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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F/A
(Amendment No. 1)
(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.
(Exact name of Registrant as specified in its charter)
Republic of Singapore
(Jurisdiction of incorporation or organization)
(Jurisdiction of incorporation or organization)
60 Woodlands Industrial Park D
Street 2, Singapore 738406
+65-6362 2838
(Address of principal executive offices)
Street 2, Singapore 738406
+65-6362 2838
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
American Depositary Shares, | NASDAQ Global Select Market | |
Each represented by ten Ordinary Shares |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of class)
None
(Title of class)
Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:
Not Applicable
obligation pursuant to Section 15(d) of the Act:
Not Applicable
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 2,535,895,593 Ordinary Shares and 28,350 Convertible Redeemable Preference Shares as of December 31, 2006.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes o No þ
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EXPLANATORY NOTE
Chartered Semiconductor Manufacturing Ltd. is filing this Amendment No. 1 on Form 20-F/A to its Annual Report on Form 20-F for the fiscal year ended December 31, 2006, which was originally filed with the Securities and Exchange Commission on March 15, 2007, to amend Items 18 and 19 by including separate audited financial statements for Silicon Manufacturing Partners Pte Ltd, or SMP, as of and for the year ended December 31, 2004, SMP’s unaudited financial statements as of and for the 12 months ended December 31, 2005 (which period includes the nine months of SMP’s fiscal year 2005 and the first three months of SMP’s fiscal year 2006) and SMP’s audited financial statements as of and for the 12 months ended December 31, 2006 (which period includes the last nine months of SMP’s fiscal year 2006 and the first three months of SMP’s fiscal year 2007), and the accompanying audit report of KPMG. SMP’s financial statements are reported in U.S. dollars and presented in accordance with United States generally accepted accounting principles. These financial statements are being filed because SMP has exceeded certain “significance” tests under Rule 3-09 of Regulation S-X.
This Amendment does not reflect events that have occurred after the March 15, 2007 filing date of the Annual Report on Form 20-F, or modify or update the disclosures presented therein, except to reflect the amendments described above.
Item 18. Financial Statements
The consolidated financial statements of Chartered Semiconductor Manufacturing Ltd were included as pages F-1 to F-46 of the Form 20-F filed on March 15, 2007. The separate financial statements of Silicon Manufacturing Partners Pte Ltd are included as pages FS-1 to FS-22 of this Amendment No. 1.
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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 | |
or after January 30, 2006. | ||
2.3(27) | Specimen certificate for ordinary shares transferred on or after January 30, 2006 in | |
respect of shares issued on or after 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 Indentures | ||
4.1.1(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 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. |
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Strategic Alliances | ||
CSP | ||
4.7.1(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. | ||
SMP | ||
4.8.1(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. |
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Technology transfer, license, joint development and other related agreements | ||
Agere/Lucent | ||
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. | ||
Toshiba | ||
4.10(2)(+) | Patent Cross License Agreement dated August 12, 1999 by and between the company and | |
Toshiba Corporation. | ||
IBM | ||
4.11.1(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. |
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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 Sharing | |
Agreement dated November 26, 2002 by and between the company and International Business | ||
Machines Corporation. | ||
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 Samsung | ||
4.12(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. | ||
Motorola | ||
4.13(4)(+) | Patent License Agreement dated July 1, 2003 by and between the company and Motorola, Inc. | |
Property Agreements | ||
Fab 2 | ||
4.14(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. | ||
Fab 3 | ||
4.15.1(5) | Sub-Lease 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. |
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Fabs 2 and 3 Site Slurry Treatment Plant | ||
4.16.1(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 among Terra Investments Pte. Ltd. | |
and the company relating to the Agreement for Sub-License and Sub-Lease (Private Lot | ||
A12787(k) now known as A1964508) dated July 8, 2005. | ||
Fab 6 | ||
4.17.1(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 7 | ||
4.18.1(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 among 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 by 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 by our 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 by 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 Agreements | ||
4.20(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. |
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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(28) | Certification of the President and Chief Executive Officer pursuant to Section 302 of | |
the Sarbanes-Oxley Act of 2002. | ||
12.2(28) | Certification of the Senior Vice President and Chief Financial Officer pursuant to | |
Section 302 of the Sarbanes-Oxley Act of 2002. | ||
13.1(28) | Certification of the President and Chief Executive Officer pursuant to 18 U.S.C Section | |
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
13.2(28) | 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 relating to incorporation of audit report relating to Chartered | |
Semiconductor Manufacturing Ltd. | ||
15.2(28) | Consent of KPMG relating to incorporation of audit report relating to Silicon | |
Manufacturing Partners Pte Ltd. |
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. |
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(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 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. |
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(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) | Previously filed as an exhibit to Chartered Semiconductor Manufacturing Ltd.’s annual report on Form 20-F for the year ended December 31, 2006 on March 15, 2007. | |
(28) | 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. |
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the company certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Amendment No. 1 to its annual report to be signed on its behalf by the undersigned, thereunto duly authorized on this 29th day of June 2007.
CHARTERED SEMICONDUCTOR MANUFACTURING LTD. | ||||
By: | /s/ George Thomas | |||
Name: | George Thomas | |||
Title: | Senior Vice President and Chief Financial Officer | |||
This annual report has been signed by the following persons in the capacities indicated:
SIGNATURE | TITLE | DATE | ||
/s/ James A. Norling | Chairman of the Board | June 29, 2007 | ||
James A. Norling | ||||
/s/ Chia Song Hwee | President and Chief Executive | June 29, 2007 | ||
Officer (principal executive officer) | ||||
Chia Song Hwee | ||||
/s/ George Thomas | Senior Vice President and Chief | June 29, 2007 | ||
Financial Officer (principal financial | ||||
George Thomas | and accounting officer) | |||
/s/ Andre Borrel | Director | June 29, 2007 | ||
Andre Borrel | ||||
/s/ Charles E. Thompson | Director | June 29, 2007 | ||
Charles E. Thompson | ||||
/s/ Tsugio Makimoto | Director | June 29, 2007 | ||
Tsugio Makimoto | ||||
/s/ Tay Siew Choon | Director | June 29, 2007 | ||
Tay Siew Choon | ||||
/s/ Peter Seah Lim Huat | Director | June 29, 2007 | ||
Peter Seah Lim Huat | ||||
/s/ Philip Tan Yuen Fah | Director | June 29, 2007 | ||
Philip tan yuen fah | ||||
/s/ Pasquale Pistorio | Director | June 29, 2007 | ||
Pasquale Pistorio |
10
Table of Contents
SIGNATURE | TITLE | DATE | ||
/s/ Steven H. Hamblin | Director | June 29, 2007 | ||
Steven H. Hamblin | ||||
/s/ Maurizio Ghirga | Director | June 29, 2007 | ||
Maurizio Ghirga |
11
Table of Contents
SILICON MANUFACTURING PARTNERS PTE LTD
Financial Statements
For the Year Ended December 31, 2004 and the Twelve
Month Periods Ended December 31, 2005 and 2006
Month Periods Ended December 31, 2005 and 2006
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The shareholders of
Silicon Manufacturing Partners Pte Ltd:
We have audited the accompanying balance sheet of Silicon Manufacturing Partners Pte Ltd as of December 31, 2006, and the related statements of income, comprehensive income, shareholders’ equity and cash flows for the year ended December 31, 2004 and the twelve month period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Silicon Manufacturing Partners Pte Ltd as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2004 and twelve month period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
KPMG
Singapore
June 29, 2007
June 29, 2007
FS1
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SILICON MANUFACTURING PARTNERS PTE LTD
BALANCE SHEETS — in US Dollars
As of December 31
In thousands (except per share data)
In thousands (except per share data)
2005 | 2006 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 20,788 | $ | 26,726 | ||||
Receivables, net | 6,447 | 6,268 | ||||||
Receivables from related parties | 22,633 | 19,598 | ||||||
Inventories | 19,003 | 17,346 | ||||||
Prepaid expenses | 2,230 | 2,125 | ||||||
Total current assets | 71,101 | 72,063 | ||||||
Property, plant and equipment, net | 55,758 | 21,972 | ||||||
Other non-current assets | 34 | 55 | ||||||
Total assets | $ | 126,893 | $ | 94,090 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Payables | $ | 10,258 | $ | 11,066 | ||||
Payables to related parties | 16,691 | 24,236 | ||||||
Other current liabilities | 4,362 | 5,314 | ||||||
Total current liabilities | 31,311 | 40,616 | ||||||
Non-current liabilities | 8 | 19 | ||||||
Total liabilities | 31,319 | 40,635 | ||||||
Ordinary share capital: | ||||||||
Authorized: 1,000,000 shares | ||||||||
Issued and outstanding: 323,965 shares | 192,389 | 152,389 | ||||||
Accumulated deficit | (96,797 | ) | (98,933 | ) | ||||
Accumulated other comprehensive loss | (18 | ) | (1 | ) | ||||
Total shareholders’ equity | $ | 95,574 | $ | 53,455 | ||||
Commitments and contingencies | ||||||||
Total liabilities and shareholders’ equity | $ | 126,893 | $ | 94,090 | ||||
See accompanying notes to financial statements
FS2
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SILICON MANUFACTURING PARTNERS PTE LTD
STATEMENTS OF INCOME — in US Dollars
For the Year Ended December 31, 2004 and the Twelve Month Periods Ended December 31, 2005
and 2006
In thousands
and 2006
In thousands
2004 | 2005 | 2006 | ||||||||||
(Unaudited) | ||||||||||||
Net revenue | $ | 303,570 | $ | 201,345 | $ | 197,932 | ||||||
Cost of revenue | (267,967 | ) | (196,470 | ) | (159,922 | ) | ||||||
Gross profit | 35,603 | 4,875 | 38,010 | |||||||||
OPERATING EXPENSES | ||||||||||||
General and administrative | 4,762 | 4,426 | 3,175 | |||||||||
Other operating expenses (income), net | (208 | ) | 5 | 126 | ||||||||
Total operating expenses | 4,554 | 4,431 | 3,301 | |||||||||
Other income (loss), net | (2,543 | ) | 8 | 13 | ||||||||
Interest income | 823 | 1,386 | 1,535 | |||||||||
Interest expense and amortization of debt discount | (8,558 | ) | — | — | ||||||||
Income before income taxes | 20,771 | 1,838 | 36,257 | |||||||||
Income tax expense | 65 | 352 | 216 | |||||||||
Net income | $ | 20,706 | $ | 1,486 | $ | 36,041 | ||||||
See accompanying notes to financial statements
FS3
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SILICON MANUFACTURING PARTNERS PTE LTD
STATEMENTS OF COMPREHENSIVE INCOME — in US Dollars
For the Year Ended December 31, 2004 and the Twelve Month Periods Ended December 31, 2005
and 2006
In thousands
and 2006
In thousands
2004 | 2005 | 2006 | ||||||||||
(Unaudited) | ||||||||||||
Net income | $ | 20,706 | $ | 1,486 | $ | 36,041 | ||||||
Net unrealized gains on change in cash flow hedging fair values | 8,002 | — | — | |||||||||
Reclassification of cash flow hedging losses into earnings | 48 | 37 | 17 | |||||||||
Other comprehensive income | 8,050 | 37 | 17 | |||||||||
Comprehensive income | $ | 28,756 | $ | 1,523 | $ | 36,058 | ||||||
See accompanying notes to financial statements
FS4
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SILICON MANUFACTURING PARTNERS PTE LTD
STATEMENTS OF SHAREHOLDERS’ EQUITY — in US Dollars
In thousands
In thousands
Accumulated | ||||||||||||||||||||
Other | Total Share | |||||||||||||||||||
Ordinary Share | Accumulated | Compre- | holders’ | |||||||||||||||||
Capital | Deficit | hensive Loss | Equity | |||||||||||||||||
No. | $ | $ | $ | $ | ||||||||||||||||
Balance at January 1, 2004 | 425,000 | 252,389 | (41,501 | ) | (8,105 | ) | 202,783 | |||||||||||||
Net income | — | — | 20,706 | — | 20,706 | |||||||||||||||
Other comprehensive income | — | — | — | 8,050 | 8,050 | |||||||||||||||
Dividend paid | — | — | (36,680 | ) | — | (36,680 | ) | |||||||||||||
Balance at December 31, 2004 | 425,000 | 252,389 | (57,475 | ) | (55 | ) | 194,859 | |||||||||||||
Net income (unaudited) | — | — | 1,486 | — | 1,486 | |||||||||||||||
Other comprehensive income (unaudited) | — | — | — | 37 | 37 | |||||||||||||||
Return of capital (unaudited) | (101,035 | ) | (60,000 | ) | — | — | (60,000 | ) | ||||||||||||
Dividend paid (unaudited) | — | — | (40,808 | ) | — | (40,808 | ) | |||||||||||||
Balance at December 31, 2005 (unaudited) | 323,965 | 192,389 | (96,797 | ) | (18 | ) | 95,574 | |||||||||||||
Net income | — | — | 36,041 | — | 36,041 | |||||||||||||||
Other comprehensive income | — | — | — | 17 | 17 | |||||||||||||||
Return of capital | — | (40,000 | ) | — | — | (40,000 | ) | |||||||||||||
Dividend paid | — | — | (38,177 | ) | — | (38,177 | ) | |||||||||||||
Balance at December 31, 2006 | 323,965 | 152,389 | (98,933 | ) | (1 | ) | 53,455 | |||||||||||||
See accompanying notes to financial statements
FS5
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SILICON MANUFACTURING PARTNERS PTE LTD
STATEMENTS OF CASH FLOWS — in US Dollars
For the Year Ended December 31, 2004 and the Twelve Month Periods Ended December 31, 2005
and 2006
In thousands
and 2006
In thousands
2004 | 2005 | 2006 | ||||||||||
(Unaudited) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 20,706 | $ | 1,486 | $ | 36,041 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation of property, plant and equipment | 137,415 | 84,105 | 36,702 | |||||||||
Gain on disposal of property, plant and equipment | (5 | ) | — | (50 | ) | |||||||
Others, net | (1,093 | ) | 183 | (4 | ) | |||||||
Change in assets and liabilities: | ||||||||||||
Receivables | 9,675 | (1,843 | ) | 190 | ||||||||
Receivables with related parties | 16,162 | (2,305 | ) | 3,035 | ||||||||
Payables with related parties | (14,405 | ) | (1,165 | ) | 1,045 | |||||||
Inventories | 10,214 | 1,910 | 1,657 | |||||||||
Prepaid expenses and other current assets | 111 | 85 | 105 | |||||||||
Payables and other current liabilities | (8,784 | ) | 1,380 | 2,542 | ||||||||
Income taxes payable | 165 | (1,276 | ) | (162 | ) | |||||||
Net cash provided by operating activities | 170,161 | 82,560 | 81,101 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Proceeds from sale of property, plant and equipment | 54 | 11 | 50 | |||||||||
Payments for property, plant and equipment | (19,797 | ) | (6,902 | ) | (3,536 | ) | ||||||
Net cash used in investing activities | (19,743 | ) | (6,891 | ) | (3,486 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Debt repayments | (171,428 | ) | — | — | ||||||||
Dividends paid | (71,188 | ) | (40,808 | ) | (38,177 | ) | ||||||
Return of capital | — | (51,500 | ) | (33,500 | ) | |||||||
Net cash used in financing activities | (242,616 | ) | (92,308 | ) | (71,677 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (92,198 | ) | (16,639 | ) | 5,938 | |||||||
Cash and cash equivalents at the beginning of the year | 129,625 | 37,427 | 20,788 | |||||||||
Cash and cash equivalents at the end of the year | $ | 37,427 | $ | 20,788 | $ | 26,726 | ||||||
Supplemental Cash Flow Information | ||||||||||||
Interest paid (net of amounts capitalized) | 7,764 | — | — | |||||||||
Income taxes paid | — | 1,579 | 183 | |||||||||
Non-cash investing and financing activities | ||||||||||||
Property, plant and equipment acquired on credit | 174 | 967 | 347 |
See accompanying notes to financial statements
FS6
Table of Contents
SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
1 | Background and Summary of Significant Accounting Policies | |
(a) Business and Organization | ||
Silicon Manufacturing Partners Pte Ltd (the “Company”) was incorporated in 1998. The immediate holding company is Agere Systems Singapore Pte Ltd (“Agere”), incorporated in the Republic of Singapore. The ultimate holding company is Agere Systems Inc., incorporated in the United States of America. The Company is owned 51% by Agere and 49% by Chartered Semiconductor Manufacturing Ltd (“Chartered”), incorporated in Singapore. | ||
The principal activities of the Company are those of an independent foundry that fabricates semiconductor integrated circuits on silicon wafers using advanced production facilities and the proprietary integrated circuit designs of its customers in the semiconductor industry. The Company operates in Singapore and its principal markets are United States of America, Taiwan and Europe. | ||
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. | ||
In August 2005, the Company’s board of directors approved a change to the Company’s fiscal year end from December 31 to September 30 so as to coincide with the fiscal year end of Agere as required by Singapore law. These financial statements are prepared for the twelve-month periods ending December 31 for filing together with the Annual Report of Chartered on Form 20-F with the U.S. Securities and Exchange Commission (“SEC”) as required by SEC Rule S-X 3-09. Under the requirements of Rule S-X 3-09, insofar as practicable, the financial statements of the Company filed together with Chartered’s Form 20-F should be as of the same dates and for the same periods as the audited consolidated financial statements of Chartered. | ||
(b) Basis of Presentation | ||
The financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“US GAAP”). | ||
(c) Reclassifications and Adjustments | ||
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 and certain other immaterial reclassification. | ||
Until January 30, 2006, ordinary shares of the Company had a par value of S$1.00. The Singapore Companies (Amendment) Act 2005, which came into the 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”. |
FS7
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
(d) Use of Estimates | ||
The preparation of the 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 judgement and such estimates include estimated useful lives and salvage values of long-lived assets, the recoverability of the carrying value of long-lived assets, valuation of accounts receivable and inventories, the recognition and measurement of revenue and sales credits and returns allowance. Actual results could differ from these estimates. | ||
During 2006, the Company changed the estimated useful lives in relation to equipment and machinery from 5 years to 3 to 8 years. The change in the estimated useful lives is a change in accounting estimate that was made prospectively. The change in accounting estimate does not have material impact to the Company’s financial statements. | ||
(e) Foreign Currency | ||
The functional currency of the Company 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 (income), net” in the statements of income. | ||
(f) Business and Credit Concentrations | ||
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. The three largest customers of the Company, other than related parties, accounted for 73%, 77% (unaudited) and 60% of the Company’s net revenue in the years ended December 31, 2004, 2005 and 2006, respectively. Total accounts receivable from these customers was $4,765 (unaudited) and $4,543 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. |
FS8
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, 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 68% and 52% of total balances at December 31, 2005 and 2006, respectively. | ||
The amounts related to derivative instruments which are subject to credit risk are generally limited to the amounts, if any, by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. The Company’s hedging practices are further described in Note 13. | ||
(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) 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. | ||
(i) 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. |
FS9
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
(j) Derivative Instruments and Hedging Activities | ||
The Company records derivatives on the balance sheet as assets or liabilities measured at fair value in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities”, as amended. 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 (loss) are recognized immediately in earnings. In all situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the balance sheet, and recognizes any changes in its fair value in earnings. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
(k) 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: |
Mechanical and electrical installations | — | 10 years | ||||
Equipment and machinery | — | 3 to 8 years | ||||
Office 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 balance sheets and any gain or loss is included in the statements of income. | ||
(l) Impairment of Long-Lived Assets | ||
The Company reviews long-lived 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. | ||
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. | ||
(m) Revenue Recognition | ||
The Company derives revenue primarily from fabricating semiconductor wafers and, to a lesser extent, from providing associated subcontracted assembly and test services as well as pre-fabricating services such as masks generation and engineering services. The Company enters into arrangements with customers which typically include some or all of the above deliverables. | ||
When arrangements include multiple deliverables, the Company first determines whether each deliverable meets the separation criteria in 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. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
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. | ||
(n) 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. | ||
(o) 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. | ||
(p) Operating Leases | ||
The Company leases its fab from its minority shareholder under a non-cancellable operating lease, with an option to renew upon expiry of the lease term (the ‘Operating Lease’). Rentals under the Operating Lease and other operating leases are expensed on a straight-line basis over the term of the leases. |
FS12
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
(q) 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. |
2 | Related Party Transactions | |
Under the strategic alliance agreement of the Company with its two shareholders, the shareholders do not share the Company’s net results in the same ratio as their equity holdings. Instead, each shareholder is entitled to the gross profits from sales to the customers that it directs to the Company after deducting its share of the overhead costs of the Company. | ||
Under the assured supply and demand agreement that both shareholders signed with the Company, with effect from January 1, 2001, each shareholder is billed for unutilised allocated wafer capacity if the quantity of wafers started for production (“wafer starts”) based on their respective orders is less than its allocated capacity. Such billed amounts represent the Company’s unrecovered overhead costs as a result of the allocated capacity not being taken up by one, or both, of the shareholders. During the financial years ended December 31, 2005 and 2006, the shareholders jointly agreed with the Company to waive the requirement for such billings even though their wafer starts fell below their allocated capacities. | ||
In September 2004, the two shareholders of the Company entered into a supplementary agreement to the strategic alliance agreement. Among other things, the supplementary agreement provides that the Company can pay dividends out of the profits determined on a year-to-year basis rather than on a cumulative basis, as previously was the case. | ||
Significant related party transactions | ||
For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. | ||
An affiliated company is defined as one, other than a related company, which has common direct or indirect shareholders or common directors with the Company. |
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Table of Contents
SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
Other than those disclosed elsewhere in these financial statements, the following were significant transactions with related parties on terms agreed between the parties: |
2004 | 2005 | 2006 | ||||||||||||
(Unaudited) | ||||||||||||||
Immediate Holding Company | ||||||||||||||
Recharge of employee related and other expenses to the Company | $ | 82 | $ | 640 | $ | 1,065 | ||||||||
Sale of processed wafers | 162,927 | 96,800 | 64,477 | |||||||||||
Affiliates of Immediate Holding Company | ||||||||||||||
Recharge of employee related and other expenses to the Company | 3,882 | 3,083 | 2,190 | |||||||||||
Sale of processed wafers | 12,773 | 31,561 | 51,025 | |||||||||||
Purchase of processed wafers | — | 856 | — | |||||||||||
Purchase of property, plant and equipment | — | 976 | — | |||||||||||
Minority Shareholder | ||||||||||||||
Purchase of property, plant and equipment | 462 | — | — | |||||||||||
Rental expense | 15,307 | 15,662 | 15,958 | |||||||||||
Recharge of employee related and other expenses to the Company | 33,199 | 36,435 | 36,490 | |||||||||||
Sale of processed wafers | 1,371 | 149 | 52 | |||||||||||
Sale of property, plant and equipment | — | 11 | — | |||||||||||
Recharge of other expenses from the Company | 499 | 302 | 1,071 | |||||||||||
Affiliates of Minority Shareholder | ||||||||||||||
Purchase of property, plant and equipment | 43 | 53 | — | |||||||||||
Purchase of processed wafers | 180 | 155 | 151 | |||||||||||
Recharge of other expenses to the Company | 217 | 161 | 190 | |||||||||||
Sale of processed wafers | 270 | 69 | 23 | |||||||||||
Recharge of other expenses from the Company | — | 24 | 58 | |||||||||||
The amounts due from related parties are: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Amount due from immediate holding company | $ | 15,234 | $ | 5,270 | ||||||
Amount due from affiliates of immediate holding company | 7,304 | 13,509 | ||||||||
Amount due from minority shareholder | 65 | 815 | ||||||||
Amount due from affiliates of minority shareholder | 30 | 4 | ||||||||
$ | 22,633 | $ | 19,598 | |||||||
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
The amounts due to related parties are: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Amount due to immediate holding company | $ | 4,528 | $ | 7,892 | ||||||
Amount due to affiliates of immediate holding company | 336 | 270 | ||||||||
Amount due to minority shareholder | 11,729 | 16,009 | ||||||||
Amount due to affiliates of minority shareholder | 98 | 65 | ||||||||
$ | 16,691 | $ | 24,236 | |||||||
The amounts due to related parties above include unpaid obligation relating to the return of capital that is further described in Note 9. | ||
The balances with related parties are unsecured, interest free and repayable within 12 months. | ||
3 | Cash and Cash Equivalents |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Cash at banks and on hand | $ | 5,283 | $ | 18,572 | ||||||
Short-term deposits with banks | 15,505 | 8,154 | ||||||||
$ | 20,788 | $ | 26,726 | |||||||
Short-term deposits with banks consist of fixed deposits with original maturities of 90 days or less. | ||
4 | Receivables, net |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Trade receivables | $ | 7,897 | $ | 6,781 | ||||||
Allowance for sales credits and returns | (1,537 | ) | (568 | ) | ||||||
Trade receivables, net of allowance | 6,360 | 6,213 | ||||||||
Other receivables | 87 | 55 | ||||||||
$ | 6,447 | $ | 6,268 | |||||||
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Table of Contents
SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
Movement in the allowance for sales credits and returns is as follows: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Beginning | $ | 1,505 | $ | 1,537 | ||||||
Utilized in year | (2,410 | ) | (1,752 | ) | ||||||
Reversed during the year | (474 | ) | (992 | ) | ||||||
Charge for the year | 2,916 | 1,775 | ||||||||
Ending | $ | 1,537 | $ | 568 | ||||||
5 | Inventories |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Raw materials | $ | 967 | $ | 2,706 | ||||||
Work-in-progress | 17,996 | 14,609 | ||||||||
Consumable supplies and spares | 40 | 31 | ||||||||
$ | 19,003 | $ | 17,346 | |||||||
6 | Property, Plant and Equipment |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Cost | ||||||||||
Mechanical and electrical installations | $ | 4,814 | $ | 4,846 | ||||||
Equipment and machinery | 801,946 | 805,043 | ||||||||
Office and computer equipment | 10,130 | 10,125 | ||||||||
Assets under installation and construction | 834 | 621 | ||||||||
Total cost | $ | 817,724 | $ | 820,635 | ||||||
Accumulated depreciation | $ | 761,966 | $ | 798,663 | ||||||
Property, plant and equipment, net | $ | 55,758 | $ | 21,972 | ||||||
Depreciation amounted to $137,415, $84,105 (unaudited) and $36,702 for the years ended December 31, 2004, 2005 and 2006, respectively. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
7 | Other Current Liabilities |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Accrued employee bonuses and related expenses | $ | 3,380 | $ | 3,927 | ||||||
Other accrued expenses | 542 | 1,051 | ||||||||
Other current liabilities | 168 | 226 | ||||||||
Income taxes payable | 272 | 110 | ||||||||
$ | 4,362 | $ | 5,314 | |||||||
8 | Income Taxes | |
Substantially all of the Company’s pre-tax income and income tax expense is sourced from Singapore. The Company has been granted pioneer status under the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86) of Singapore for the wafer fabrication of integrated circuits for a ten-year period beginning May 1, 2000. 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. Income arising from activities not covered under the pioneer incentive (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 the interest income. | ||
Income tax expense consists of the following: |
2004 | 2005 | 2006 | ||||||||||||
(Unaudited) | ||||||||||||||
Current expense | $ | 165 | $ | 304 | $ | 237 | ||||||||
Deferred expense (benefit) | (100 | ) | 48 | (21 | ) | |||||||||
$ | 65 | $ | 352 | $ | 216 | |||||||||
A reconciliation of the expected tax expense computed by applying the Singapore statutory tax rate of 20% for 2004, 2005 and 2006 to income before income taxes to the income tax expense is as follows: |
2004 | 2005 | 2006 | ||||||||||||
(Unaudited) | ||||||||||||||
Income tax expense computed at the Singapore statutory tax rate | $ | 4,154 | $ | 367 | $ | 7,251 | ||||||||
Permanent non-deductible expenses | 767 | 53 | 25 | |||||||||||
Effect of pioneer status, including wear and tear allowances not recognized as deferred tax benefit | (4,856 | ) | (118 | ) | (7,054 | ) | ||||||||
All other items, net | — | 50 | (6 | ) | ||||||||||
Income tax expense | $ | 65 | $ | 352 | $ | 216 | ||||||||
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
Deferred tax assets which are non-current and relate to Singapore, consist of the following: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Property, plant and equipment | $ | 34 | $ | 55 | ||||||
Under Singapore tax law, loss carryforwards and tax depreciation of property, plant and equipment (hereinafter referred to as wear and tear allowances) are deductible to the extent of income before loss carryforwards and wear and tear allowances. Unutilised losses and wear and tear allowances can be carried forward indefinitely to set off against income in future tax years, subject to compliance with certain conditions. As of December 31, 2006, the Company estimates that it will not have any wear and tear allowance carryforwards. In addition, the Company does not have any tax losses carryforwards as of December 31, 2006. | ||
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 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 historical level of taxable income, management believes that it is more likely than not that the Company will generate sufficient future taxable income from the wafer fabrication activities subsequent to the pioneer status period to realize the benefits of these deductible differences. | ||
9 | Ordinary Share Capital | |
In October 2005, the Company reorganized its paid-up share capital by the extinguishment of accumulated losses of $108,349 against paid-up share capital and the return of a portion to its shareholders in the form of cash amounting to $60,000 in a return of capital sanctioned by the High Court of Singapore (unaudited). During the year ended December 31, 2005, the Company paid cash of $51,500 (unaudited) to its shareholders and the balance of $8,500 was paid in January 2006. The return of capital through the extinguishment of accumulated losses does not qualify as a quasi-reorganization under US GAAP and accordingly no adjustments for this reorganization to the carrying values of the assets and liabilities of the Company and its accumulated losses have been reflected in these financial statements. | ||
In October 2006, the board of directors of the Company approved a second return of capital which was subsequently approved by the High Court of Singapore and filed with the Accounting and Corporate Regulatory Authority of Singapore in November. This second return of capital will be effected by paying cash of $40,000 to the shareholders. During the year ended December, 2006, the Company paid cash of $25,000 to its shareholders. | ||
The equity has been reduced for the full return of capital upon board of directors approval and the unpaid portion has been recognised as liabilities as at December 31, 2005 and 2006. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
10 | Accumulated Deficit | |
Singapore law allows dividends to be paid only out of 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. As the Company is under the one-tier corporate tax system, tax payable by the Company on its non-pioneer chargeable income constitutes a final tax, and dividends are exempt from tax in the hands of its shareholders. | ||
11 | Accumulated Other Comprehensive Loss | |
Accumulated other comprehensive loss consists of the following: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Net unrealized cash flow hedging losses | $ | (18 | ) | $ | (1 | ) | ||||
The net unrealized cash flow hedging losses are not adjusted for income taxes because such losses are capital in nature. | ||
12 | Commitments and Contingencies | |
The Company has the following capital commitments: |
December 31 | ||||||||||
2005 | 2006 | |||||||||
(Unaudited) | ||||||||||
Contracts for capital expenditure | $ | 2,036 | $ | 157 | ||||||
Operating lease commitments | ||
The Company leases its fab from its minority shareholder under a lease agreement which expires in 2008. Minimum future lease payments on non-cancellable operating leases from the minority shareholder and other operating leases as of December 31, 2006 are as follows: |
Payable in the year ending December 31, | ||||||
2007 | $ | 16,710 | ||||
2008 | 3,828 | |||||
2009 | 5 | |||||
$ | 20,543 | |||||
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
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. The Company accrues costs associated with these matters when they become probable and reasonably estimable. The Company does not have any outstanding litigation or claim as at December 31, 2006. | ||
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 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. As of December 31, 2005 and 2006, the income tax contingencies recorded as tax payable amounted to $60 (unaudited) and $62 respectively and relate to deduction claims which may not be allowable. 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. | ||
13 | Derivative Instruments | |
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. 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. Consequently, gains and losses on these instruments are included in the statements of income in the line item foreign exchange gain (loss). | ||
The Company uses derivative instruments to manage identified foreign currency risks resulting from foreign currency 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. 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. | ||
The estimated net amount of existing losses from cash flow hedges expected to be reclassified into earnings within the next year is $1. Net realized losses recognized from cash flow hedges was $37 (unaudited) and $17 for the years ended December 31, 2005 and 2006, respectively. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
The components of other comprehensive loss related to derivative and hedging activities consist of the following: |
December 31, 2005 | December 31, 2006 | |||||||||
(Unaudited) | ||||||||||
Beginning | $ | (55 | ) | $ | (18 | ) | ||||
Reclassification of cash flow hedging losses into earnings | 37 | 17 | ||||||||
Ending | $ | (18 | ) | $ | (1 | ) | ||||
The Company is exposed to credit risk and market risk by using derivative instruments to hedge exposures of changes in foreign currency 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. | ||
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 Company assesses 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. | ||
14 | Fair Values of Financial Instruments |
December 31, | ||||||||||||||||||
2005 | 2006 | |||||||||||||||||
(Unaudited) | ||||||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||||
amount | fair value | amount | fair value | |||||||||||||||
Embedded foreign currency derivatives in purchase contracts | $ | — | $ | — | $ | 11 | $ | 11 |
Cash and cash equivalents, amounts owing from and to immediate holding company, other related companies and affiliated companies, accounts receivable and accounts payable.The carrying amounts approximate fair value in view of the short-term nature of these balances. | ||
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. |
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SILICON MANUFACTURING PARTNERS PTE LTD
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
NOTES TO THE FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)
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. | ||
15 | Subsequent Events | |
Subsequent to the year end, the immediate holding company, Agere Systems (Singapore) Pte Ltd changed its name to LSI Technology (Singapore) Pte Ltd. | ||
Subsequent to the Company’s original issuance of its financial statements for the three months period ended December 31, 2006, in March and May 2007, the Singapore tax authorities completed the examination of the Company’s prior years’ income tax returns and allowed the deduction claims as mentioned in Note 12. As a result, the Company received total tax refund of $1,660 pertaining to tax contingencies which had already been paid to the tax authorities prior to December 31, 2005. Accordingly, the Company has in 2007 reversed the income tax contingencies recorded as tax payable. |
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