iron curtain
approach (dual approach). The rollover approach quantifies misstatements based on the
amount of the error originating in the current year statement of operations whereas the iron
curtain approach quantifies misstatements based on the effects of correcting the misstatement
existing in the balance sheet at the end of the current year, irrespective of the
misstatements year(s) of origin. Financial statements would require adjustment when either
approach results in quantifying a misstatement that is material. The Company adopted SAB 108
effective January 1, 2006.As a transition accommodation SAB 108 permits a cumulative effect adjustment, without
restatement of previously issued financial statements, to be used for errors that are
determined to be immaterial pursuant to the Companys previous method of quantification of
unadjusted errors but are determined to be material under the dual approach. Prior to the
adoption of SAB 108, the Company had quantified unadjusted errors under the rollover approach
and had assessed these unadjusted errors to be immaterial  individually and in the
aggregate. Upon initial adoption of SAB 108 for the fiscal year 2006, the Company quantified
unadjusted errors under the dual approach and assessed that these unadjusted errors are
material. As such, the Company elected to report a cumulative effect adjustment as of January
1, 2006 for those unadjusted errors quantified as of January 1, 2006. The impact to the
Companys accumulated deficit at January 1, 2006 was an increase of $10,029. Individual
adjustments that comprise the cumulative effect adjustment are as follows:Accrued rent.The Company did not recognize rental expense for its operating leases on land
using the required straight-line method during the years 1994 to 2004 and began using the
straight-line method prospectively in 2005 following a clarification issued by the SEC in
2005 related to the accounting for leases. The misstatements were determined to be immaterial
to each period based on the prior method of assessing materiality. As a result, rental
expense was cumulatively understated by $20,449 at January 1, 2006. The Company recorded a
$20,449 increase in the liability for accrued rent as of January 1, 2006 with a corresponding
increase to accumulated deficit to correct this misstatement.Accrued purchase order cancellation penalties. The Company incorrectly recorded certain loss
contingency accruals for purchase order cancellation penalties during 2000 and 2001. These
did not qualify for recognition as a liability in the balance sheet as it was not probable
that the penalties would be imposed. The misstatements were determined to be immaterial to
each period based on the prior method of assessing materiality. As a result, accrued
operating expenses were overstated by $9,962 at January 1, 2006. The Company recorded a
$9,962 decrease in the liability for accrued purchase order cancellation penalties as of
January 1, 2006 with a corresponding decrease to accumulated deficit to correct these
misstatements.Share-based compensation charge. The Company had certain computation errors in its
share-based compensation charge in the years 2000 to 2005 which include incorrect basis used
for options issued to non-employees and incorrect measurement dates for certain awards. These
misstatements were determined to be immaterial to each period based on the prior method of
assessing materiality and the circumstances giving rise to the misstatements have been
corrected in 2006. As a result, ordinary share capital was understated by $8,114 at January
1, 2006. The Company recorded a $8,114 increase in ordinary share capital as of January 1,
2006 with a corresponding increase to accumulated deficit to correct these misstatements.Income tax payable. The Company overprovided for income tax arising out of certain incorrect
data used in its tax provision calculations for years 2001 to 2005. The misstatements were
determined to be immaterial to each period based on the prior method of assessing
materiality. As a result, income tax payable was overstated by $3,062 at January 1, 2006. The
Company recorded a $3,062 reduction to income tax payable as of January 1, 2006 with a
corresponding decrease to accumulated deficit to correct these misstatements.Accrued research and development costs.The Company over-accrued certain amounts in 2001 for
research and development costs payable to a research partner arising from the data used in
the calculations being incorrect. The misstatements were determined to be immaterial to each
period based on the prior method of assessing materiality. As a result, accrued expenses were
overstated by $1,787 at January 1, 2006. The Company recorded a $1,787 decrease in accrued
research and development costs as of January 1, 2006 with a corresponding decrease to
accumulated deficit to correct these misstatements.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 Inventory carrying value.The Company wrote down the carrying value of certain aged inventory
although the cost basis was realizable. The misstatements were determined to be immaterial to
each period based on the prior method of assessing materiality. As a result, inventories were
understated by $1,572 at January 1, 2006. The Company recorded a $1,572 increase to
inventories as of January 1, 2006 with a corresponding decrease to accumulated deficit to
correct these misstatements.Debt issuance costs.The Company used certain incorrect assumptions in applying the interest
method to amortize debt issuance costs in 2005. The misstatements were determined to be
immaterial to each period based on the prior method of assessing materiality. As a result,
debt issuance costs were understated by $1,194 at January 1, 2006. The Company recorded a
$1,194 decrease to deferred debt issuance costs as of January 1, 2006 with a corresponding
increase to accumulated deficit to correct these misstatements.Insurance receivable.The Company did not recognize an asset in 2004 and 2005 for amounts
that were receivable from an insurance company based on experience to date under an insurance
contract. The misstatements were determined to be immaterial to each period based on the
prior method of assessing materiality. As a result, other receivables were understated by
$908 at January 1, 2006. The Company recorded a $908 increase in other receivables as of
January 1, 2006 with a corresponding decrease to accumulated deficit to correct these
misstatements.Management fees receivable.The Company historically recognized certain management fees based
on billings instead of accruing at the time services were rendered. The misstatements were
determined to be immaterial to each period based on the prior method of assessing
materiality. As a result, management fees receivable was understated by $775 at January 1,
2006. The Company recorded a $775 increase in management fees receivable as of January 1,
2006 with a corresponding decrease to accumulated deficit to correct these misstatements.Research and development cost sharing fees.The Company recognized certain research and
development cost sharing fees in 2005 on a payment basis rather than when the expenses were
incurred. The misstatements were determined to be immaterial to each period based on the
prior method of assessing materiality. As a result, accrued research and development cost
sharing fees were understated by $550 at January 1, 2006. The Company recorded a $550
increase in the liability for accrued research and development cost sharing fees as of
January 1, 2006 with a corresponding increase to accumulated deficit to correct these
misstatements.Deferred payroll-related expenses.The Company recognized certain payroll related expenses on
a payment basis rather than amortizing such prepaid expenses over the requisite service
period during 2004 and 2005. The misstatements were determined to be immaterial to each
period based on the prior method of assessing materiality. As a result, deferred payroll
related expenses were understated by $546 at January 1, 2006. The Company recorded a $546
increase in asset for deferred payroll related expenses as of January 1, 2006 with a
corresponding decrease to accumulated deficit to correct these misstatements.Advances to suppliers. The exchange rate fluctuations between the date of advance payments
made in foreign currencies for equipment and the date of delivery of the equipment were
deferred in other comprehensive loss rather than recorded as a component of property, plant
and equipment during 2004 and 2005. The misstatements were determined to be immaterial to
each period based on the prior method of assessing materiality. As a result, other
comprehensive loss was overstated by $1,906 and property, plant and equipment, net was
understated by $1,396 at January 1, 2006. The Company recorded a $1,906 decrease in other
comprehensive loss and a $1,396 increase in property, plant and equipment, net as of January
1, 2006 with a corresponding net increase of $510 to accumulated deficit to correct these
misstatements.Deferred grant income.The Company incorrectly calculated the amount of grant to be refunded
to the grantor and hence the amount of grant income to be recognized during 2003 to 2005. The
misstatements were determined to be immaterial to each period based on the prior method of
assessing materiality. As a result, deferred grant income was understated by $475 at January
1, 2006. The Company recorded a $475 increase in deferred grant income as of January 1, 2006
with a corresponding decrease to accumulated deficit to correct these misstatements.Translation of income tax payable.The Company historically did not translate foreign
currency denominated income tax payable using the current exchange rate. The misstatements
were determined to be immaterial to each period based on the prior method of assessing
materiality. As a result, income tax payable were understated by $430 at January 1, 2006. The
Company recorded a $430 increase in income tax payable as of January 1, 2006 with a
corresponding increase to accumulated deficit to correct these misstatements.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 Withholding tax receivable.The Company did not recognize an asset in 2005 for refundable
withholding tax that were receivable from a tax authority. The misstatements were determined
to be immaterial to each period based on the prior method of assessing materiality. As a
result, withholding tax receivable were understated by $164 at January 1, 2006. The Company
recorded a $164 increase in withholding tax receivable as of January 1, 2006 with a
corresponding decrease to accumulated deficit to correct these misstatements.Provision for income tax (deferred and current).As a result of the misstatements described
above, provision for income tax was misstated by $1,967 at January 1, 2006. The Company
recorded an increase in deferred tax assets, valuation allowance and income tax payable in
the amounts of $3,993, $1,846 and $180, respectively, as of January 1, 2006 with a
corresponding (decrease) increase to accumulated deficit to correct these misstatements.Other Adjustments and ReclassificationsIn 2007, the Company has recorded an increase (decrease) in the inventories, property, plant
and equipment, payables, other current liabilities and accumulated deficit balances of
$1,445, $2,060, $(136), $(611), and $(4,252), respectively, in the consolidated balance sheet
as of December 31, 2006 included in this report as compared with the corresponding amounts
previously reported in the Companys 2006 consolidated financial statements, to reflect the
net impact of the correction of certain misstatements identified by the Company subsequent to
the adoption of SAB 108. The Company has determined these misstatements to be immaterial to
the 2006 and earlier consolidated financial statements. Accordingly, the correction of these
immaterial errors has no impact on the cumulative effect adjustment previously recorded upon
adoption of SAB 108.The errors which were corrected relate to:
 
    
    Certain production costs not capitalized as inventory;
    
    Certain depreciable costs that were not capitalized as property, plant and
equipment;
    
    Overstatement of payables relating to insurance expenses; and
    
    Misstatement of other current liabilities due to an uncertain tax provision which
should have been reversed in a prior year after receipt of evidence supporting the
position, under-accrual of tax payable due to a tax deduction for interest expense
claimed in the wrong year, and an over-accrual for sales and marketing expenses.
 (d)
    
    Use of Estimates
 The preparation of the consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and
the reported revenues and expenses during the reporting period. Estimates are based on
historical experience, current conditions and on various other assumptions that are believed
to be reasonable under the circumstances. Significant items subject to judgment and estimates
include the amount of income tax expense, the estimated useful lives and salvage values of
long-lived assets, the recoverability of the carrying value of long-lived assets and other
investments, the realization of deferred income tax assets, the valuation of accounts
receivable and inventories, the determination of normal capacity of the Companys production
facilities, the recognition and measurement of revenue and sales credits and returns
allowance, the likelihood of achieving the milestones attached to Government grants,
managements projections of achievement of performance conditions over the performance
period, and the fair value of share-based employee compensation awards and financial
instruments. Actual results could differ from these estimates.During 2006, the Company changed the estimated salvage values in relation to certain
eight-inch process equipment and machinery to reflect higher expected salvage values than the
Company had historically estimated. The change in the estimated salvage values is a change in
accounting estimate that was applied prospectively from July 1, 2006. This change will result
in lower depreciation over the remaining lives of the affected eight-inch process equipment
and machinery. The impact of this change was an increase in the Companys net income by
$11,289 and $10,801 for the years ended December 31, 2006 and 2007, respectively. Basic and
diluted net earnings per American Depositary Shares (ADS) increased by $0.04 and $0.04 for
the years ended December 31, 2006 and 2007, respectively. Basic and diluted net earnings per
ordinary share for the years ended December 31, 2006 and 2007 were not affected by the impact
of this change.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (e)
    
    Foreign Currency
 The functional currency of Chartered and its subsidiaries is the US dollar. Assets and
liabilities which are denominated in foreign currencies are translated into the functional
currency at the rates of exchange prevailing at the balance sheet date. Foreign currency
transactions are translated using the exchange rates prevailing at the date of transactions.
Foreign exchange gains or losses, resulting from the settlement of foreign currency
transactions and from the translation of assets and liabilities denominated in foreign
currencies at financial year-end exchange rates, are included in the line item Other
operating expenses, net in the consolidated statements of operations.
 (f)
    
    Business and Credit Concentrations
 The semiconductor industry has historically been highly cyclical and, at various times, has
experienced significant economic downturns characterized by production overcapacity, reduced
product demand and rapid erosion of selling prices. The market for semiconductors is
characterized by rapid technological change, intense competition and fluctuations in
end-user demand. The Company depends, and will continue to depend, for a significant portion
of its revenue on a relatively limited number of customers who from time to time may be
concentrated in particular end markets. Customer concentration is more significant for the
Companys leading-edge process technologies. The five largest customers of the Company
accounted for 56%, 60% and 61% of net revenue in the years ended December 31, 2005, 2006 and
2007, respectively. Total accounts receivable from these customers was $166,297 and $95,336
at December 31, 2006 and 2007, respectively. The Companys top customer profile may change
from period to period depending on the strength of various market sectors.Financial instruments that potentially subject the Company to concentrations of credit risk
consist principally of cash and cash equivalents, marketable securities, derivative financial
instruments, investments and receivables. The Company mitigates the concentration of its
credit risk in trade receivables through its credit evaluation process, credit policies and
credit control and collection procedures.The Company mitigates the concentration of credit risk regarding cash and cash equivalents by
placing these amounts with major international banks and financial institutions. Cash and
cash equivalents are generally available upon demand. Cash and cash equivalents deposited
with a single counterparty bank accounted for 20% and 26% of total balances at December 31,
2006 and 2007, respectively.The amounts related to derivative instruments which are subject to credit risk are
generally limited to the amounts, if any, by which a counterpartys obligations exceed the
obligations of the Company with that counterparty. The Companys hedging practices are
further described in Note 21.The Company obtains most of its raw materials and supplies, including critical raw materials
such as raw semiconductor wafers, from a limited number of vendors. Some of these raw
materials and supplies are available from a limited number of vendors in limited quantities
and their procurement may require a long lead time. In certain instances, the Company only
has one qualified supplier for raw materials and supplies.The Company also depends on a limited number of original equipment manufacturers and vendors
that make and sell certain complex equipment and equipment spare parts that the Company uses
in its manufacturing processes. In the event of shortage of supply of equipment spare parts,
the Company would need to qualify alternative sources and/or equipment spare parts.
 (g)
    
    Cash Equivalents
 Cash equivalents consist of highly liquid investments in money market funds and short-term
deposits with banks that are readily convertible into cash and have original maturities of
three months or less.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (h)
    
    Marketable Securities
 The Company classifies its investments in marketable equity and debt securities as
available-for-sale, held to maturity or trading at the time of purchase in accordance
with the provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. There are no investments
classified as trading or held-to-maturity as of December 31, 2006 and 2007. There have been
no transfers between investment classifications in any of the periods presented.Available-for-sale securities are carried at fair value with unrealized gains and losses, net
of related tax, if any, reported as a component of other comprehensive income (loss) until
realized. Realized gains and losses from the sale or impairment of available-for-sale
securities are determined on a specific-identification basis. A decline in the market value
of any available-for-sale security below cost that is deemed to be other than temporary will
result in an impairment, which is included in the line item Other loss, net in the
consolidated statement of operations. In determining whether a decline in fair value is
other-than-temporary, the Company considers various factors including market price (when
available), analyst reports on the companies it has invested in and relevant industry reports
relating to these companies, the financial condition and near term prospects of the issuers,
the length of time and the extent to which the fair value has been less than cost and the
Companys intent and ability to hold the investments for a reasonable period of time
sufficient to allow for any anticipated recovery in fair value.
 (i)
    
    Accounts Receivable
 The Company reviews its accounts receivable on a periodic basis and makes specific
allowances when there is doubt as to the collectibility of individual receivable balances.
In evaluating the collectibility of individual receivable balances, the Company considers
the age of the balance, the customers payment history, their current credit-worthiness and
current economic trends.
 (j)
    
    Inventories
 Inventories consist of work in progress, raw materials and consumable supplies and spares and
are stated at the lower of cost or market. Cost is determined using standard cost and an
allocation of the cost variances arising in the period of production, which approximates
actual costs determined on the weighted average basis. Standard cost is based on estimates of
materials, labor and other costs incurred in each process step associated with the
manufacture of the Companys products. Labor and overhead costs are allocated to each step in
the wafer production process based on normal fab capacity utilization, with costs arising
from abnormal under-utilization of capacity expensed when incurred. The Company routinely
reviews its inventories for their saleability and for indications of obsolescence to
determine if inventory carrying values are higher than market value. Some of the significant
factors the Company considers in estimating the market value of its inventories include the
likelihood of changes in market and customer demand and expected changes in market prices for
its inventories.
 (k)
    
    Other Investments
 The Company accounts for its investment in a non-marketable
private enhanced cash fund as a
cost-method investment. Any decline in the value of the fund below cost that is deemed to be
other-than-temporary will result in an impairment, which is included in the line item Other
loss, net in the consolidated statement of operations. In determining whether a decline in
fair value is other-than-temporary, the Company considers various factors including market
price of underlying holdings (when available), investment ratings, the financial condition
and near-term prospects of the investee, the length of time and the extent to which the fair
value has been less than cost, and the Companys intent and ability to hold the investment
for a reasonable period of time sufficient to allow for any anticipated recovery in fair
value.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (l)
    
    Derivative Instruments and Hedging Activities
 In accordance with SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging
Activities and related amendments and interpretations, the Company records derivatives on
the balance sheet as assets or liabilities measured at fair value.On the date a derivative contract is entered into, the Company will consider if the
derivative instrument is part of a hedging relationship. Once a hedging relationship is
established, the Company designates the derivative as either a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm commitment (fair-value hedge), a
hedge of a forecasted transaction or of the variability of cash flows to be received or paid
related to a recognized asset or liability (cash-flow hedge), or a foreign-currency
fair-value or cash-flow hedge (foreign-currency hedge). The Company formally documents all
relationships between hedging instruments and hedged items, as well as its risk-management
objective and strategy for undertaking various hedge transactions, at the hedges inception.
This process includes linking all derivatives that are designated as fair-value, cash-flow,
or foreign-currency hedges to specific assets and liabilities on the balance sheet or to
specific firm commitments or forecasted transactions. The Company also formally assesses,
both at the hedges inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.Changes in the fair value of derivatives that are highly effective and that are designated
and qualify as fair-value hedges are recorded in earnings, along with the loss or gain on the
hedged assets or liabilities or unrecognized firm commitment of the hedged item that are
attributable to the hedged risks. Changes in the fair value of derivatives that are highly
effective and that are designated and qualify as cash-flow hedges are recorded in other
comprehensive income (loss) until earnings are affected by the variability in cash flows of
the designated hedged items. Changes in the fair value of derivatives that are highly
effective as hedges and that are designated and qualify as foreign-currency hedges are
recorded in either earnings or other comprehensive income (loss), depending on whether the
hedge transaction is a fair-value hedge or a cash-flow hedge. Changes in the fair value of
derivative instruments that are not designated as part of a hedging relationship are reported
in current period earnings.The Company discontinues hedge accounting prospectively when it determines
that a derivative is no longer effective in offsetting changes in the fair value or cash
flows of the hedged item, the derivative expires or is sold, terminated, or exercised, the
derivative is de-designated as a hedging instrument because it is unlikely that a forecasted
transaction will occur, a hedged firm commitment no longer meets the definition of a firm
commitment, or management determines that designation of the derivative as a hedging
instrument is no longer appropriate. When hedge accounting is discontinued because it is
determined that the derivative no longer qualifies as an effective fair-value hedge, the
Company no longer adjusts the hedged asset or liability for changes in fair value. The
adjustment of the carrying amount of the hedged asset or liability is accounted for in the
same manner as other components of the carrying amount of that asset or liability. When
hedge accounting is discontinued because the hedged item no longer meets the definition of a
firm commitment, the Company removes any asset or liability that was recorded pursuant to
recognition of the firm commitment from the balance sheet and recognizes any gain or loss in
earnings. When hedge accounting is discontinued because it is probable that a forecasted
transaction will not occur, gains and losses that were accumulated in other comprehensive
income (loss) are recognized immediately in earnings. In all situations in which hedge
accounting is discontinued, the Company continues to carry the derivative at its fair value
on the balance sheet, and recognizes any changes in its fair value in earnings.
 (m)
    
    Technology Licenses
 Technology license agreements are stated at cost and amortized on a straight-line basis over
the shorter of the expected life of the related technology or the license period.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (n)
    
    Property, Plant and Equipment
 Property, plant and equipment are recorded at cost and depreciated to their estimated salvage
values using the straight-line method over their estimated useful lives as follows:
 Buildings
    
    
    
    20 years (or, if shorter, the
remaining period of the lease of
the land on which the buildings
are erected)Mechanical and electrical installations
    
    
    
    10 yearsEquipment and machinery
    
    
    
    5 yearsOffice and computer equipment
    
    
    
    2 to 5 years
 The Company capitalizes interest with respect to major assets under installation and
construction until such assets are ready for use. Interest capitalized is based on the
average cost of the Companys pooled borrowings related to purchases of property, plant and
equipment. Repairs and replacements of a routine nature are expensed, while those that
extend the life of an asset are capitalized. Upon retirement or disposal of assets, the cost
and related accumulated depreciation are removed from the consolidated balance sheets and any
gain or loss is included in the consolidated statements of operations.Property, plant and equipment acquired through capital leases are capitalized at the lower of
fair value or the present value of the minimum lease payments at the inception of the lease.
The minimum lease payments are allocated between interest expense and reductions of the lease
obligation so as to produce a constant periodic rate of interest on the remaining balance of
the lease obligation. Assets under capital leases are depreciated over the shorter of their
estimated useful lives or the lease term.
 (o)
    
    Impairment of Long-Lived Assets and Intangible Assets
 The Company reviews long-lived assets and intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
Recoverability of long-lived asset groups to be held and used are measured by a comparison of
the carrying amount to the sum of the undiscounted cash flows expected to result from the use
and eventual disposition of the asset group. If an asset group is considered to be impaired,
the impairment loss is measured as the amount by which the carrying amounts of the long-lived
assets exceed their fair value. The Company does not have any intangible assets with
indefinite useful lives.Long-lived assets to be disposed of by sale are measured at the lower of their carrying
amounts or fair value less cost to sell. Depreciation ceases when such long-lived assets are
classified as held-for-sale. Long-lived assets to be abandoned are considered held and used
until they are disposed of, which is the point at which they cease to be used.
 (p)
    
    Asset Retirement Obligations
 The Company records asset retirement obligations in accordance with the provisions of SFAS
No. 143, Accounting for Asset Retirement Obligations which requires recognition of a
liability for an asset retirement obligation in the period in which it is incurred at its
estimated fair value. Asset retirement obligations consist of the estimated costs of
dismantlement, removal, site reclamation and similar activities associated with the Companys
facilities built on land held on long-term operating leases. The estimated fair value of the
asset retirement obligation is determined as the present value of asset retirement costs
discounted using a credit-adjusted risk-free rate. After initial recognition, the liability
is increased for the passage of time, with the increase being reflected as accretion expense
in the consolidated statement of operations. The associated asset retirement costs are
capitalized as part of the carrying amount of the underlying asset and depreciated over the
estimated useful life of the asset. Subsequent adjustments in the cost estimate other than
changes resulting from the passage of time are recognized as an increase or decrease in the
carrying amount of the liability and the related asset retirement cost capitalized as part of
the carrying amount of the related long-lived asset.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (q)
    
    Revenue Recognition
 The Company derives revenue primarily from fabricating semiconductor wafers and, to a
lesser extent, from providing associated subcontracted assembly and test services as well as
pre-fabricating services such as masks generation and engineering services. The Company
enters into arrangements with customers which typically include some or all of the above
deliverables.When arrangements include multiple deliverables, the Company first determines whether each
deliverable meets the separation criteria in Financial Accounting
Standards Board (FASB)
Emerging Issues Task Force (EITF) Issue 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. In general, a deliverable (or a group of deliverables) meets the
separation criteria if the deliverable has standalone value to the customer and if there is
objective and reliable evidence of the fair value of the remaining deliverables in the
arrangement. Each deliverable that meets the separation criteria is considered a separate
unit of accounting. The total arrangement consideration is then allocated to each unit of
accounting based on their relative fair values. Substantially all of the Companys
arrangements for the sale of semiconductor wafers and related services consist of a single
unit of accounting.Revenue for each unit of accounting is recognized when the contractual obligations have been
performed and title and risk of loss has passed to the customer, there is evidence of a final
arrangement as to the specific terms of the agreed upon sales, selling prices to the
customers are fixed or determinable, collection of the revenue is reasonably assured, and,
where applicable, delivery has occurred. Generally this results in revenue recognition upon
shipment of wafers. Revenue represents the invoiced value of goods and services supplied
excluding goods and services tax, less allowances for estimated sales credits and returns.
The Company estimates allowances for sales credits and returns based on historical experience
and managements estimate of the level of future claims. Additionally, the Company accrues
for specific items at the time their existence is known and amounts are estimable.The Company also derives other revenue relating to rental income and management fees
which is recognized when the contractual obligations have been performed, there is evidence
of a final arrangement, fees are fixed or determinable and collection of the revenue is
reasonably assured. Generally, revenue from rental is recognized over the lease period and
management fee revenue is recognized when services are rendered. These are recorded in the
line item Other revenue in the consolidated statements of operations.Goods and services taxes collected from customers and remitted to Governmental
authorities are accounted for on a net basis and therefore excluded from revenues in the
consolidated statements of operations.
 (r)
    
    Government Grants
 The Company has received grants from various agencies of the Government of Singapore. The
Company recognizes grants when there is reasonable assurance that the conditions attached to
the grant will be complied with and that the grant will be received.Income-related grants are subsidies of expenses incurred, and are disbursed based on the terms
of the respective grants, the amount of qualifying expenditures incurred and the achievement
of the conditions attached to the grants. Income-related grants are recorded as a reduction of
the expenses which they are intended to reimburse.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (s)
    
    Share-Based Compensation
 The Company adopted the provisions of SFAS No. 123(R), Share-Based Payments on January 1,
2006, the first day of the Companys fiscal year 2006. Under SFAS No. 123(R), share-based
compensation cost related to employee grants is measured based on the estimated fair value of
the award at the grant date and is recognized as expense over the employees requisite
service period, adjusted for forfeiture. Share-based compensation cost related to
non-employees, primarily granted to employees of SMP, is accounted for utilizing the
measurement guidance of EITF 96-18 Accounting for Equity Instruments that are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. The
Company adopted the provisions of SFAS No. 123(R) using the modified prospective application.
Under the modified prospective application, prior periods are not revised for comparative
purposes. The provisions of SFAS No. 123(R) apply to new awards issued on or after the
effective date (new awards), unvested awards that are outstanding on the effective date,
and to subsequent modification or cancellation of awards. Share-based compensation cost for
new awards granted to employees is recognized on a straight-line basis over the vesting
period for the entire award. Share-based compensation cost for unvested awards that are
outstanding on the effective date and awards for non-employees continues to be recognized in
accordance with FASB Interpretation No. 28 (FIN 28), Accounting for Stock Appreciation
Rights and Other Variable Stock Option Award Plans.Share-based compensation cost is calculated based on awards ultimately expected to vest after
adjusting for estimated future pre-vesting forfeitures. SFAS No. 123(R) requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent reporting
periods if actual forfeitures differ from those estimates.Share-based compensation cost for market-based portion of awards granted is measured based on
the estimated fair value of the award at the grant date and is recognized as expense over the
employees requisite service period, adjusted for forfeiture.Share-based compensation cost for performance-based portion of awards granted is recorded as
compensation cost over the employees requisite service period based on managements estimate
of the number of shares that will ultimately be issued. Accordingly, for each reporting
period, the Company determines the compensation cost based upon the grant-date fair value,
managements projections of achievement of performance-based conditions over the performance
period and the resulting estimate of shares that will ultimately be issued.Prior to adopting the provisions of SFAS No. 123(R), the Company measured share-based
employee compensation cost for financial statement purposes in accordance with the intrinsic
value method of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations. Employee compensation cost was measured as
the excess of fair market value of the share subject to the option at the grant date over the
exercise price of the option.For the year ended December 31, 2005, the pro forma information disclosures under SFAS No.
123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, are indicated in the table below. The share-based compensation cost indicated
below is based on fair value determined at grant date, using the Black-Scholes option-pricing
model.
 2005Share-based employee compensation costAs
reported (intrinsic method)
    
    $
    1Pro
forma (fair-value method)
    
    $
    9,431Net loss available to ordinary shareholdersAs
reported
    
    $
    (161,141
    )Pro
forma
    
    $
    (170,571
    )Basic and diluted net loss per ordinary shareAs
reported
    
    $
    (0.06
    )Pro
forma
    
    $
    (0.07
    )Basic and diluted net loss per ADSAs
reported
    
    $
    (0.64
    )Pro
forma
    
    $
    (0.68
    )
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (t)
    
    Product Warranties
 The Company guarantees that products will meet the stated functionality as agreed to in
each sales arrangement. The Company provides for the estimated warranty costs under these
guarantees based upon historical experience and managements estimate of the level of future
claims, and accrues for specific items at the time their existence is known and the amounts
are estimable. Expenses for warranty costs were not significant in any of the years
presented.
 (u)
    
    Fab Start-up Costs
 The Company records costs related to start-up activities, including fab start-up costs, as
expenses when they are incurred. Such costs primarily include employee related expenses and
engineering activities associated with the start-up of a fab.
 (v)
    
    Deferred Loan Costs
 Expenses associated with the issuance of long-term debt are capitalized and amortized
over the terms of the respective arrangement using the effective interest rate method.
 (w)
    
    Operating Leases
 Rental on operating leases, including the effects of scheduled rent increases, lease
incentives and rent holidays, are charged to expense on a straight-line basis over the term
of the lease. Contingent rentals are charged to expense when they are incurred.
 (x)
    
    Income Taxes
 Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences
between the carrying amounts of existing assets and liabilities in the financial statements
and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation allowance is
recorded for deferred tax assets when it is more likely than not that they will not be
realized.On January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109, or FIN 48. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in financial statements
in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a
recognition threshold and measurement attributes for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. Only tax positions that meet the
more-likely-than-not recognition threshold at the effective date may be recognized or
continue to be recognized upon adoption of FIN 48. The Companys accounting policy is to
treat interest and penalties as a component of income taxes.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars  In thousands (except per share data)
 (y)
    
    Net Earnings (Loss) Per Ordinary Share
 Basic net earnings (loss) per ordinary share is computed by deducting from net income or
adding to net (loss) the accretion to redemption value of the convertible redeemable
preference shares and dividing the resulting amount of net income (loss) available to
ordinary shareholders by the weighted-average number of ordinary shares outstanding. Diluted
net earnings per ordinary share is computed using the weighted-average number of ordinary
shares outstanding plus potentially dilutive securities, which includes the dilutive effect
of share options using the treasury stock method, the dilutive effect of restricted share
units, the impact of contingently issuable share-based awards with performance conditions and
the dilutive effect of ordinary shares issuable upon the assumed conversion of the Companys
convertible securities. The accretion charges on convertible securities are added back to net
income available to ordinary shareholders when the related ordinary share equivalents are
included in computing diluted net earnings per ordinary share.The following table reconciles net income (loss) and ordinary shares outstanding used in the
computation of basic and diluted net earnings (loss) per ordinary share for 2005, 2006 and
2007:
 2005
    
    2006
    
    2007Basic
    
    Diluted
    
    Basic
    
    Diluted
    
    Basic
    
    DilutedNet income (loss)
available to ordinary
shareholders
    
    $
    (161,141
    )
    
    
    (161,141
    )
    
    $
    57,548
    
    
    
    57,548
    
    
    $
    92,025
    
    
    
    92,025Accretion to redemption
value of convertible
redeemable preference
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,663Net income (loss)
available for per-share /
ADS computation
    
    $
    (161,141
    )
    
    
    (161,141
    )
    
    $
    57,548
    
    
    
    57,548
    
    
    $
    92,025
    
    
    
    101,688Per-share computation:Weighted average number of
ordinary shares
outstanding
    
    
    2,511,428
    
    
    
    2,511,428
    
    
    
    2,528,056
    
    
    
    2,528,056
    
    
    
    2,538,357
    
    
    
    2,538,357Dilutive effect of
potential ordinary shares
issuable from share-based
awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,009
    
    
    
    
    
    
    
    5,116Dilutive effect of
potential ordinary shares
issuable from conversion
of convertible redeemable
preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    325,144Weighted average number of
ordinary shares
outstanding for per-share
computation
    
    
    2,511,428
    
    
    
    2,511,428
    
    
    
    2,528,056
    
    
    
    2,534,065
    
    
    
    2,538,357
    
    
    
    2,868,617Per-ADS computation:Weighted average number of
ordinary shares
outstanding
    
    
    251,143
    
    
    
    251,143
    
    
    
    252,806
    
    
    
    252,806
    
    
    
    253,836
    
    
    
    253,836Dilutive effect of
potential ordinary shares
issuable from share-based
awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    601
    
    
    
    
    
    
    
    512Dilutive effect of
potential ordinary shares
issuable from conversion
of convertible redeemable
preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,514Weighted average number of
ordinary shares
outstanding for per-ADS
computation
    
    
    251,143
    
    
    
    251,143
    
    
    
    252,806
    
    
    
    253,407
    
    
    
    253,836
    
    
    
    286,862Net earnings (loss) per
ordinary share
    
    $
    (0.06
    )
    
    
    (0.06
    )
    
    $
    0.02
    
    
    
    0.02
    
    
    $
    0.04
    
    
    
    0.04Net earnings (loss) per ADS
    
    $
    (0.64
    )
    
    
    (0.64
    )
    
    $
    0.23
    
    
    
    0.23
    
    
    $
    0.36
    
    
    
    0.35
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 The Company excluded certain potentially dilutive securities for each financial year
presented from its diluted net earnings (loss) per ordinary share computation because:
 i.
    
    The exercise price or conversion price of the securities exceeded the
average fair value of the Companys share price; orii.
    
    The total assumed proceeds under the treasury stock method resulted in
negative incremental shares; oriii.
    
    The accretion to redemption value of convertible securities per ordinary
share obtainable on conversion was higher than the basic net earnings per ordinary
share, as adjusted for the effect of any potentially dilutive securities which are
more dilutive than the convertible securities; oriv.
    
    The conditions for the vesting of the performance share units were not
expected to be met.
 A summary of the excluded potentially dilutive securities is as follow:
 December 31,2005
    
    2006
    
    2007Convertible redeemable preference shares
    
    
    344,067
    
    
    
    325,144
    
    
    
    Call options with Goldman Sachs International (GS)
    
    
    214,792
    
    
    
    214,792
    
    
    
    214,792Employee share options
    
    
    71,841
    
    
    
    96,479
    
    
    
    94,086Convertible debt
    
    
    36,300
    
    
    
    
    
    
    
    Performance share units
    
    
    
    
    
    
    
    
    
    
    2,316
 The conversion price of the convertible redeemable preference shares is $0.8719 per share.
The call options with Goldman Sachs International (GS) have a per share exercise price of
S$1.600 and US$1.408 as of December 31, 2006 and 2007 respectively. The weighted-average
exercise prices of employee share options outstanding were $2.04, $1.89 and $1.82 as of
December 31, 2005, 2006 and 2007, respectively. The conversion price of convertible debt
during the period outstanding was S$4.7980 per share (equivalent to approximately US$26.7701
per ADS).
 2.
    
    Related Parties
 (a)
    
    Temasek and affiliates
 The Company is a majority owned subsidiary of ST Semiconductors, which is a wholly-owned
subsidiary of Temasek. Temasek is a holding company through which corporate investments of
the Government of Singapore are held. The Company transacts business in the normal course of
its operations with Temasek and its affiliates as well as with other companies and entities
that are partially or wholly owned or controlled by the Government of Singapore. These
include long-term operating leases from the Jurong Town Corporation (JTC), a statutory
board established by the Government of Singapore to develop and manage industrial estates in
Singapore, as well as Ascendas Land (Singapore) Pte Ltd (Ascendas), a private company
wholly-owned by JTC.The Company had the following significant transactions with related parties:
 2005
    
    2006
    
    2007Affiliates of TemasekServices purchased from STATS ChipPAC
    
    $
    12,872
    
    
    $
    10,625
    
    
    $
    9,229Property, plant and equipment purchased
    
    
    4,016
    
    
    
    1,762
    
    
    
    2,493Services purchased
    
    
    883
    
    
    
    531
    
    
    
    492Sub-lease rental billed for leasehold land from JTC
    
    
    2,416
    
    
    
    3,170
    
    
    
    2,684Rental billed for leasehold land from Ascendas
    
    
    331
    
    
    
    108
    
    
    
    
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Included in receivables from related parties and payables to related parties are amounts
due from or to affiliates of Temasek:
 December 31,2006
    
    2007Amounts due from affiliates of Temasek
    
    $
    8
    
    
    $
    Amounts due to affiliates of Temasek
    
    $
    2,763
    
    
    $
    3,174
 The balances with affiliates of Temasek are unsecured, interest free and repayable within 12
months.The fabs of the Company are built on land held on long-term operating leases from JTC and
Ascendas. Fab 1 was built on land leased by the Company from Ascendas. Following the
cessation of Fab 1 operations in March 2004, the Company classified its leasehold interest in
Fab 1 as held for sale. The sale was completed in January 2006.Fabs 2, 3, 5 (occupied by SMP), 6 (occupied by CSP) and 7 and Fab 2 and Fab 3 slurry
treatment plants occupy land leased by Terra Investments Pte Ltd (Terra) (a wholly-owned
subsidiary of Temasek) from JTC. The Company entered into sub-leases for the underlying land
for the entire term of the leases between Terra and JTC, expiring between 2024 and 2030, with
an option, subject to certain conditions, to extend for another 30 years.In 2006, the Company leased an additional plot of land from Terra which in turn leased the
land from JTC. The lease runs until 2030. The Company is using this additional plot of land
primarily for ancillary purposes to support the Companys business operations.Rental rates on the long-term leases are subjected to revisions at periodic intervals in
accordance with the rental agreements, with such scheduled increases generally capped between
5.5% to 9.0% per annum.Rental expense for land leased from related parties for the years ended December 31, 2005,
2006 and 2007 was $2,747, $2,768 and $3,476, respectively. Contingent rental included in
rental expense for land leased from related parties for the years ended December 31, 2005,
2006 and 2007 was $1,127, $955 and $1,059 respectively.Minimum future rental payments on non-cancellable operating leases of land from the above
related parties as of December 31, 2007 are as follows:
 Payable in year ending December 31,2008
    
    $
    2,9612009
    
    
    3,1302010
    
    
    3,3162011
    
    
    3,5172012
    
    
    3,737Thereafter
    
    
    68,718$
    85,379
 (b)
    
    SMP
 The Company has a 49% ownership interest in SMP that is accounted for using the equity
method. SMPs net operating results are not shared between the Company and SMPs majority
shareholder, LSI, in the same ratio as the equity holding. Instead, each party is entitled to
the gross profits from sales to the customers that it directs to SMP after deducting its
share of the overhead costs of SMP. Accordingly, the equity in income (loss) of SMP and the
share of retained post-formation gain (loss) that is included in the Companys consolidated
statements of operations and consolidated balance sheets are different than the amount that
would be obtained by applying a 49% ownership percentage. The difference in the equity income
of SMP recorded as compared to a 49% ratio is an increase of $5,758, $18,380 and $17,441 for
the years ended December 31, 2005, 2006 and 2007. The share of retained post-formation
results recorded was a surplus of $15,359 as compared to a surplus of $35,023 using the 49%
ratio and a surplus recorded of $49,557 as compared to a surplus of $51,780 using the 49%
ratio as of December 31, 2006 and 2007, respectively.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Singapore law allows dividends to be paid only out of profits of a company. The Company
and LSI have agreed that dividends will be paid out of the profits of SMP determined on a
year-to-year basis rather than a cumulative basis.The Company and LSI have entered into an assured supply and demand agreement with SMP under
which the intention was to ensure that all of the fixed costs of SMP are recovered by
allocating all of its wafer capacity to the Company and LSI in accordance with the respective
parties equity interest in SMP and each party will bear the fixed costs attributable to its
allocated capacity. These billings, if any, do not change the equity in income (loss) of SMP
that the Company recognizes in its consolidated statements of operations. No amounts were
payable by the Company under this agreement for 2005, 2006 and 2007, respectively.In 2004, the Company and LSI entered into an agreement pursuant to which the Company and LSI
agreed to annually reimburse any losses suffered by SMP that are attributable to the
respective parties. SMP did not suffer any loss that was attributable to the Company in 2005,
2006 and 2007 and accordingly no reimbursements were payable by the Company to SMP under this
agreement for these years.During 2005, SMPs shareholders agreed to a reduction in wafer prices for LSI, related to the
wafer capacity allocated to LSI, to the minimum price allowed under the assured supply and
demand agreement. As each shareholder is entitled to the gross profits from sales to the
customers that it directs to SMP, the wafer price reduction did not affect the equity in
income (loss) of SMP and the share of retained post-formation gain (loss) that is included in
the Companys consolidated statements of operations and consolidated balance sheets.The Company purchased $218, $75 and $47 of processed wafers from SMP for the years ended
December 31, 2005, 2006 and 2007, respectively.Certain management and corporate support functions, including accounting, financial, sales
and marketing, are shared by Chartered and SMP. Chartered allocates a portion of the shared
costs to SMP, which is recorded as a reduction of the related expenses. Such charges to SMP amounted to $8,811, $9,480 and $9,482 for the years ended
December 31, 2005, 2006 and 2007, respectively.The Company bought plant and equipment of $11 from SMP and sold plant and equipment of $53 to
SMP during 2005. There were no such transactions with SMP during 2006 and 2007.SMP leases its fab from the Company under a long-term lease agreement that expires in 2008.
The rental income from SMP for the years ended December 31, 2005, 2006 and 2007 was $15,662,
$15,958 and $16,810, respectively. In September 2007, SMP exercised the renewal option under
the long-term lease agreement for another ten years until 2018.Included in receivables from related parties and payables to related parties are amounts due
from or to SMP:
 December 31,2006
    
    2007Amounts due from SMP
    
    $
    8,724
    
    
    $
    10,193Amounts due to SMP
    
    $
    819
    
    
    $
    1,341
 The balances with SMP are unsecured, interest free and repayable within 12 months.
 Investment in SMP
    
    December 31,2006
    
    
    2007Cost (net of return of capital)
    
    $
    88,324
    
    
    $
    80,936Share of retained post-formation gains
    
    
    15,359
    
    
    
    49,557Share of accumulated other comprehensive losses
    
    
    (1
    )
    
    
    Dividends received
    
    
    (67,638
    )
    
    
    (101,240
    )$
    36,044
    
    
    $
    29,253
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 In August 2005, SMPs board of directors approved a change to SMPs fiscal year end from
December 31 to September 30 so as to coincide with the fiscal year end of LSI. During 2007,
LSI changed its fiscal year end to December 31 and hence, SMP also changed its fiscal year end
to December 31. The change in SMPs fiscal year end does not affect how the Company accounts
for its share of SMPs net results.In October 2005, SMP reorganized its paid-up share capital and authorized a return of a
portion to its shareholders in the form of cash, the Companys entitlement being $20,424, in a
capital reduction sanctioned by the High Court of Singapore. In 2005, the Company received
$17,300 arising from the return of capital approved in 2005. In October 2006, the board of
directors of SMP approved a second capital reduction which was subsequently approved by the
High Court of Singapore and filed with the Accounting and Corporate Regulatory Authority of
Singapore in November 2006. The Companys entitlement arising from the second return of
capital from SMP was $19,061. In 2006, the Company received an additional $16,913 arising from
both the first and the second return of capital from SMP. In 2007, the Company received $7,350
arising from the second return of capital from SMP.Shown below is summarized financial information for SMP:
 December 31,2006
    
    
    2007Current assets
    
    $
    72,063
    
    
    $
    65,343Property, plant and equipment
    
    
    21,972
    
    
    
    18,436Other assets
    
    
    55
    
    
    
    669Current liabilities
    
    
    (40,616
    )
    
    
    (30,390
    )Other liabilities
    
    
    (19
    )
    
    
    (6
    )Shareholders equity
    
    $
    53,455
    
    
    $
    54,052
 2005
    
    2006
    
    2007Net revenue
    
    $
    201,345
    
    
    $
    197,932
    
    
    $
    175,174Gross profit
    
    
    4,875
    
    
    
    38,010
    
    
    
    34,507Net income
    
    
    1,486
    
    
    
    36,040
    
    
    
    34,198
 (c)
    
    Gateway Silicon Inc.
 The Company has a 26.7% ownership interest in Gateway Silicon Inc. (GSI) that is accounted
for using the equity method. The remaining 73.3% interest in GSI is held by Macronix
International Co., Ltd. (Macronix).GSI is a Taiwan-based firm specializing in Application-Specific Integrated Circuit
(ASIC)/System-on-chip design services and intellectual property development and integration.
The Company commenced equity accounting for GSI in March 2007. GSIs net operating results are
shared between the Company and GSIs majority shareholder, Macronix, in the same ratio as the
equity holdings.The Company purchased $97 of design services from GSI and sold $94 of processed wafers to
GSI for the year ended December 31, 2007.Included in payables to related parties as of December 31, 2007 are amounts due to GSI of
$97. There were no amounts due from GSI as of December 31, 2007. The balances with GSI are
unsecured, interest free and repayable within 12 months.As of December 31, 2007, the carrying value of the Companys investment in GSI amounted to
$859.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 3.
    
    Cash and Cash Equivalents and Restricted Cash
 December 31,2006
    
    
    2007Cash at banks and cash on hand
    
    $
    49,814
    
    
    $
    46,180Money market funds and short-term deposits with banks
    
    
    669,168
    
    
    
    696,993Cash and cash equivalents
    
    $
    718,982
    
    
    $
    743,173Restricted cash
    
    $
    43,063
    
    
    
    45,092
 Under the terms of the EXIM Guaranteed Loan agreement which is described in Note 15, the
Company is required to maintain on deposit with the lender a compensating balance, restricted
as to use, equal to the amount of principal, interest and commitment fees payable at the next
repayment date. The restricted cash was included in interest-bearing money market funds.
 4.
    
    Marketable SecuritiesAt December 31, 2006
 Cost
    
    
    UnrealizedGains
    
    
    Unrealized(Losses)
    
    
    Fair ValueCurrentAvailable-for-sale securities:Equity securities
    
    $
    2,673
    
    
    $
    
    
    
    $
    (390
    )
    
    $
    2,283
 At December 31, 2007
 Cost
    
    
    UnrealizedGains
    
    
    Unrealized(Losses)
    
    
    Fair ValueCurrentAvailable-for-sale securities:Equity securities
    
    $
    2,526
    
    
    $
    296
    
    
    $
    
    
    
    $
    2,822
 No realized gains or losses were recorded for the year ended December 31, 2005. Proceeds from
sale of available-for-sale securities were $5,990 and gross realized gains from sale of
available-for-sale securities were $348 in 2006. The Company also realized losses amounting to
$2,698 and $835 as a result of other-than-temporary impairment assessments in 2006 and 2007,
respectively.The following table shows the fair value and gross unrealized gains and (losses) recorded in
accumulated other comprehensive income (loss) of the Companys available-for-sale equity
securities, aggregated by the length of time the securities have been in a continuous
unrealized gain and (loss) position.
 At December 31, 2006
    
    Less than 12 months
    
    
    Greater than 12 months
    
    
    TotalFair Value
    
    
    Unrealized(Losses)
    
    
    Fair Value
    
    
    Unrealized(Losses)
    
    
    Fair Value
    
    
    Unrealized(Losses)Available-for-sale
securities:Equity securities
    
    $
    2,283
    
    
    $
    (390
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,283
    
    
    $
    (390
    )
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 At December 31, 2007
    
    Less than 12 months
    
    
    Greater than 12 months
    
    
    TotalFair Value
    
    
    UnrealizedGains
    
    
    Fair Value
    
    
    UnrealizedGains
    
    
    Fair Value
    
    
    UnrealizedGainsAvailable-for-sale
securities:Equity securities
    
    $
    2,822
    
    
    $
    296
    
    
    $
    
    
    
    $
    
    
    
    $
    2,822
    
    
    $
    296
 The Companys investments in available-for-sale equity securities consist of investments in
the common stock of two companies in the semiconductor industry. The fair value of the
investments is based on quoted share prices at the balance sheet date.At December 31, 2006, both of the investments were in an unrealized loss position and based on
the Companys evaluation, these investments were not considered to be other-than temporarily
impaired.At December 31, 2007, one of the investments was in an unrealized gain position while the
other was written down to its fair value as a result of an other-than temporary impairment
assessment.5.
    
    Receivables, net
 December 31,2006
    
    
    2007Trade receivables
    
    $
    230,590
    
    
    $
    173,959Allowance for doubtful accounts
    
    
    (1,149
    )
    
    
    Allowance for sales credits and returns
    
    
    (6,827
    )
    
    
    (3,280
    )Trade receivables, net of allowances
    
    
    222,614
    
    
    
    170,679Receivables from related parties
    
    
    8,732
    
    
    
    10,193Other receivables
    
    
    12,015
    
    
    
    56,440$
    243,361
    
    
    $
    237,312
 Movement in the allowance for doubtful accounts is as follows:
 2006
    
    
    2007Beginning
    
    $
    991
    
    
    $
    1,149Utilized during the year
    
    
    (4
    )
    
    
    (926
    )Charge for the year
    
    
    466
    
    
    
    330Reversal of specific allowances
    
    
    (304
    )
    
    
    (553
    )Ending
    
    $
    1,149
    
    
    $
    
 Movement in the allowance for sales credits and returns is as follows:
 2006
    
    
    2007Beginning
    
    $
    13,901
    
    
    $
    6,827Utilized during the year
    
    
    (13,353
    )
    
    
    (8,087
    )Charge for the year
    
    
    6,279
    
    
    
    4,540Ending
    
    $
    6,827
    
    
    $
    3,280
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 6.
    
    Inventories
 December 31,2006
    
    
    2007Raw materials
    
    $
    13,306
    
    
    $
    14,149Work-in-progress
    
    
    138,659
    
    
    
    194,255Consumable supplies and spares
    
    
    6,527
    
    
    
    5,120$
    158,492
    
    
    $
    213,524
 7.
    
    Other InvestmentsThe Company has an investment in a private enhanced cash fund (Fund), which is managed
by an external financial institution and consists primarily of high quality corporate debt,
mortgage-backed securities and asset-backed securities. Due to the nature of the securities
that the Fund invests in, the Funds underlying securities have been exposed to adverse
market conditions that have affected the value of the collateral and the liquidity of the
Fund. As a result, in December 2007, the investment manager of the Fund halted demand
redemptions and announced its intention to liquidate the Fund. As at
December 31, 2007, the fair value of the Companys pro-rata share of the investment in the
Fund, was $89,290 and the Company recognized an other-than-temporary impairment loss of
$1,140. The investment in the Fund which was classified as a cash equivalent since the time
of placement in 2003, was reclassified to Other investments as of December 31, 2007. In the same month, the Company received cash proceeds of $8,837 in distributions from the Fund.8.
    
    Technology Licenses, net
 Weighted averageamortizationperiod (years)December 31,
    
    
    December 31,2006
    
    
    2007
    
    
    2006
    
    
    2007Technology licenses, at cost
    
    $
    178,043
    
    
    $
    186,851
    
    
    
    6
    
    
    
    6Accumulated amortization
    
    
    (93,052
    )
    
    
    (124,152
    )Technology licenses, net
    
    $
    84,991
    
    
    $
    62,699
 Amortization amounted to $24,616, $30,877 and $31,100 for 2005, 2006 and 2007, respectively.
Estimated amortization for future periods is as follows:
 2008
    
    $
    33,1982009
    
    
    19,4052010
    
    
    9,2422011
    
    
    854Thereafter
    
    
    $
    62,699
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 9.
    
    Property, Plant and Equipment, net
 December 31,2006
    
    
    2007CostBuildings
    
    $
    265,324
    
    
    $
    264,846Mechanical and electrical installations
    
    
    636,796
    
    
    
    643,006Equipment and machinery
    
    
    4,134,226
    
    
    
    4,514,325Office and computer equipment
    
    
    163,787
    
    
    
    192,884Assets under installation and construction
    
    
    519,584
    
    
    
    745,126Total cost
    
    $
    5,719,717
    
    
    $
    6,360,187Accumulated depreciation and amortization
    
    $
    3,444,538
    
    
    $
    3,896,398Property, plant and equipment, net
    
    $
    2,275,179
    
    
    $
    2,463,789
 Depreciation amounted to $482,141, $472,282 and $465,267 for the years ended December 31,
2005, 2006 and 2007, respectively. The Company recorded grants amounting to $Nil, $139
and $2,988 as reduction of depreciation expense for the years ended December 31, 2005,
2006, and 2007, respectively.Capitalized interest relating to property, plant and equipment amounted to $19,032,
$12,062 and $34,818 in the years ended December 31, 2005, 2006 and 2007, respectively.For assets under capital leases, total cost was $77,930 and $78,460 at December 31, 2006 and
2007 respectively and accumulated amortization was $7,500 and $12,993 at December 31, 2006
and 2007 respectively. Amortization of assets under capital leases, included in depreciation
expense, was $2,886, $4,614 and $5,493 for the years ended December 31, 2005, 2006 and 2007,
respectively.10.
    
    Other Non-current AssetsAs of December 31, 2006 and 2007, the Company had a refundable deposit placed with a
vendor of $9,533 and $10,006 respectively to secure wafer capacity. The deposit is refundable
according to the utilization of such allocated capacity or at the end of the agreed period of
such allocated capacity. The deposit is initially recorded at the net present value of
payments due pursuant to its contractual terms. The related discount, which is offset by an
equal amount of deferred expense, is amortized to interest income using the effective
interest rate method. Deferred expense is amortized to cost of revenue over the length of the
contract using the straight-line method. The deposit is classified based on maturity, except
that the amounts are considered current if it is probable that the deposits will be refunded
within the next 12 months.11.
    
    Payables
 December 31,2006
    
    
    2007Trade and accrued purchases
    
    $
    104,544
    
    
    $
    116,459Purchases of property, plant and equipment
    
    
    193,742
    
    
    
    91,644Payables to related parties
    
    
    3,582
    
    
    
    4,515$
    301,868
    
    
    $
    212,618
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 12.
    
    Other Current Liabilities
 December 31,2006
    
    
    2007Accrued employee related expenses and bonuses
    
    $
    43,350
    
    
    $
    31,101Customer capacity guarantee deposits
    
    
    33,137
    
    
    
    5,992Accrued interest
    
    
    30,494
    
    
    
    31,731Customer prepayment
    
    
    19,247
    
    
    
    16,844Other accrued expenses
    
    
    4,136
    
    
    
    4,942Other current liabilities
    
    
    19,492
    
    
    
    18,561$
    149,856
    
    
    $
    109,171
 The Company enters into capacity guarantee agreements with certain of its customers under
which the customers are required to maintain non-interest bearing deposits with the Company to
secure guaranteed access to wafer capacity. Such deposits are generally for periods exceeding
one year and are refundable at the end of the agreed period of such guaranteed capacity, or in
certain cases based on the cumulative wafers purchased from the Company. Such deposits are
initially recorded at the net present value of payments due pursuant to their contractual
terms. The related discount, which is offset by an equal amount of deferred revenue, is
amortized to interest expense using the effective interest rate method. Deferred revenue is
amortized to earnings over the term of the deposits using the straight-line method. Deposits
are classified based on maturity, except that the amounts are considered current if it is
probable that the deposits will be refunded within the next 12 months.The customer prepayment is for future purchases which also secures access to wafer capacity.
This amount will be used to offset certain trade receivables from that customer. The receipt
was recorded as an operating cash flow in the consolidated statement of cash flows.13.
    
    Income TaxesThe Company has been granted pioneer status under the Economic Expansion Incentives (Relief
from Income Tax) Act (Chapter 86) (EEIA) of Singapore for:
 
    
    the manufacture of integrated circuits using submicron technology at
Fab 2 for a ten-year period beginning July 1, 1996. The pioneer
status expired on June 30, 2006;
    
    the wafer fabrication of ASIC and other advanced semiconductor devices
at Fab 6 for a ten-year period beginning September 1, 2003; and
    
    the wafer fabrication of integrated circuits at Fab 7 for a
fifteen-year period beginning October 1, 2005.
 Under the EEIA, the Company has also been granted:
 
    
    post-pioneer status for the manufacture of integrated circuits using
submicron technology at Fab 2 for a five-year period beginning July 1,
2006;
    
    development and expansion status for the manufacture of integrated
circuits using submicron technology at Fab 3 for a five-year period
beginning July 1, 2009; and
    
    development and expansion status for the wafer fabrication of ASICs
and other advanced semiconductor devices at Fab 6 for a five-year
period beginning September 1, 2013.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 During the period in which pioneer status is effective, subject to compliance with
certain conditions, income arising from the pioneer trade is exempt from Singapore income
tax. During the period in which post-pioneer status or development and expansion status is
effective, subject to compliance with certain conditions, income arising from the incentive
activities is taxed at a concessionary rate of 10%. Based on these tax incentives, income tax
is assessed at the individual fab level. Income arising from activities not covered under any
of the abovementioned incentives (hereinafter referred to as non-qualifying income) is taxed
at the prevailing Singapore corporate tax rate, which was 20% for the years ended December
31, 2005 and 2006 and 18% for the year ended December 31, 2007. The reduction in corporate
tax rate from 20% to 18% for the year of assessment 2008 and onwards was announced by the
Singapore Second Minister for Finance on February 15, 2007 and was enacted by the Government
of Singapore on December 7, 2007. The effects of the change in corporate tax rate have been
recognized in the Companys consolidated statement of operations for the year ended December
31, 2007.The income tax expenses for the years ended December 31, 2005, 2006 and 2007 are primarily
related to non-qualifying income, such as interest income, rental income and income from the
sale of wafers manufactured by technologies that are not granted preferential tax treatment.The Company was previously granted pioneer status under the EEIA for the manufacture of
integrated circuits using submicron technology at Fab 3 for a ten-year period beginning July
1, 1999. During its pioneer period, Fab 3 had accumulated substantial wear and tear
allowances on plant and machinery which it was unable to fully utilize against
income from activities covered under the pioneer status. In
addition, Fab 3 had tax losses incurred in fiscal years 1997 and
1998, which under the pioneer status, were not allowed for carry
forward. The Company applied to revoke the
pioneer status of Fab 3 in order to utilize these unabsorbed wear and tear allowances and tax
losses against the income not covered under the pioneer status. The application was approved
in September 2007 and the Company recorded an income tax benefit of $119,451 in 2007. This
tax benefit is available to offset taxes paid or incurred by the Company in current and prior
years. Relating to this, the Company expects to receive a refund of taxes
previously paid on non-qualifying income from previous years. Accordingly, the Company has
recorded $35,506 and $63,171 in Receivables, net and Other non-current assets,
respectively. The balance of the income tax benefit, after offsetting
taxes paid or incurred
by the Company in prior years, was used to offset current year income tax expense.Under Singapore tax law, loss carryforwards and wear and tear allowances are deductible to the extent of income before loss carryforwards and wear
and tear allowances. Unabsorbed tax losses and wear and tear allowances can be
carried forward indefinitely to set off against income in future tax years, subject to
compliance with certain conditions. As of December 31, 2006 and 2007, the Company has
unabsorbed wear and tear allowances of approximately $1,742,000 and $1,355,977, respectively.
The Company does not have any loss carryforwards as of December 31, 2006 and 2007.Income (loss) before income tax consists of the following:
 2005
    
    
    2006
    
    
    2007Singapore
    
    $
    (145,828
    )
    
    $
    89,294
    
    
    $
    8,950Foreign
    
    
    994
    
    
    
    1,654
    
    
    
    1,305Total
    
    $
    (144,834
    )
    
    $
    90,948
    
    
    $
    10,255
 Income tax expense (benefit) consists of the following:
 2005
    
    
    2006
    
    
    2007Current tax expense (benefit)
     Singapore
    
    $
    13,962
    
    
    $
    22,011
    
    
    $
    (86,455
    ) Foreign
    
    
    (17
    )
    
    
    573
    
    
    
    472Deferred tax expense (benefit)
     Singapore
    
    
    (800
    )
    
    
    1,502
    
    
    
    (5,233
    ) Foreign
    
    
    (34
    )
    
    
    (162
    )
    
    
    (217
    )$
    13,111
    
    
    $
    23,924
    
    
    $
    (91,433
    )
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 A reconciliation of the expected tax expense (benefit) computed by applying the Singapore
statutory tax rate of 20% for 2005 and 2006 and 18% for 2007 to income (loss) before income
tax to income tax expense (benefit) is as follows:
 2005
    
    
    2006
    
    
    2007Income tax expense (benefit) computed at the Singapore
statutory tax rate
    
    $
    (28,967
    )
    
    $
    18,190
    
    
    $
    1,846Non-deductible research and development expenses
    
    
    473
    
    
    
    16,726
    
    
    
    16,277Non-deductible pre-pioneer operating losses
    
    
    13,084
    
    
    
    
    
    
    
    Other non-deductible expenses
    
    
    3,721
    
    
    
    7,137
    
    
    
    7,290Effect of pioneer status, including losses and allowances
not recognized as deferred tax benefit
    
    
    27,322
    
    
    
    (4,556
    )
    
    
    12,470Effect of post-pioneer status
    
    
    
    
    
    
    (6,833
    )
    
    
    (8,302
    )Non-taxable income in equity method investment
    
    
    (1,332
    )
    
    
    (7,208
    )
    
    
    (6,091
    )Effect of revocation of a tax incentive
    
    
    
    
    
    
    
    
    
    
    (119,451
    )Impact of change in enacted tax rates
    
    
    
    
    
    
    
    
    
    
    2,973Effect of prior years adjustments on deferred tax benefit
    
    
    
    
    
    
    
    
    
    
    1,532Others, net
    
    
    (1,190
    )
    
    
    468
    
    
    
    23Income tax expense (benefit)
    
    $
    13,111
    
    
    $
    23,924
    
    
    $
    (91,433
    )
 The pioneer status had the effect of increasing (decreasing) basic and diluted net earnings
(loss) per ordinary share by $0.01, $0.00 and $(0.00), and basic and diluted net earnings
(loss) per ADS by $0.11, $0.02 and $(0.04), for the years ended December 31, 2005, 2006 and
2007, respectively.The post-pioneer status had the effect of increasing basic
and diluted net earnings per ordinary share by $0.00 and $0.00, and
basic and diluted net earnings per ADS by $0.03 and $0.03, for the
years ended December 31, 2006 and 2007, respectively. None of
the Fabs were under post-pioneer status during the year ended
December 31, 2005.Deferred tax assets and deferred tax liabilities are non-current and
relate to Singapore. Net deferred tax assets are classified as
Other non-current assets and consist of the following:
 December 31,2006
    
    
    2007Deferred tax liabilitiesProperty, plant and equipment
    
    $
    (2,105
    )
    
    $
    (7,220
    )Intangible assets
    
    
    (662
    )
    
    
    (1,329
    )Unremitted offshore income
    
    
    (2,554
    )
    
    
    (685
    )$
    (5,321
    )
    
    $
    (9,234
    )Deferred tax
assetsUnutilized wear and tear allowances
    
    $
    263,437
    
    
    $
    175,586Property, plant and equipment
    
    
    11,598
    
    
    
    7,436Other accrued expenses
    
    
    12,545
    
    
    
    13,790287,580
    
    
    
    196,812Valuation allowance
    
    
    (273,814
    )
    
    
    (173,683
    )$
    13,766
    
    
    $
    23,129Net deferred tax assets
    
    $
    8,445
    
    
    $
    13,895
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of net deferred tax assets is dependent on the
availability of taxable income during the periods in which those assets will be reversed.
Management considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, taxable income in prior years and tax planning strategies in making this
assessment. The valuation allowance is established for deferred tax assets that cannot be
objectively supported as more likely than not to be realized by the Company.Based on the historical level of taxable income specific to certain fabs, management has
concluded that it could not objectively support that sufficient future taxable income will be
realized and therefore it is more likely than not that deferred tax assets will not be
realizable. As a result of the assessment, a valuation allowance of $273,814 and $173,683 for
these fabs net deferred tax assets has been recorded as at December 31, 2006 and 2007,
respectively. The Company expects to continue to maintain valuation allowances on future tax
benefits for such fabs until objective positive evidence is sufficient to support reversal of
the valuation allowance based upon current and preceding years results of operations and
anticipated future taxable income levels. Management has, however, concluded that a
valuation allowance of $8,445 and $13,895 for net deferred tax assets arising from other
operations as at December 31, 2006 and 2007 respectively, was not required. This is because
it is more likely than not that these operations will generate sufficient future taxable
income to realize the related net deferred tax assets.The net change in the valuation allowance during the year ended December 31, 2006 was a
decrease of $48,599, due to the de-recognition of deferred tax assets for temporary
differences that were expected to reverse during the tax-exempt pioneer period rather than
the taxable post-pioneer period, as previously assessed. The net change in the valuation
allowance during the year ended December 31, 2007 was a decrease of $100,131 mainly due to
consequential adjustment arising from the substantial reduction in Fab 3s deductible
temporary differences. Revocation of Fab 3s pioneer status was effective in 2007 and the
temporary differences are now available for set-off against the Companys income not covered
under the pioneer status. Based on the Companys historical records of taxable income, the
Company expects that it will have sufficient taxable income to fully utilize Fab 3s
deductible temporary differences.The Company recorded an increase in deferred tax assets and valuation allowance in the
amounts of $3,993 and $1,846, respectively, as a result of the cumulative effect adjustment
under SAB 108 in 2006 (see Note 1(c)).The adoption of FIN 48 did not have an impact on the accumulated deficit as the Company had
previously recorded the full amount of the unrecognized tax benefits as income tax payable.
The balance, however, was reclassified as a non-current liability under FIN 48 because the
Company does not anticipate payment within the next 12 months.A reconciliation of the liability for unrecognized tax benefits for 2007 is as follows:
 Balance as at January 1, 2007
    
    $
    6,307Gross decrease as a result of tax positions taken during prior years
    
    
    (1,482
    )Gross increase as a result of tax positions taken during the current year
    
    
    1,671Effect of foreign currency translation
    
    
    (506
    )Balance as at December 31, 2007
    
    $
    5,990
 The total unrecognized tax benefits as at December 31, 2007 of $5,990, if recognized, would
affect the effective tax rate.The Company does not anticipate any significant changes to the total amounts of unrecognized
tax benefits within the next 12 months.The Companys accounting policy is to treat interest and penalties as a component of income
taxes. However, the tax law in the Companys primary tax jurisdiction, Singapore, only
imposes penalties on tax underpayments relating to tax positions which contravene the
provisions of the Singapore income tax legislation. In addition, interest may be imposed for
request by taxpayers to extend the time limit for tax payment. As such, as of December 31,
2007, the Company has not recognized any interest or penalties in the consolidated statement
of operations or in the consolidated balance sheet.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 The Company is subject to taxation in Singapore and other foreign tax jurisdictions. The
tax authority in Singapore had previously completed its examination of the Companys tax
computations for the fiscal years 2000 and earlier. However, as a result of the revocation of
Fab 3s pioneer tax incentive during fiscal year 2007, the Company has submitted revised tax
computations adopting the new tax status for the prior tax years, beginning from the fiscal
year 1997, to the tax authority. A summary of the tax years that remain subject to
examination in the Companys major tax jurisdictions are:
 Fiscal years that remain subject to examination as ofMajor tax jurisdiction
    
    January 1, 2007
    
    December 31, 2007Singapore
    
    2000 and forward
    
    1997 and forwardUnited States of America
    
    2004 and forward
    
    2004 and forward
 14.
    
    Short-term debtShort-term debt consists of:
 December 31,2007Bank of America short-term credit facility
    
    $
    70,000Bank of America revolving facility
    
    
    50,000Sumitomo Mitsui Banking Corporation revolving facility
    
    
    150,000$
    270,000
 Weighted AverageInterest Rates as ofDecember 31,2007Short-term debt obligations at floating rates
    
    
    5.59
    %
 The Bank of America short-term credit facility is an uncommitted facility, for a maximum of
$20,000, which was temporarily increased to $70,000 in December 2007 for a three-month period
ending March 31, 2008. The facility was fully drawn down as at December 31, 2007.The Bank of America Revolving Loan Facility is for a maximum of $50,000, which was fully drawn
down as at December 31, 2007. The availability period is for three years from April 2007.The Sumitomo Mitsui Banking Corporation Revolving Loan Facility is for a maximum of $150,000,
which was fully drawn down as at December 31, 2007. The availability period is for 364 days
from July 2007.The Companys loans and available credit facilities contain various financial, shareholding
and other restrictive covenants, discussed under Note 15.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 15.
    
    Long-term Debt and Obligations under Capital LeasesLong-term debt consists of:
 December 31,2006
    
    
    2007Floating rate loans:EXIM Guaranteed Loan
    
    $
    324,277
    
    
    $
    543,501Bank of America Term Loan
    
    
    50,000
    
    
    
    5.75% senior notes due 2010
    
    
    371,904
    
    
    
    372,7006.00% amortizing bonds due 2010
    
    
    38,433
    
    
    
    29,6596.25% senior notes due 2013
    
    
    297,405
    
    
    
    297,7526.375% senior notes due 2015
    
    
    246,805
    
    
    
    247,092Others
    
    
    2,836
    
    
    
    9,6331,331,660
    
    
    
    1,500,337Less: Current installments of long-term debt
    
    
    (123,629
    )
    
    
    (74,163
    )Long-term debt, excluding current installments
    
    $
    1,208,031
    
    
    $
    1,426,174
 Obligations under capital leases:
 2006
    
    
    2007Minimum future lease payments
    
    $
    124,194
    
    
    $
    123,409Amount representing interest at rates of 2006: 6.2% to 7.8% &
2007: 5.9% to 7.8%
    
    
    (47,255
    )
    
    
    (45,166
    )Present value of minimum future lease payments
    
    
    76,939
    
    
    
    78,243Less: Current installments
    
    
    (3,998
    )
    
    
    (4,500
    )Obligations under capital leases, excluding current installments
    
    $
    72,941
    
    
    $
    73,743
 2006
    
    
    2007Current installments of:Long-term debt
    
    $
    123,629
    
    
    $
    74,163Obligations under capital leases
    
    
    3,998
    
    
    
    4,500$
    127,627
    
    
    $
    78,663Non-current portion, excluding current installments:Long-term debt
    
    $
    1,208,031
    
    
    $
    1,426,174Obligations under capital leases
    
    
    72,941
    
    
    
    73,743$
    1,280,972
    
    
    $
    1,499,917
 Weighted AverageInterest Rates as ofDecember 31,2006
    
    
    2007Long-term debt obligations at floating rates
    
    5.80%
    
    
    5.44%Long-term debt obligations at fixed rates
    
    6.08%
    
    
    6.08%Obligations under capital leases
    
    7.08%
    
    
    7.09%
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 The Export-Import Bank of the United States (EXIM) Guaranteed Loan is from JPMorgan
Chase Bank, N.A. (JP Morgan), guaranteed by the EXIM, for a maximum of $653,131. The loan
is divided into two tranches, of which one tranche of $324,277 had been fully drawn down as
of December 31, 2006. Principal repayment of the first tranche is payable semi-annually over
five years from January 16, 2007. The availability period for the other tranche is until
December 15, 2008. It may only be used to finance the purchase of Fab 7 equipment from U.S.
vendors and is drawn down in accordance with equipment purchases per the Companys schedule
for the construction of phase 2 of Fab 7 facility. As of December 31, 2007, the Company has
drawn down a total of $284,079 from the second tranche. Principal repayment of the second
tranche is payable semi-annually over five years, beginning on 15 July 2008. The loan bears
interest at LIBOR plus 0.125%. Interest is payable semi-annually.The Bank of America Term Loan was for a maximum of $50,000, which was fully drawn down in
2005. The loan bore interest at LIBOR plus 0.80%. Interest was payable semi-annually and
principal was repayable in full at maturity. The loan was fully repaid in April 2007.The senior notes due 2010 (Senior Notes due 2010) with face value of $375,000 were issued at
a price of 98.896% of the principal amount. The senior notes due 2015 (Senior Notes due
2015) with face value of $250,000 were issued at a price of 98.573% of the principal amount.
Interest on the Senior Notes due 2010 is payable at the rate of 5.75% per annum and interest
on the Senior Notes due 2015 is payable at the rate of 6.375% per annum, in each case on
February 3 and August 3 of each year from February 3, 2006. The Senior Notes due 2010 mature
on August 3, 2010 and the Senior Notes due 2015 mature on August 3, 2015. The Senior Notes due
2010 and Senior Notes due 2015 constitute senior, unsecured obligations of the Company.The convertible redeemable preference shares (refer to Note 17) and the 6% amortizing bonds
due 2010 (Amortizing Bonds) have an aggregate issue price of $300,000. The initial principal
amount assigned to the Amortizing Bonds was $46,703. Interest on the Amortizing Bonds is
payable at the rate of 6.0% per annum on the outstanding principal amount. The Amortizing
Bonds pay semi-annual cash payments of $5,475 per payment, as a combination of principal and
interest, on February 17 and August 17 of each year from February 17, 2006, and amortize to
zero at maturity on August 17, 2010. The Amortizing Bonds constitute senior, unsecured
obligations of the Company.The senior notes due 2013 (Senior Notes due 2013) with a face value of $300,000 were
issued at a price of 99.053% of the principal amount. Interest is payable at the rate of 6.25%
per annum on April 4 and October 4 of each year, from October 4, 2006. The Senior Notes due
2013 mature on April 4, 2013, and constitute senior, unsecured obligations of the Company.As of December 31, 2007, other long-term debt includes the unamortized portion of the
cumulative fair value change of the Senior Notes due 2013 due to changes in interest rates for
the period the Company designated an interest rate swap
(IRS) transaction as a fair value hedge of
this debt. The IRS was terminated in 2007.The senior notes due 2010, senior notes due 2013 and senior notes due 2015 (collectively,
Senior Notes) and the Amortizing Bonds include a company call option and an investor put
option. If the Company were to exercise the call option, investors would receive an amount
equal to the outstanding principal amount, plus any accrued and unpaid interest through the
call/redemption date. If the investors were to exercise the put option, they would receive an
amount equal to 101% of the outstanding principal amount, plus any accrued and unpaid interest
to the put/repayment date.The Company evaluated the call and put options included in the Senior Notes and the
Amortizing Bonds in accordance with SFAS No. 133 and Derivatives Implementation Group (DIG)
Issue B16 Embedded Derivatives: Calls and Puts in Debt Instruments (DIG Issue B16). Based
on its evaluation, the Company determined that the call and put options are clearly and
closely related to the debt instrument. Therefore these embedded derivatives have not been
bifurcated.The above borrowings, Senior Notes and Amortizing Bonds rank pari passu.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Annual maturities of long-term debt as of December 31, 2007 are as follows:
 Payable in year ending December 31,2008
    
    $
    74,1632009
    
    
    131,5462010
    
    
    507,1472011
    
    
    121,6712012
    
    
    56,816Thereafter
    
    
    606,817$
    1,498,160
 These amounts represent the expected repayments in each of the periods indicated and do not
include the unamortized debt discount relating to the Senior Notes, which are reported as a
direct reduction to the face amounts of the Senior Notes, and the effect from the basis adjustment due to the termination of the IRS.In May 2007, the Company signed an agreement for a $610,000 term loan facility from JP Morgan,
guaranteed by EXIM. The loan is to support phase 2 of the build up of production capacity in
Fab 7. This new credit facility is divided into two tranches and has an availability period of
between three to five years beginning May 2007. It may only be used to finance the purchase of
Fab 7 equipment from U.S. vendors and is drawn down in accordance with equipment purchases per
the Companys schedule for the construction of phase 2 of Fab 7 facility. The loan bears
interest at LIBOR plus 0.0695%. Interest is payable semi-annually and each tranche is payable
semi-annually over five years.The Company has total unutilized banking facilities of $591,400 and $687,478 for short-term
advances, loans and bankers guarantees as of December 31, 2006 and 2007, respectively. These
facilities are available to the Company on an uncommitted basis, other than the remaining
unutilized EXIM facilities and Sumitomo Mitsui Banking Corporation revolving loan facility
(see Note 14). The Company pays commitment fees ranging from 0.025%
to 0.25% and 0.025% to
0.125% per annum for the remaining unutilised facilities for 2006 and 2007, respectively.As of December 31, 2007, the Companys loans and available credit facilities contain various
financial, shareholding and other restrictive covenants. Under the financial covenants, the
Company is required to maintain certain financial conditions and ratios such as consolidated
net worth, total debt to net worth ratio, and historical debt service coverage ratio. The
Company is also required to ensure that its consolidated net worth is not at any time less
than $1,000,000 and its total debt does not at any time exceed 180% of its total net worth.
Under the shareholding covenants, Temasek is required to own, directly or indirectly, a
certain percentage of the Companys outstanding shares or is required to be the Companys
single largest shareholder. In addition, some of the loans and available credit facilities
also impose other restrictive covenants such as restrictions on incurring further
indebtedness, creating security interests over assets, payment of dividends, disposal of
assets and mergers and corporate restructuring.The obligations under capital leases include contracts for supply of gases used by the
Companys fabrication facilities. The Company has assessed that such supply contracts contain
a lease pursuant to the consensus reached in EITF Issue 01-8, Determining Whether An
Arrangement Contains A Lease, and are accounted for as capital leases.Minimum future lease payments under capital leases for equipment and machinery for supply of
gases as of December 31, 2007 are as follows:
 Payable in year ending December 31,2008
    
    $
    9,9122009
    
    
    9,9122010
    
    
    9,9122011
    
    
    9,9122012
    
    
    9,912Thereafter
    
    
    73,849Total minimum lease payments
    
    $
    123,409
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 16.
    
    Other Non-current LiabilitiesAs at December 31, 2006 and 2007, the asset retirement obligation related to the
requirements in the Companys lease agreements for the potential return of buildings to
tenantable condition and the potential return of land on which fabs have been built to its
original condition amounted to $17,909 and $19,304, respectively.A reconciliation of the carrying amount of asset retirement obligations as of December 31,
2006 and 2007 is as follows:
 Asset retirement obligations as of December 31, 2005
    
    $
    16,561Liabilities incurred
    
    
    55Accretion expense
    
    
    1,293Asset retirement obligations as of December 31, 2006
    
    
    17,909Accretion expense
    
    
    1,395Asset retirement obligations as of December 31, 2007
    
    $
    19,304
 17.
    
    Convertible Redeemable Preference SharesThe holders of the convertible redeemable preference shares (Preference Shares) are not
entitled to receive any dividends, regardless of whether dividends are paid to the holders
of the Companys ordinary shares (Ordinary Shares). Holders of the Preference Shares may
convert the Preference Shares into new Ordinary Shares or, subject to certain limitations,
ADSs at a conversion price of $0.8719 per Ordinary Share at any time before the close of
business on the 7th business day prior to maturity or early redemption.Unless previously redeemed, converted or purchased and cancelled, the Company will redeem,
out of funds legally available for such payment, each Preference Share at maturity on August
17, 2010 at a redemption price equal to $10,000 per Preference Share.Prior to maturity, the Company may redeem the Preference Shares at the early redemption
price:
 
    
    at any time, if at least 95% of the Preference Shares originally
issued have been converted, redeemed or purchased and cancelled;
    
    at any time after 2 years after the date of issuance of the Preference
Shares which was in August 2005, if the closing sale price of the
Ordinary Shares for any 20 trading days in a specified 45 consecutive
calendar day period is at least 125% of the conversion price per
Ordinary Share; or
    
    at any time the Company is required to pay additional amounts as a
result of any change in or amendment to the laws or regulations of
Singapore or for certain other events.
 If certain events occur before the close of business on the 7th business day
prior to maturity or early redemption, holders of the Preference Shares may under certain
circumstances require the Company to redeem all or any of the Preference Shares at the early
redemption price. Such events include the delisting of the Companys
shares from the stock exchanges on which they are currently traded,
changes in the Companys controlling shareholder or a majority of
the board of directors, or the Companys share capital becoming
insufficient to cover the redemption amount.The Company has evaluated these call and put options under the
provisions of SFAS No. 133 and DIG Issue B16. For purposes of assessing if the puts and calls
are closely related to the Preference Shares, the Company has referred to DIG Issue B16 as
the Preference Shares are akin to a debt instrument because they have a mandatory redemption
feature at maturity and holders are not entitled to vote at the Companys general meetings
nor are they entitled to receive dividends or otherwise participate in earnings. The
Preference Shares do not embody any claim to residual interest of the Company. Upon exercise
of the call or put options, investors would receive an amount equal to the accreted value of
their shares and such amount does not constitute an accelerated repayment of the redemption
principal amount of $10,000 per Preference Share. The call and put options are considered to
be clearly and closely related to the Preference Shares. Therefore these embedded derivatives
have not been bifurcated.In the event of early redemption, each Preference Share will be redeemed for cash at the
accreted amount approximating its carrying value, which is the original allocated issue
price of $8,443.24 per Preference Share accreted to its present value using the effective
interest rate method calculation as follows:
 Elapsed days
     1,800Allocated value * ($10,000/allocated value)
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 The Preference Shares rank, with respect to rights upon liquidation, winding up or
dissolution:
 
    
    junior to all the Companys existing and future debt obligations;
    
    junior to each class of the Companys shares the terms of which
provide that such class will rank senior to the Preference Shares;
    
    on a parity with any class of the Companys shares that has terms
which provide that such class will rank on a parity with the
Preference Shares; and
    
    senior to the Companys Ordinary Shares (including those represented
by ADSs) and to any class of the Companys shares that has terms which
provide that such class will rank junior to the Preference Shares.
 The initial carrying amounts of the Preference Shares were stated at their fair values as of
the date of issuance, net of the associated issuance costs. The carrying amounts of the
Preference Shares are accreted to their redemption values over the remaining period until
the maturity date on August 17, 2010 using the effective interest rate method. Such
accretion adjusts net income (loss) available to ordinary shareholders. Accretion charge for
the years ended December 31, 2005, 2006 and 2007 was $3,196, $9,476 and $9,663,
respectively.In 2006, 2 Preference Shares were converted and 18,924 ordinary shares were issued as a
result of the conversion. There was no conversion during 2007.18.
    
    Shareholders EquityOrdinary Share CapitalUntil January 30, 2006, ordinary shares of the Company had a par value of S$0.26. The
Singapore Companies (Amendment) Act 2005, which came into effect on January 30, 2006,
abolished the concept of par value and authorized capital.In March 2006, the Company entered into a call option transaction (2006 Option)
with GS to replace the call option transaction that the Company had previously entered
into with GS in August 2004 with an expiration date of April 2, 2006. Under the 2006
Option, GS could purchase up to 214,792 of Chartered ordinary shares at S$1.60 per
share should the Company early terminate the 2006 Option in the first year and S$2.15
per share thereafter. Prior to the modification of the 2006 Option as mentioned below,
the 2006 Option was accounted for as a derivative instrument that was dual indexed to
the Companys ordinary share price and currency exchange rates, and changes in fair
value were recognized in earnings.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 On March 9, 2007, the Company modified the terms of the 2006 Option by
simultaneously terminating the Singapore dollar-denominated option and entering into a US
dollar-denominated option. The modification was based on the exchange rate of S$1.5268 per
US$1.00 on March 9, 2007. Under the modified terms of the 2006 Option, GS is entitled to
purchase up to 214,792 of new ordinary shares at US$1.408 per share and the Company may
terminate the transaction early, in whole or in part, if the closing price of Chartered
ordinary shares is equal to or higher than US$1.760 (equivalent to 125% of the US$1.408
exercise price) on each of any 20 business days in any consecutive 30 business-day period.
Should the Company exercise this right and opt for physical settlement, GS will be required
to buy the number of new ordinary shares relating to the terminated portion of the 2006
Option at US$1.408 per share. The Company continues to have the right to cash settle the
2006 Option. Under the terms of the 2006 Option, if the option is exercised, the Company has
the right either to issue new shares to GS or to settle the transaction in cash. If the 2006
Option is not exercised or terminated earlier, it will expire on March 29, 2011. As of
December 31, 2007, the US dollar-denominated option is accounted for as shareholders equity
in the consolidated balance sheet.Accumulated DeficitSingapore law allows dividends to be paid only out of the Companys net profits for the year
or retained earnings. Shareholders of ordinary shares are not liable for Singapore income
tax on dividends paid by the Company out of its tax exempt profits from pioneer activities
and net profits after deduction of tax at the concessionary rate from post-pioneer or
development and expansion activities. Some of the Companys loan agreements restrict the
ability of the Company to pay dividends without prior approval from the lender.Distributions of profits from non-pioneer activities which have been subject to tax at the
normal corporate tax rate are paid with a franking tax credit which Singapore tax-resident
shareholders can apply as a prepayment of income tax on the dividend. Shareholders who are
not tax-residents in Singapore are not liable for further Singapore income tax.Under the one-tier system with effect from January 1, 2003, tax payable by the Company on
its non-qualifying chargeable income constitutes a final tax. Companies that have moved to
the one-tier system can henceforth pay dividends that are exempted from Singapore income tax
in the hands of their shareholders.During the transitional period, the Company had up to December 31, 2007 to utilize any
available franking tax credit balance under the old imputation system to pay a franked
dividend to its shareholders. The Company had approximately S$52,416 of available balances
under the old imputation system as of December 31, 2006 and 2007.From January 1, 2008, the imputation system will cease to exist and the Company will move to
the one-tier system. In this regard, the full amount of the franking tax credit balance
would be nullified subsequent to December 31, 2007.Accumulated Other Comprehensive LossAccumulated other comprehensive loss consists of the following:
 December 31,2006
    
    
    2007Cumulative foreign currency translation loss
    
    $
    52,091
    
    
    $
    52,124Net unrealized cash flow hedging losses
    
    
    1,350
    
    
    
    1,442Net unrealized (gains)/losses on available-for-sale securities
    
    
    390
    
    
    
    (296
    )$
    53,831
    
    
    $
    53,270
 The foreign currency translation loss, net unrealized cash flow hedging losses and net
unrealized (gains) losses on available-for-sale securities are not adjusted for income taxes
because such (gains) losses are generally not tax deductible.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 19.
    
    Share Options and Incentive PlansTotal share-based compensation cost related to employee share options, restricted
share units and performance share units under SFAS No. 123(R) for the years ended December
31, 2006 and 2007 was:
 2006
    
    
    2007Cost of revenue
    
    $
    2,565
    
    
    $
    1,637Research and development
    
    
    712
    
    
    
    506Sales and marketing
    
    
    1,031
    
    
    
    703General and administrative
    
    
    3,068
    
    
    
    1,947Total share-based compensation cost
    
    $
    7,376
    
    
    $
    4,793
 2006
    
    2007Total share-based compensation cost
    
    Perordinaryshare
    
    Per ADS
    
    Perordinaryshare
    
    Per ADSBasic
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.00
    
    
    $
    0.02Diluted
    
    $
    0.00
    
    
    $
    0.03
    
    
    $
    0.00
    
    
    $
    0.02
 As the share-based compensation cost does not satisfy the conditions for tax deduction in
Singapore, the recognition of the share-based compensation cost did not result in income tax
benefits.
 (a)
    
    1999 Option Plan
 Effective March 1999, the Company adopted the Chartered Semiconductor Manufacturing Ltd
Share Option Plan 1999 (the 1999 Option Plan) which provided for a maximum of 107,160
shares (subject to adjustment) to be reserved for option grants. This amount was increased
to 197,160 shares in May 2002. As a result of the Companys rights offering in October
2002, the shares available for future grants increased by 30,488 shares. The total shares
provided under the 1999 Option Plan are hence 227,648 shares. Options granted under the
plan may include non-statutory options as well as incentive share options intended to
qualify under Section 422 of the United States Internal Revenue Code. The Company issues
new shares upon exercise of options. The remaining shares available for future grants are
81,727 and 84,104 as of December 31, 2006 and 2007, respectively.The plan is administered by a committee appointed by the Directors. Employees, outside
directors and consultants are eligible for the grant of options subject to certain
exceptions as provided in the 1999 Option Plan.The contractual term of options does not exceed 10 years from the date of grant. Upon
leaving employment of the Company, employees are given a specified period to exercise
outstanding options. The exercise price of share option is generally the fair market value
of the shares at the date of the grant. In certain circumstances, the exercise price may be
higher than the fair market value at the date of the grant.The weighted-average grant-date fair value of share options granted, the total intrinsic
value of share options exercised and the total fair value of share options vested during the
years ended December 31, 2005, 2006 and 2007 were as follows:
 2005
    
    2006
    
    2007Weighted-average grant-date fair value of share
options granted
    
    $
    0.47
    
    
    $
    0.43
    
    
    $
    0.35Total intrinsic value of share options exercised
    
    $
    249
    
    
    $
    320
    
    
    $
    207Total fair value of share options vested
    
    $
    26,717
    
    
    $
    14,495
    
    
    $
    10,893
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Share option activity for all outstanding options and the corresponding price information for the year ended December 31, 2007 were as follows:
 Numberof options
    
    WeightedAverageExercisePriceOutstanding at January 1, 2007
    
    
    119,843
    
    
    
    $1.89Granted
    
    
    9,005
    
    
    
    $0.72Expired
    
    
    (2,204
    )
    
    
    $1.51Exercised
    
    
    (2,446
    )
    
    
    $0.56Forfeited
    
    
    (9,179
    )
    
    
    $2.10Outstanding at December 31, 2007
    
    
    115,019
    
    
    
    $1.82Exercisable at December 31, 2007
    
    
    85,026
    
    
    
    $2.20
 Information regarding outstanding and exercisable share options as of December 31, 2007, was
as follows:
 Options outstandingRange of exercise prices
    
    Number ofoptions

    
    
    Weightedaverageremainingcontractualterm
    
    
    Weightedaverageexerciseprice
    
    
    Intrinsicvalue$0.39 to $1.00
    
    
    70,013
    
    
    6.8 years
    
    
    $0.73
    
    
    $
    1,731$1.02 to $1.89
    
    
    17,368
    
    
    4.1 years
    
    
    $1.40
    
    
    $
    2,585$2.14 to $2.44
    
    
    12,312
    
    
    3.5 years
    
    
    $2.32
    
    
    $
    657$5.81
    
    
    8,772
    
    
    2.8 years
    
    
    $5.81
    
    
    $
    $8.31
    
    
    6,554
    
    
    2.3 years
    
    
    $8.31
    
    
    $
    115,019
    
    
    
    
    
    
    
    
    
    
    $
    4,973
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Options exercisableRange of exercise prices
    
    Number ofoptions

    
    
    Weightedaverageremainingcontractualterm
    
    
    Weightedaverageexerciseprice
    
    
    Intrinsicvalue$0.39 to $1.00
    
    
    40,069
    
    
    5.8 years
    
    
    $0.72
    
    
    $
    1,731$1.02 to $1.89
    
    
    17,319
    
    
    4.1 years
    
    
    $1.40
    
    
    $
    2,585$2.14 to $2.44
    
    
    12,312
    
    
    3.5 years
    
    
    $2.32
    
    
    $
    657$5.81
    
    
    8,772
    
    
    2.8 years
    
    
    $5.81
    
    
    $
    $8.31
    
    
    6,554
    
    
    2.3 years
    
    
    $8.31
    
    
    $
    85,026
    
    
    
    
    
    
    
    
    
    
    $
    4,973
 The options vest over one to five years and expire on dates ranging from February 2008
to October 2017.Total share-based compensation cost recognized for employee share options for the years
ended December 31, 2006 and 2007 was $7,376 and $4,450, respectively. As of December 31, 2007, there was
$6,498 of total unrecognized compensation costs related to share options scheduled to be
recognized over a weighted average period of 2.7 years.Cash proceeds of $1,549 were received from option exercises during the year ended December
31, 2007.The fair values of the option grants awarded during the years ended December 31, 2005,
2006 and 2007 were estimated on the date of grant using the Black-Scholes option-pricing
model, which was also used in the computation for the Companys pro forma information
disclosures required under SFAS No. 123, Accounting for
Stock-Based Compensation, with the
following assumptions.
 2005
    
    2006
    
    2007Risk free interest rate
    
    4.06% to4.64%
    
    4.59% to5.22%
    
    4.05% to4.94%Expected volatility
    
    58.75% to61.04%
    
    40.45% to57.86%
    
    35.01% to49.09%Expected term
    
    5 to9 years
    
    3 to6.25 years
    
    3 to6.25 yearsDividend yield
    
    
    
    0.00%
    
    
    
    0.00%
    
    
    
    0.00%
 The risk-free rate for periods within the contractual term of the award is based
upon observed interest rates appropriate for the term of the Companys employee share
options. Expected volatilities are based on historical volatility rates of the
Companys ordinary shares. For options awarded during the year ended December 31, 2005,
the expected term is based on the contractual term of the grant, vesting periods, and
past exercise and post-vesting forfeiture behavior. For options awarded during the
years ended December 31, 2006 and 2007, the expected term is determined using the
simplified approach as permitted by Staff Accounting Bulletin No. 107 (SAB 107).Pre-vesting forfeitures for share options granted were estimated to be between approximately
1% to 21% and 6% to 22% for the years ended December 31, 2006 and 2007, respectively
based on historical pre-vesting forfeitures. In the Companys pro forma information
disclosures required under SFAS No. 123 for the year ended December 31, 2005, the
Company accounted for forfeitures as they occurred.Options to purchase 406, 390 and 177 shares of the Company were granted to employees of
SMP in 2005, 2006 and 2007, respectively. SMP bears the share-based compensation cost in
respect of these options.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 (b)
    
    2004 Share Purchase Plans
 As approved by the shareholders in April 2004, the Company has adopted the Chartered
Semiconductor Manufacturing Ltd Employee Purchase Plan 2004 (Chartered ESPP 2004) and a new
share purchase plan for the employees of Silicon Manufacturing Partners Pte Ltd (SMP ESPP
2004), collectively ESPP 2004 Plans. The ESPP 2004 Plans provide for the issuance of a
maximum of 30,000 shares (subject to adjustment).The ESPP 2004 Plans permitted eligible employees to purchase shares through payroll
deductions of between 1 percent to 10 percent of an employees compensation, including
salaries, wages, bonuses, incentive compensation, commissions, overtime pay and shift
premiums. Employees of the Company and SMP are eligible for
participation in the Chartered ESPP 2004 and SMP ESPP 2004 Plans
respectively, subject to certain employment conditions as provided
in the ESPP 2004 Plans. The offering periods consisted of the six-month periods commencing on each March 1
and September 1. The purchase price for each share purchased at the close of an offering
period was the lower of 95% of the fair market value of the share on the last trading day in
such offering period or last trading day before the commencement of such offering period.
The ESPP 2004 Plans were intended to qualify under Section 423 of the United States Tax Code.The ESPP 2004 Plans are administered by a committee appointed by the Directors (Committee).
The ESPP 2004 Plans give the Committee the right to stipulate the method to determine the
purchase price for each Ordinary Share purchased at the close of an offering period, if the
Committee determines that the existing method of determining the purchase price would cause
the Company to incur any stock-based compensation expense.The ESPP 2004 Plans impose a limit of 3,000 Ordinary Shares per calendar year (and a limit
of 1,500 Ordinary Shares per offering period) on the number of Ordinary Shares available for
purchase by participants in the ESPP 2004 Plans.1,156 and 1,284 shares were issued at prices from $0.77 to $0.79 (S$1.22 to S$1.28) and $0.67
to $0.91 (S$1.02 to S$1.40) during the years ended December 31, 2006 and 2007, respectively.The ESPP 2004 Plans are non-compensatory as the purchase price is 95% of the fair market
value of the ordinary shares applied to the Companys average ordinary share price on the
last trading day of the offer period. Therefore, the Company does not recognize compensation
expense related to shares sold under the ESPP 2004 Plans.
 (c)
    
    Restricted Share Unit Plan 2007
 In April 2007, the Companys shareholders approved the Restricted Share Unit Plan 2007 (RSU
Plan) which is a share-based incentive plan designed to reward, retain and motivate the
Companys employees. This plan also extends to employees of SMP.
The RSU Plan is administered by a committee appointed by the
Directors (Committee). The aggregate number of
ordinary shares that may be issued under the RSU Plan, together with the aggregate number of
ordinary shares that may be issued under other existing share-based compensation plans of the
Company, may not exceed 380,000 ordinary shares, with a limit of 50,000 ordinary shares that
may be granted under all share-based compensation plans of the Company per calendar year. The
maximum aggregate number of ordinary shares that may be granted under the RSU Plan to any one
grantee may not exceed 5,000 ordinary shares per calendar year. Each RSU will entitle the
holder to one ordinary share of the Company. All vested RSUs may be
paid in cash or ordinary shares of the Company as determined by the
Committee. The Company had historically settled all vested awards in
shares and the intention is also to settle all future vested awards
in shares. The RSUs awarded will vest according to the
vesting schedule, and ordinary shares will be issued provided the employee remains employed
by the Company through the vesting dates; otherwise the unvested RSUs will be forfeited.A total of 4,061 RSUs were granted and accepted in 2007, out of which 38 RSUs were granted to
employees of SMP. These RSUs vest equally on each anniversary of the grant date over three
years. Total share-based compensation cost recognized for the RSUs for the year ended
December 31, 2007 was $304. As of December 31, 2007, the total compensation cost related to
unvested RSUs not yet recognized is estimated at approximately $2,435 which is expected to be
recognized over a weighted-average period of 2.7 years. The weighted-average grant date fair
value of RSUs granted
during 2007 and as of December 31, 2007 is $0.70. As of December 31, 2007, 4,036 RSUs
remained outstanding as no RSUs were vested and 25 RSUs were forfeited during the period from
the date of grant to December 31, 2007.The grant-date fair value of awards granted under the RSU Plan is based on the average of the
high and low quotes of the Companys ordinary shares at the date of grant. SMP reimburses the
Company for the share-based compensation cost in respect of the RSUs that were granted to its
employees.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Pre-vesting forfeitures for RSUs granted were estimated to be between approximately 0.95%
to 2.18% for the years ended December 31, 2007 based on historical and expected attrition
rates.
 (d)
    
    Performance Share Unit Plan 2007
 In April 2007, the Companys shareholders approved the Performance Share Unit Plan 2007 (PSU
Plan) which is a share-based incentive for senior executives in key positions who are able
to drive the strategic direction and performance of the Company. The
PSU Plan is administered by a committee appointed by the Directors
(Committee). The aggregate number of
ordinary shares that may be issued under the PSU Plan, together with the aggregate number of
ordinary shares that may be issued under other existing share-based compensation plans of the
Company, may not exceed 380,000 ordinary shares, with a limit of 50,000 ordinary shares that
may be granted under all share-based compensation plans of the Company per calendar year. The
maximum aggregate number of ordinary shares that may be granted under the PSU Plan to any one
grantee may not exceed 5,000 ordinary shares per calendar year. Each PSU will entitle the
holder to one ordinary share of the Company. All vested PSUs may be
paid in cash or ordinary shares of the Company as determined by the
Committee. The Company had historically settled all vested awards in
shares and the intention is also to settle all future vested awards
in shares. The PSUs will generally vest at the end of the
requisite service period and vesting is contingent upon the achievement of pre-determined
conditions.In 2007, a base number of PSUs that may be awarded at the end of a three-year performance
period was granted. The vesting of the awards is contingent upon the achievement of
pre-determined levels of Economic Value Added (EVA) spread and Absolute Total Shareholder
Return (TSR) as those measures are defined in the PSU Plan, which have been established at
the grant date. Both conditions are determined based on the average of three financial years
EVA spread and Absolute TSR. The EVA spread is calculated by deducting
weighted-average cost of capital from return on invested capital, while TSR is calculated by
adding dividend yield to the change in the opening and closing share price of the Companys
ordinary shares for the performance period. The achievement of EVA spread is a performance
condition while the achievement of TSR is a market condition. Half of the base number of PSUs
will vest according to the achievement of the EVA spread and the other half will vest
according to the achievement of the TSR. The number of PSUs ultimately vested will range from
30% to 150% of the base number of PSUs awarded, or zero, subject to the achievement of either
of the abovementioned performance condition or market condition, as applicable.A total of 2,316 base number of PSUs were granted and accepted in 2007. Total share-based
compensation cost recognized for the PSUs for year ended December 31, 2007 was $39. Depending
upon the Companys performance against target performance measures specified in the award
agreements, as of December 31, 2007, the total compensation cost related to unvested PSUs not
yet recognized is estimated to be approximately $329. This estimated compensation cost is
expected to be recognized over a weighted-average period of 2.8 years. The weighted-average
grant date fair value of PSUs granted during 2007 and as of December 31, 2007 is $0.52. As
of December 31, 2007, 2,316 PSUs remained outstanding as no PSUs were vested or forfeited
during the period from the date of grant to December 31, 2007.The grant-date fair value for the performance-based portion of the awards is based on the
average of the high and low quotes of the Companys ordinary shares at the date of grant.The grant-date fair value for the market-based portion of the awards is calculated by an
independent third-party appraiser which adopted the Monte-Carlo valuation model with the
following assumptions:
 2007Risk-free interest rate
    
    
    2.37
    %Expected volatility
    
    
    38.0
    %Dividend yield
    
    
    0.0
    %
 The risk-free rate is based upon observed interest rates appropriate for the term of the
Companys PSUs. Expected volatility is based on historical volatility rates of the Companys
ordinary shares.Pre-vesting forfeitures for PSUs granted were estimated to be approximately 3.81% for the
year ended December 31, 2007 based on historical and expected attrition rates.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 20.
    
    Commitments and Contingencies
 (a)
    
    Commitments
 The Company has the following commitments:
 December 31,2006
    
    2007Contracts for capital expenditures
    
    $
    525,200
    
    
    $
    280,576Technology agreements
    
    
    335,463
    
    
    
    261,402Others
    
    
    69,928
    
    
    
    83,812
 Minimum future rental payments on non-cancellable operating leases, excluding amounts
payable to related parties disclosed in Note 2, as at December 31, 2007, are as follows:
 Payable in year ending December 31,2008
    
    $
    4,0682009
    
    
    2,2182010
    
    
    1,2562011
    
    
    6612012
    
    
    631Thereafter
    
    
    300$
    9,134
 Rental expense on operating leases, excluding amounts payable to related parties disclosed
in Note 2, for the years ended December 31, 2005, 2006 and 2007 was $5,660, $5,687 and
$5,031 respectively. There was no contingent rental included in the above rental expense for
all the years ended December 31, 2005, 2006 and 2007.The Company has a patent license agreement with LSI under which the parties grant to one
another a license to use certain of each others patents. Under the terms of the patent
license agreement, the Company may provide wafer capacity in lieu of payment for royalties.
Such royalties under the patent license agreement are waived until such time as the interest
of LSI in SMP falls below 49%. In exchange the Company has waived capacity shortfall
obligations from LSI. The patent license agreement continues for as long as the joint
venture agreement between the parties remains.
 (b)
    
    Contingencies
 The Company may from time to time be a party to claims that arise in the normal course of
business. These claims include allegations of infringement of intellectual property rights
of others as well as other claims of liability. In addition, the Company, on a case-by-case
basis, includes intellectual property indemnification provisions in the terms of sale and
technology licenses with third parties. The Company is also subject to various taxes in the
different jurisdictions in which it operates. These include taxes on income, property,
goods and services, and other taxes. The Company accrues costs associated with these
matters when they become probable and reasonably estimable. The Company does not believe it
is probable that losses associated with these matters beyond those already recognized will
be incurred in amounts that would be material to its consolidated balance sheets or
consolidated statements of operations.The Company submits tax returns and claims with Government tax authorities which are subject
to agreement and audit by those tax authorities. Actual taxes to be paid could vary due to
the outcome of audits completed by the tax authorities. The Company records tax contingencies
as tax payable for certain positions which may be challenged by the tax authorities and which
the Company may not
ultimately prevail in defending. The income tax contingencies mainly relate to transfer
pricing positions and gains which may be taxable. As of December 31, 2006, the income tax
contingencies recorded as tax payable amounted to $6,307. The amounts recorded are determined
based upon the Companys best estimate of possible assessments by the tax authorities and are
adjusted, from time to time, based upon changing facts and circumstances.
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CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 21.
    
    Derivative InstrumentsAt December 31, 2007
 Derivative Instrument
    
    Notional Amount
    
    Average Rate/Price
    
    MaturityForward Contracts Euro Forward Contracts
    

    12,035

    
    1.47/Euro
    

    2008 SGD Forward Contracts
    

    8,680

    
    1.45/USD
    

    2008
 To protect against volatility of future cash flows caused by changes in exchange rates, the
Company may use forward exchange contracts, currency options and currency swap instruments
for forecasted transactions such as operating expenses and capital purchases. To manage
interest rate risk, the Company may utilize interest rate derivative instruments to modify
the interest characteristics of its outstanding debts.Most of the Companys derivatives are formally designated as foreign currency cash flow or
fair value hedges except for certain foreign currency forward contracts and embedded foreign
currency derivatives in purchase contracts. These certain foreign currency forward contracts
relate to groups of forecasted foreign currency denominated payments. While the Company
expects the forward contracts which have not been formally designated as hedges to be
effective in hedging the variability in cash flows resulting from changes in foreign
exchange rates, it does not believe it is practicable to formally document the hedging
relationship and link the derivatives to specific forecasted transactions. The embedded
foreign currency derivatives are in purchase contracts for which payments are denominated in
currencies other than the functional currency or the local currency of the parties to the
contracts or, in some cases, their parent company where the parent company provides the
majority of resources required under the contract on behalf of the subsidiary who is a party
to the contract. Gains and losses on these certain foreign currency forward contracts and
embedded foreign currency derivatives in purchase contracts are included in Other operating
expenses, net.The Company uses derivative instruments to manage identified foreign currency risks
resulting from its foreign currency denominated purchase commitments which are denominated
principally in Japanese yen and Euro. The maximum tenure for these transactions is 18
months. The Company uses foreign currency forward contracts to manage these risks and
designates them as foreign currency cash-flow hedges. The Company uses foreign currency
forward contracts, which match the terms of the individual foreign currency exposures, and
as a result, any ineffectiveness of the Companys hedges is negligible. For the year ended
December 31, 2007, the ineffective amount reclassified from other comprehensive income into
earnings was a loss of $565 and was included in Other operating expenses, net. Amounts
included in other comprehensive income (loss) related to hedges of foreign currency purchase
commitments are reclassified into earnings (Other operating expenses, net) upon the
commencement of depreciation of the asset related to the purchase commitment over the
remaining useful life of the asset.As of December 31, 2005, the Company had four interest rate cap contracts associated with a
certain US dollar loan. The amount relating to time value, which is excluded from the
assessment of hedge effectiveness, was $(989) for the year ended December 31, 2006. For the
year ended December 31, 2006, the ineffective amount reclassified into earnings (Other
loss, net) was a gain of $806. The interest rate cap contracts matured following the
maturity of the loan in 2006.As of December 31, 2004, the Company had IRS contracts to hedge fixed rate interest
obligations associated with convertible notes issued in April 2001.
These IRS contracts, designated as fair-value hedges, were terminated
following the completion of the tender offer for the convertible
notes in September 2005. Net recognized losses arising from the
ineffectiveness of these fair value hedges were $5,246 for the year
ended December 31, 2005.In 2006, the Company entered into an IRS contract to hedge the
fixed-rate interest obligations of 6.25% per annum associated with the Senior Notes due 2013
with the effect of swapping the fixed-rate interest obligations to a floating-rate
obligation based on US LIBOR rates. In August 2006, the Company designated the IRS as a
fair-value hedge of changes in the fair value of the Senior Notes due 2013 attributable to
changes in the benchmark interest rate, which is US dollar six-month LIBOR. From that date,
changes in the fair value of the derivative and changes in the fair value of the item being
hedged are recorded in earnings (Other loss, net). Net recognized gain arising from
ineffectiveness of fair value hedges was $574 and $1,013 for the years ended December 31,
2006 and 2007, respectively. The IRS contract was terminated in November 2007. The cash
proceeds from the termination of the IRS contract of $9,050 was recorded as an operating
cash flow in the consolidated statements of cash flows.The estimated net amount of existing losses from cash flow hedges expected to be
reclassified into earnings within the next 12 months is $148. Net realized gains (losses)
recognized from cash flow hedges were $(435) and $1,917 for the years ended December 31,
2006 and 2007, respectively.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 The components of other comprehensive income (loss) related to derivative and hedging
activities consist of the following:
 December 31,2006
    
    
    2007Beginning
    
    $
    (2,036
    )
    
    $
    (1,350
    )Cumulative effect adjustment on adoption of SAB 108
    
    
    1,906
    
    
    
    Reclassification of cash flow hedging (gains) losses into earnings
    
    
    435
    
    
    
    (1,917
    )Share of cash flow hedging activity gains of SMP
    
    
    9
    
    
    
    1Net unrealized gains (losses) on change in cash flow hedging
derivative fair values
    
    
    (1,664
    )
    
    
    1,824Ending
    
    $
    (1,350
    )
    
    $
    (1,442
    )
 The Company is exposed to credit risk and market risk by using derivative instruments to
hedge exposures of changes in foreign currency rates and interest rates. Credit risk is the
failure of the counterparty to perform under the terms of the derivative contract. When the
fair value of a derivative contract is positive, the counterparty owes the Company, which
creates credit risk for the Company. When the fair value of a derivative contract is
negative, the Company owes the counterparty and, therefore, is not exposed to credit risk.
The Company anticipates, however, that counterparties will be able to fully satisfy their
obligations under the contracts. The Company does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit standing of
counterparties. As of December 31, 2007, the maximum amount of loss due to credit risk
associated with these financial instruments is their respective fair values as stated in Note
22.Market risk is the adverse effect on the value of a financial instrument that results from a
change in interest rates or currency exchange rates. The market risk associated with interest
rate contracts is managed by establishing and monitoring parameters that limit the types and
degree of market risk that may be undertaken. The Company assesses interest rate cash flow
risk and currency exchange cash flow risk by identifying and monitoring changes in interest
rate or currency exchange rate exposures that may adversely impact expected future cash flows
and by evaluating hedging opportunities.22.
    
    Fair Values of Financial Instruments
 December 31,2006
    
    2007Carryingamount
    
    Estimatedfair value
    
    Carryingamount
    
    Estimated fairvalueAsset/(Liability)
    
    $
    
    $
    
    $
    
    $Other investments
    
    
    
    
    
    
    
    
    
    
    89,290
    
    
    
    89,290Short-term debt
    
    
    
    
    
    
    
    
    
    
    (270,000
    )
    
    
    (270,018
    )Long term debt
    
    
    (1,331,660
    )
    
    
    (1,336,789
    )
    
    
    (1,500,337
    )
    
    
    (1,509,896
    )Forward foreign exchange contracts
    
    
    (1,724
    )
    
    
    (1,724
    )
    
    
    (183
    )
    
    
    (183
    )Interest rate swap
    
    
    3,109
    
    
    
    3,109
    
    
    
    
    
    
    
    2006 Option
    
    
    (7,466
    )
    
    
    (7,466
    )
    
    
    
    
    
    
    
 Cash and cash equivalents, related party receivables and payables, accounts receivable and
accounts payable.The carrying amounts approximate fair value in view of the short term
nature of these balances.Marketable securities.Marketable securities are recorded at fair value (see Note 4). The
fair value of equity securities is based on market prices quoted on the last business day of
the fiscal year.Other investments.The fair value is based on the net asset value quoted by the
counterparty.Short-term debt.The fair value is based on current interest rates available to the Company
for issuance of debt with similar terms and remaining maturities, or by obtaining quotes from
brokers.Long-term debt.The fair value is based on current interest rates available to the Company
for issuance of debt with similar terms and remaining maturities, or by obtaining quotes from
brokers.
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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 Forward foreign exchange contracts.The fair value is estimated by reference to market
quotations for forward contracts with similar terms, adjusted where necessary for maturity
differences.Interest rate swap.The fair value as of December 31, 2006 was estimated using market
quotations for interest rate swaps with similar terms, adjusted where necessary for maturity
differences. The interest rate swap was terminated in November 2007.2006 Option.The fair value as of December 31, 2006 was based on an external market value
quotation. Such market value quotation was derived using equity option pricing variables
including Chartereds ordinary share price, 2006 Option strike price, 2006 Option date of
expiration, prevailing market interest rate, Chartereds underlying share price volatility;
adjusted for the availability of stock borrow, market liquidity of Chartereds traded
instruments and early termination features. Following the modification of the terms of the
2006 Option in March 2007 (see Note 18), as at December 31, 2007, the 2006 Option is no
longer accounted for as a derivative instrument.Forward foreign exchange contracts are recorded in Other current liabilities on the
consolidated balance sheets. The interest rate swap and the 2006 Option were recorded in
Other non-current assets or Other non-current liabilities on the consolidated balance
sheet as of December 31, 2006.Limitations.Fair value estimates are made at a specific point in time, and are based on
relevant market information and information about the financial instruments. These estimates
are subjective in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.23.
    
    Operating Segment, Geographic and Major Customer InformationOperating segments, as defined under SFAS No. 131 Disclosure About Segments of an Enterprise
and Related Information, are components of an enterprise: (1) that engage in business
activities from which they may earn revenue and incur expenses, (2) has discrete financial
information, and (3) whose operating results are regularly reviewed by the chief operating
decision maker in deciding how to allocate resources and in assessing performance. Management
has determined that it does not have any operating segments because the chief operation
decision maker, which the Company has identified as the Chief Executive Officer, does not
regularly review financial operating results on a disaggregated basis for purposes of
assessing performance and allocating resources. All of the Companys products are
manufactured in Singapore.The following table presents a summary of revenues by country of domicile of customers
and long-lived assets by geographic region. The Company geographically categorizes a sale
based on the country in which the customer is headquartered.
 2005
    
    
    2006
    
    
    2007RevenuesUS
    
    $
    743,431
    
    
    $
    1,079,187
    
    
    $
    958,795Taiwan
    
    
    112,089
    
    
    
    122,881
    
    
    
    205,285Japan
    
    
    33,496
    
    
    
    23,861
    
    
    
    8,833Singapore
    
    
    8,995
    
    
    
    37,716
    
    
    
    39,434Others
    
    
    134,723
    
    
    
    150,880
    
    
    
    143,139$
    1,032,734
    
    
    $
    1,414,525
    
    
    $
    1,355,486
 December 31,2006
    
    
    2007Property, Plant and Equipment, netSingapore
    
    $
    2,273,072
    
    
    $
    2,462,224Others
    
    
    2,107
    
    
    
    1,565$
    2,275,179
    
    
    $
    2,463,789
 2005
    
    2006
    
    2007Revenue by Major Customer:Customer A
    
    
    22.3
    %
    
    
    24.0
    %
    
    
    29.1
    %Customer B
    
    
    19.3
    
    
    
    18.9
    
    
    
    *Customer C
    
    
    
    
    
    
    10.3
    
    
    
    10.1
 
 *
    
    less than 10% of net revenue for the year F-46




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##### Table of Contents



CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  in US Dollars
In thousands (except per share data)
 24.
    
    Other Operating Expenses, netOther operating expenses, net primarily consists of:An impairment charge of $3,938 recorded in 2005 on certain plant and equipment which were
initially classified as held for sale during the quarter ended June 30, 2004. These assets
were written down to $3,878, which was their fair value less costs to sell at June 30, 2005.
These assets were expected to be sold on the open market within twelve months of
classification as held for sale. However, during this period, the market conditions that
existed at June 30, 2004 deteriorated and as a result, these assets remained unsold. During
that period, the Company actively solicited offers to purchase the assets but did not receive
any offers it considered reasonable. The assets were actively marketed at a price that
management considered reasonable given the change in market conditions, and the criteria under
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets were met.
Accordingly, as the assets remained unsold at the end of the initial twelve-month period, the
assets continued to be classified as held for sale. The sale was completed in January 2006
for a total consideration of $6,500. A gain on this sale of $2,611 was recorded in 2006.Rental-related expenses of $10,937, $11,121 and $10,846 for 2005, 2006 and 2007,
respectively.Foreign exchange loss of $356, $6,125 and $1,856 for 2005, 2006 and 2007, respectively.25.
    
    Other Loss, netIn 2005, other loss, net included costs of $6,995 related to the termination of hedging
transactions and other costs as a result of the tender offer for and repurchase of the
Convertible Notes.In 2006, other loss, net included an other-than-temporary impairment loss of $2,698 on
available-for-sale securities.In 2007, other loss, net included other-than-temporary impairment losses of $1,975 on
other investments and available-for-sale securities.26.
    
    Defined Contribution PlanUnder Singapore law, the Company makes monthly contributions based on the statutory funding
requirement into a Central Provident Fund (CPF) for substantially all of our Singapore
employees who are Singapore citizens and Singapore permanent residents. The aggregate
expenses under this plan were $10,108, $13,186 and $15,476 for 2005, 2006 and 2007,
respectively.27.
    
    Subsequent EventIn February 2008, the Company entered into an agreement with Hitachi, Ltd and Hitachi
Asia, Ltd to purchase 100% of the shares of Hitachi Semiconductor Singapore Pte Ltd (HNS),
which owns and operates an eight-inch wafer fabrication facility
located in Singapore. This additional facility will augment the
capacity of four eight-inch fabs the Company currently operates and
is located on a 90,000 square-meter campus with building space of
28,000 square meters, including approximately 12,000 square
meters of clean-room space. This fabrication facility is currently
capable of producing approximately 24,000 eight-inch wafers per
month at the 0.15um to 0.25um technology nodes. This transaction also
includes a manufacturing agreement with Renesas Technology Corp, an
existing customer of HNS, to provide future wafer fabrication services.The total cash consideration for the acquisition is S$330,800 (approximately US$233,000),
which is subject to a working capital adjustment. The acquisition is scheduled to be completed
at the end of the first quarter of 2008 and is subject to certain customary closing
conditions.
 F-47