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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM
20-F
 (Mark One)
 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, 2006.
 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 SEMICONDUCTOR MANUFACTURING 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
  þ o 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 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    37ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    64ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    78ITEM
8. FINANCIAL INFORMATION
    
    
    80ITEM 9. THE OFFER AND LISTING
    
    
    81ITEM 10. ADDITIONAL INFORMATION
    
    
    82ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    98ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    100PART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    101ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    101ITEM 15. CONTROLS AND PROCEDURES
    
    
    101ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    102BB. CODE OF ETHICS
    
    
    102BC. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    102BD. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    103E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    103PART IIIITEM 17. FINANCIAL STATEMENTS
    
    
    103ITEM 18. FINANCIAL STATEMENTS
    
    
    103ITEM 19. EXHIBITS
    
    
    104SIGNATURESIndex
to Financial Statements
    
    
    F-1Ex-2.2 Specimen certificate for ordinary shares in respect of new issuances of shares issued on and after Jan 30, 2006.Ex-2.3 Specimen certificate for ordinary shares transferred on and after Jan 30, 2006 in respect of shares issued before Jan 30, 2006.Ex-4.11.8 Third Amended & Restated Amendment No.3 dated Nov 17, 2006.Ex-4.11.13 Master IBM Joint Development Terms and Conditions dated Dec 15, 2006 for joint development projects with International Business Machines Corporation.Ex-4.11.14 Participation Agreement dated Jan 1, 2007 by and between the company and International Business Machines Corporation.Ex-4.11.15 Joint Development Project Agreement dated Dec 15, 2006 for 45nm Bulk-Industry Standard Semiconductor Process Technology.Ex-4.11.16 Joint Development Project Agreement dated Dec 15, 2006 for 32nm Bulk-Industry Standard Semiconductor Process Technology.Ex-4.16.3 Supplemental Agreement dated Jan 3, 2007 by and between Terra Investments Pte. Ltd.Ex-4.18.4 Supplemental Agreement dated Jan 3, 2007 by and between Terra Investments Pte. Ltd.Ex-4.19.1 Offer Letter dated Feb 16, 2006 from Jurong Town Corporation to Terra Investment Pte. Ltd.Ex-4.19.2 Acceptance of Offer dated Feb 21, 2006 from the company to Terra Investments Pte. Ltd.Ex-4.19.3 Acceptance of Offer dated Feb 24, 2006 from Terra Investments Pte. Ltd.Ex-12.1 Certification of the President & Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Ex-12.2 Certification of the Senior Vice President & 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
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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
 Share-Based Payments
 Year Ended December 31,2002(16)
    
    
    2003(16)
    
    
    2004(16)
    
    
    2005(16)
    
    
    2006(in thousands, except share and per share data and ratios)Consolidated Statements of
Operations Data:Net revenue
    
    $
    449,241
    
    
    $
    551,911
    
    
    $
    932,131
    
    
    $
    1,032,734
    
    
    $
    1,414,525Cost of revenue
    
    
    627,682
    
    
    
    646,320
    
    
    
    764,305
    
    
    
    917,048
    
    
    
    1,070,782Gross profit (loss)
    
    
    (178,441
    )
    
    
    (94,409
    )
    
    
    167,826
    
    
    
    115,686
    
    
    
    343,743Other
revenue (1)
    
    
    18,314
    
    
    
    16,956
    
    
    
    17,927
    
    
    
    20,685
    
    
    
    21,030Operating expenses:Research and development
    
    
    77,565
    
    
    
    115,478
    
    
    
    93,818
    
    
    
    122,073
    
    
    
    152,756Sales and marketing
    
    
    41,196
    
    
    
    39,010
    
    
    
    37,995
    
    
    
    42,503
    
    
    
    55,007General and administrative
    
    
    43,899
    
    
    
    41,540
    
    
    
    34,951
    
    
    
    40,025
    
    
    
    42,558Fab start-up costs
    
    
    8,338
    
    
    
    9,219
    
    
    
    33,199
    
    
    
    22,697
    
    
    
    Other operating expenses
(income), net
    
    
    23,415
    (2)
    
    
    2,292
    (3)
    
    
    (139
    )(4)
    
    
    14,202
    (6)
    
    
    13,766
    (8)Total operating expenses
    
    
    194,413
    
    
    
    207,539
    
    
    
    199,824
    
    
    
    241,500
    
    
    
    264,087Equity in income (loss) of
SMP
    
    
    (84,846
    )
    
    
    23,194
    
    
    
    27,563
    
    
    
    6,486
    
    
    
    36,040Other income (loss), net
    
    
    (1,212
    )
    
    
    9,241
    
    
    
    16,416
    (5)
    
    
    (6,744
    )(7)
    
    
    (2,689
    )(9)Interest income
    
    
    16,637
    
    
    
    12,168
    
    
    
    11,530
    
    
    
    28,625
    
    
    
    44,591Interest expense and
amortization of debt
discount
    
    
    (41,661
    )
    
    
    (42,222
    )
    
    
    (30,093
    )
    
    
    (69,839
    )
    
    
    (87,950
    )
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Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(in thousands, except share and per share data and ratios)Income tax expense(10)
    
    
    (7,029
    )
    
    
    (11,671
    )
    
    
    (4,774
    )
    
    
    (12,997
    )
    
    
    (23,924
    )Minority interest in loss of CSP
    
    
    55,563
    
    
    
    9,491
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) before cumulative
effect of change in accounting policy
    
    
    (417,088
    )
    
    
    (284,791
    )
    
    
    6,571
    
    
    
    (159,598
    )
    
    
    66,754Cumulative effect adjustment for change
in accounting
policy(11)
    
    
    
    
    
    
    (6,421
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    (417,088
    )
    
    
    (291,212
    )
    
    
    6,571
    
    
    
    (159,598
    )
    
    
    66,754Less:Accretion to redemption value of
convertible redeemable preference
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,196
    )
    
    
    (9,476
    )Net Income (loss) available to common
shareholders
    
    $
    (417,088
    )
    
    $
    (291,212
    )
    
    $
    6,571
    
    
    $
    (162,794
    )
    
    $
    57,278Basic and diluted net earnings (loss) per
ordinary
share(12)
    
    $
    (0.23
    )
    
    $
    (0.12
    )
    
    $
    0.00
    
    
    $
    (0.06
    )
    
    $
    0.02Number of shares used in computing net
earnings (loss) per ordinary share:Basic
    
    
    1,799,106
    
    
    
    2,502,294
    
    
    
    2,508,376
    
    
    
    2,511,428
    
    
    
    2,528,056Diluted
    
    
    1,799,106
    
    
    
    2,502,294
    
    
    
    2,516,942
    
    
    
    2,511,428
    
    
    
    2,534,065Basic and diluted net earnings (loss) per ADS(12)
    
    $
    (2.32
    )
    
    $
    (1.16
    )
    
    $
    0.03
    
    
    $
    (0.65
    )
    
    $
    0.23Number of ADSs used in computing net
earnings (loss) per ADS:Basic
    
    
    179,911
    
    
    
    250,229
    
    
    
    250,838
    
    
    
    251,143
    
    
    
    252,806Diluted
    
    
    179,911
    
    
    
    250,229
    
    
    
    251,694
    
    
    
    251,143
    
    
    
    253,407Other
Data(13):Ratio of earnings to combined fixed
charges and preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.76XDeficiency of earnings available to cover
combined fixed charges and preferred
dividends
    
    $
    381,225
    
    
    $
    301,421
    
    
    $
    19,268
    
    
    $
    132,793
    
    
    
    
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As of December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    1,210,925
    
    
    $
    905,472
    
    
    $
    539,399
    
    
    $
    819,856
    
    
    $
    718,982Working capital(14)
    
    
    942,059
    
    
    
    682,322
    
    
    
    165,537
    
    
    
    549,441
    
    
    
    568,469Total assets
    
    
    3,333,463
    
    
    
    3,021,027
    
    
    
    3,090,012
    
    
    
    3,517,294
    
    
    
    3,618,431Long-term obligations
    
    
    1,154,815
    
    
    
    1,049,837
    
    
    
    960,660
    
    
    
    1,187,004
    
    
    
    1,329,908Convertible redeemable preference
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,663
    
    
    
    246,174Long-term obligations and
convertible redeemable
preference shares
    
    
    1,154,815
    
    
    
    1,049,837
    
    
    
    960,660
    
    
    
    1,437,667
    
    
    
    1,576,082Ordinary share capital(15)
    
    
    2,682,465
    
    
    
    2,678,661
    
    
    
    2,682,638
    
    
    
    2,682,050
    
    
    
    2,704,215Total
shareholders equity
    
    
    1,785,459
    
    
    
    1,494,555
    
    
    
    1,505,631
    
    
    
    1,346,374
    
    
    
    1,428,857
 
 Notes:
 (1)
    
    Other revenue consists of rental income and management fees.(2)
    
    Included in the 2002 other operating expenses (income), net line was a charge of $10.0
million associated with a restructuring
charge on workforce re-sizing and a fixed asset impairment charge.(3)
    
    Included in the 2003 other operating expenses (income), net line were:
 (a)
    
    A gain of $27.5 million associated with the cancellation of our employee bonus award plan;(b)
    
    A gain of $4.9 million resulting from equipment disposition;(c)
    
    An impairment charge of $9.0 million on certain machinery and equipment, as part of our
fab capacity rationalization; and(d)
    
    A restructuring charge of $12.4 million relating to the phase out of Fab 1.
 (4)
    
    Included in the 2004 other operating expenses (income), net line were:
 (a)
    
    A gain of $10.4 million from the sale of equipment to CSMC Technologies Corporation, or CSMC;(b)
    
    A gain of $4.9 million associated with the resolution of a goods and services tax matter;(c)
    
    A restructuring charge of $4.6 million relating to the closing of Fab 1; and(d)
    
    An impairment charge of $1.7 million resulting from the migration to an enhanced manufacturing system.
 (5)
    
    Other income, net, in 2004 related primarily to a
gain of $14.3 million from the sale of technology to CSMC.(6)
    
    Other operating expenses (income), net in 2005 included a fixed asset impairment charge
of $3.9 million on assets held for sale.(7)
    
    Other loss, net, in 2005 related primarily to 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.(8)
    
    Other operating expenses, net, in 2006 included losses of $6.1 million resulting from
foreign currency fluctuations, partially
offset by a gain of $2.6 million from the disposal of fixed assets from Fab 1.(9)
    
    Other loss, net, in 2006 related primarily to an other-than-temporary
impairment loss of $2.7 million on securities classified as available-for-sale. Other loss, net, in 2006 also included net losses of $0.4 million
relating to net losses of $1.4 million resulting from changes in the fair value of a call option
transaction and net losses of $1.0 million relating to time
value of our interest rate cap contracts which are excluded from the assessment of hedge
effectiveness, partially offset by net gains of $1.4 million arising from the ineffective portion
of our derivative instruments and net gains of $0.6 million resulting from changes in the fair
value of an interest rate swap prior to its designation as a hedging instrument.
 (10)
    
    The pioneer status had the effect of increasing (decreasing) basic and diluted net earnings
per ordinary share or (increasing) decreasing basic and diluted net (loss) per ordinary
share by $(0.04), $(0.02), $(0.00), $(0.01) and $0.00 and increasing (decreasing) basic and
diluted net earnings per ADS or (increasing) decreasing basic and diluted net (loss) per ADS
by
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$(0.36), $(0.15), $(0.02), $(0.11) and $0.02 for the years ended December 31, 2002,
2003, 2004, 2005 and 2006, respectively.
 (11)
    
    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.(12)
    
    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 $(1.14).(13)
    
    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.(14)
    
    Working capital is calculated as the excess of current assets over current liabilities.(15)
    
    Until 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. Accordingly, the amounts
previously disclosed under ordinary shares and additional paid-in capital line items
have been combined as Ordinary Share Capital.(16)
    
    Reclassifications and certain immaterial classification corrections have been made to prior years
financial statements to conform to classifications used in the current year. These include
reporting operating grant income as a reduction of the expenses that the grants are intended to
reimburse rather than as other income, reporting rental income and management fees as other revenue
rather than as other income, reporting depreciation of rental buildings as other operating expense
rather than as other expense and certain other immaterial reclassifications.
 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.
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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 and fab
start-up costs in connection with our growth plans and may require additional financing that may
not be available.
    Failure to maintain high capacity utilization, optimize the technology mix of our semiconductor
wafer production and continuously improve our device yields would seriously harm our prospects and
financial condition.
  
    
    maintain high capacity utilization;
    
    optimize the technology mix of our semiconductor wafer production; and
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
    
    continuously improve our device yields.
      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.
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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.
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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.
  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 tabs. 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.
    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
key customer to pay accounts receivable in a timely manner;
    
    the occurrence of losses from a customers inability to pay our accounts receivable from them;
    
    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 new 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;
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
    
    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 exceeding 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.
  We are subject to the risk of increased income taxes
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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.
  Risks Related to Our Infrastructure
 We face risks in constructing and equipping new fabrication plants.
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
    
    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 plans for new fabrication plants
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 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 demand exceeding supply and long lead times for delivery of
equipment during periods of
growth in the industry.
 We depend on key personnel and due to the shortage of skilled labor in Singapore, 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
 Economic conditions where our customers and their markets are located may have a negative impact on
our revenue.
  Terrorist attacks or a war could adversely affect our business, results of operations and financial
condition.
   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.
  16




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We operate internationally and are therefore affected by problems in other countries.
  
    
    fluctuations in the values of currencies;
    
    changes in labor conditions;
    
    longer payment cycles;
    
    greater difficulty in collecting accounts receivable;
    
    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; and
    
    reversal of the current policies (including favorable tax and lending policies)
encouraging foreign investment or
foreign trade by our host countries.
  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.
  17




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##### Table of Contents



It may be difficult for you to enforce any judgment obtained in the U.S. against us or our
affiliates.
   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 have been and may continue to be highly volatile.
  
    
    actual or anticipated variations in our quarterly operating results;
    
    announcements of technological innovations;
    
    changes in estimates of our performance or recommendations by financial analysts;
    
    market conditions in the semiconductor industry and economy as a whole;
    
    introduction of new services by us or our competitors;
    
    changes in market valuations of other foundries and semiconductor companies;
    
    announcements made by us or our competitors of significant acquisitions, strategic
partnerships or joint ventures;
    
    problems in our advanced manufacturing facilities;
    
    announcements made by our customers of their performance or financial results and of
their foundry alliances
and relationships;
    
    market rumors or speculation about our business, operations, capital raising,
change in our controlling
shareholder or affairs;
 18




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##### Table of Contents




    
    issue of additional equity or equity linked offerings;
    
    significant reduction or increase of shareholding by our controlling shareholder;
    
    additions or departures of key personnel; and
    
    other events or factors, many of which are beyond our control.
  The Singapore securities market is relatively small and more volatile than the U.S. markets and may
cause the market price of our securities to fluctuate.
  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
    
    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.
  19




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    our business strategy;
    
    our outlook for 2007;
    
    our capacity utilization rate, production capacity and production capacity mix;
    
    our plans to expand our production capacity for 90nm and smaller process geometry
technologies to meet the
anticipated needs of our customers;
    
    our 2007 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;
    
    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 and Samsung);
    
    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.
  
 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.
  20




---



##### Table of Contents



B. BUSINESS OVERVIEW
 Overview
    Industry Background
    The Growth of the Semiconductor Foundry Industry
   21




---



##### Table of Contents



The Requirements of a Full-Service Foundry
  Systems Integration Expertise.
 Leading-Edge Process Technologies.
 Comprehensive Prefabrication Services.
 Long-Term Relationships.
 Security.
 The Chartered Solution
   22




---



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




---



##### Table of Contents



Leading-edge Technologies.
 Mature Technologies.
 Focus on solutions that support the growing trend of product convergence
  Provide complete product support for customers
  Offer leading process technology
    24




---



##### Table of Contents



Enhance and expand alliances
  Overview of Wafer Fabrication Services
  Pre-Fabrication Services
 Circuit Design.
  Mask Making.
 Wafer Fabrication
 Wafer Manufacturing.
  25




---



##### Table of Contents




    
    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 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 Shipment and Capacity
 Data Including
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QChartereds Share of SMP
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Thousand eight-inch
equivalent wafers:Total wafers shipped
    
    
    186.2
    
    
    
    224.5
    
    
    
    295.2
    
    
    
    345.8
    
    
    
    349.4
    
    
    
    355.7
    
    
    
    337.0
    
    
    
    322.9Total
capacity
    
    
    317.0
    
    
    
    346.5
    
    
    
    401.4
    
    
    
    435.9
    
    
    
    427.5
    
    
    
    436.4
    
    
    
    458.2
    
    
    
    461.7Utilization
    
    
    59
    %
    
    
    65
    %
    
    
    74
    %
    
    
    79
    %
    
    
    82
    %
    
    
    82
    %
    
    
    74
    %
    
    
    70
    %
 26




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##### Table of Contents



1Q
    
    
    2Q
    
    
    3Q
    
    
    4Q
    
    
    1Q
    
    
    2Q
    
    
    3Q
    
    
    4QCapacity by Fab
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Thousand eight-inch equivalent
wafers:Fab2
    
    
    130.6
    
    
    
    137.7
    
    
    
    139.2
    
    
    
    145.7
    
    
    
    142.6
    
    
    
    144.1
    
    
    
    145.7
    
    
    
    145.7Fab3
    
    
    71.4
    
    
    
    74.3
    
    
    
    74.2
    
    
    
    74.2
    
    
    
    69.5
    
    
    
    70.3
    
    
    
    71.0
    
    
    
    71.0Fab5(1)
    
    
    34.5
    
    
    
    35.8
    
    
    
    36.2
    
    
    
    35.6
    
    
    
    34.3
    
    
    
    34.6
    
    
    
    35.0
    
    
    
    35.0Fab6
    
    
    80.5
    
    
    
    89.4
    
    
    
    100.5
    
    
    
    112.9
    
    
    
    114.5
    
    
    
    115.8
    
    
    
    117.0
    
    
    
    117.0Fab7(2)
    
    
    
    
    
    
    9.3
    
    
    
    51.3
    
    
    
    67.5
    
    
    
    66.6
    
    
    
    71.6
    
    
    
    89.5
    
    
    
    93.0Total
    
    
    317.0
    
    
    
    346.5
    
    
    
    401.4
    
    
    
    435.9
    
    
    
    427.5
    
    
    
    436.4
    
    
    
    458.2
    
    
    
    461.7
 
 Notes:   Wafer Capacity
  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
    
    25,000 wafers per month
    
    24,000 wafers per month
    
    39,000 wafers per month
    
    45,000 wafers per month(3)Wafer size
    
    Eight-inch
    
    Eight-inch
    
    Eight-inch
    
    Eight-inch
    
    Twelve-inch(200-mm)
    
    (200-mm)
    
    (200-mm)
    
    (200-mm)
    
    (300-mm)Process
technologies
    
    0.6 to 0.3um(4)
    
    0.35 to
    
    0.25 to
    
    0.25 to
    
    0.13um and0.18um(4)
    
    0.13um(4)
    
    0.11um(4)
    
    smaller processgeometrytechnologies including90nm, 65nm and 45nmManufacturing
technologies(5)
    
    Digital; Mixed
    
    Digital; Mixed
    
    Digital; RF CMOS;
    
    High performance,
    
    High performance,Signal; RF CMOS; SRAM;
    
    Signal; RF
    
    BiCMOS; Mixed Signal;
    
    high-density CMOS; high
    
    high-density CMOS;Flash Memory; HVCMOS;
    
    CMOS; SRAM
    
    eSRAM
    
    density SRAM Mixed
    
    Mixed Signal; SOIEEPROM; DMOS; BiCMOS,
    
    
    
    
    
    Signal; RF CMOSBiPolar; OTP;PowerMosClean room
    
    109,000 sq.ft.
    
    81,000 sq.ft.
    
    96,540 sq. ft.
    
    126,000 sq. ft.
    
    232,000 sq. ft.Class-1 SMIF(6)
    
    Class-1 SMIF(6)
    
    Class-1 SMIF(6)
    
    Class-1 SMIF(6)
    
    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
 27




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(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. RF CMOS 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
MOSFET (metal oxide semiconductor field effect transistor). OTP refers to one time programmable
memory. SOI refers to Silicon-On-lnsulator. 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 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(in thousands)Total Output
    
    
    445
    
    
    
    722
    
    
    
    1,035
    
    
    
    1,052
    
    
    
    1,365
 Quality Assurance Programs
    28




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Strategic Business and Technology Alliances
 IBM, Infineon and Samsung
      Chartered Silicon Partners
  29




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Silicon Manufacturing Partners
    30




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31




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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.IBM
    
    Video game devices.Advanced Micro Devices
    
    Central processing units (CPUs) for computers.
   2004
    
    2005
    
    2006Americas
    
    
    68
    %
    
    
    75
    %
    
    
    77
    %Europe
    
    
    9
    
    
    
    9
    
    
    
    9Asia-Pacific Singapore
    
    
    1
    
    
    
    1
    
    
    
    3 Others
    
    
    19
    
    
    
    12
    
    
    
    9Japan
    
    
    3
    
    
    
    3
    
    
    
    2Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  2004
    
    2005
    
    2006Americas
    
    $
    631,150
    
    
    $
    774,950
    
    
    $
    1,089,068Europe
    
    
    85,125
    
    
    
    91,844
    
    
    
    129,619Asia-Pacific Singapore
    
    
    3,392
    
    
    
    8,995
    
    
    
    37,716 Others
    
    
    179,206
    
    
    
    123,449
    
    
    
    134,261Japan
    
    
    33,258
    
    
    
    33,496
    
    
    
    23,861Total
    
    $
    932,131
    
    
    $
    1,032,734
    
    
    
    $1,414,525
    32




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Customer Service
    Research and Development
       33




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Equipment and Materials
   Intellectual Property
      Competition
  34




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Environmental Matters and Compliance
   Insurance
    C. ORGANIZATIONAL STRUCTURE
  35




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##### Table of Contents



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
       Production Capacity and Utilization
  ITEM 4A. UNRESOLVED STAFF COMMENTS
  36




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##### Table of Contents



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 no later than June 30, 2007. 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
     INDUSTRY OVERVIEW
 Cyclicality of the Semiconductor industry
  37




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Substantial Capital Expenditures
  Pricing, Change in Product Mix and Technology Migration
  Capacity Utilization Rates (based on total shipments and total capacity, both of which include
our share of SMP)
   2002
    
    2003
    
    2004(2)
    
    2005(3)
    
    2006Average capacity utilization (1)
    
    
    37
    %
    
    
    58
    %
    
    
    80
    %
    
    
    70
    %
    
    
    77
    %
 
 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, with some of its operations moved to Fab 2.(3)
    
    Fab 7 started commercial shipment in June 2005.
 2006 OVERVIEW
  38




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2007 OUTLOOK AND PLANS
  2007 Outlook
  2007 Planned Capacity
  2007
Planned Capital Expenditures
  39




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2007 Planned Research and Development Expenditures
  CRITICAL ACCOUNTING POLICIES
  Depreciation and Amortization of Long-lived Assets
   ,
   Recoverability of Long-lived Assets
  
    
    A significant decrease in the market price of a long-lived asset group;
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##### Table of Contents




    
    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
 Net Realizable Value.
 41




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Revenue Recognition
      42




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Sales Credits and Returns Allowances
    Collectibility of Accounts Receivable
  Income Taxes
     43




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CHANGE IN ACCOUNTING POLICIES
 SFAS No. 123(R), Share-Based Payments
    Staff Accounting Bulletin No. 108, or SAB 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements
  Other Adjustments and Reclassifications
  44




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RESULTS OF OPERATIONS
  Years ended December 31,2004
    
    2005
    
    2006Consolidated Statements of Operations data:Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    82.0
    
    
    
    88.8
    
    
    
    75.7Gross profit
    
    
    18.0
    
    
    
    11.2
    
    
    
    24.3Other revenue
    
    
    1.9
    
    
    
    2.0
    
    
    
    1.5Operating expenses:Research and development
    
    
    10.1
    
    
    
    11.8
    
    
    
    10.8Sales and marketing
    
    
    4.1
    
    
    
    4.1
    
    
    
    3.9General and administrative
    
    
    3.7
    
    
    
    3.9
    
    
    
    3.0Fab start-up costs
    
    
    3.5
    
    
    
    2.2
    
    
    
    Other operating expenses (income), net
    
    
    (0.0
    )
    
    
    1.4
    
    
    
    1.0Total operating expenses
    
    
    21.4
    
    
    
    23.4
    
    
    
    18.7Equity in income of SMP
    
    
    2.9
    
    
    
    0.6
    
    
    
    2.5Other income (loss), net
    
    
    1.8
    
    
    
    (0.6
    )
    
    
    (0.2
    )Interest income
    
    
    1.2
    
    
    
    2.8
    
    
    
    3.2Interest expense and amortization of debt discount
    
    
    (3.2
    )
    
    
    (6.8
    )
    
    
    (6.2
    )Income (loss) before income taxes
    
    
    1.2
    
    
    
    (14.2
    )
    
    
    6.4Income tax expense
    
    
    0.5
    
    
    
    1.3
    
    
    
    1.7Net income (loss)
    
    
    0.7
    %
    
    
    (15.5
    )%
    
    
    4.7
    %Less: Accretion to redemption value of convertible redeemable preference shares
    
    
    
    
    
    
    0.3
    
    
    
    0.7Net income (loss) available to ordinary shareholders
    
    
    0.7
    %
    
    
    (15.8
    )%
    
    
    4.0
    %
  Years ended December 31,2004
    
    2005
    
    2006Communications
    
    
    51
    %
    
    
    35
    %
    
    
    30
    %Computer
    
    
    30
    
    
    
    25
    
    
    
    31Consumer
    
    
    15
    
    
    
    35
    
    
    
    37Other *
    
    
    4
    
    
    
    5
    
    
    
    2Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Years ended December 31,2004
    
    2005
    
    2006Americas
    
    
    68
    %
    
    
    75
    %
    
    
    77
    %Europe
    
    
    9
    
    
    
    9
    
    
    
    9Asia-Pacific
    
    
    20
    
    
    
    13
    
    
    
    12Japan
    
    
    3
    
    
    
    3
    
    
    
    2Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 45




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Years ended December 31,2004
    
    2005
    
    20060.09 and below
    
    
    
    %
    
    
    19
    %
    
    
    29
    %Up to 0.13
    
    
    19
    
    
    
    23
    
    
    
    28Up to 0.18
    
    
    16
    
    
    
    10
    
    
    
    8Up to 0.25
    
    
    19
    
    
    
    10
    
    
    
    9Up to 0.35
    
    
    29
    
    
    
    23
    
    
    
    16Above 0.35
    
    
    17
    
    
    
    12
    
    
    
    10Other *
    
    
    
    
    
    
    3
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 Note:
 *
    
    Includes revenue from generation of customers mask sets Years
ended December 31, 2005 and December 31, 2006
 Net revenue
      46




---



##### Table of Contents



Cost of revenue and gross profit
       Other revenue
  47




---



##### Table of Contents



Research and development expenses
  Sales and marketing expenses
  General and administrative expenses
  Fab start-up costs
  Other operating expenses, net
  Equity in income of SMP
   48




---



##### Table of Contents



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
  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
  49




---



##### Table of Contents



Accretion to redemption value of convertible redeemable preference shares
  Years ended December 31, 2004 and December 31, 2005
 Net revenue
        Cost of revenue and gross profit
 50




---



##### Table of Contents



Other revenue
  Research and development expenses
  Sales and marketing expenses
  General and administrative expenses
  Fab start-up costs
  51




---



##### Table of Contents



Other operating expenses (income), net
  
    
    A gain of $10.4 million from the sale of equipment to CSMC; and
    
    A gain of $4.9 million resulting from resolution of a goods and services tax matter,
  
    
    Fab 1 restructuring charges of $4.6 million; and
    
    An impairment charge of $1.7 million resulting from our migration to an enhanced manufacturing system.
  Equity
in income of SMP
   Year ended December 31,2004
    
    2005(in millions)Net revenue (U.S. GAAP)
    
    $
    932.1
    
    
    $
    1,032.7Chartereds share of SMP revenue
    
    $
    170.8
    
    
    $
    99.2Net revenue including Chartereds share of SMP
    
    $
    1,102.9
    
    
    $
    1,131.9
  Year ended December 31,2004
    
    2005Excluding
    
    Including
    
    Excluding
    
    IncludingChartereds
    
    Chartereds
    
    Chartereds
    
    Charteredsshare
    
    share
    
    share
    
    shareof SMP
    
    of SMP
    
    of SMP
    

of SMPShipments (in thousands)*
    
    
    921.0
    
    
    
    1,035.5
    
    
    
    965.0
    
    
    
    1,051.8ASP per wafer
    
    $
    1,012
    
    
    $
    1,065
    
    
    $
    1,036
    
    
    $
    1,045
 
 Note:
 *
    
    Eight-inch equivalent wafers 52




---



##### Table of Contents



Other income (loss), net
  Interest expense and amortization of debt discount, net
  Income tax expense
  Minority interest in CSP
  Accretion to redemption value of convertible redeemable preference shares
  Quarterly Results
   53




---



##### Table of Contents



53A




---



##### Table of Contents



Quarter ended(in millions $)Mar 31,
    
    
    Jun 30,
    
    
    Sep 30,
    
    
    Dec 31,
    
    
    Mar 31,
    
    
    Jun 30,
    
    
    Sep 30,
    
    
    Dec 31,2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Consolidated Statements of Operations
Data:Net revenue
    
    
    181.4
    
    
    
    194.0
    
    
    
    290.1
    
    
    
    367.2
    
    
    
    355.2
    
    
    
    364.8
    
    
    
    355.3
    
    
    
    339.1Cost of revenue
    
    
    191.1
    
    
    
    193.6
    
    
    
    253.1
    
    
    
    279.2
    
    
    
    262.4
    
    
    
    276.3
    
    
    
    260.5
    
    
    
    271.4Gross profit (loss)
    
    
    (9.7
    )
    
    
    0.4
    
    
    
    37.0
    
    
    
    88.0
    
    
    
    92.8
    
    
    
    88.5
    
    
    
    94.8
    
    
    
    67.7Other Revenue
    
    
    4.7
    
    
    
    5.7
    
    
    
    5.1
    
    
    
    5.2
    
    
    
    5.0
    
    
    
    5.3
    
    
    
    5.4
    
    
    
    5.4Operating expenses:Research and development
    
    
    27.3
    
    
    
    27.7
    
    
    
    31.7
    
    
    
    35.4
    
    
    
    34.9
    
    
    
    37.9
    
    
    
    42.0
    
    
    
    38.1Sales and marketing
    
    
    10.5
    
    
    
    10.1
    
    
    
    11.7
    
    
    
    10.2
    
    
    
    13.6
    
    
    
    11.9
    
    
    
    14.2
    
    
    
    15.4General and administrative
    
    
    9.3
    
    
    
    10.7
    
    
    
    9.1
    
    
    
    11.0
    
    
    
    9.7
    
    
    
    9.8
    
    
    
    11.0
    
    
    
    12.1Fab start-up costs
    
    
    14.8
    
    
    
    7.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other operating expenses
(income), net
    
    
    2.8
    
    
    
    6.0
    
    
    
    2.3
    
    
    
    3.1
    
    
    
    (0.7
    )
    
    
    8.4
    
    
    
    4.3
    
    
    
    1.7Total operating expenses
    
    
    64.7
    
    
    
    62.4
    
    
    
    54.8
    
    
    
    59.7
    
    
    
    57.5
    
    
    
    68.0
    
    
    
    71.5
    
    
    
    67.3Equity in income (loss) of SMP
    
    
    (9.0
    )
    
    
    0.8
    
    
    
    4.2
    
    
    
    10.5
    
    
    
    10.2
    
    
    
    7.9
    
    
    
    9.6
    
    
    
    8.4Other income (loss), net
    
    
    0.0
    
    
    
    0.1
    
    
    
    (7.0
    )
    
    
    0.0
    
    
    
    (7.3
    )
    
    
    (5.3
    )
    
    
    10.6
    
    
    
    (0.7
    )Interest income
    
    
    4.9
    
    
    
    6.0
    
    
    
    8.5
    
    
    
    9.1
    
    
    
    10.1
    
    
    
    12.5
    
    
    
    11.5
    
    
    
    10.4Interest expense and amortization of debt discount
    
    
    (7.3
    )
    
    
    (14.6
    )
    
    
    (22.5
    )
    
    
    (25.2
    )
    
    
    (24.8
    )
    
    
    (22.9
    )
    
    
    (22.3
    )
    
    
    (17.9
    )Income (loss) before income taxes
    
    
    (81.1
    )
    
    
    (64.0
    )
    
    
    (29.5
    )
    
    
    27.9
    
    
    
    28.5
    
    
    
    18.0
    
    
    
    38.1
    
    
    
    6.0Income tax expense
    
    
    3.4
    
    
    
    3.1
    
    
    
    5.0
    
    
    
    1.4
    
    
    
    6.5
    
    
    
    5.1
    
    
    
    11.4
    
    
    
    0.9Net income (loss)
    
    
    (84.5
    )
    
    
    (67.1
    )
    
    
    (34.5
    )
    
    
    26.5
    
    
    
    22.0
    
    
    
    12.9
    
    
    
    26.7
    
    
    
    5.1Less: Accretion to redemption value of convertible redeemable preference shares
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.3
    
    
    
    2.3Net income (loss) available to ordinary shareholders
    
    
    (84.5
    )
    
    
    (67.1
    )
    
    
    (35.3
    )
    
    
    24.1
    
    
    
    19.6
    
    
    
    10.5
    
    
    
    24.4
    
    
    
    2.8
 54




---



##### Table of Contents



Quarter ended(as a percentage of net revenue)Mar 31,
    
    
    Jun 30,
    
    
    Sep 30,
    
    
    Dec 31,
    
    
    Mar 31,
    
    
    Jun 30,
    
    
    Sep 30,
    
    
    Dec 31,2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Consolidated Statements of Operations Data:Net revenue
    
    
    100.0
    %
    
    
    100.
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    105.4
    
    
    
    99.8
    
    
    
    87.2
    
    
    
    76.0
    
    
    
    73.9
    
    
    
    75.8
    
    
    
    73.3
    
    
    
    80.0Gross profit (loss)
    
    
    (5.4
    )
    
    
    0.2
    
    
    
    12.8
    
    
    
    24.0
    
    
    
    26.1
    
    
    
    24.2
    
    
    
    26.7
    
    
    
    20.0Other Revenue
    
    
    2.6
    
    
    
    2.9
    
    
    
    1.7
    
    
    
    1.4
    
    
    
    1.4
    
    
    
    1.4
    
    
    
    1.5
    
    
    
    1.6Operating expenses:Research and development
    
    
    15.1
    
    
    
    14.2
    
    
    
    10.9
    
    
    
    9.6
    
    
    
    9.8
    
    
    
    10.4
    
    
    
    11.8
    
    
    
    11.3Fab start-up costs
    
    
    8.2
    
    
    
    4.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sales and marketing
    
    
    5.8
    
    
    
    5.2
    
    
    
    4.0
    
    
    
    2.8
    
    
    
    3.8
    
    
    
    3.2
    
    
    
    4.0
    
    
    
    4.5General and administrative
    
    
    5.1
    
    
    
    5.5
    
    
    
    3.2
    
    
    
    3.0
    
    
    
    2.7
    
    
    
    2.6
    
    
    
    3.1
    
    
    
    3.6Other operating expenses (income), net
    
    
    1.5
    
    
    
    3.1
    
    
    
    0.8
    
    
    
    0.9
    
    
    
    (0.2
    )
    
    
    2.3
    
    
    
    1.2
    
    
    
    0.5Total operating expenses
    
    
    35.7
    
    
    
    32.1
    
    
    
    18.9
    
    
    
    16.3
    
    
    
    16.1
    
    
    
    18.5
    
    
    
    20.1
    
    
    
    19.9Equity in income (loss) of SMP
    
    
    (4.9
    )
    
    
    0.4
    
    
    
    1.5
    
    
    
    2.9
    
    
    
    2.9
    
    
    
    2.2
    
    
    
    2.7
    
    
    
    2.5Other income (loss), net
    
    
    0.0
    
    
    
    0.0
    
    
    
    (2.4
    )
    
    
    0.0
    
    
    
    (2.1
    )
    
    
    (1.4
    )
    
    
    3.0
    
    
    
    (0.2
    )Interest income
    
    
    2.7
    
    
    
    3.1
    
    
    
    2.9
    
    
    
    2.5
    
    
    
    2.8
    
    
    
    3.4
    
    
    
    3.2
    
    
    
    3.1Interest expense and amortization of debt discount
    
    
    (4.0
    )
    
    
    (7.5
    )
    
    
    (7.8
    )
    
    
    (6.9
    )
    
    
    (7.0
    )
    
    
    (6.3
    )
    
    
    (6.2
    )
    
    
    (5.3
    )Income (loss) before income taxes
    
    
    (44.7
    )
    
    
    (33.0
    )
    
    
    (10.2
    )
    
    
    7.6
    
    
    
    8.0
    
    
    
    5.0
    
    
    
    10.8
    
    
    
    1.8Income tax expense
    
    
    1.9
    
    
    
    1.6
    
    
    
    1.7
    
    
    
    0.4
    
    
    
    1.8
    
    
    
    1.4
    
    
    
    3.2
    
    
    
    0.3Net income (loss)
    
    
    (46.6
    )
    
    
    (34.6
    )
    
    
    (11.9
    )
    
    
    7.2
    
    
    
    6.2
    
    
    
    3.6
    
    
    
    7.6
    
    
    
    1.5Less: Accretion to redemption value of convertible redeemable preference shares
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.7Net income (loss) available to ordinary shareholders
    
    
    (46.6
    )%
    
    
    (34.6
    )%
    
    
    (12.2
    )%
    
    
    6.6
    %
    
    
    5.5
    %
    
    
    2.9
    %
    
    
    6.9
    %
    
    
    0.8
    %
 Net revenue
  55




---



##### Table of Contents



Gross profit (loss)
  Research and development expenses
  Fab start-up costs
  Other operating expenses (income), net
  Equity in income (loss) of SMP
   56




---



##### Table of Contents



Mar 31,
    
    Jun 30,
    
    Sep 30,
    
    Dec 31,
    
    Mar 31,
    
    Jun 30,
    
    Sep 30,
    
    Dec 31,2005
    
    2005
    
    2005
    
    2005
    
    2006
    
    2006
    
    2006
    
    2006(in millions)Net revenue
(U.S. GAAP)
    
    $
    181.4
    
    
    $
    194.0
    
    
    $
    290.1
    
    
    $
    367.2
    
    
    $
    355.2
    
    
    $
    364.8
    
    
    $
    355.3
    
    
    $
    339.1Chartereds share of
SMP revenue
    
    $
    14.7
    
    
    $
    25.9
    
    
    $
    26.4
    
    
    $
    32.2
    
    
    $
    30.9
    
    
    $
    28.9
    
    
    $
    27.8
    
    
    $
    24.6Net revenue including
Chartereds share of
SMP
    
    $
    196.1
    
    
    $
    219.9
    
    
    $
    316.5
    
    
    $
    399.4
    
    
    $
    386.1
    
    
    $
    393.7
    
    
    $
    383.1
    
    
    $
    363.7
  Mar 31, 2005
    
    

Jun 30, 2005
    
    

Sep 30, 2005
    
    

Dec 31, 2005Excluding
    
    
    Including
    
    
    Excluding
    
    
    Including
    
    
    Excluding
    
    
    Including
    
    
    Excluding
    
    
    IncludingChartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Charteredsshare of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share ofQuarter ended
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMPShipments(in thousands)*
    
    
    175.8
    
    
    
    186.2
    
    
    
    203.8
    
    
    
    224.5
    
    
    
    270.7
    
    
    
    295.2
    
    
    
    314.8
    
    
    
    345.8ASP per wafer
    
    $
    996
    
    
    $
    1,019
    
    
    $
    913
    
    
    $
    944
    
    
    $
    1,035
    
    
    $
    1,039
    
    
    $
    1,139
    
    
    $
    1,130
 Mar 31 ,2006
    
    
    Jun 30, 2006
    
    

Sep 30, 2006
    
    

Dec 31, 2006Excluding
    
    
    Including
    
    
    Excluding
    
    
    including
    
    
    Excluding
    
    
    including
    
    
    Excluding
    
    
    IncludingChartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Chartereds
    
    
    Charteredsshare of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share of
    
    
    share ofQuarter ended
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMP
    
    
    SMPShipments(in thousands)*
    
    
    318.2
    
    
    
    349.4
    
    
    
    327.0
    
    
    
    355.7
    
    
    
    307.9
    
    
    
    337.0
    
    
    
    295.5
    
    
    
    322.9ASP per wafer
    
    $
    1,089
    
    
    $
    1,080
    
    
    $
    1,089
    
    
    $
    1,082
    
    
    $
    1,136
    
    
    $
    1,120
    
    
    $
    1,135
    
    
    $
    1,115
 
 Note:
  57




---



##### Table of Contents



Other income (loss), net
  Interest income
  Interest expense and amortization of debt discount
  Accretion to redemption value of convertible redeemable preference shares
  LIQUIDITY AND CAPITAL RESOURCES
 Current and expected liquidity
    58




---



##### Table of Contents




    
    Ability to Increase Revenue 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.
    
    Renewal of credit facilitiesThere is no certainty that we will renew our credit facilities
which expire in 2007.
    
    Debt RatingsOur ability to obtain external financing and the related cost of borrowing are
affected by our debt ratings.
 Historical cash flows
  Year ended December 31,2004
    
    
    2005
    
    
    2006(In thousands)Net cash provided by operating activities
    
    $
    331,684
    
    
    $
    404,374
    
    
    $
    520,670Net cash used in investing activities
    
    
    732,715
    
    
    
    568,243
    
    
    
    419,905Net cash provided by (used in) financing activities
    
    
    34,939
    
    
    
    444,753
    
    
    
    (204,987
    )
 Historical operating cash flows
   59




---



##### Table of Contents



Historical
investing cash flows and capital expenditures
     Historical financing cash flows
  60




---



##### Table of Contents



Grants for research and development and training
  Off-balance sheet arrangements
  Outstanding indebtedness
  As ofDecember 31,2006(in thousands)Floating rate loans:Exim Guaranteed Loan
    
    
    324,277Bank of America Term Loan
    
    
    50,0006.00% amortizing bonds due 2010
    
    
    38,4335.75% senior notes due 2010
    
    
    371,9046.25% senior notes due 2013
    
    
    297,4056.375% senior notes due 2015
    
    
    246,805Other
    
    
    2,836Total
    
    $
    1,331,660
  Loan covenant compliance
   61




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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 yearsLong-term debt including
principal and interest (1)
    
    $
    1,714,885
    
    
    $
    197,965
    
    
    $
    283,580
    
    
    $
    602,791
    
    
    $
    630,549Capital lease obligations
including principal and
interest
    
    
    124,194
    
    
    
    9,323
    
    
    
    18,646
    
    
    
    18,646
    
    
    
    77,579Capacity deposits (2)
    
    
    33,766
    
    
    
    33,766
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    91,554
    
    
    
    6,426
    
    
    
    8,789
    
    
    
    7,650
    
    
    
    68,689Purchase obligations under (3)Capital expenditures
    
    
    525,200
    
    
    
    525,200
    
    
    
    
    
    
    
    
    
    
    
    Technology agreements
    
    
    335,463
    
    
    
    94,366
    
    
    
    188,847
    
    
    
    52,250
    
    
    
    Other
    
    
    69,928
    
    
    
    67,129
    
    
    
    2,169
    
    
    
    315
    
    
    
    315Other long-term liabilities
    
    
    17,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,909Total
    
    $
    2,912,899
    
    
    $
    934,175
    
    
    $
    502,031
    
    
    $
    681,652
    
    
    $
    795,041
 
 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, 2006, 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 $371.9 million, $297.4 million and $246.8
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 floating interest rates related to these obligations as of
December 31, 2006. Actual payments could differ from these estimates.(2)
    
    This amount relates to our contractual obligation to refund deposits placed with us to secure
wafer capacity for one of our more advanced technologies.(3)
    
    We have not included purchase obligations that have been recorded on our consolidated balance
sheet as of December 31, 2006. These obligations amounted to $270.7 million, $12.0 million and
$213.4 million for capital expenditures, technology agreements and other purchase obligations
primarily relating to operating expenses, respectively.
  62




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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 manufacture of integrated circuits using submicron technology at Fab 3 for a ten-year
period beginning July 1, 1999;
    
    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.
  
    
    post-pioneer enterprise 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 incentive 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 incentive status for the wafer fabrication of ASICs and other
advanced semiconductor devices at Fab 6 for a five-year period beginning September 1, 2013.
     63




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Foreign Currency Risk
  RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
      
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A.
    
    DIRECTORS AND SENIOR MANAGEMENT
  64




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##### Table of Contents



Board of Directors
 Name
    

Age
    
    PositionJames A. Norling(1)(2)(4)
    
    
    64
    
    
    Chairman of the BoardChia Song Hwee(1)
    
    
    44
    
    
    DirectorAndre Borrel(2)(3)(4)
    
    
    70
    
    
    DirectorCharles E. Thompson(2)(4)
    
    
    77
    
    
    DirectorTsugio
Makimoto, PhD
    
    
    69
    
    
    DirectorTay
Siew Choon(1)(2)(4)
    
    
    59
    
    
    DirectorPeter Seah Lim Huat(1)(2)(4)
    
    
    60
    
    
    DirectorPhilip Tan Yuen Fah(3)
    
    
    62
    
    
    DirectorPasquale Pistorio
    
    
    71
    
    
    DirectorSteven H. Hamblin(3)
    
    
    58
    
    
    DirectorMaurizio Ghirga(3)(5)
    
    
    68
    
    
    DirectorSenior ManagementName
    
    Age
    
    PositionChia Song Hwee
    
    
    44
    
    
    President and Chief Executive OfficerGeorge Thomas
    
    
    53
    
    
    Senior Vice President and Chief Financial OfficerAng Kay Chai
    
    
    47
    
    
    Senior Vice President, Fab OperationsHsia Liang Choo, PhD
    
    
    58
    
    
    Senior Vice President, Technology DevelopmentMichael J. Rekuc
    
    
    57
    
    
    Senior Vice President, Worldwide Sales and MarketingSimon Yang, PhD
    
    
    47
    
    
    Senior Vice President and Chief Technology OfficerRoy
Kannan(6)
    
    
    54
    
    
    Vice President and Chief Information OfficerLeow Kim Keat
    
    
    44
    
    
    Vice President, Customer Support Operations and
Supply Management OrganizationNg Seng Huwi
    
    
    49
    
    
    Vice President, Human ResourcesTan Seng Chai
    
    
    44
    
    
    Vice President, Strategy ResourcesTony Tsai
    
    
    57
    
    
    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. Mr. Andre Borrel ceased to be a member of the Audit Committee
on February 1, 2007.(4)
    
    Member of the Nominating Committee.(5)
    
    Appointed as a Director to our Board of Directors on November 2, 2006.(6)
    
    Mr. Roy Kannan will be leaving our company and his last day is on March 9, 2007. Mr.
Tan Seng Chai will, with effect from March 10, 2007, act as our interim Chief Information
Officer.
 Biographical Information
 James A. Norling
  Chia Song Hwee
  65




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##### Table of Contents



Andre
Borrel
  Charles E. Thompson
  Tsugio Makimoto, PhD
  Tay Siew Choon
  Peter Seah Lim Huat
  Philip Tan Yuen Fah
  66




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Pasquale Pistorio
  Steven H. Hamblin
  Maurizio Ghirga
  George Thomas
  67




---



##### Table of Contents



Ang
Kay Chai
  Hsia Liang Choo, PhD
  Michael J. Rekuc
  Simon Yang, PhD
  Roy Kannan
  68




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##### Table of Contents



Leow Kim Keat
  Ng Seng Huwi
  Tan Seng Chai
  Tony Tsai
  B. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT
   69




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70




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##### Table of Contents



Options
    
    ExerciseDirectors
    
    
    
    
    
    Granted
    
    PriceSalary(1)
    
    Bonus(2)
    
    Others(3)
    
    Fees(4)
    
    Total
    
    in 2006
    
    S$
    
    Exercise Period(US$ in thousands, except options data)Chia Song Hwee
    
    
    490
    
    
    
    469
    
    
    
    149
    
    
    
    
    
    
    
    1,108
    
    
    
    1,000,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016James A. Norling
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    108
    
    
    
    120,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Andre Borrel
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    66
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Charles E. Thompson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    57
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Tsugio Makimoto
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Tay Siew Choon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Peter Seah Lim Huat
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    51
    
    
    
    95,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Philip Tan Yuen Fah
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    49
    
    
    
    95,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Pasquale Pistorio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    51
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Steven H.
Hamblin(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    61
    
    
    
    70,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Sum Soon
Lim(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    Robert E. La
Blanc(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    Maurizio
Ghirga(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    Total as of December
31, 2006
    
    
    490
    
    
    
    469
    
    
    
    149
    
    
    
    591
    
    
    
    1,699Total as of December
31, 2005
    
    
    406
    
    
    
    194
    
    
    
    35
    
    
    
    463
    
    
    
    1,098
 
 Notes:(1)
    
    Base salary (inclusive of employers Central Provident Fund, or CPF).(2)
    
    Bonus paid in February 2007 for services rendered in 2006, inclusive of employer CPF contribution.(3)
    
    Allowances (inclusive of employers CPF) and others.(4)
    
    Shareholders approval will be sought at our annual general meeting to be held in April 2007
for the payment of our directors fees
of approximately $591,000 for the fiscal year ended December 31, 2006.(5)
    
    Messrs. Steven H. Hamblin and Maurizio Ghirga were appointed as our Directors in January
2006 and November 2006,
respectively.(6)
    
    Messrs Sum Soon Lim and Robert E. La Blanc. retired from our Board of Directors in April 2006.(7)
    
    For disclosure purposes, all payments in Singapore dollars
are converted to United States dollars based on the exchange rate of
S$1.5418 = US$1.00 as of December 31, 2006. 71




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Total OptionsSalary
    
    Bonus
    
    Others
    
    Total
    
    Granted in 2006
    
    Exercise Price
    
    Exercise Period(1)
    
    (2)
    
    (3)
    


    
    
    
    
    (4)

    S$(US$ in thousands, except options data)Above US$900,000Chia Song Hwee
    
    
    490
    
    
    
    469
    
    
    
    149
    
    
    
    1,108
    
    
    
    1,000,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/201644
    %
    
    
    42
    %
    
    
    14
    %
    
    
    100
    %US$700,000
US$899,000NilUS$500,000  US$699,000Aggregate of top five senior
executives
    
    
    1,694
    
    
    
    613
    
    
    
    716
    
    
    
    3,023
    
    
    
    2,100,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016Average per person
    
    
    339
    
    
    
    123
    
    
    
    143
    
    
    
    605Ang Kay Chai
    
    
    65
    %
    
    
    26
    %
    
    
    9
    %
    
    
    100
    %
    
    
    400,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016George Thomas
    
    
    56
    %
    
    
    22
    %
    
    
    22
    %
    
    
    100
    %
    
    
    400,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016Hsia Liang Choo
    
    
    50
    %
    
    
    13
    %
    
    
    37
    %
    
    
    100
    %
    
    
    400,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016Michael J Rekuc
    
    
    58
    %
    
    
    16
    %
    
    
    26
    %
    
    
    100
    %
    
    
    400,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016Yang Simon Shi-Ning
    
    
    53
    %
    
    
    25
    %
    
    
    22
    %
    
    
    100
    %
    
    
    500,000
    
    
    
    1.21
    
    
    25/08/2007 to 25/08/2016
 
 Notes:(1)
    
    Base salary (inclusive of employers Central Provident Fund, or CPF).(2)
    
    Bonus paid in February 2007 for services rendered in 2006, inclusive of employer CPF
contribution.(3)
    
    Allowances (inclusive of employers CPF) and others.(4)
    
    In number of ordinary shares.(5)
    
    For disclosure purposes, all payments in Singapore dollars
are converted to United States dollars based on the exchange rate of
S$1.5418 = US$1.00 as of December 31, 2006. C. BOARD PRACTICES
 BOARD COMPOSITION
    72




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
    
    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 made 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 must be made by a majority of the independent directors on the full Board.
   Committees
of the Board of Directors
 Executive Committee
  Audit Committee
   Executive Resource and Compensation Committee
   
 73




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Nominating Committee
   D. EMPLOYEES
  As of December 31,Functions
    
    2004
    
    2005
    
    2006Engineering (Modules, Yield Engineering,
Process
Integration, Product Engineering, Joint
Venture Technology, Metrology)
    
    
    1,410
    
    
    
    1,677
    
    
    
    1,856Manufacturing Operations
    
    
    900
    
    
    
    880
    
    
    
    1,011Manufacturing Support
    
    
    572
    
    
    
    638
    
    
    
    724Research and Development
    
    
    253
    
    
    
    370
    
    
    
    508Administration, Marketing and Finance
    
    
    471
    
    
    
    508
    
    
    
    582Total
    
    
    3,606
    
    
    
    4,073
    
    
    
    4,681
 As of December 31,Geographical Locations
    
    2004
    
    2005
    
    2006Singapore
    
    
    3,479
    
    
    
    3,932
    
    
    
    4,540Americas
    
    
    87
    
    
    
    104
    
    
    
    103Europe
    
    
    17
    
    
    
    16
    
    
    
    15Asia-Pacific (other than Singapore)
    
    
    23
    
    
    
    21
    
    
    
    23Total
    
    
    3,606
    
    
    
    4,073
    
    
    
    4,681
    74




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##### Table of Contents



E. SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT
  No. of OrdinaryShares BeneficiallyDirectors
    
    Owned(1)James A. Norling
    
    
    1,596,804Chia Song Hwee
    
    
    6,227,128Andre Borrel
    
    
    312,947Charles E. Thompson
    
    
    285,054Tsugio Makimoto
    
    
    228,304Tay Siew Choon
    
    
    461,326
    > Please see note (2)Peter Seah Lim Huat
    
    
    301,887
    belowPhilip Tan Yuen Fah
    
    
    170,000Pasquale Pistorio
    
    
    2,560,000Steven H. Hamblin
    
    
    10,000Maurizio Ghirga
    
    
    0All directors and senior
management(3) as a group (21
persons)
    
    
    21,173,271
 
 Notes:(1)
    
    Gives effect to the ordinary shares issuable within 60 days from December 31, 2006 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 and 132,070 shares held by Michael J. Rekuc 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(2)
    
    Less than 1% of our outstanding ordinary shares as of December 31, 2006.(3)
    
    None of our directors or senior management individually owns 1% or more of our
outstanding ordinary shares. Share Options for Directors
  Directors
    
    As of December 31, 2006
    
    Exercise Price S$
    
    Exercise PeriodJames A. Norling
    
    
    58,609
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/20071,172,195
    
    
    
    3.88
    
    
    01/05/2002 to 01/05/201258,609
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200750,000
    
    
    
    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 25/08/2011Chia Song Hwee
    
    
    20,935
    
    
    
    1.00
    
    
    28/11/1998 to 28/11/200761,704
    
    
    
    0.80
    
    
    30/11/1998 to 29/11/200826,444
    
    
    
    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 25/08/2016
 75




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Directors
    
    As of December 31, 2006
    
    Exercise Price S$
    
    Exercise PeriodAndre Borrel
    
    
    46,887
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/200746,887
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200740,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200845,000
    
    
    
    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 25/08/2011Charles E. Thompson
    
    
    29,304
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/200729,304
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200725,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200835,000
    
    
    
    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 25/08/2011Tsugio Makimoto
    
    
    29,304
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/200729,304
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200725,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200835,000
    
    
    
    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 25/08/2011Peter Seah Lim Huat
    
    
    23,443
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/200746,887
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200740,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200845,000
    
    
    
    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 25/08/2011Tay Siew Choon
    
    
    29,304
    
    
    
    3.46
    
    
    22/02/2003 to 22/02/2007234,439
    
    
    
    3.88
    
    
    01/05/2002 to 01/05/200746,887
    
    
    
    1.86
    
    
    30/08/2003 to 30/08/200725,000
    
    
    
    0.72
    
    
    28/02/2004 to 28/02/200835,000
    
    
    
    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 25/08/2011Philip Tan
Yuen Fah
    
    
    85,000
    
    
    
    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 25/08/2011Pasquale Pistorio
    
    
    60,000
    
    
    
    1.16
    
    
    26/08/2006 to 26/08/201070,000
    *
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011Steven H. Hamblin
    
    
    70,000
    *
    
    
    1.21
    
    
    25/08/2007 to 25/08/2011
 
 Note:*
    
    Options that were granted in 2006. Employee Benefit Plans
 Share Option Plan 1999
   76




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##### Table of Contents




    
    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



Equity Compensation Plan Information as of December 31, 2006
 (b)
    
    (c)Weighted-
    
    Number of Securities(a)
    
    average
    
    Remaining AvailableNumber of Securities
    
    Exercise Price of
    
    for Future Issuanceto be Issued upon
    
    Outstanding
    
    under EquityExercise of
    
    Options,
    
    Compensation PlansOutstanding Options,
    
    Warrants and
    
    (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    Rights
    
    in Column (a))Equity compensation plans approved
by shareholders
    
    
    119,842,980
    
    
    $
    1.89
    
    
    
    108,223,143Equity compensation plans not
approved by shareholders
    
    N.A.*
    
    N.A.*
    
    
    N.A.*Total
    
    
    119,842,980
    
    
    $
    1.89
    
    
    
    108,223,143
 
 Note:*
    
    Chartered does not have any equity compensation plans which have not been approved by
shareholders. 
 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
    
    
    
    59.55
    %
 
 Notes:(1)
    
    The number of ordinary shares listed in this table includes ordinary shares held
directly or 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.(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.  78




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##### Table of Contents



B. RELATED PARTY TRANSACTIONS
 The Temasek Group
   Financial Support Provided by Singapore Technologies
    Corporate Services Provided by Singapore Technologies
   Other Transactions
   79




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##### Table of Contents



C. INTERESTS OF EXPERTS AND COUNSEL
  
 ITEM 8. FINANCIAL INFORMATION
 A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
  Export Sales
  Dividend Policy
  80




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##### Table of Contents



Legal Proceedings
  B. SIGNIFICANT CHANGES
  
 ITEM 9. THE OFFER AND LISTING
 PRICE RANGE OF OUR ADSs AND ORDINARY SHARES
  (a) Annual high and low market prices
 NasdaqHigh
    
    LowJanuary 1, through December 31, 2002
    
    $
    27.10
    
    
    $
    3.94January 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
    
    
    $
    6.70
 Singapore ExchangeHigh
    
    LowJanuary 1, through
December 31, 2002
    
    
    S$4.81
    
    
    
    S$0.71January 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$1.03
 (b)  Quarterly high and low market prices
 NasdaqHigh
    
    LowJanuary 1, through March 31, 2005
    
    $
    7.37
    
    
    $
    5.62April 1, through June 30, 2005
    
    $
    8.21
    
    
    $
    5.56July 1, through September 30, 2005
    
    $
    9.01
    
    
    $
    6.58October 1, through December 31, 2005
    
    $
    7.90
    
    
    $
    5.52January 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
    
    
    $
    7.29
 Singapore ExchangeHigh
    
    LowJanuary 1, through March 31, 2005
    
    
    S$1.20
    
    
    
    S$0.92April 1,
through June 30, 2005
    
    
    S$1.35
    
    
    
    S$0.93July 1, through September 30, 2005
    
    
    S$1.44
    
    
    
    S$1.10October 1, through December 31, 2005
    
    
    S$1.34
    
    
    
    S$0.95January 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$1.15
 81




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##### Table of Contents



(c)  Monthly high and low market prices
 NasdaqHigh
    
    LowSeptember 1,
through September 30, 2006
    
    
    $  8.04
    
    
    
    $7.41October 1, through October 31, 2006
    
    
    $  7.89
    
    
    
    $7.29November 1, through November 30, 2006
    
    
    $  9.00
    
    
    
    $7.60December 1, through December 31, 2006
    
    
    $  9.15
    
    
    
    $7.99January 1, through January 31, 2007
    
    
    $  8.99
    
    
    
    $8.08February 1,
through February 28, 2007
    
    
    $10.48
    
    
    
    $9.22
 Singapore ExchangeHigh
    
    LowSeptember 1, through September 30, 2006
    
    
    S$1.27
    
    
    
    S$1.19October 1,
through October 31, 2006
    
    
    S$1.23
    
    
    
    S$1.15November 1,
through November 30, 2006
    
    
    S$1.40
    
    
    
    S$1.17December 1, through December 31, 2006
    
    
    S$1.40
    
    
    
    S$1.25January 1,
through January 31, 2007
    
    
    S$1.40
    
    
    S$1.22February 1,
through February 28, 2007
    
    
    S$1.61
    
    
    
    S$1.40
   
 ITEM 10. ADDITIONAL INFORMATION
 A. SHARE CAPITAL
  B. OUR MEMORANDUM AND ARTICLES OF ASSOCIATION
   Objects and purposes
  Directors
  82




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Shares
   New ordinary shares
   Transfer of ordinary shares
  83




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##### Table of Contents



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
  Voting rights
 1 3
    84




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##### Table of Contents



Dividends
   Bonus and rights issue
  Liquidation or other return of capital
   Redemption of preference shares
  
    
    Tax call
 
If 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 call
 85




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##### Table of Contents



If 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 business 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.
     Conversion rights of Preference Shareholders
  
    
    commencing on 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
  86




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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.
 87




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##### Table of Contents




    
    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
  (a) Loan and financing agreements
 CSP Loan
Agreements
     Chartered Loan Agreements
 EXIM
Guaranteed Loan
  SMBC/OCBC Term Loan
 th
 88




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##### Table of Contents



BOA Term Loan
  SMBC Facility Agreement
   Equity Call Option
      5.75%
senior notes due 2010 and 6.375% senior notes
due 2015
  89




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##### Table of Contents



Convertible Redeemable Preference Shares and 6% Amortizing Bonds due 2010
      6.25% senior notes due 2013
   90




---



##### Table of Contents



(b) Strategic business
alliances
 CSP
    SMP
   (c) Technology transfer, licenses, joint development and other
related agreements
 Agere Systems
   91




---



##### Table of Contents



IBM
      IBM, Infineon and Samsung
  Motorola
  92




---



##### Table of Contents



(d) Leases
  D.  EXCHANGE CONTROLS
  Exchange rates
   Singapore Dollar Per
US$1.00Noon
Buying RateFiscal
Year Ended December 31,
    

Average (1)
    
    

High
    
    

Low
    
    

Period
End2002
    
    
    1.7908
    
    
    
    1.8525
    
    
    
    1.7310
    
    
    
    1.73522003
    
    
    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
    
    
    
    1.5338
 Singapore Dolllars Per
US$1. 00Noon
Buying RateMonth
    

High
    

LowSeptember 2006
    
    
    1.5900
    
    
    
    1.5676October 2006
    
    
    1.5904
    
    
    
    1.5575November 2006
    
    
    1.5662
    
    
    
    1.5373December 2006
    
    
    1.5456
    
    
    
    1.5338January 2007
    
    
    1.5428
    
    
    
    1.5316February 2007
    
    
    1.5424
    
    
    
    1.5258
 
 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
  93




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Income tax
 General. s
   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
 Imputation System.
  One-Tier Corporate Tax System.
 94




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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.
 95




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Ownership of ADSs
  Dividends
     Sale or exchange of ordinary shares or ADSs
  PFIC rules
  96




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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
   97




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##### Table of Contents



I. SUBSIDIARY INFORMATION
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 Quantitative and qualitative disclosures about market risk
  Interest rate risk
   As of December 31, 2006Expected Maturity Date(In thousands, except interest rates)Fair2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    ValueLONG-TERM DEBT:Floating rate
debt (US$)
    
    $
    114,855
    
    
    $
    64,855
    
    
    $
    64,855
    
    
    $
    64,855
    
    
    $
    64,857
    
    
    $
    
    
    
    $
    374,277
    
    
    $
    373,905Weighted
average
interest
rate
    
    
    5.95
    %
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    
    %
    
    
    5.80
    %(1)Fixed rate debt
(US$)(2)
    
    $
    8,774
    
    
    $
    9,308
    
    
    $
    9,875
    
    
    $
    385,476
    
    
    $
    
    
    
    $
    550,000
    
    
    $
    963,433
    
    
    $
    962,140Weighted
average
interest
rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    5.76
    %
    
    
    
    %
    
    
    6.31
    %
    
    
    6.08

%(1)Total
    
    $
    123,629
    
    
    $
    74,163
    
    
    $
    74,730
    
    
    $
    450,333
    
    
    $
    64,855
    
    
    $
    550,000
    
    
    $
    1,337,710
    
    
    $
    1,336,045
 98




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##### Table of Contents



As of December 31, 2006Expected Maturity Date(In thousands, except interest rates)2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueINTEREST RATE DERIVATIVESInterest rate swap(2):Fixed to Floating (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    300,000
    
    
    $
    300,000
    
    
    $
    3,109Average pay rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LIBOR plus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.93
    %Average receive rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.25
    %
 As ofDecember 31, 2005(In Thousands)Total
    
    
    Fair ValueLONG-TERM DEBTFloating rate debt(2)
    
    $
    686,657
    
    
    $
    686,657Fixed rate debt
    
    
    768,858
    
    
    
    779,768Total
    

    $
    1,455,515
    
    
    $
    1,466,425INTEREST RATE DERIVATIVESInterest rate cap contracts(3)
    
    $
    183,333
    
    
    $
    1,394
 
 Note:(1)
    
    Average interest rate under Total are the weighted average interest rates of loans
outstanding as of December 31, 2006.(2)
    
    The SMBC/OCBC Term Loan, which bears floating interest at LIBOR plus 1.75% as of December 31,
2005, was fully repaid using
the proceeds from the issuance of the 6.25% senior notes due 2013 in 2006. We entered
into an interest rate swap to
economically swap the fixed-rate interest obligation associated with the 6.25% senior notes due
2013 from a fixed-rate interest
obligation to a floating-rate interest obligation based on LIBOR for U.S. dollars plus 0.93%.(3)
    
    As of December 31, 2005, we entered into four interest rate cap contracts related to the
floating rate obligations associated with
$300.0 million of one of the U.S. dollar loans, with the effect of placing an upper limit on
the cash flow and earnings exposure due
to market interest rate changes. These interest rate cap contracts matured in September 2006.  Foreign currency risk
  99




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As of December 31, 2006Expected
Maturity Date of Notional Amounts
    
    As of December 31, 2005(In
thousands, except exchange rates)
    
    (In thousands)2007
    
    
    Thereafter
    
    
    Total
    
    
    Fair Value
    
    
    Total
    
    
    Fair ValueFORWARD FOREIGN
EXCHANGE AGREEMENTS:(Receive Yen/Pay US$)Contract Amount
    
    $
    51,264
    
    
    
    
    
    
    $
    51,264
    
    
    $
    (1,724
    )
    
    $
    30,024
    
    
    $
    (208
    )Average Contractual
Exchange Rate
    
    
    114.43
    
    
    
    (Receive S$/Pay US$)Contract Amount
    
    $
    8,997
    
    
    
    
    
    
    $
    8,997
    
    
    $
    41
    
    
    $
    11,976
    
    
    $
    1Average Contractual
Exchange Rate
    
    
    1.54
    
    
    
    (Receive Euros/Pay US$)Contract Amount
    
    $
    11,997
    
    
    
    
    
    
    $
    11,997
    
    
    $
    50
    
    
    $
    1,102
    
    
    $
    (107
    )Average Contractual Exchange
Rate
    
    
    1.31
    
    
    
    Total Contract Amount
    
    $
    72,258
    
    
    
    
    
    
    $
    72,258
    
    
    $
    (1,633
    )
    
    $
    43,102
    
    
    $
    (314
    )
  Denominated in Japanese yen (in thousands)
    
    
    743,349Denominated in Euro (in thousands)
    
    
    29
  Equity Price Risk
   
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  100




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PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 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.
  101




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  102




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,
       
 102A




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##### Table of Contents



ITEM 16.
 
 A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 B. CODE OF ETHICS
   
 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit fees
    
    Audit-related fees
    
    Tax fees
    
    All other fees
    
    Total($ in thousands)2005
    
    
    788
    
    
    
    76
    
    
    
    206
    
    
    
    233
    
    
    
    1,3032006
    
    
    1,257
    
    
    
    21
    
    
    
    150
    
    
    
    6
    
    
    
    1,434
 Audit-related fees
  Tax fees
  102B




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All other fees
   
 D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 E. 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
        Silicon Manufacturing Partners Pte Ltd Financial Statements
  103




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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).2.6(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.4.4(18)(+)
    
    Facility Agreement dated December 22, 2004 by and between the company as Borrower and
Bank of America as Lender.4.5(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.4.6(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.4.6.1(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.Strategic Alliances
 104




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CSP4.7.1(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).4.7.2(7)
    
    Amendment Agreement No. 1 dated January 31, 2002 to Restated Joint Venture Agreement
dated October 23, 2001.4.7.3(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.SMP4.8.1(2)(+)
    
    Joint Venture Agreement dated December 19, 1997 by and between the company and Lucent
Technologies Microelectronics Pte. Ltd.4.8.2(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.).4.8.3(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.4.8.4(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.4.8.5(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.4.8.6(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.4.8.7(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.4.8.8(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.4.8.9(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.4.8.10(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/Lucent
 105




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##### Table of Contents



4.9.1(2)(+)
    
    Technology Transfer Agreement dated February 17, 1998 by and between the company and
Lucent Technologies Inc.4.9.2(8)(+)
    
    Amendment Agreement (No. 1) dated July 31, 2000 to Technology Transfer Agreement dated
February 17, 1998 between Lucent Technologies Inc. and the company.4.9.3(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.4.9.4(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.4.9.5(2)(+)
    
    Patent License Agreement dated January 1,1998 by and between the company and Lucent
Technologies Inc.4.9.6(14)(+)
    
    Patent License Agreement Amendment dated August 3, 2000 by and between the company
and Lucent Technologies Inc.4.9.7(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.Toshiba4.10(2)(+)
    
    Patent Cross License Agreement dated August 12, 1999 by and between the company and
Toshiba Corporation.IBM4.11.1(7)(++)
    
    Patent Cross-License Agreement dated January 1, 2001 by and between the company and
International Business Machines Corporation.4.11.2(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.4.11.3(11)(++)
    
    SF Process Development and Cost Sharing Agreement dated
November 26, 2002 by and between the company and International Business Machines
Corporation.4.11.4(11)(+)
    
    Copper / Related FEOL Technology License Agreement dated November 26, 2002
by and between the company and International Business Machines Corporation.4.11.5(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.4.11.6(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.4.11.7(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.4.11.8(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.4.11.9(18)(+)
    
    Amendment No. 4 dated December 15, 2004 to SF Process Development and Cost Scaring
Agreement dated November 26, 2002 by and between the company and International
Business Machines Corporation.
 106




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4.11.10(11)(+)
    
    Refundable Cross Deposit Agreement dated November
26, 2002 by and between the company and International Business Machines Corporation.4.11.11(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.4.11.12(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.4.11.13(27)(++)
    
    Master IBM Joint Development Terms and Conditions dated
December 15, 2006 for joint development projects with International Business Machines Corporation.4.11.14(27)(++)
    
    Participation Agreement dated January 1, 2007 by and between the
company and International Business Machines Corporation.4.11.15(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.4.11.16{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.IBM, Infineon and Samsung4.12(16)(+)
    
    SF Process 65nm/45nm Development and Cost Sharing Agreement dated March 5, 2004 by
and among the company, International Business Machines Corporation, Infineon
Technologies, A.G. and Samsung Electronics Co., Ltd.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
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
 107




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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.Related Party Agreements4.20(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.4.21(15)
    
    Mr. Chia Song Hwees, President and Chief Executive Officer, Contract of Employment.8(11)
    
    List of the companys subsidiaries.12.1(27)
    
    Certification of the President and Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.12.2(27)
    
    Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.13.1(27)
    
    Certification of the President and Chief Executive Officer pursuant to 18 U.S.C Section 1350,
 108




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as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2(27)
    
    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(27)
    
    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 first amended by shareholders
resolutions which were 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 June 29, 2001, and were as set forth in the proxy statement for our companys
annual general meeting in May 2001 which 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 April 18, 2001. The Memorandum and Articles of
Association were further amended by shareholders resolutions which were 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 18, 2005, and were
set forth in the proxy statement for our extraordinary general meeting in August
2005 which 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 July 25,
2005. All such exhibits are 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 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 109




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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.(27)
    
    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. 110




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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 15, 2007JamesA. Norling/s/ Chia Song Hwee
    
    President and Chief Executive
Officer (principal
executive officer)
    
    March 15, 2007Chia Song Hwee/s/ George Thomas
    
    Senior Vice President and Chief
Financial Officer
(principal financial and accounting officer)
    
    March 15, 2007George Thomas/s/ Andre Borrel
    
    Director
    
    March 15, 2007Andre Borrel/s/ Charles E. Thompson
    
    Director
    
    March 15, 2007CharlesE. Thompson/s/ Tsugio Makimoto
    
    Director
    
    March 15, 2007Tsugio Makimoto/s/ Tay Siew Choon
    
    Director
    
    March 15, 2007Tay Siew Choon/s/ Peter Seah Lim Huat
    
    Director
    
    March 15, 2007Peter Seah Lim Huat
 111




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SIGNATURE
    

TITLE
    

DATE/s/ Philip Tan Yuen Fah
    
    Director
    
    March 15, 2007Philip Tan Yuen Fah/s/ Pasquale Pistorio
    
    Director
    
    March 15, 2007Pasquale Pistorio/s/ Steven H. Hamblin
    
    Director
    
    March 15, 2007StevenH. Hamblin/s/ Maurizio Ghirga
    
    Director
    
    March 15, 2007Maurizio Ghirga
 112




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##### 



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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based Payments
   
 F-1




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CHARTERED
SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
 
 CONSOLIDATED
BALANCE SHEETS  in US Dollars
 As of December 31
In thousands (except per share data)
 2005
    
    
    2006ASSETSCash and cash equivalents
    
    $
    819,856
    
    
    $
    718,982Restricted cash
    
    
    2,832
    
    
    
    43,063Marketable securities
    
    
    7,467
    
    
    
    2,283Receivables, net
    
    
    180,764
    
    
    
    243,361Inventories
    
    
    134,240
    
    
    
    157,047Prepaid expenses
    
    
    7,670
    
    
    
    6,978Other current assets
    
    
    129,865
    
    
    
    10,247Total current assets
    
    
    1,282,694
    
    
    
    1,181,961Investment in SMP
    
    
    54,517
    
    
    
    36,044Technology licenses, net
    
    
    106,612
    
    
    
    84,991Property, plant and equipment, net
    
    
    2,049,695
    
    
    
    2,273,119Other non-current assets
    
    
    23,776
    
    
    
    42,316Total assets
    
    $
    3,517,294
    
    
    $
    3,618,431LIABILITIES, CONVERTIBLE REDEEMABLE PREFERENCE SHARES AND SHAREHOLDERS EQUITYPayables
    
    $
    166,681
    
    
    $
    302,004Income taxes payable
    
    
    27,674
    
    
    
    33,280Current installments of long-term debt and capital lease obligations
    
    
    322,453
    
    
    
    127,627Other current liabilities
    
    
    216,445
    
    
    
    150,581Total current liabilities
    
    
    733,253
    
    
    
    613,492Long-term debt and capital lease obligations, excluding current installments
    
    
    1,169,034
    
    
    
    1,280,972Other non-current liabilities
    
    
    17,970
    
    
    
    48,936Total liabilities
    
    
    1,920,257
    
    
    
    1,943,400Convertible redeemable preference sharesAuthorized: 30 shares in 2005 and 2006Issued and outstanding: 30 shares in 2005 and 28 shares in 2006Redemption value at maturity: $10,000 per share
    
    
    250,663
    
    
    
    246,174Ordinary share capitalAuthorized: 4,615,385 shares in 2005 and 2006Issued and outstanding: 2,513,384 shares in 2005 and 2,535,896 shares
in 2006
    
    
    2,682,050
    
    
    
    2,704,215Accumulated deficit
    
    
    (1,278,252
    )
    
    
    (1,221,527
    )Accumulated other comprehensive loss
    
    
    (57,424
    )
    
    
    (53,831
    )Total shareholders equity
    
    $
    1,346,374
    
    
    $
    1,428,857Commitments and contingenciesTotal liabilities, convertible redeemable preference shares and
shareholders equity
    
    $
    3,517,294
    
    
    $
    3,618,431
 See accompanying notes to consolidated financial statements.
 F-2




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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)
 2004
    
    
    2005
    
    
    2006Net revenue
    
    $
    932,131
    
    
    $
    1,032,734
    
    
    $
    1,414,525Cost of revenue
    
    
    (764,305
    )
    
    
    (917,048
    )
    
    
    (1,070,782
    )Gross profit
    
    
    167,826
    
    
    
    115,686
    
    
    
    343,743Other revenue
    
    
    17,927
    
    
    
    20,685
    
    
    
    21,030OPERATING EXPENSESResearch and development
    
    
    93,818
    
    
    
    122,073
    
    
    
    152,756Sales and marketing
    
    
    37,995
    
    
    
    42,503
    
    
    
    55,007General and administrative
    
    
    34,951
    
    
    
    40,025
    
    
    
    42,558Fab start-up costs
    
    
    33,199
    
    
    
    22,697
    
    
    
    Other operating expenses (income), net
    
    
    (139
    )
    
    
    14,202
    
    
    
    13,766Total operating expenses
    
    
    199,824
    
    
    
    241,500
    
    
    
    264,087Equity in income of SMP
    
    
    27,563
    
    
    
    6,486
    
    
    
    36,040Other income (loss), net
    
    
    16,416
    
    
    
    (6,744
    )
    
    
    (2,689
    )Interest income
    
    
    11,530
    
    
    
    28,625
    
    
    
    44,591Interest expense and amortization of debt discount
    
    
    (30,093
    )
    
    
    (69,839
    )
    
    
    (87,950
    )Income (loss) before income taxes
    
    
    11,345
    
    
    
    (146,601
    )
    
    
    90,678Income tax expense
    
    
    4,774
    
    
    
    12,997
    
    
    
    23,924Net income (loss)
    
    
    6,571
    
    
    
    (159,598
    )
    
    
    66,754Less: Accretion to redemption value of convertible redeemable
preference shares
    
    
    
    
    
    
    3,196
    
    
    
    9,476Net income (loss) available to ordinary shareholders
    
    $
    6,571
    
    
    $
    (162,794
    )
    
    $
    57,278Basic net earnings (loss) per ordinary share
    
    $
    0.00
    
    
    $
    (0.06
    )
    
    $
    0.02Diluted net earnings (loss) per ordinary share
    
    $
    0.00
    
    
    $
    (0.06
    )
    
    $
    0.02Basic net earnings (loss) per ADS
    
    $
    0.03
    
    
    $
    (0.65
    )
    
    $
    0.23Diluted net earnings (loss) per ADS
    
    $
    0.03
    
    
    $
    (0.65
    )
    
    $
    0.23Number of ordinary shares used in computing:Basic net earnings (loss) per ordinary share
    
    
    2,508,376
    
    
    
    2,511,428
    
    
    
    2,528,056Effect of dilutive options
    
    
    8,566
    
    
    
    
    
    
    
    6,009Diluted net earnings (loss) per ordinary share
    
    
    2,516,942
    
    
    
    2,511,428
    
    
    
    2,534,065Number of ADS used in computing:Basic net earnings (loss) per ADS
    
    
    250,838
    
    
    
    251,143
    
    
    
    252,806Effect of dilutive options
    
    
    856
    
    
    
    
    
    
    
    601Diluted net earnings (loss) per ADS
    
    
    251,694
    
    
    
    251,143
    
    
    
    253,407
 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
 2004
    
    
    2005
    
    
    2006Net income (loss)
    
    $
    6,571
    
    
    $
    (159,598
    )
    
    $
    66,754Net unrealized gains (losses) on change in cash flow hedging fair values
    
    
    598
    
    
    
    112
    
    
    
    (1,362
    )Share of cash flow hedging gains of SMP
    
    
    3,945
    
    
    
    17
    
    
    
    9Reclassification of cash flow hedging (gains) losses into earnings
    
    
    (2,942
    )
    
    
    469
    
    
    
    133Foreign currency translation
    
    
    
    
    
    
    1,721
    
    
    
    568Unrealized losses on available-for-sale securities
    
    
    (1,073
    )
    
    
    (1,390
    )
    
    
    (11
    )Reclassification of losses on available-for-sale securities into earnings
    
    
    
    
    
    
    
    
    
    
    2,350Other comprehensive income, net
    
    
    528
    
    
    
    929
    
    
    
    1,687Comprehensive income (loss)
    
    $
    7,099
    
    
    $
    (158,669
    )
    
    $
    68,441
 See accompanying notes to consolidated financial statements.
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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
    
    ShareOrdinary Share
    
    Accumulated
    
    Compre-
    
    holdersCapital
    
    Deficit
    
    hensive Loss
    
    EquityNo.
    
    $
    
    $
    
    $
    
    $Balance at January 1, 2004
    
    
    2,505,480
    
    
    
    2,678,661
    
    
    
    (1,125,225
    )
    
    
    (58,881
    )
    
    
    1,494,555Net income
    
    
    
    
    
    
    
    
    
    
    6,571
    
    
    
    
    
    
    
    6,571Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    528Issuance of shares
    
    
    3,758
    
    
    
    2,001
    
    
    
    
    
    
    
    
    
    
    
    2,001Employee stock compensation
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Non-employee stock
compensation
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    173Others
    
    
    
    
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    1,800Balance at December 31, 2004
    
    
    2,509,238
    
    
    
    2,682,638
    
    
    
    (1,118,654
    )
    
    
    (58,353
    )
    
    
    1,505,631Net loss
    
    
    
    
    
    
    
    
    
    
    (159,598
    )
    
    
    
    
    
    
    (159,598
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    929
    
    
    
    929Accretion to redemption
value of convertible
redeemable preference
shares
    
    
    
    
    
    
    (3,196
    )
    
    
    
    
    
    
    
    
    
    
    (3,196
    )Issuance of shares
    
    
    4,146
    
    
    
    2,387
    
    
    
    
    
    
    
    
    
    
    
    2,387Employee stock compensation
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Non-employee stock
compensation
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    
    
    
    
    220Balance at December 31, 2005
    
    
    2,513,384
    
    
    
    2,682,050
    
    
    
    (1,278,252
    )
    
    
    (57,424
    )
    
    
    1,346,374Cumulative 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
    
    
    
    (1,288,281
    )
    
    
    (55,518
    )
    
    
    1,346,365Net income
    
    
    
    
    
    
    
    
    
    
    66,754
    
    
    
    
    
    
    
    66,754Other 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
    
    
    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
    
    
    
    (1,221,527
    )
    
    
    (53,831
    )
    
    
    1,428,857
 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
 2004
    
    
    2005
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    6,571
    
    
    $
    (159,598
    )
    
    $
    66,754Adjustments to reconcile net income (loss) to net cash provided by operating activities:Equity in income of SMP
    
    
    (27,563
    )
    
    
    (6,486
    )
    
    
    (36,040
    )Cash dividends received from SMP
    
    
    
    
    
    
    29,460
    
    
    
    38,178Depreciation and amortization
    
    
    437,590
    
    
    
    507,687
    
    
    
    503,789Foreign exchange (gain) loss, net
    
    
    (19
    )
    
    
    434
    
    
    
    1,946Gain on disposal of property, plant and equipment
    
    
    (11,703
    )
    
    
    (1,594
    )
    
    
    (4,822
    )(Gain) loss on derivatives
    
    
    (1,270
    )
    
    
    5,993
    
    
    
    2,391Impairment loss on investments
    
    
    
    
    
    
    
    
    
    
    2,698Share-based compensation
    
    
    3
    
    
    
    1
    
    
    
    7,376Gain on sale of technology and equipment
    
    
    (11,708
    )
    
    
    
    
    
    
    Others, net
    
    
    (6,106
    )
    
    
    (6,615
    )
    
    
    (1,417
    )Change in assets and liabilities:Receivables
    
    
    16,327
    
    
    
    (44,280
    )
    
    
    (61,687
    )Inventories
    
    
    (15,726
    )
    
    
    (62,081
    )
    
    
    (21,193
    )Prepaid expenses and other current assets
    
    
    (180
    )
    
    
    853
    
    
    
    (5,716
    )Payables and other liabilities
    
    
    (49,346
    )
    
    
    136,347
    
    
    
    20,355Income taxes payable
    
    
    (5,186
    )
    
    
    4,253
    
    
    
    8,058Net cash provided by operating activities
    
    
    331,684
    
    
    
    404,374
    
    
    
    520,670CASH FLOWS FROM INVESTING ACTIVITIESPayments for property, plant and equipment
    
    
    (686,252
    )
    
    
    (628,127
    )
    
    
    (554,292
    )Payments for technology licenses
    
    
    (37,083
    )
    
    
    (9,351
    )
    
    
    (9,667
    )Purchases of term deposits
    
    
    (30,000
    )
    
    
    
    
    
    
    Refundable deposits placed with vendors
    
    
    (35,000
    )
    
    
    
    
    
    
    (15,000
    )Refund of deposits placed with a vendor
    
    
    
    
    
    
    
    
    
    
    111,656Proceeds from sale of property, plant and equipment
    
    
    31,217
    
    
    
    6,245
    
    
    
    9,975Proceeds from redemption, maturity and disposal of marketable securities and term
deposits
    
    
    15,000
    
    
    
    45,000
    
    
    
    20,998Return of capital from SMP
    
    
    
    
    
    
    17,300
    
    
    
    16,913Others
    
    
    9,403
    
    
    
    690
    
    
    
    (488
    )Net cash used in investing activities
    
    
    (732,715
    )
    
    
    (568,243
    )
    
    
    (419,905
    )CASH FLOWS FROM FINANCING ACTIVITIESDebtBorrowings
    
    
    318,000
    
    
    
    1,128,592
    
    
    
    492,915Repayments
    
    
    (287,312
    )
    
    
    (990,172
    )
    
    
    (635,010
    )Capital lease payments
    
    
    
    
    
    
    
    
    
    
    (3,845
    )Receipts of refundable customer deposits
    
    
    450
    
    
    
    81,300
    
    
    
    45,183Refund of customer deposits
    
    
    
    
    
    
    (22,035
    )
    
    
    (72,108
    )Issuance of ordinary shares
    
    
    2,001
    
    
    
    2,387
    
    
    
    2,357Issuance of convertible redeemable preference shares
    
    
    
    
    
    
    247,513
    
    
    
    Increase in
cash restricted for debt repayment
    
    
    
    
    
    
    (2,832
    )
    
    
    (40,231
    )Others
    
    
    1,800
    
    
    
    
    
    
    
    5,752Net cash provided by (used in) financing activities
    
    
    34,939
    
    
    
    444,753
    
    
    
    (204,987
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    19
    
    
    
    (427
    )
    
    
    3,348Net increase (decrease) in cash and cash equivalents
    
    
    (366,073
    )
    
    
    280,457
    
    
    
    (100,874
    )Cash and cash equivalents at the beginning of the year
    
    
    905,472
    
    
    
    539,399
    
    
    
    819,856Cash and cash equivalents at the end of the year
    
    $
    539,399
    
    
    $
    819,856
    
    
    $
    718,982Supplemental Cash Flow InformationInterest paid (net of amounts capitalized)
    
    $
    18,215
    
    
    $
    77,510
    
    
    $
    85,585Income taxes paid
    
    $
    11,276
    
    
    $
    9,576
    
    
    $
    15,434Non-cash investing and financing activitiesEquity securities received from sale of technology and equipment
    
    $
    11,708
    
    
    $
    
    
    
    $
    Property, plant and equipment acquired through capital lease
    
    $
    
    
    
    $
    45,933
    
    
    $
    31,998Property, plant and equipment acquired on credit
    
    $
    129,147
    
    
    $
    52,280
    
    
    $
    193,742Issuance of ordinary shares arising from conversion of convertible redeemable
preference shares
    
    $
    
    
    
    $
    
    
    
    $
    13,965Property, plant and equipment contributed by landlord
    
    $
    
    
    
    $
    
    
    
    $
    858
 See accompanying notes to consolidated financial statements.
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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)
 1.
    
    Background and Summary of Significant Accounting Policies
 (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.The Company was incorporated in Singapore in 1987. As of December 31, 2006, Singapore
Technologies Semiconductors Pte Ltd (ST Semiconductors), a wholly owned subsidiary of
Temasek Holdings (Private) Limited (Temasek), owns a majority of the shares of the
Company. Temasek is a holding company through which corporate investments of the government
of Singapore are held.Chartered Silicon Partners Pte Ltd (CSP) was formed in March 1997. The Company, 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 formed in January 1998. Agere Systems
Singapore Pte Ltd (Agere) and the Company 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 generally accepted accounting principles (US GAAP).The consolidated financial statements reflect the accounts of Chartered Semiconductor
Manufacturing Ltd 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 Companys 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:
 2004
    
    2005
    
    2006Losses not allocated to the
minority shareholders of CSP according to their proportionate
ownership
    
    $55,786
    
    $64,889
    
    $12,831
 The cumulative losses not allocated to the minority shareholders of CSP according to their
proportionate ownership as of December 31, 2005 and 2006 are $194,992 and $207,823,
respectively.
 F-7




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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)
 (c)
    
    Accounting Changes, Reclassifications and Adjustments
 Cumulative Effect Adjustment  SAB 108
 In September 2006, the 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 beginning accumulated deficit was an increase of $10,029.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.Stock compensation charge. The Company had certain computation errors in its stock
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.
 F-8




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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)
 Income taxes payable. The Company overprovided for income taxes 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 taxes payable was overstated by $3,062 at January
1, 2006. The Company recorded a $3,062 reduction to income taxes 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.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.
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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)
 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 taxes payable.The Company historically did not translate foreign
currency denominated income taxes 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 taxes payable were understated by $430 at January 1, 2006.
The Company recorded a $430 increase in income taxes payable as of January 1, 2006 with a
corresponding increase to accumulated deficit to correct these misstatements.Withholding taxes receivable.The Company did not recognize an asset in 2005 for refundable
withholding taxes 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 taxes receivable were understated by $164 at January
1, 2006. The Company recorded a $164 increase in withholding taxes receivable as of January
1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.Provision for income taxes (deferred and current).As a result of the misstatements
described above, provision for income taxes was misstated by $1,967 at January 1, 2006. The
Company recorded an increase in deferred tax assets, valuation allowance and income taxes
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 ReclassificationsReclassifications and certain immaterial classification corrections have been made to prior years financial statements to conform to classifications
used in the current year. These include reporting operating grant income as a reduction of the expenses that the grants are intended to reimburse rather than
as other income, reporting rental income and management fees as other revenue rather than as other income, reporting depreciation of rental buildings as other operating
expenses rather than as other expense and certain other immaterial reclassifications.Until 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. Accordingly, the amounts
previously disclosed under ordinary shares and additional paid-in capital line items
have been combined as Ordinary Share Capital.
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F-11




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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)
 (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 such
estimates include estimated useful lives and salvage values of long-lived assets, the
recoverability of the carrying value of long-lived assets, the realization of deferred
income tax assets, valuation of accounts receivable and inventories, the recognition and
measurement of revenue and sales credits and returns allowance, 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 improvement to the
Companys net income by $11,289 for the year ended December 31, 2006, resulting in an
improvement of basic and diluted net earnings per American Depository Shares (ADS) by
$0.04 for the year ended December 31, 2006. Basic and diluted net earnings per ordinary
share for the year ended December 31, 2006 were $0.02 and $0.02, respectively, both before
and after the impact of this change.
 (e)
    
    Foreign Currency
 The functional currency of the Company 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 at financial year-end exchange rates of assets and
liabilities denominated in foreign currencies, 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 52%, 56% and 60% of net revenue in the years ended December 31, 2004,
2005 and 2006, respectively. Total accounts receivable from these customers was $92,668
and $166,297 at December 31, 2005 and 2006, respectively. The Companys top customer
profile may change from period to period depending on the strength of various market
sectors.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.Financial instruments that potentially subject the Company to concentrations of credit risk
consist principally of cash, investments, derivative financial instruments 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s cash and cash equivalents are placed with major international banks and
financial institutions. Cash and cash equivalents deposited with a single counterparty bank
accounted for 20% of total balances at December 31, 2005 and 2006.
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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 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 19.
 (g)
    
    Cash Equivalents
 Cash equivalents consist of highly liquid investments that are readily convertible into cash
and have original maturities of three months or less.
 (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, 2005 and 2006. 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 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 income (loss), net in the
consolidated statement of operations.
 (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 historical 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 (net realizable value). 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.
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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)
 (k)
    
    Derivative Instruments and Hedging Activities
 In accordance with SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging
Activities, as amended, 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 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, 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 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.
 (l)
    
    Technology Licenses
 Technology license agreements are stated at cost and amortized on a straight-line basis over
the shorter of the expected technology life 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)
 (m)
    
    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. 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.
 (n)
    
    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, and depreciation is ceased. 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.
 (o)
    
    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.
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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)
 When arrangements include multiple deliverables, the Company first determines whether
each deliverable meets the separation criteria in 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.Other arrangements include sale of equipment and contemporaneous licensing of
intellectual property. Arrangement consideration is allocated between equipment and
licensing of intellectual property using the residual method based on the fair value of
equipment sold. Estimates of fair value of equipment are based on the resale prices of
similar equipment sold on the used equipment market. Income from intellectual property is
classified as a component of Other income (loss), net in the consolidated statements of
operations as it is not considered as a source of income from principal operations, and is
recognized when the title and risk of loss have passed to the customer or the license is
delivered, there is evidence of a final arrangement, fees are fixed or determinable, and
collectibility is reasonably assured.
 (p)
    
    Government Grants
 Income-related government grants are subsidies of expenses incurred. Income-related
grants are credited to the related expenses when expenditures already incurred constitute
qualifying expenditures for purposes of reimbursement under the grants.Asset-related government grants consist of grants for the purchase of equipment.
Asset-related grants are credited to the related expenses on a straight-line basis over the
estimated useful lives of the relevant assets or the qualifying period of the relevant grant
projects, depending on the conditions of the grants.
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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)
 (q)
    
    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. 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, 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. Share-based compensation cost for unvested awards that are outstanding at the date of
adoption 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.Prior to adopting the provisions of SFAS No. 123(R), the Company measured stock-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 stock subject to the option at the grant date over the
exercise price of the option.The Company uses the Black-Scholes option-pricing model for valuation of share-based awards
granted on or after January 1, 2006, which was also previously used for the Companys pro
forma information disclosures required under SFAS No. 123,
Accounting for Stock-Based Compensation.Had the Company determined employee compensation cost based on the fair value at the grant
date for its share options under SFAS No. 123, as amended by
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, the Companys net
income (loss) would have changed to the pro forma amounts indicated below for the years ended
December 31, 2004 and 2005:
 2004
    
    
    2005Stock-based employee compensation costAs reported (intrinsic method)
    
    $
    3
    
    
    $
    1Pro forma (fair-value method)
    
    $
    21,406
    
    
    $
    9,431Net income (loss) available to ordinary shareholdersAs reported
    
    $
    6,571
    
    
    $
    (162,794
    )Pro forma
    
    $
    (14,832
    )
    
    $
    (172,224
    )Basic and diluted net earnings (loss) per ordinary shareAs reported
    
    $
    0.00
    
    
    $
    (0.06
    )Pro forma
    
    $
    (0.01
    )
    
    $
    (0.07
    )Basic and diluted net earnings (loss) per ADSAs reported
    
    $
    0.03
    
    
    $
    (0.65
    )Pro forma
    
    $
    (0.06
    )
    
    $
    (0.69
    )
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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)
 (r)
    
    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.
 (s)
    
    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.
 (t)
    
    Deferred Loan Costs
 Expenses associated with the issuance of long-term debt are capitalized and are
amortized over the terms of the respective arrangement using the effective interest rate
method.
 (u)
    
    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.
 (v)
    
    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 where it is more likely than not that they will not be
realized.
 (w)
    
    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 over the weighted average number of ordinary shares outstanding. Diluted
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
over the weighted average number of ordinary shares outstanding plus dilutive potential
ordinary shares from the assumed exercise of options outstanding during the period, if any,
using the treasury stock method and other potentially dilutive securities outstanding, such
as convertible redeemable preference shares.
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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 excluded potentially dilutive securities for each period presented from its
diluted net earnings (loss) per ordinary share computation because either the exercise price
or conversion price of the securities exceeded the average fair value of the Companys share
price or when the accretion to redemption value of convertible securities per ordinary share obtainable on conversion exceeds basic net earnings per ordinary share,
and therefore these securities were anti-dilutive. A summary
of the excluded potentially dilutive securities and the range of related exercise prices are
as follows:
 Years ended December 31,2004
    
    
    2005
    
    
    2006Convertible debt
    
    
    214,792
    
    
    
    36,300
    
    
    
    Employee stock options
    
    
    98,468
    
    
    
    71,841
    
    
    
    96,479Call options with Goldman Sachs International
    
    
    214,792
    
    
    
    214,792
    
    
    
    214,792Convertible redeemable preference shares
    
    
    
    
    
    
    344,067
    
    
    
    325,144
 The conversion price of convertible debt during the period outstanding was S$4.7980 per share
(equivalent to approximately US$26.7701 per ADS). The weighted average exercise prices of
employee stock options outstanding were $2.36, $2.04 and $1.89 as of December 31, 2004, 2005
and 2006, respectively. The call options have a per share exercise
price of S$1.60 as of
December 31, 2006. The conversion price of the convertible redeemable preference shares is
$0.8719 per share.
 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.The Company had the following significant transactions with related parties:
 2004
    
    
    2005
    
    
    2006Affiliates of TemasekServices purchased from STATS ChipPAC
    
    $
    19,104
    
    
    $
    12,872
    
    
    $
    10,625Property, plant and equipment purchased
    
    
    415
    
    
    
    4,016
    
    
    
    1,762Services purchased
    
    
    2,178
    
    
    
    883
    
    
    
    531Interest income received
    
    
    2,853
    
    
    
    
    
    
    
    Management fees paid
    
    
    2,739
    
    
    
    
    
    
    
    Sub-lease rental billed for leasehold land from JTC
    
    
    2,460
    
    
    
    2,416
    
    
    
    3,170Rental billed for leasehold land from Ascendas
    
    
    335
    
    
    
    331
    
    
    
    108
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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)
 Included in receivables from related parties and payables to related parties are amounts due
from or to affiliates of Temasek:
 December 31,2005
    
    
    2006Amounts due from affiliates of Temasek
    
    $
    217
    
    
    $
    8Amounts due to affiliates of Temasek
    
    $
    8,008
    
    
    $
    2,763
 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 entities
controlled by the government of Singapore. The Jurong Town Corporation (JTC) is a
statutory board established by the Singapore government to develop and manage industrial
estates in Singapore. Fab 1 was built on land leased by the Company from Ascendas Land
(Singapore) Pte Ltd (Ascendas), a private company wholly-owned by JTC. 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 plant 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.The Company has in 2006 leased an additional plot of land from Terra which in turn leased the
land from JTC. The lease runs until 2030. The Company intends to use this additional plot of
land primarily for ancillary purposes to support the Companys business operations.Rental rates on the long-term leases are subject to revisions at periodic intervals in
accordance with the rental agreements, with such increases generally capped between 4% to 9%
per annum.Rental expense for land leased from related parties for the years ended December 31, 2004,
2005 and 2006 was $2,795, $2,747 and $2,768, respectively.Minimum future rental payments on non-cancellable operating leases of land from the above
related parties as of December 31, 2006 are as follows:
 Payable in year ending December 31,2007
    
    $
    2,6162008
    
    
    2,7622009
    
    
    2,9232010
    
    
    3,0972011
    
    
    3,287Thereafter
    
    
    67,861$
    82,546
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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)
 (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, Agere, 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 $17,417, $5,758 and
$18,380 for the years ended December 31, 2004, 2005 and 2006. The share of retained
post-formation results recorded was a deficit of $20,681 as compared to a surplus of $17,363
using the 49% ratio and a surplus recorded of $15,359 as compared to a surplus of $35,023
using the 49% ratio as of December 31, 2005 and 2006, respectively.Singapore law allows dividends to be paid only out of profits of a company. The Company and
Agere 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 Agere 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 Agere 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 2004, 2005 and
2006, respectively.In 2004, the Company and Agere entered into an agreement pursuant to which the Company and
Agere 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 2004,
2005 and 2006 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 Agere, related to
the wafer capacity allocated to Agere, 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 $1,641, $218 and $75 of processed wafers from SMP for the years ended
December 31, 2004, 2005 and 2006, respectively.The Company provides management and corporate support services including accounting,
financial, sales and marketing services to SMP and allocates a portion of its related costs
to SMP. Such charges to SMP amounted to $9,622, $8,811 and $9,480 in the years ended
December 31, 2004, 2005 and 2006, respectively.The Company bought plant and equipment of $Nil, $11 and $Nil from SMP during 2004, 2005 and
2006, respectively. The Company also sold plant and equipment of $505, $53 and $Nil to SMP
during 2004, 2005 and 2006, respectively.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, 2004, 2005 and 2006 was $15,307,
$15,662 and $15,958, 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)
 Included in receivables from related parties and payables to related parties are amounts due
from or to SMP:
 December 31,2005
    
    
    2006Amounts due from SMP
    
    $
    7,694
    
    
    $
    8,724Amounts due to SMP
    
    $
    94
    
    
    $
    819
 The balances with SMP are unsecured, interest free and repayable within 12 months.
 Investment in SMP
    
    December 31,2005
    
    
    2006Cost (net of return of capital)
    
    $
    104,668
    
    
    $
    88,324Share of retained post-formation (losses) gains
    
    
    (20,681
    )
    
    
    15,359Share of accumulated other comprehensive losses
    
    
    (10
    )
    
    
    (1
    )Dividends received
    
    
    (29,460
    )
    
    
    (67,638
    )$
    54,517
    
    
    $
    36,044
 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 Agere. 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.Shown below is summarized financial information for SMP:
 December 31,2005
    
    
    2006Current assets
    
    $
    71,101
    
    
    $
    72,063Property, plant and equipment
    
    
    55,758
    
    
    
    21,972Other assets
    
    
    34
    
    
    
    55Current liabilities
    
    
    (31,311
    )
    
    
    (40,616
    )Other liabilities
    
    
    (8
    )
    
    
    (19
    )Shareholders deficit
    
    $
    95,574
    
    
    $
    53,455
 2004
    
    
    2005
    
    
    2006Net revenue
    
    $
    303,570
    
    
    $
    201,345
    
    
    $
    197,932Gross profit
    
    
    34,827
    
    
    
    4,875
    
    
    
    38,010Operating income
    
    
    30,070
    
    
    
    449
    
    
    
    34,885Net income
    
    
    20,706
    
    
    
    1,486
    
    
    
    36,040
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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)
 3.
    
    Cash and Cash Equivalents and Restricted Cash
 December 31,2005
    
    
    2006Cash at
banks, money market funds and cash on hand
    
    $
    393,083
    
    
    $
    362,120Short-term deposits with banks
    
    
    426,773
    
    
    
    356,862$
    819,856
    
    
    $
    718,982
 Short-term deposits with banks consist of fixed deposits with original maturities of
90 days or less.Under the terms of the Exim Guaranteed Loan agreement which is described in Note 14, 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. At December 31, 2005 and 2006, restricted cash amounted to $2,832 and $43,063
respectively, and consists of interest-bearing money market funds.
 4.
    
    Marketable Securities
 At December 31, 2005
 Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair ValueCurrentAvailable-for-sale securities:Equity securities
    
    $
    10,196
    
    
    $
    
    
    
    $
    (2,729
    )
    
    $
    7,467
 At December 31, 2006
 Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair ValueCurrentAvailable-for-sale securities:Equity securities
    
    $
    2,673
    
    
    $
    
    
    
    $
    (390
    )
    
    $
    2,283
 No realized gains or losses were recorded for the years ended December 31, 2004 and 2005.
Proceeds from sale of available-for-sale securities were $5,990 in 2006. Gross realized gains
from sale of available-for-sale securities were $348 in 2006. The Company also recorded losses
amounting to $2,698 as a result of an other-than-temporary impairment assessment in 2006.
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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 following table shows the fair value and gross unrealized 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 loss
position.
 At December 31,
    
    Less than 12 months
    
    
    Greater than 12 months
    
    
    Total2005Unrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedFair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)Available-for-sale
securities:Equity securities
    
    $
    1,123
    
    
    $
    (115
    )
    
    $
    6,344
    
    
    $
    (2,614
    )
    
    $
    7,467
    
    
    $
    (2,729
    )
 At December 31,
    
    Less than 12 months
    
    
    Greater than 12 months
    
    
    Total2006Unrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedFair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)Available-for-sale
securities:Equity securities
    
    $
    2,283
    
    
    $
    (390
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,283
    
    
    $
    (390
    )
 The Companys investments in available-for-sale equity securities at December 31, 2005 and
2006 consist of investments in the common stock of two companies in the semiconductor
industry, both of which are in an unrealized loss position as at the respective balance sheet
dates. The fair value of the investments was based on quoted share prices at the balance sheet
date. When determining whether the investments were other-than-temporarily impaired, the
Company considered industry analyst reports on the outlook of the semiconductor industry and
the two companies, the length of time that market value has been less than cost, the financial
condition and near term prospects of the issuers and the Companys ability and intent to hold
the investments for a reasonable period of time sufficient for this forecasted recovery of the
fair value. Based on this evaluation, the Company does not consider these investments to be
other-than-temporarily impaired at December 31, 2005 and 2006.5.
    
    Receivables, net
 December 31,2005
    
    
    2006Trade receivables
    
    $
    181,079
    
    
    $
    230,590Allowance for doubtful accounts
    
    
    (991
    )
    
    
    (1,149
    )Allowance for sales credits and returns
    
    
    (13,901
    )
    
    
    (6,827
    )Trade receivables, net of allowances
    
    
    166,187
    
    
    
    222,614Receivables from related parties
    
    
    7,911
    
    
    
    8,732Other receivables
    
    
    6,666
    
    
    
    12,015$
    180,764
    
    
    $
    243,361
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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)
 Movement in the allowance for doubtful accounts is as follows:
 2004
    
    
    2005
    
    
    2006Beginning
    
    $
    1,083
    
    
    $
    1,178
    
    
    $
    991Utilized in year
    
    
    (38
    )
    
    
    
    
    
    
    (4
    )Charge for the year
    
    
    1,106
    
    
    
    420
    
    
    
    466Reversal of specific allowances due to collection
    
    
    (973
    )
    
    
    (607
    )
    
    
    (304
    )Ending
    
    $
    1,178
    
    
    $
    991
    
    
    $
    1,149
 Movement in the allowance for sales credits and returns is as follows:
 2004
    
    
    2005
    
    
    2006Beginning
    
    $
    9,556
    
    
    $
    6,537
    
    
    $
    13,901Utilized in year
    
    
    (7,769
    )
    
    
    (10,940
    )
    
    
    (13,353
    )Charge for the year
    
    
    4,750
    
    
    
    18,304
    
    
    
    6,279Ending
    
    $
    6,537
    
    
    $
    13,901
    
    
    $
    6,827
 6.
    
    Inventories
 December 31,2005
    
    
    2006Raw materials
    
    $
    6,895
    
    
    $
    13,306Work-in-progress
    
    
    121,871
    
    
    
    137,214Consumable supplies and spares
    
    
    5,474
    
    
    
    6,527$
    134,240
    
    
    $
    157,047
 7.
    
    Other Current AssetsAs of December 31, 2005, the Company had a refundable deposit placed with a vendor of $109,581
to secure wafer capacity. The deposit was fully refunded during 2006.
 8.
    
    Technology Licenses, net
 Weighted averageamortizationperiod (years)December 31,
    
    
    December 31,2005
    
    
    2006
    
    
    2005
    
    
    2006Technology licenses, at cost
    
    $
    168,787
    
    
    $
    178,043
    
    
    
    6
    
    
    
    6Accumulated amortization
    
    
    (62,175
    )
    
    
    (93,052
    )Technology licenses, net
    
    $
    106,612
    
    
    $
    84,991
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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)
 Amortization amounted to $16,263, $24,616 and $30,877 for 2004, 2005 and 2006, respectively.
Estimated amortization for future periods is as follows:
 2007
    
    $
    31,5632008
    
    
    30,9502009
    
    
    16,3692010
    
    
    5,8342011
    
    
    240Thereafter
    
    
    35$
    84,991
 9.
    
    Property, Plant and Equipment, net
 December 31,2005
    
    
    2006CostBuildings
    
    $
    269,276
    
    
    $
    265,324Mechanical and electrical installations
    
    
    612,340
    
    
    
    636,796Equipment and machinery
    
    
    3,893,041
    
    
    
    4,131,234Office and computer equipment
    
    
    144,834
    
    
    
    163,787Assets under installation and construction
    
    
    140,733
    
    
    
    519,584Total cost
    
    $
    5,060,224
    
    
    $
    5,716,725Accumulated depreciation and amortization
    
    $
    3,010,529
    
    
    $
    3,443,606Property, plant and equipment, net
    
    $
    2,049,695
    
    
    $
    2,273,119
 Depreciation amounted to $420,217, $481,874 and $471,617 for the years ended December 31,
2004, 2005 and 2006, respectively.Capitalized interest relating to property, plant and equipment amounted to $15,177, $19,032
and $12,062 in the years ended December 31, 2004, 2005 and 2006, respectively.For assets under capital leases, total cost was $45,933 and $77,930 at December 31, 2005 and
2006 respectively and accumulated amortization was $2,886 and $7,500 at December 31, 2005 and
2006 respectively. Amortization of assets under capital leases, included in depreciation
expense, was $Nil, $2,886 and $4,614 for the years ended December 31, 2004, 2005 and 2006
respectively.
 10.
    
    Other Non-current AssetsAs of December 31, 2006, the Company had a refundable deposit placed with a vendor of
$9,533 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 term of the deposit 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 one
year.
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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)
 11.
    
    Payables
 December 31,2005
    
    
    2006Trade and accrued purchases
    
    $
    106,299
    
    
    $
    104,680Purchases of property, plant and equipment
    
    
    52,280
    
    
    
    193,742Payables to related parties
    
    
    8,102
    
    
    
    3,582$
    166,681
    
    
    $
    302,004
 12.
    
    Other Current Liabilities
 December 31,2005
    
    
    2006Accrued employee related expenses and bonuses
    
    $
    24,619
    
    
    $
    43,350Customer capacity guarantee deposits
    
    
    58,410
    
    
    
    33,137Accrued interest
    
    
    41,612
    
    
    
    30,494Customer prepayment
    
    
    30,889
    
    
    
    19,247Other accrued expenses
    
    
    5,857
    
    
    
    4,136Other current liabilities
    
    
    55,058
    
    
    
    20,217$
    216,445
    
    
    $
    150,581
 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 one year.The Company received a prepayment from a customer for future purchases which also secures
access to wafer capacity. This amount will be used to off-set trade receivables from that
customer. The receipt was recorded as operating cash flows in the consolidated statements 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 manufacture of integrated circuits using submicron technology at
Fab 3 for a ten-year period beginning July 1, 1999;
    
    the wafer fabrication of Application Specific Integrated Circuits
(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.
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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)
 Under the EEIA, the Company has also been granted:
 
    
    post-pioneer enterprise 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 incentive 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 incentive status for the wafer fabrication
of ASICs and other advanced semiconductor devices at Fab 6 for a
five-year period beginning September 1, 2013.
 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 incentive status
is effective, subject to compliance with certain conditions, income arising from the
incentive activities is taxed at a concessionary rate of 10%. Income arising from activities
not covered under any of the abovementioned incentives (hereinafter referred to as
non-qualifying income) is taxed at the normal Singapore corporate tax rate, which was 20% for
the years ended December 31, 2004, 2005 and 2006. Thus, the income tax expenses for the
years ended December 31, 2004, 2005 and 2006 are primarily on 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. Based on these tax incentives,
income tax is assessed at the individual fab level.The Company was granted development and expansion incentive status for wafer fabrication of
integrated circuits at Fab 1 for a five-year period beginning January 1, 2001, subject to
compliance with certain conditions during that period. In February 2003, the Company
announced its plan to consolidate the business of Fab 1 into Fab 2, and close down Fab 1
during 2004. This closure would result in non-compliance with the conditions of the
development and expansion incentive status, and accordingly at that time the Company accrued
additional taxes payable for the period subsequent to January 1, 2001 at the normal corporate
tax rate. During 2004, the relevant authority agreed to deem the Company as having complied
with all the conditions and continued the grant of the development and expansion incentive
status until December 31, 2004. Accordingly, the Company revised its accruals based on the
concessionary tax rate of 10% and reduced its tax provision by $9,784 for the year ended
December 31, 2004.Under Singapore tax law, loss carryforwards and tax depreciation of property, plant and
equipment (hereinafter referred to as wear and tear allowances), which are determined at the
fab level, are deductible to the extent of income before loss carryforwards and wear and tear
allowances. Unutilized 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, 2005 and 2006, the Company has unutilized wear and tear
allowance carryforwards of approximately $1,583,000 and $1,742,000 respectively. The Company
does not have any loss carryforwards as of December 31, 2005 and 2006.Income (loss) before income taxes consists of the following:
 2004
    
    
    2005
    
    
    2006Singapore
    
    $
    9,942
    
    
    $
    (147,595
    )
    
    $
    89,024Foreign
    
    
    1,403
    
    
    
    994
    
    
    
    1,654Total
    
    $
    11,345
    
    
    $
    (146,601
    )
    
    $
    90,678
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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)
 Income tax expense consists of the following:
 2004
    
    
    2005
    
    
    2006Current expense (benefit)  Singapore
    
    $
    5,798
    
    
    $
    13,848
    
    
    $
    22,011 Foreign
    
    
    292
    
    
    
    (17
    )
    
    
    573Deferred expense (benefit)  Singapore
    
    
    (1,428
    )
    
    
    (800
    )
    
    
    1,502 Foreign
    
    
    112
    
    
    
    (34
    )
    
    
    (162
    )$
    4,774
    
    
    $
    12,997
    
    
    $
    23,924
 A reconciliation of the expected tax expense (benefit) computed by applying the Singapore
statutory tax rate of 20% for 2004, 2005 and 2006 to income (loss) before income taxes to
income tax expense is as follows:
 2004
    
    
    2005
    
    
    2006Income tax expense (benefit) computed at the
Singapore statutory tax rate
    
    $
    2,269
    
    
    $
    (29,320
    )
    
    $
    18,136Non-deductible research and development expenses
    
    
    898
    
    
    
    473
    
    
    
    16,726Non-deductible pre-pioneer operating losses
    
    
    5,412
    
    
    
    13,084
    
    
    
    Other non-deductible expenses
    
    
    6,272
    
    
    
    3,721
    
    
    
    7,137Effect of pioneer status, including losses and
allowances not recognized as deferred tax
benefit
    
    
    6,263
    
    
    
    27,561
    
    
    
    (4,502
    )Effect of post-pioneer status
    
    
    (2,263
    )
    
    
    
    
    
    
    (6,833
    )Non-taxable decrease in equity method investment
    
    
    (5,512
    )
    
    
    (1,332
    )
    
    
    (7,208
    )Effect of change in concessionary tax status
    
    
    (6,884
    )
    
    
    
    
    
    
    All other items, net
    
    
    (1,681
    )
    
    
    (1,190
    )
    
    
    468Income tax expense
    
    $
    4,774
    
    
    $
    12,997
    
    
    $
    23,924
 For the years ended December 31, 2004 and 2006, the pioneer status had the effect of
increasing (decreasing) basic and diluted net earnings per ordinary share by $(0.00) and
$0.00 and basic and diluted net earnings per ADS by $(0.02) and $0.02, respectively.For the year ended December 31, 2005, the pioneer status had the effect of (increasing)
decreasing basic and diluted net (loss) per ordinary share by $(0.01) and basic and diluted
net (loss) per ADS by $(0.11).Deferred tax assets and deferred tax liabilities, which are substantially non-current and
relate to Singapore, consist of the following:
 December 31,2005
    
    
    2006Deferred tax liabilitiesProperty, plant and equipment
    
    $
    (802
    )
    
    $
    (2,105
    )Intangible assets
    
    
    (1,000
    )
    
    
    (662
    )Unremitted offshore income
    
    
    
    
    
    
    (2,554
    )$
    (1,802
    )
    
    $
    (5,321
    )Deferred tax assetsUnutilized wear and tear allowances
    
    $
    316,550
    
    
    $
    263,437Property, plant and equipment
    
    
    7,112
    
    
    
    11,598Other accrued expenses
    
    
    8,191
    
    
    
    12,545331,853
    
    
    
    287,580Valuation allowance
    
    
    (322,413
    )
    
    
    (273,814
    )$
    9,440
    
    
    $
    13,766Net deferred tax assets
    
    $
    7,638
    
    
    $
    8,445
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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 future 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, 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 that 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 $322,413 and $273,814 for
these fabs net deferred tax assets has been recorded as at December 31, 2005 and 2006,
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 on $7,638 and $8,445 of net deferred tax assets arising from other
operations as at December 31, 2005 and 2006 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. The decrease is due to the derecognition of deferred tax
assets for temporary differences that are now expected to reverse during the tax-exempt pioneer period
rather than the taxable post-pioneer period.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 SAB108 (see Note 1(c)).
 14.
    
    Long-term Debt and Obligations under Capital LeasesLong-term debt consists of:
 December 31,2005
    
    
    2006Floating rate loans:CSP Syndicated Loan
    
    $
    214,533
    
    
    $
    SMBC/OCBC Term Loan
    
    
    300,000
    
    
    
    Exim Guaranteed Loan
    
    
    122,124
    
    
    
    324,277Bank of America Term Loan
    
    
    50,000
    
    
    
    50,0002.5% senior convertible notes due 2006
    
    
    97,155
    
    
    
    5.75% senior notes due 2010
    
    
    371,161
    
    
    
    371,9046.00% amortizing bonds due 2010
    
    
    46,703
    
    
    
    38,4336.25% senior notes due 2013
    
    
    
    
    
    
    297,4056.375% senior notes due 2015
    
    
    246,540
    
    
    
    246,805Other
    
    
    (324
    )
    
    
    2,8361,447,892
    
    
    
    1,331,660Less: Current installments of long-term debt
    
    
    (319,634
    )
    
    
    (123,629
    )Long-term debt, excluding current installments
    
    $
    1,128,258
    
    
    $
    1,208,031
 Obligations under capital leases:
 2005
    
    
    2006Minimum future lease payments
    
    $
    63,931
    
    
    $
    124,194Amount representing interest at rates of 6.2% to 7.8%
    
    
    (20,336
    )
    
    
    (47,255
    )Present value of minimum future lease payments
    
    
    43,595
    
    
    
    76,939Less: Current installments
    
    
    (2,819
    )
    
    
    (3,998
    )Obligations under capital leases, excluding current installments
    
    $
    40,776
    
    
    $
    72,941
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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)
 2005
    
    
    2006Current installments of:Long-term debt
    
    $
    319,634
    
    
    $
    123,629Obligations under capital leases
    
    
    2,819
    
    
    
    3,998$
    322,453
    
    
    $
    127,627Non-current portion, excluding current installments:Long-term debt
    
    $
    1,128,258
    
    
    $
    1,208,031Obligations under capital leases
    
    
    40,776
    
    
    
    72,941$
    1,169,034
    
    
    $
    1,280,972
 Weighted AverageInterest Rates As ofDecember 31,2005
    
    
    2006Debt obligations at floating rates
    
    
    5.11
    %
    
    
    5.80
    %Debt obligations at fixed rates
    
    
    5.91
    %
    
    
    6.08
    %Obligations under capital leases
    
    
    6.50
    %
    
    
    7.08
    %
 CSPs U.S. dollar syndicated floating rate loan was arranged by ABN Amro Bank N.V., Singapore
branch, Citibank, N.A., Singapore, Overseas Union Bank Limited (now known as United Overseas
Bank Limited), Sumitomo Mitsui Banking Corporation Ltd, Danske Bank A/S, Industrial and
Commercial Bank of China, Singapore branch and Commerzbank Aktiengesellschaft, Singapore
branch for an amount of $820,000 which was fully drawn down. The loan bore interest at 0.60%
to 0.85% above the London Interbank Offering Rate (LIBOR) rates for U.S. dollars deposits
quoted by specified banks to the lender (depending on certain criteria relating to wafer
starts and debt/equity ratio). Interest was payable semi-annually and principal was payable
in six semi-annual installments which commenced in March 2004. The loan matured and was
fully repaid during 2006.The SMBC/OCBC Term Loan was with Sumitomo Mitsui Banking Corporation, Oversea-Chinese Banking
Corporation, ABN AMRO Bank, United Overseas Bank, and Deutsche Bank for a maximum of
$300,000, which was fully drawn down in 2005. The loan bore interest at LIBOR plus 1.75% and
was payable semi-annually. The loan was fully repaid in April 2006 using the proceeds from
the issuance of the 6.25% senior notes due in 2013.The Exim Guaranteed Loan is from J.P. Morgan, guaranteed by the Export-Import Bank of the
United States, 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, beginning on 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 the equipment purchases per the ramp schedule. The loan bears interest at LIBOR plus
0.125%. Interest is payable semi-annually and each tranche is payable semi-annually over five
years.The Bank of America Term Loan is for a maximum of $50,000, which was fully drawn down in
2005. The loan bears interest at LIBOR plus 0.80%. Interest is payable semi-annually and
principal is repayable in full at maturity in 2007.The senior unsecured convertible notes (Convertible Notes) bore a coupon rate of 2.50%
per annum and had a yield to maturity of 5.25% per annum. In September 2005, pursuant to a
cash tender offer (Tender Offer) for any and all of its $575,000 original principal amount
of the Convertible Notes outstanding, $477,845 original principal amount of the Convertible
Notes, representing approximately 83.1% of the Convertible Notes, were purchased. The
remaining Convertible Notes matured and were fully redeemed on April 2, 2006.
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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 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 beginning on 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.Convertible redeemable preference shares (refer to Note 15) and 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, beginning on February 17, 2006, and amortize to
zero at maturity on August 17, 2010. The Amortizing Bonds constitute senior, unsecured
obligations of the Company.In 2006, the Company issued senior notes due 2013 (Senior Notes due 2013) with a
face value of $300,000 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, beginning on 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, 2006, other long-term debt represents the cumulative fair value
change of the Senior Notes due 2013 due to changes in interest rates commencing on the date
the Company designated an interest rate swap transaction as a fair value hedge of this debt.The Senior Notes and 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. Therefore, the sum of the amounts received by the investors in the
event of exercise of the call or put options would not significantly differ from the recorded
value.The Company evaluated the call and put options included in the Senior Notes and
Amortizing Bond 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.Annual maturities of long-term debt as of December 31, 2006 are as follows:
 Payable in year ending December 31,2007
    
    $
    123,6292008
    
    
    74,1642009
    
    
    74,7302010
    
    
    450,3322011
    
    
    64,855Thereafter
    
    
    550,000$
    1,337,710
 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.
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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 has total unutilized banking facilities of $591,763 and $591,400 for
short-term advances, term loans and bankers guarantees as of December 31, 2005 and 2006,
respectively. Facilities as of December 31, 2006 include $200,000 that will expire on March
30, 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 as of December
31, 2006 are as follows:
 Payable in year ending December 31,2007
    
    $
    9,3232008
    
    
    9,3232009
    
    
    9,3232010
    
    
    9,3232011
    
    
    9,323Thereafter
    
    
    77,579Total minimum lease payments
    
    $
    124,194
 15.
    
    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, 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.
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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)
 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.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 days1,800Allocated value * ($10,000/allocated value)
 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 and 2006 was $3,196 and $9,476, respectively.During 2006, 2 Preference Shares were converted and 18,924 of ordinary shares were issued as
a result of the conversion.The Preference Shares include call and put options, which the Company has evaluated 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 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.
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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)
 16.
    
    Shareholders EquityOrdinary Share CapitalIn August 2004, the Company entered into a bilateral
option transaction with Goldman Sachs International as counter-party.
Under the transaction, the Company had a choice of physical or cash
settlement. The counter-party could purchase 214,800 of the
Companys
ordinary shares at $0.93 per share (approximately S$1.60 per share,
based on an exchange rate of $1.00 = S$1.71) and the Company would
receive approximately $200,000. The number of ordinary shares under
the option transaction was equal to the number of shares that were
originally planned for issuance under the Convertible Notes. The option
transaction, which was contractually separate from the Convertible
Notes, was exercisable by the counter-party from January 2, 2005
and expired on April 2, 2006, matching the maturity date of the
Convertible Notes. Goldman Sachs International did not exercise its
rights under the option transaction.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 has 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 has approximately $54,000 and $52,400 of available
balances under the old imputation system as of December 31, 2005 and 2006, respectively.Accumulated deficit includes $(20,681) and $15,359 of post-formation (losses) gains of SMP as
of December 31, 2005 and 2006, respectively.Accumulated Other Comprehensive LossAccumulated other comprehensive loss consists of the following:
 December 31,2005
    
    
    2006Cumulative foreign currency translation loss
    
    $
    52,659
    
    
    $
    52,091Net unrealized cash flow hedging losses
    
    
    2,036
    
    
    
    1,350Net unrealized losses on available-for-sale securities
    
    
    2,729
    
    
    
    390$
    57,424
    
    
    $
    53,831
 The foreign currency translation loss, net unrealized losses on available-for-sale securities
and net unrealized cash flow hedging losses are not adjusted for income taxes because such
losses are generally not tax deductible.
 17.
    
    Share Options and Incentive Plans
 (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 under the plan) 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 stock 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 90,521
and 81,727 as of December 31, 2005 and 2006, 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.
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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 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 an incentive stock 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.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, 2004, 2005 and 2006 were as follows:
 2004
    
    
    2005
    
    
    2006Weighted-average grant-date fair value of share options granted
    
    $
    0.63
    
    
    $
    0.47
    
    
    $
    0.43Total intrinsic value of share options exercised
    
    $
    557
    
    
    $
    249
    
    
    $
    320Total fair value of share options vested
    
    $
    25,561
    
    
    $
    26,717
    
    
    $
    14,495
 Stock option activity for all outstanding options and the corresponding price information for
the years ended December 31, 2004, 2005 and 2006 were as follows:
 WeightedAverageNumber
    
    
    Exerciseof options
    
    
    PriceOutstanding at January 1, 2004
    
    
    104,223
    
    
    $
    2.67Granted
    
    
    20,905
    
    
    $
    0.93Expired
    
    
    (919
    )
    
    $
    1.65Exercised
    
    
    (1,074
    )
    
    $
    0.46Forfeited
    
    
    (10,481
    )
    
    $
    2.89Outstanding at December 31, 2004
    
    
    112,654
    
    
    $
    2.36Granted
    
    
    15,542
    
    
    $
    0.69Expired
    
    
    (2,695
    )
    
    $
    6.90Exercised
    
    
    (1,798
    )
    
    $
    0.54Forfeited
    
    
    (10,223
    )
    
    $
    2.41Outstanding at December 31, 2005
    
    
    113,480
    
    
    $
    2.04Granted
    
    
    16,666
    
    
    $
    0.77Expired
    
    
    (1,958
    )
    
    $
    2.30Exercised
    
    
    (2,432
    )
    
    $
    0.55Forfeited
    
    
    (5,913
    )
    
    $
    2.01Outstanding at December 31, 2006
    
    
    119,843
    
    
    $
    1.89Exercisable at end of year
    
    
    76,720
    
    
    $
    2.51
 Changes in the number of unvested share options during the year ended December 31, 2006,
together with the corresponding weighted-average grant date fair values and the status of
unvested options at December 31, 2006, were as follows:
 WeightedAverageNumber
    
    
    grant dateof options
    
    
    fair valueUnvested at January 1, 2006
    
    
    48,214
    
    
    $
    0.66Granted
    
    
    16,666
    
    
    $
    0.43Vested
    
    
    (18,885
    )
    
    $
    0.77Forfeited
    
    
    (2,872
    )
    
    $
    0.57Unvested at December 31, 2006
    
    
    43,123
    
    
    $
    0.52
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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)
 Information regarding outstanding and exercisable share options as of December 31, 2006,
was as follows:
 Options outstandingWeightedaverage
    
    
    Weightedremaining
    
    
    averageNumber of
    
    
    contractual
    
    
    exercise
    
    
    IntrinsicRange of exercise prices
    
    options
    
    
    term
    
    
    price
    
    
    value$0.39 to $1.00
    
    
    68,671
    
    
    7.4 years
    
    $
    0.73
    
    
    $
    1,891$1.06 to $1.95
    
    
    20,466
    
    
    4.7 years
    
    $
    1.41
    
    
    $
    2,618$2.14 to $2.44
    
    
    13,815
    
    
    4.4 years
    
    $
    2.32
    
    
    $
    477$5.81
    
    
    9,781
    
    
    3.8 years
    
    $
    5.81
    
    
    $
    $8.31
    
    
    7,110
    
    
    3.3 years
    
    $
    8.31
    
    
    $
    119,843
    
    
    
    
    
    
    
    
    
    
    $
    4,986
 Options exercisableWeightedaverage
    
    
    Weightedremaining
    
    
    averageNumber of
    
    
    contractual
    
    
    exercise
    
    
    IntrinsicRange of exercise prices
    
    options
    
    
    term
    
    
    price
    
    
    value$0.39 to $1.00
    
    
    28,760
    
    
    6.4 years
    
    $
    0.70
    
    
    $
    1,583$1.06 to $1.95
    
    
    17,272
    
    
    4.5 years
    
    $
    1.42
    
    
    $
    2,168$2.14 to $2.44
    
    
    13,797
    
    
    4.4 years
    
    $
    2.32
    
    
    $
    477$5.81
    
    
    9,781
    
    
    3.8 years
    
    $
    5.81
    
    
    $
    $8.31
    
    
    7,110
    
    
    3.3 years
    
    $
    8.31
    
    
    $
    76,720
    
    
    
    
    
    
    
    
    
    
    $
    4,228
 The options vest over one to five years and expire on dates ranging from February 2007
to October 2016.Income from continuing operations, income before income taxes and net income for the
year ended December 31, 2006 were reduced by $7,376 as a result of the adoption of SFAS No.
123(R). Total share-based compensation expense recognized for the year ended December 31,
2006 was:
 2006Cost of revenue
    
    $
    2,565Research and development
    
    
    712Sales and marketing
    
    
    1,031General and administrative
    
    
    3,068Total share-based compensation expense
    
    $
    7,376
 Perordinaryshare
    
    
    Per ADSNet share-based compensation expenseBasic
    
    $
    0.00
    
    
    $
    0.03Diluted
    
    $
    0.00
    
    
    $
    0.03
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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)
 As of December 31, 2006, there was $8,498 of total unrecognized compensation costs
related to share options scheduled to be recognized over a weighted average period of 3
years.Cash proceeds of $1,456 were received from option exercises during the year ended December
31, 2006.As share-based compensation cost is not tax deductible in Singapore, the recognition of
the share-based compensation expense did not result in income tax benefits.The fair values of the option grants awarded during the years ended December 31, 2004,
2005 and 2006 were estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions.
 2004
    
    

    
    2005
    
    
    
    2006Risk free interest rate
    
    2.97% to 4.14%
    
    
    4.06% to 4.64%
    
    
    4.59% to 5.22%Expected volatility
    
    61.94% to 65.04%
    
    
    58.75% to 61.04%
    
    
    40.45% to 57.86%Expected term
    
    
    5 to 8 years
    
    
    
    5 to 9 years
    
    
    
    3 to 6.25 yearsDividend yield
    
    
    0.00%
    
    
    
    0.00%
    
    
    
    0.00%
 Expected volatilities are based on historical volatility rates of the Companys
ordinary shares. For options awarded during the years ended December 31, 2004 and 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 year ended
December 31, 2006, the expected term is determined using the simplified approach as permitted
by Staff Accounting Bulletin No. 107 (SAB 107). 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 stock options.Share-based compensation expense recognized in the consolidated statements of operations for
the year ended December 31, 2006 was 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. Pre-vesting forfeitures were
estimated to be between approximately 1% to 21% for the year ended December 31, 2006 based
on historical pre-vesting forfeitures. In the Companys pro forma information disclosures
required under SFAS No. 123 for the periods prior to fiscal year 2006, the Company accounted
for forfeitures as they occurred.Options to purchase 595, 406 and 390 shares of the Company were granted to employees of
SMP in 2004, 2005 and 2006, respectively. SMP bears the share-based compensation expense in
respect of these options.
 (b)
    
    2001 Share Purchase Plans
 As approved by the shareholders in May 2001, the Company adopted the Chartered Semiconductor
Manufacturing Ltd Employee Share Purchase Plan 2001 (the Chartered Purchase Plan) and the
Share Purchase Plan 2001 for Employees of Silicon Manufacturing Partners Pte Ltd (the SMP
Purchase Plan), collectively the 2001 Plans, which provided for the issuance of a maximum
of 10,000 shares (subject to adjustment under the Plans). The amount was subsequently
revised to 11,722 shares as a result of the Companys rights offering which was completed in
October 2002.
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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 2001 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 compensations, commissions, overtime pay and shift
premiums. 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 85% 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 2001 Plans were intended to qualify under Section 423 of the United States Tax Code.The 2001 Plans were administered by a committee appointed by the Directors. Approximately
2,700 shares were purchased at $0.56 (S$0.94) in 2004 under the 2001 Plans. As of February
2004, all shares available under the 2001 Plans had been issued and allotted and as a
result, the 2001 Plans were terminated.
 (c)
    
    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 under the Plans).The terms of the ESPP 2004 Plans and the 2001 Plans are similar except for the following
significant differences:
 (i)
    
    the ESPP 2004 Plans give the committee appointed by the Directors to administer
the plans (Committee) the right to stipulate that the purchase price for each Ordinary
Share purchased at the close of an offering period be determined by an alternative
method, which is to be prescribed by the Committee, if the Committee determines that the
existing method of determining the purchase price would cause the Company to incur any
stock-based compensation expense; and(ii)
    
    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. The ESPP 2004 Plans continue to
provide for two offering periods in a calendar year commencing on each March 1 and
September 1.
 The 2004 Plans are administered by a committee appointed by the Directors. 2,348 and 1,156
shares were issued at prices from $0.56 to $0.63 (S$0.92 to S$1.06) and $0.77 to $0.79
(S$1.22 to S$1.28) during the years ended 2005 and 2006, 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.
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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)
 18.
    
    Commitments and Contingencies
 (a)
    
    Commitments
 The Company has the following capital commitments:
 December 31,2005
    
    
    2006Contracts for capital expenditures
    
    $
    205,689
    
    
    $
    525,200
 Minimum future rental payments on non-cancellable operating leases, excluding amounts
payable to related parties disclosed in Note 2, as at December 31, 2006, are as follows:
 Payable in year ending December 31,2007
    
    $
    3,8112008
    
    
    2,1572009
    
    
    9472010
    
    
    7392011
    
    
    527Thereafter
    
    
    827$
    9,008
 Rental expense, excluding amounts payable to related parties disclosed in Note 2, for the
years ended December 31, 2004, 2005 and 2006 was $5,473, $5,660 and $5,687 respectively.The Company has a patent license agreement with Agere 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 Agere in SMP falls below 49%. In exchange the Company has waived capacity shortfall
obligations from Agere. The patent license agreement continues for as long as the joint
venture agreement between the parties remains.The Company has entered into agreements to purchase technology licenses, jointly perform
research and development, and swap capacity commitments. The future payment obligations
under these agreements at December 31, 2005 and 2006 are $200,000 and $335,000 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)
 (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 financial position 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, 2005 and 2006, the income tax contingencies recorded as tax payable amounted
to $5,070 and $6,759, respectively. 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.Effective January 1, 2003, the Company measures its obligations associated with its
retirement of tangible long-lived assets in accordance with the provisions of SFAS No. 143,
Accounting for Asset Retirement Obligations. As at December 31, 2006, the liability
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.
 19.
    
    Derivative InstrumentsAt December 31, 2006
 Derivative Instrument
    
    Notional Amount
    
    Average Rate/Price
    
    MaturityForward Contracts Yen Forward Contracts
    
    6,102,865
    
    114.43/USD
    
    2007 Euro Forward Contracts
    
    9,137
    
    1.31/Euro
    
    2007 SGD Forward Contracts
    
    13,871
    
    1.54/USD
    
    2007Interest rate swap
    
    300,000
    
    LIBOR + 0.93%
    
    20132006 Option (shares)
    
    214,800
    
    S$1.60/S$2.15
    
    2011
 In March 2006, the Company entered into a call option transaction (2006 Option) with
Goldman Sachs International (GS) to replace the call option transaction that the Company
had previously entered into with GS in August 2004 (2004 Option) that
expired on April 2, 2006. Under the 2006 Option, GS may purchase up to 214,800 of the
Companys ordinary shares at a price of S$1.60 per share in the
first year and S$2.15 per share
thereafter. If the 2006 Option is exercised in
full and physically settled the Company will receive approximately $300,000 (based on an
exchange rate of $1.00 = S$1.54). If the 2006 Option is exercised in full and physically settled in the first year, the Company will receive
approximately $222,911 (based on an exchange rate
$1.00 = S$1.54).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.
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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 the first year of the 2006 Option, the Company has the right to terminate the 2006
Option early in whole or in part upon the first time that the closing price of the ordinary shares equals or exceeds S$1.75 on each of any 20 business days in a consecutive 30 business
day period. If the Company elects to do so and elects to settle by delivering shares, GS
will have the right but not the obligation to buy from the Company from time to time during
the following 30 business days such number of the ordinary shares up to the amount
terminated at S$1.60 per share. As of December 31, 2006, the
Companys right to terminate the 2006 Option had not been
triggered.From the second year of the 2006 Option, the Company has the right to terminate the 2006
Option early in whole or in part if the closing price of the ordinary shares is equal to or
exceeds S$2.6875 on each of any 20 business days in any consecutive 30 business day period.
If the Company elects to exercise this right of termination, GS will be required to buy from
the Company such number of the ordinary shares relating to the terminated portion of the 2006
Option at S$2.15 per share.The 2006 Option is a derivative instrument that is dual indexed to the Companys own
stock and the Singapore Dollar currency exchange rate. As a result, the 2006 Option is not eligible for the scope
exception of paragraph 11(a) of SFAS No. 133 and is accounted for
as a derivative in accordance with SFAS No. 133, with changes in its fair value recorded in
earnings.The fair value of the 2006 Option at issuance was approximately $6,040 and has been recorded
as a liability. In subsequent periods, changes in the fair value of the 2006 Option have been
recorded in earnings as other income (loss).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 and
fair value hedges except for certain foreign currency forward contracts and the 2006 Option.
These certain foreign currency forward contracts relate to groups of forecasted foreign
currency denominated payments. While the Company expects these derivatives 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. Gains and losses on these instruments
are included in foreign exchange gain (loss).The Company uses derivative instruments to manage identified foreign currency risks
resulting from its Singapore dollar denominated debt and 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, 2006, the ineffective amount
reclassified from other comprehensive income into earnings was a loss of $269 and was
included in foreign exchange gain (loss). Amounts included in other comprehensive income
(loss) related to hedges of foreign currency purchase commitments are reclassified into
earnings (foreign exchange gain (loss)) when depreciation commences for the asset related to
the purchase commitment.In August 2004, the Company entered into two interest rate cap contracts in respect of the
floating rate obligations associated with $100,000 of the CSP Syndicated Loan, with the
effect of placing an upper limit on the cash flow and earnings exposure due to market
interest rate changes. In March 2005, the Company entered into two additional interest rate
cap contracts related to the floating rate obligations associated with $200,000 of the above
mentioned US dollar loan. The amount relating to time value, which is excluded from the
assessment of hedge effectiveness, was $(989) in the year ended December 31, 2006. For the
year ended December 31, 2006, the ineffective amount reclassified into earnings (Other
income (loss), net) was a gain of $806. The interest rate cap contracts matured following
the maturity of the loan.
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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 entered into interest rate swap contracts to hedge fixed-rate interest
obligations associated with Convertible Notes issued in April 2001, with the effect of
swapping the fixed-rate interest obligations to floating-rate obligations based on LIBOR
rates. The Company designated these interest rate swap contracts as fair-value hedges. The
interest rate swaps were terminated following the completion of the tender offer for the
Convertible Notes in September 2005.For the fair-value hedge transactions, changes in fair value of the derivative and changes
in the fair value of the item being hedged are both recorded in earnings as interest
expense. Net recognized gains (losses) arising from ineffectiveness of these fair value
hedges were $(1,771), $(5,246) and $Nil in the years ended December 31, 2004, 2005 and 2006,
respectively.In 2006, the Company issued $300,000 Senior Notes due 2013 with semi-annual interest
payments. The Company entered into an interest rate swap (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 income (loss), net). Net recognized gain arising from
ineffectiveness of fair value hedges was $574 in the year ended December 31, 2006.The estimated net amount of existing losses from cash flow hedges expected to be
reclassified into earnings within the next year is $(156). Net realized losses recognized
from cash flow hedges were $(469) and $(133) for the years ended December 31, 2005 and 2006,
respectively.The components of other comprehensive income (loss) related to derivative and hedging
activities consist of the following:
 December 31,2005
    
    
    2006Beginning
    
    $
    (2,634
    )
    
    $
    (2,036
    )Cumulative effect adjustment on adoption of SAB 108
    
    
    
    
    
    
    1,906Reclassification of cash flow hedging losses into earnings
    
    
    469
    
    
    
    133Share of cash flow hedging activity gains of SMP
    
    
    17
    
    
    
    9Net unrealized gains (losses) on change in cash flow
hedging derivative fair values
    
    
    112
    
    
    
    (1,362
    )Ending
    
    $
    (2,036
    )
    
    $
    (1,350
    )
 The Company exposes itself 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, it does not possess 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. The maximum amount of loss due to credit risk associated with these
financial instruments is their respective fair values as stated in Note 20.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.
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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.
    
    Fair Values of Financial Instruments
 December 31,2005
    
    
    2006Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated fairamount
    
    
    fair value
    
    
    amount
    
    
    valueAsset/(Liability)
    
    $
    
    
    $
    
    
    $
    
    
    $Long term debt
    
    
    (1,447,892
    )
    
    
    (1,466,425
    )
    
    
    (1,331,660
    )
    
    
    (1,336,045
    )Forward foreign exchange contracts
    
    
    29
    
    
    
    29
    
    
    
    91
    
    
    
    91Forward foreign exchange contracts
    
    
    (344
    )
    
    
    (344
    )
    
    
    (1,724
    )
    
    
    (1,724
    )Embedded
foreign currency derivatives in purchase contracts
    
    
    
    
    
    
    
    
    
    
    297
    
    
    
    297Interest rate swap
    
    
    
    
    
    
    
    
    
    
    3,109
    
    
    
    3,109Interest rate cap
    
    
    1,394
    
    
    
    1,394
    
    
    
    
    
    
    
    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 term deposits is estimated by obtaining quotes from brokers. The fair value of
equity securities is based on market prices quoted on the last business day of the fiscal
year.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.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.Embedded foreign currency derivatives in purchase
contracts.The fair value is estimated by reference to movements
in exchange rates between contract date and balance sheet date.Interest rate swap.The fair value is estimated using market quotations for interest rate
swaps with similar terms, adjusted where necessary for maturity differences.Interest rate cap.The fair value is estimated by obtaining quotes from brokers.2006 Option.The fair value is based on an external
market value quotation. Such market value quotation is 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.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.
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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)
 21.
    
    Operating Segment, Geographic and Major Customer Information
 Operating 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.
 Years ended December 31,2004
    
    
    2005
    
    
    2006RevenuesUSA
    
    $
    618,743
    
    
    $
    743,431
    
    
    $
    1,079,187Taiwan
    
    
    161,420
    
    
    
    112,089
    
    
    
    122,881Japan
    
    
    33,258
    
    
    
    33,496
    
    
    
    23,861Singapore
    
    
    3,392
    
    
    
    8,995
    
    
    
    37,716Others
    
    
    115,318
    
    
    
    134,723
    
    
    
    150,880$
    932,131
    
    
    $
    1,032,734
    
    
    $
    1,414,525
 December 31,2005
    
    
    2006Property, Plant and Equipment, netSingapore
    
    $
    2,048,913
    
    
    $
    2,271,012Others
    
    
    782
    
    
    
    2,107$
    2,049,695
    
    
    $
    2,273,119
 Years ended December 31,2004
    
    
    2005
    
    
    2006Revenue by Major Customer:Customer A
    
    
    20.7
    %
    
    
    22.3
    %
    
    
    24.0
    %Customer B
    
    
    
    
    
    
    19.3
    
    
    
    18.9Customer C
    
    
    
    
    
    
    
    
    
    
    10.3Customer D
    
    
    13.4
    
    
    
    *
    
    
    
    *Customer E
    
    
    10.1
    
    
    
    *
    
    
    
    *
 
 *
    
    less than 10% of net revenue for the year F-45




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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)
 22.
    
    Other Operating Expenses, net
 Other operating expenses, net primarily consists of:A gain of $15,257 in 2004 associated with the resolution of a goods and services tax matter
amounting to $4,900 and a gain of $10,357 resulting from an equipment disposition with CSMC
Technologies Corporation.An impairment charge of $1,705 in 2004 resulting from the migration to an enhanced
manufacturing system.A restructuring charge of $4,558, $Nil and $Nil in December 31, 2004, 2005 and 2006
respectively, relating to the closing of the Companys Fab 1, in accordance with SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. In February 2003,
the Company announced that as a result of continuing under-utilization of its fabs resulting
from the deep and continuing semiconductor industry downturn, it would close Fab 1 and
consolidate that business into Fab 2. The production in Fab 1 ceased at the end of March
2004. A summary of estimated and actual costs incurred is shown below. These amounts do not
include gain on disposition of fixed assets. Plant closure, customer assistance and related
expenses mainly relate to product qualification, prototyping, reticles, unhook and
decommissioning of equipment and other activities to be carried out for consolidating the
Fab 1 business into Fab 2.
 CumulativeexpenseTotal estimated costs
    
    
    to dateEmployee termination benefits
    
    $
    8,000
    
    
    $
    7,673Plant closure, customer assistance and related expenses
    
    
    9,000 to 12,000
    
    
    
    9,306Total
    
    $
    17,000 to 20,000
    
    
    $
    16,979
 An impairment charge of $3,938 recorded in 2005 on certain plant and equipment which were
initially classified as held for sale during the period 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
otherwise 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.A foreign exchange gain (loss) of $1,320, $(356) and $(6,125) for the years ended December
31, 2004, 2005 and 2006 respectively.
 23.
    
    Other Income (loss), net
 In 2004, other income (loss), net included the recognition of a gain of $14,330 from the
sale of technology to CSMC Technologies Corporation.In 2005, other income (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 income (loss), net included an other-than-temporary impairment loss of $2,698 on
available-for-sale securities.
 F-46