CHRT Chartered Semiconductor Manufacturing Ltd. (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer Pursuant
to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended September 30, 2009

Commission File Number 000-27811

CHARTERED SEMICONDUCTOR
MANUFACTURING LTD.

(Exact name of registrant as specified in its charter)

Not Applicable
(Translation of registrant’s name into English)

Republic of Singapore
(Jurisdiction of incorporation or organization)
60 Woodlands Industrial Park D
Street 2, Singapore 738406
(65) 6362-2838
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ                Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o                No þ

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b). Not applicable.

 

 

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			40
Item 4. Controls and Procedures			41
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 2. Unregistered Sales of Equity and Use of Proceeds			42
Item 3. Defaults Upon Senior Securities			42
Item 4. Submission of Matters to a Vote of Security Holders			42
Item 5. Other Information			42
Item 6. Exhibits			42
SIGNATURES			43

The Company is incorporating by reference the information and exhibits set forth in this Form 6-K into its registration statements on Form F-3 (Registration No. 333-155774); Form S-8 (Registration No. 333-89849); Form S-8 (Registration No. 333-63814); Form S-8 (Registration No. 333-63816); Form S-8 (Registration No. 333-116844) and Form S-8 (Registration No. 333-145081).

CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

In this document, unless otherwise indicated, all references to “Chartered”, the “Company”, “we”, “our” and “us” refer to Chartered Semiconductor Manufacturing Ltd., a limited liability company formed in the Republic of Singapore, and its subsidiaries. When we refer to “Singapore dollars”, “S$” and “SGD” in this document, we are referring to Singapore dollars, the legal currency of Singapore. When we refer to “U.S. dollars”, “dollars”, “$”, “US$” and “USD” in this document, we are referring to United States dollars, the legal currency of the United States. When we refer to “Euro” in this document, we are referring to Euro, the legal currency of certain member states of the European Union and, when we refer to “Yen” in this document, we are referring to Japanese Yen, the legal currency of Japan. When we refer to “NTD” in this document, we are referring to New Taiwan dollars, the legal currency of Taiwan.

FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

This Quarterly Report contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including, without limitation, statements relating to the proposed acquisition of Chartered, our belief that our sources of liquidity and projected cash flows will be sufficient to meet our expected capital and research and development expenditures, debt service obligations, investment and liquidity needs for at least the next twelve months, our expected capital expenditures for 2009 and our expectations of Fab 7, reflect our current views with respect to future events and financial performance, and are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated. Among the factors that could cause actual results to differ materially are decreased consumer confidence, credit crisis, financial market turmoil and the deteriorating global economic conditions; the ability to access or renew existing or to obtain additional financing and the terms thereof; changes in the demands from our customers; demand and supply outlook in the semiconductor market; competition from existing foundries and new foundry companies resulting in pricing pressures; excess inventory, life cycle, market outlook and trends for specific products; product mix; unforeseen delays, interruptions and performance level of our fabrication facilities; our progress on leading-edge products; changes in capacity plans, allocation and process technology mix; 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 partnership, technology and supply alliances (including our joint development agreements with International Business Machines Corporation (“IBM”) and the other joint development partners); the growth rate of fabless companies; the outsourcing strategy of integrated device manufacturers (“IDM”) and our expectation that IDMs will utilize foundry capacity more extensively. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained and, in relation to the proposed acquisition of Chartered, that the proposed acquisition will be approved by our shareholders, that other conditions precedent to the closing of the proposed acquisition will be satisfied or that such acquisition will occur. In addition to the foregoing factors, a description of certain other risks and uncertainties which could cause actual results to differ materially can be found in “Item 3. Key Information — D. Risk Factors” in our 2008 annual report on Form 20-F filed with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements which reflect management’s current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		As of
		December 31,				September 30,
		2008				2009
ASSETS
Cash and cash equivalents		$	524,501			$	805,726
Restricted cash			69,560				66,301
Marketable securities			950				1,175
Receivables, less allowances of $2,451 in 2008 and $1,680 in 2009			224,428				297,893
Inventories			189,498				154,895
Other investments			19,634				3,274
Other current assets			19,840				36,267
Total current assets			1,048,411				1,365,531
Investment in associated companies			28,924				34,662
Technology licenses and other intangible assets, net			48,178				35,376
Property, plant and equipment, net			2,845,668				2,768,222
Other non-current assets			53,992				34,466
Total assets		$	4,025,173			$	4,238,257
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERENCE SHARES AND EQUITY
Payables		$	311,264			$	337,913
Current installments of long-term debt and capital lease obligations			163,232				565,745
Other current liabilities			102,355				86,571
Total current liabilities			576,851				990,229
Long-term debt and capital lease obligations, excluding current installments			1,677,228				1,318,644
Other non-current liabilities			61,801				60,309
Total liabilities			2,315,880				2,369,182
Convertible redeemable preference shares			265,879				273,669
Ordinary share capital			2,706,244				3,010,312
Accumulated deficit			(1,208,166	)			(1,351,019	)
Accumulated other comprehensive loss			(54,664	)			(53,724	)
Total shareholders’ equity of Chartered			1,443,414				1,605,569
Noncontrolling interest in CSP			—				(10,163	)
Total equity		$	1,443,414			$	1,595,406
Total liabilities, convertible redeemable preference shares and total equity		$	4,025,173			$	4,238,257

     The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share units and per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2009				2008				2009
Net revenue		$	463,648			$	415,228			$	1,309,440			$	1,008,175
Cost of revenue			398,068				327,254				1,109,407				916,747
Gross profit			65,580				87,974				200,033				91,428
Other revenue			2,654				2,312				10,974				6,169
OPERATING EXPENSES
Research and development			44,184				43,878				132,474				137,672
Sales and marketing			19,493				14,914				54,921				41,390
General and administrative			11,196				18,486				33,154				39,571
Other operating expenses, net			1,364				6,480				5,116				15,013
Total operating expenses, net			76,237				83,758				225,665				233,646
Equity in income of associated companies, net			8,941				8,827				28,192				13,306
Other income (loss), net			(941	)			476				8,782				747
Interest income			2,992				3,145				11,608				5,736
Interest expense and amortization of debt discount			(16,553	)			(16,374	)			(49,990	)			(46,865	)
Income (loss) before income tax			(13,564	)			2,602				(16,066	)			(163,125	)
Income tax expense (benefit)			10,813				(58	)			(37,497	)			(10,050	)
Net income (loss)			(24,377	)			2,660				21,431				(153,075	)
Less: Net income (loss) attributable to the noncontrolling interest in CSP			—				7,356				—				(10,222	)
Net income (loss) attributable to Chartered			(24,377	)			(4,696	)			21,431				(142,853	)
Less: Accretion to redemption value of convertible redeemable preference shares			2,522				2,622				7,495				7,790
Net income (loss) available to ordinary shareholders of Chartered		$	(26,899	)		$	(7,318	)		$	13,936			$	(150,643	)
Basic and diluted net earnings (loss) per ordinary share*		$	(0.07	)		$	(0.01	)		$	0.04			$	(0.22	)
Basic and diluted net earnings (loss) per ADS*		$	(0.70	)		$	(0.08	)		$	0.36			$	(2.22	)
Number of ordinary shares (in millions) used in computing:*
Basic net earnings (loss) per ordinary share			383.2				941.9				383.1				679.9
Effect of dilutive securities			—				—				0.2				—
Diluted net earnings (loss) per ordinary share			383.2				941.9				383.3				679.9
Number of ADSs (in millions) used in computing:*
Basic net earnings (loss) per ADS			38.3				94.2				38.3				68.0
Effect of dilutive securities			—				—				—				—
Diluted net earnings (loss) per ADS			38.3				94.2				38.3				68.0

     The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(In thousands)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2009				2008				2009
Net income (loss)		$	(24,377	)		$	2,660			$	21,431			$	(153,075	)
Other comprehensive income (loss):
Net unrealized gains (losses) on change in cash flow hedging fair values			(338	)			(441	)			(294	)			6
Reclassification of cash flow hedging (gains) losses into earnings			(319	)			280				(83	)			282
Foreign currency translation			(487	)			118				(397	)			121
Unrealized gains (losses) on available-for-sale securities			(766	)			(55	)			(2,107	)			225
Reclassification of realized losses on available-for-sale securities into earnings			446				—				1,287				365
Other comprehensive income (loss), net			(1,464	)			(98	)			(1,594	)			999
Comprehensive income (loss), net			(25,841	)			2,562				19,837				(152,076	)
Less: Comprehensive income (loss) attributable to the noncontrolling interest in CSP			—				7,372				—				(10,163	)
Comprehensive income (loss) attributable to Chartered		$	(25,841	)		$	(4,810	)		$	19,837			$	(141,913	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF TOTAL EQUITY
(In thousands)

		Shareholders of Chartered
														Accumulated
														Other
														Compre-
														hensive				Noncontrol-
										Accumulated				Income				ling interest
		Ordinary Share Capital								deficit				(Loss)				in CSP				Total Equity
		Number				$				$				$				$				$
Balance at January 1, 2008			2,539,626				2,710,006				(1,115,587	)			(53,270	)			—				1,541,149
Net loss			—				—				(92,579	)			—				—				(92,579	)
Other comprehensive loss			—				—				—				(1,394	)			—				(1,394	)
Accretion to redemption value of convertible redeemable preference shares			—				(10,042	)			—				—				—				(10,042	)
Issuance of shares arising from share-based awards			3,574				1,871				—				—				—				1,871
Employee share-based compensation			—				4,432				—				—				—				4,432
Non-employee share-based compensation			—				(23	)			—				—				—				(23	)
Balance at December 31, 2008			2,543,200				2,706,244				(1,208,166	)			(54,664	)			—				1,443,414
Net loss			—				—				(142,853	)			—				(10,222	)			(153,075	)
Other comprehensive income			—				—				—				940				59				999
Accretion to redemption value of convertible redeemable preference shares			—				(7,790	)			—				—				—				(7,790	)
Issuance of shares arising from share-based awards			1,844				2,846				—				—				—				2,846
Employee share-based compensation			—				2,352				—				—				—				2,352
Non-employee share-based compensation			—				32				—				—				—				32
Issuance of ordinary shares, net of direct issuance costs			6,869,926				306,628				—				—				—				306,628
Adjustment for “ten for one” share consolidation			(8,472,909	)			—				—				—				—				—
Balance at September 30, 2009			942,061				3,010,312				(1,351,019	)			(53,724	)			(10,163	)			1,595,406

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Nine Months Ended
		September 30,				September 30,
		2008				2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	21,431			$	(153,075	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in income of associated companies, net			(28,192	)			(13,306	)
Cash dividends received from associated companies			28,457				7,689
Depreciation and amortization			433,698				380,142
Foreign exchange loss, net			1,366				2,071
(Gain) loss on disposal of property, plant and equipment, net			8				(691	)
Deferred tax benefit			(23,052	)			(9,952	)
Others, net			12,425				15,452
Changes in assets and liabilities, net of effects from purchase of a subsidiary in 2008:
Receivables			(6,666	)			(68,489	)
Inventories			19,838				34,603
Other assets			(18,993	)			(3,666	)
Payables and other liabilities			(11,623	)			35,202
Net cash provided by operating activities		$	428,697			$	225,980
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment			(443,556	)			(280,234	)
Payments for technology licenses			(11,014	)			(4,381	)
Investment in associated companies			(8,041	)			—
Purchase of a subsidiary, net of cash acquired of $6,523			(237,072	)			—
Refund of deposits placed with a vendor			1,278				841
Proceeds from sale of property, plant, equipment			10,482				5,251
Proceeds from redemption of other investments			55,841				16,150
Others, net			(433	)			675
Net cash used in investing activities		$	(632,515	)		$	(261,698	)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt
Borrowings			389,072				167,905
Repayments			(433,631	)			(157,512	)
Capital lease payments			(3,972	)			(4,488	)
Receipts (refunds) of customer deposits			(5,609	)			15
Issuance of ordinary shares, net of direct issuance costs			989				306,817
(Increase) decrease in cash restricted for debt repayment			(24,468	)			3,259
Net cash provided by (used in) financing activities		$	(77,619	)		$	315,996
Effect of exchange rate changes on cash and cash equivalents			189				947
Net increase (decrease) in cash and cash equivalents			(281,248	)			281,225
Cash and cash equivalents at the beginning of the period			743,173				524,501
Cash and cash equivalents at the end of the period		$	461,925			$	805,726
Non-cash investing activities
Property, plant and equipment acquired through capital lease		$	—			$	31,092

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share units and per share data)

1.		Basis of Presentation

		The unaudited interim condensed consolidated financial statements have been prepared in accordance with United States of America (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) and, in the opinion of management, contain all adjustments necessary, all of which are of a normal recurring nature except for the rights offering completed in April 2009 and share consolidation in May 2009 which resulted in adjustments being made to the Company’s share plans and agreements as discussed in Note 3 and retroactive adjustments to the net earnings (loss) per ordinary share and American Depositary Share (“ADS”) as discussed in Note 5, to present fairly the financial information included herein. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 20-F for the year ended December 31, 2008.
		The condensed consolidated balance sheet as of December 31, 2008 and the condensed consolidated statement of total equity for the year ended December 31, 2008 included herein are derived from the audited consolidated financial statements in the Company’s annual report on Form 20-F for the year ended December 31, 2008 and as reclassified upon adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810-10-65-1 on noncontrolling interests in consolidated financial statements, which requires the presentation of noncontrolling interests within equity. The interim condensed consolidated financial statements as of September 30, 2009 and for three and nine months ended September 30, 2008 and September 30, 2009, have not been audited.
		The unaudited interim condensed consolidated financial statements reflect the accounts of Chartered Semiconductor Manufacturing Ltd. (“Chartered”) and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
		On July 1, 2009, as a result of the FASB’s Codification of U.S. GAAP, ASC became the single source of authoritative nongovernmental U.S. GAAP. The Codification became effective for financial statements that cover interim and annual periods ending after September 15, 2009.
		Prior to the adoption of ASC 810-10-65-1 on noncontrolling interests in consolidated financial statements, none of the losses from Chartered Silicon Partners Pte Ltd (“CSP”) had been allocated to the noncontrolling interest in the consolidated statements of operations since the first quarter of 2003 onwards as the obligations of the noncontrolling interest were reduced to zero in that quarter due to cumulative losses. CSP subsequently reported profits in the first quarter of 2008. Accordingly, profits applicable to the noncontrolling interest in CSP were taken to the consolidated statements of operation until the noncontrolling interest’s share of losses previously recorded in the consolidated statements of operations is fully recovered. The effect of not allocating profits (losses) of the noncontrolling interests in CSP in the three and nine months ended September 30, 2008 resulted in a decrease to the net income attributable to Chartered by $1,513 and an increase to the net income attributable to Chartered by $4,802, respectively.
		The cumulative net losses not allocated to the noncontrolling shareholders of CSP according to their proportionate ownership as of December 31, 2008 is $213,496.
		ASC 810-10-65-1 on noncontrolling interests in consolidated financial statements became effective for financial statements issued for fiscal years and interim periods beginning on or after December 15, 2008. It requires that accounting and reporting for minority interests be recharacterized as noncontrolling interests and classified as a component of equity. This ASC also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.
		Supplemental pro forma financial information is presented below as if ASC 810-10-65-1 on noncontrolling interests in consolidated financial statements was not adopted on January 1, 2009.

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
		(In thousands, except per share data)
Pro forma net income (loss) attributable to Chartered			2,660				(153,075	)
Pro forma net income (loss) available to ordinary shareholders of Chartered			38				(160,865	)
Pro forma basic net income (loss) per ordinary share			0.00				(0.24	)
Pro forma diluted net income (loss) per ordinary share			0.00				(0.24	)
Pro forma basic net income (loss) per ADS			0.00				(2.37	)
Pro forma diluted net income (loss) per ADS			0.00				(2.37	)

2.		Proposed Acquisition

		On September 7, 2009, the respective boards of directors of Chartered and ATIC International Investment Company LLC (the “Acquiror”) announced the proposed acquisition of Chartered by the Acquiror by way of a scheme of arrangement under Section 210 of the Companies Act, Chapter 50 of Singapore (the “Scheme”). The Acquiror is a special purpose vehicle incorporated in Abu Dhabi and wholly-owned by Advanced Technology Investment Company LLC (“ATIC”). ATIC is a technology investment company wholly-owned by the Government of Abu Dhabi. On October 9, 2009, Chartered dispatched the scheme document to ordinary shareholders containing details of the Scheme (the “Scheme Document”) together with related documentation.
		As described in the Scheme Document, the Scheme requires the approval of Chartered’s ordinary shareholders at a meeting convened at the direction of the High Court of the Republic of Singapore. In connection with the Scheme, Chartered has also given notice to convene an extraordinary general meeting and a class meeting of holders of convertible redeemable preference shares in the capital of Chartered to pass special resolutions relating to amendments of Chartered’s Articles of Association specified in the proxy statements for these meetings dispatched together with the Scheme Document. These meetings are scheduled to be held on November 4, 2009. The Scheme will also require the subsequent sanction of the High Court of the Republic of Singapore and satisfaction (or, where applicable, waiver) of customary conditions, including regulatory conditions. Subject to the satisfaction (or, where applicable, waiver) of the other conditions set out in the Scheme Document, the Scheme is expected to become effective in December 2009. The accompanying unaudited condensed financial statements do not reflect any adjustments to the assets and liabilities that might occur if such shareholder approval is obtained and Chartered becomes a wholly-owned subsidiary of the Acquiror.

3.		Rights Offering and Share Consolidation

		On March 9, 2009, the Company announced a rights offering of approximately 6,869,926,194 new ordinary shares (“Shares”), directly or in the form of ADS.
		Pursuant to the rights offering:

	•		27 new Shares were offered for every 10 Shares held at S$0.07 per rights share; and
	•		27 new ADSs were offered for every 10 ADSs held at a price of US$0.46 per rights ADS.

		The rights offering was completed on April 15, 2009 and final net proceeds from the rights offering were approximately $307 million.
		Subsequent to the completion of the rights offering, the Company held a “ten for one” share consolidation which was approved during an Extraordinary General Meeting of shareholders on April 30, 2009. The share consolidation took effect on May 21, 2009.
		In connection with the rights offering and the share consolidation, adjustments were made with respect to:

	•		the exercise price of, and number of ordinary shares issuable upon exercise of, outstanding options issued under the 1999 employee share option plan (“1999 Option Plan”);
	•		the number of ordinary shares issuable upon vesting of awards issued under the restricted share unit plan (“RSU Plan”) and the performance share unit plan (“PSU Plan”);
	•		the conversion price of convertible redeemable preference shares (“CRPS”); and
	•		the strike prices and number of ordinary shares issuable under the call option with Goldman Sachs International (“GS”).

(a)

1999 Option Plan

		As a result of the rights offering in March 2009, changes were made on March 18, 2009, being the modification date, to both the exercise price and the number of outstanding share options granted under the 1999 Option Plan. The adjustments were made by multiplying each existing option exercise price by 0.6632 and multiplying the number of outstanding share options by 1.5078. The number of share options granted under the 1999 Option Plan increased by 51,146 options immediately after the modification.
		Subsequently, as a result of the share consolidation in May 2009, further changes were made on May 21, 2009, being the modification date, to both the exercise price and the number of outstanding share options granted under the 1999 Option Plan. The adjustments were made by multiplying each existing option exercise price by 10 and multiplying the number of outstanding share options by 0.1. The number of share options granted under the 1999 Option Plan decreased by 132,499 options immediately after the modification.
		The modification to the 1999 Option Plan as a result of the rights offering in March 2009 and the share consolidation in May 2009 did not result in any incremental compensation cost as the fair value of the modified awards equals the fair value of the original awards immediately before the modification. As of September 30, 2009, the number of share options outstanding

		was 14,480.
		The 1999 Option Plan expired on January 28, 2009.

(b)

RSU Plan

		As a result of the rights offering in March 2009, changes were made on March 18, 2009, being the modification date, to the number of outstanding RSUs granted under the RSU Plan. The adjustments were made by multiplying the number of outstanding RSUs by 1.5078. The number of RSUs granted under the RSU Plan increased by 5,468 RSUs immediately after the modification.
		Subsequently, as a result of the share consolidation in May 2009, further changes were made on May 21, 2009, being the modification date, to the number of outstanding RSUs granted under the RSU Plan. The adjustments were made by multiplying the number of outstanding RSUs by 0.1. The number of RSUs granted under the RSU Plan decreased by 14,504 RSUs immediately after the modification.
		The modification to the RSU Plan as a result of the rights offering in March 2009 and the share consolidation in May 2009 did not result in any incremental compensation cost as the fair value of the modified awards equals the fair value of the original awards immediately before the modification. As of September 30, 2009, the number of RSUs outstanding was 8,292.
		See Note 12 for details of new RSU grants during the nine months ended September 30, 2009.

(c)

PSU Plan

		As a result of the rights offering in March 2009, changes were made on March 18, 2009, being the modification date, to the base number of outstanding PSUs granted under the PSU Plan. The adjustments were made by multiplying the base number of outstanding PSUs by 1.5078. The base number of outstanding PSUs granted under the PSU Plan increased by 2,234 PSUs immediately after the modification.
		Subsequently, as a result of the share consolidation in May 2009, further changes were made on May 21, 2009, being the modification date, to the base number of outstanding PSUs granted under the PSU Plan. The adjustments were made by multiplying the base number of outstanding PSUs by 0.1. The base number of outstanding PSUs granted under the PSU Plan decreased by 5,969 PSUs immediately after the modification.
		The modification to the PSU Plan as a result of the rights offering in March 2009 and the share consolidation in May 2009 did not result in any incremental compensation cost as the fair value of the modified awards equals the fair value of the original awards immediately before the modification. As of September 30, 2009, the number of PSUs outstanding was 980.
		See Note 12 for details of new PSU grants during the nine months ended September 30, 2009.

(d)

CRPS

		As of September 30, 2009, there are 28 outstanding CRPS, each with a redemption price of US$10. Prior to the rights offering and the share consolidation, holders of the CRPS may convert the CRPS into new Shares or, subject to certain limitations, ADSs at a conversion price of $0.8719 per Share at any time before the close of business on the 7th business day prior to maturity or early redemption.
		Pursuant to the terms of the Articles of Association of the Company, such conversion price is required to be adjusted on account of the rights offering and the share consolidation. As a result of the rights offering, the conversion price was adjusted to $0.4120 per Share. This adjustment was made on March 18, 2009, being the modification date for the rights offering.
		Subsequently, as a result of the share consolidation, the conversion price was further adjusted to $4.12 per Share. This adjustment was made on May 21, 2009, being the modification date for the share consolidation.

(e)

Call option with GS

		Pursuant to the original provisions of the call option agreement with GS, GS is entitled to purchase up to 214,800 of new ordinary shares (“Options”) at US$1.408 per share (“Strike Price”) and the Company may terminate the transaction early, in whole or in part, if the closing price of the Company’s ordinary shares is equal to or higher than US$1.76 (equivalent to 125% of the US$1.408 exercise price termed as the Higher Soft Call Strike Price) on each of any 20 business days in any consecutive 30 business day period. As a result of the rights offering, the number of Options was adjusted from 214,800 to 323,883, the Strike Price was adjusted from $1.408 to $0.9338, and the Higher Soft Call Strike Price was adjusted from $1.76 to $1.1672 by GS on March 16, 2009.
		Subsequently, as a result of the share consolidation, the number of Options was further adjusted from 323,883 to 32,388, the Strike Price was adjusted from $0.9338 to $9.338, and the Higher Soft Call Strike Price was adjusted from $1.1672 to $11.672 by GS on May 21, 2009.

4.		Use of Estimates

		The preparation of the unaudited interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure about contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Significant items subject to judgment and estimates include the amount of income tax expense, the estimated useful lives and salvage values of long-lived assets, the recoverability of the carrying value of long-lived assets, other-than-temporary impairment assessments of other investments, available-for-sale securities and investments in other equity securities, the realization of deferred income tax assets, the valuation of accounts receivable and inventories, the determination of normal capacity of the Company’s production facilities, the recognition of revenue, the recognition and measurement of sales credits and returns allowance, the likelihood of achieving the milestones attached to Government grants, management’s projections of achievement of performance conditions for grants under the performance share units plan over the performance period, the fair value of share-based employee compensation awards and financial instruments, the amount of asset retirement obligations and costs, and the valuation of net assets acquired from purchase business combinations. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets; volatile equity, foreign currency and energy markets; and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
		During 2008, the Company revised the estimated useful lives of its twelve-inch process equipment and machinery from five years to eight years and the related mechanical and electrical installations from ten years to fifteen years. In addition, the estimated salvage values of the related process equipment and machinery were reduced to zero. These changes were made to better reflect the expected pattern of economic benefits from the use of the equipment and machinery over time based on an analysis of the expected technology lifecycle, historical usage experience and industry practices. The change in estimated useful lives and residual values is a change in accounting estimate that was applied prospectively from October 1, 2008. The impact of this change was a decrease in the Company’s net loss by $27,090 and $73,774 and a decrease in the Company’s basic and diluted net loss per ADS by $0.29 and $1.09 for the three and nine months ended September 30, 2009, respectively. Basic and diluted net loss per ordinary share for the three and nine months ended September 30, 2009 decreased by $0.03 and $0.11, respectively.
		During 2008, the Company changed the estimated useful lives for certain technology-related intangible assets classified under “Technology licenses” in the consolidated balance sheets from three to five years. The change was made to better reflect the expected pattern of economic benefits from the use of the intangible assets over time based on an analysis of the expected future usage of the underlying technology and historical usage experience. The change in estimated useful lives is a change in accounting estimate that was applied prospectively from October 1, 2008. The impact of this change was a decrease in the net loss of the Company by $1,098 and $3,516 for the three and nine months ended September 30, 2009, respectively. Basic and diluted net loss per ADS for the three and nine months ended September 30, 2009 decreased by $0.01 and $0.05, respectively. Basic and diluted net loss per ordinary share for the three months ended September 30, 2009 were not affected by the impact of this change. Basic and diluted net loss per ordinary share for the nine months ended September 30, 2009 decreased by $0.01.

5.		Net Earnings (Loss) Per Ordinary Share

		Basic net earnings (loss) per ordinary share is computed by deducting from (adding to) net income (loss) available to ordinary shareholders of Chartered the accretion to redemption value of the convertible redeemable preference shares and dividing the resulting amount of net income (loss) available to ordinary shareholders of Chartered by the weighted-average number of ordinary shares outstanding. Diluted net earnings (loss) per ordinary share is computed using the weighted-average number of ordinary shares outstanding plus potentially dilutive securities, which includes the dilutive effect of share options using the treasury stock method, the dilutive effect of restricted share units, the impact of contingently issuable share-based awards with performance conditions and the dilutive effect of ordinary shares issuable upon the assumed conversion of the Company’s convertible securities. The accretion charges on convertible securities are added back to net income available to ordinary shareholders of Chartered when the related ordinary share equivalents are included in computing diluted net earnings (loss) per ordinary share.
		The weighted average number of ordinary shares and ADSs used in computing the comparative basic and diluted net earnings (loss) per ordinary share and ADS, respectively, for the three and nine months ended September 30, 2008, were retroactively adjusted to take effect of the following:

	•		bonus element contained within the rights offering, and
	•		the “ten for one” share consolidation as follows:

		Three Months Ended				Nine Months Ended
		September 30, 2008				September 30, 2008
Basic net earnings (loss) per ordinary share
— before adjustment for rights offering and share consolidation			(0.01	)			0.01
— retroactive adjustment for rights offering and share consolidation			(0.06	)			0.03
— after adjustment for rights offering and share consolidation			(0.07	)			0.04
Diluted net earnings (loss) per ordinary share
— before adjustment for rights offering and share consolidation			(0.01	)			0.01
— retroactive adjustment for rights offering and share consolidation			(0.06	)			0.03
— after adjustment for rights offering and share consolidation			(0.07	)			0.04
Basic net earnings (loss) per ADS
— before adjustment for rights offering and share consolidation			(0.11	)			0.05
— retroactive adjustment for rights offering and share consolidation			(0.59	)			0.31
— after adjustment for rights offering and share consolidation			(0.70	)			0.36
Diluted net earnings (loss) per ADS
— before adjustment for rights offering and share consolidation			(0.11	)			0.05
— retroactive adjustment for rights offering and share consolidation			(0.59	)			0.31
— after adjustment for rights offering and share consolidation			(0.70	)			0.36
Number of ordinary shares (in millions) used in computing basic net earnings (loss) per ordinary share:
— before adjustment for rights offering and share consolidation			2,541.6				2,540.8
— retroactive adjustment for rights offering and share consolidation			(2,158.4	)			(2,157.7	)
— after adjustment for rights offering and share consolidation			383.2				383.1
Number of ordinary shares (in millions) used in computing diluted net earnings (loss) per ordinary share:
— before adjustment for rights offering and share consolidation			2,541.6				2,541.9
— retroactive adjustment for rights offering and share consolidation			(2,158.4	)			(2,158.6	)
— after adjustment for rights offering and share consolidation			383.2				383.3
Number of ADSs (in millions) used in computing basic net earnings (loss) per ADS:
— before adjustment for rights offering and share consolidation			254.2				254.1
— retroactive adjustment for rights offering and share consolidation			(215.9	)			(215.8	)
— after adjustment for rights offering and share consolidation			38.3				38.3
Number of ADSs (in millions) used in computing diluted net earnings (loss) per ADS:
— before adjustment for rights offering and share consolidation			254.2				254.2
— retroactive adjustment for rights offering and share consolidation			(215.9	)			(215.9	)
— after adjustment for rights offering and share consolidation			38.3				38.3

The Company excluded certain potentially dilutive securities for each period presented from its diluted net earnings (loss) per ordinary share computation because:

	i.		The exercise price or conversion price of the securities exceeded the average fair value of the Company’s share price; or
	ii.		The total assumed proceeds under the treasury stock method resulted in negative incremental shares; or
	iii.		The accretion to redemption value of convertible securities per ordinary share obtainable on conversion was higher than the basic net earnings per ordinary share, as adjusted for the effect of any potentially dilutive securities which were more dilutive than the convertible securities; or
	iv.		The conditions for the vesting of the performance share units were not expected to be met; or
	v.		The Company has net losses available to ordinary shareholders of Chartered.

		The below information, including those of the comparative periods, reflect the effects of the rights offering and the share consolidation.
		A summary of the excluded potentially dilutive securities is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2009				2008				2009
Convertible redeemable preference shares			68,803				68,803				68,803				68,803
Call option with Goldman Sachs International			32,388				32,388				32,388				32,388
Employee share options			16,184				14,480				16,146				14,480
Performance share units			734				980				734				980
Restricted share units			1,747				8,292				1,747				8,292

As of September 30, 2009, the conversion price of the convertible redeemable preference shares, the per share exercise price of the call option with GS and the weighted-average exercise price of employee stock options outstanding was $4.12, $9.338 and $12.18, respectively, as adjusted for the rights offering and the share consolidation.

6.		Jobs Credit Scheme

		In the first quarter of 2009, to encourage employers to preserve jobs and help Singaporeans stay employed, the Singapore government introduced the Jobs Credit Scheme in the 2009 Budget. Employers receive cash grants up to 12% on the first S$2,500 of the qualifying monthly wages of each employee paid from October 2008 to September 2009 on a quarterly basis. In October 2009, the Singapore government announced that the Jobs Credit Scheme will be extended for six months with another two payments in March and June 2010 at stepped down rates, of 6% and 3%, respectively, on the first S$2,500 of the qualifying monthly wages of each employee. The condition of the grant is that the employee must continue to be on the Company’s payroll in the following month subsequent to a quarter. These payments have been granted tax exemption by the Singapore government.
		The Company recognizes the grant at the end of each quarter when there is reasonable assurance that the condition will be complied with and that the grant will be received.
		For the three and nine months ended September 30, 2009, $2,390 and $9,280, respectively, were recorded as a reduction of the related payroll expenses, which the Jobs Credit Scheme intended to reimburse. Out of the total grant which was recorded, $2,383, $2,286 and $2,294 were received on March 31, 2009, June 30, 2009, and September 30, 2009, respectively, with the remaining amount expected to be received in December 2009.

7.		Marketable Securities

		In the second quarter of 2009, the Company adopted ASC 320-10-65-1 on investments — debt and equity securities which requires the Company to provide all disclosures required by ASC 320-10-50 in interim reporting periods.
		The Company’s investments in available-for-sale equity securities consist of investments in the common stock of two companies in the semiconductor industry. The fair value of the investments is based on quoted market prices in active markets at the respective balance sheet dates.

At December 31, 2008
						Unrealized				Unrealized
Current		Cost				Gains				(Losses)				Fair Value
Available-for-sale securities:
Equity securities		$	1,238			$	—			$	(288	)		$	950

At September 30, 2009
						Unrealized				Unrealized
Current		Cost				Gains				(Losses)				Fair Value
Available-for-sale securities:
Equity securities		$	874			$	301			$	—			$	1,175

The Company realized losses amounting to $446 and $1,287 as a result of other-than-temporary impairment assessments for the three and nine months ended September 30, 2008, respectively. No realized gains and losses were recorded for the three months ended September 30, 2009. The Company realized losses amounting to $365 as a result of other-than-temporary

impairment assessments for the nine months ended September 30, 2009.

The following table shows the fair value and gross unrealized gains and (losses) recorded in accumulated other comprehensive income (loss) related to the Company’s available-for-sale equity securities, aggregated by the length of time the securities have been in a continuous unrealized gain and (loss) position.

At December 31, 2008		Less than 12 months								Total
						Unrealized								Unrealized
		Fair Value				(Losses)				Fair Value				(Losses)
Available-for-sale securities:
Equity securities		$	950			$	(288	)		$	950			$	(288	)

At September 30, 2009		Less than 12 months								Total
						Unrealized								Unrealized
		Fair Value				Gains				Fair Value				Gains
Available-for-sale securities:
Equity securities		$	1,175			$	301			$	1,175			$	301

		As of December 31, 2008, one of the investments was in an unrealized gain position while the other was in an unrealized loss position. Based on the Company’s evaluation, the investment in a net unrealized loss position was not considered to be other-than-temporarily impaired.
		As of September 30, 2009, both of the investments were in unrealized gain positions.
		As of December 31, 2008 and September 30, 2009, none of the investments were in continuous unrealized loss positions for a period greater than twelve months.

8.		Inventories

Inventories consist of the following:

		As of
		December 31,				September 30,
		2008				2009
Raw materials		$	12,509			$	6,856
Work-in-progress			169,002				139,785
Consumable supplies and spares			7,987				8,254
		$	189,498			$	154,895

9.		Other Investments

		The Company has an investment in a private enhanced cash fund (“Fund”), which is managed by an external financial institution and consists primarily of corporate debt, mortgage-backed securities and asset-backed securities. Due to the nature of the securities that the Fund invests in, the Fund’s underlying securities have been exposed to adverse market conditions that have affected the value of the collateral and the liquidity of the Fund. As a result, in December 2007, the investment manager of the Fund halted demand redemptions and announced its intention to liquidate the Fund. The investment in the Fund, which was classified as cash equivalent since the time of placement in 2003, was reclassified to ‘Other investments’ as of December 31, 2007.
		The Company received cash proceeds of $13,481 and $55,841 in redemptions from the Fund for the three and nine months ended September 30, 2008, respectively, resulting in a realized loss of $92 and $132 on the redemptions for the three and nine months ended September 30, 2008, respectively. For the three and nine months ended September 30, 2009, the Company received cash proceeds of $8,626 and $16,150, respectively, in redemptions from the Fund, resulting in realized gains of $530 and $613 on the redemptions for the three and nine months ended September 30, 2009, respectively. The Company recorded an other-than-temporary impairment loss of $429 and $1,466 for the three and nine months ended September 30, 2008, respectively. No other-than-temporary impairment loss was recorded for the Fund for the three and nine months ended September 30, 2009. The fair value of the Company’s pro-rata share of the remaining investment in the Fund was $19,634 and $4,376, as of December 31, 2008 and September 30, 2009, respectively. As of December 31, 2008, the carrying value of the Company’s pro-rata share of the remaining investment in the Fund of $19,634 was classified in “Other

investments”. As of September 30, 2009, the carrying value of the Company’s pro-rata share of the remaining investment in the Fund was $4,097. As the redemption of a portion of the Fund is not expected to be within the next 12 months, $823 was reclassified from “Other investments” to “Other non-current assets” as of September 30, 2009.

10.		Income Taxes

		In the second quarter of 2009, the Company recorded additional amounts of deferred tax assets due primarily to the unabsorbed wear and tear allowances and tax losses of Chartered Semiconductor Manufacturing (Tampines) Pte. Ltd. (“CST” or “Fab 3E”) of approximately $493,203 and $29,732, respectively, which became available for carry forward upon approval from the Singapore tax authorities. A net tax benefit of $9,964 is recognized based on a portion of the deferred tax assets that is assessed as more likely than not to be realizable through offset against existing deferred tax liabilities. A valuation allowance is established for the remaining deferred tax assets which are assessed as more likely than not to be unrealizable for offset against future taxable income. Such future taxable income is based on the projection of the Company which is contingent upon future market conditions.
		There is no significant change in the liability for unrecognized tax benefits, as provided under ASC 740-10 on income taxes, as of September 30, 2009 as compared to December 31, 2008. The Company anticipates that the liabilities for unrecognized tax benefits recorded for the Year of Assessment 2003 (fiscal year 2002) amounting to $377 would be reversed out within the next 12 months as the statute of limitations for the Comptroller of Income Tax to raise additional assessments for that tax year will lapse by December 31, 2009.
		The Company is subject to taxation in Singapore and other foreign tax jurisdictions. A summary of the tax years that remain subject to examination in the Company’s major tax jurisdictions are:

				Fiscal years that remain subject to examination as of
Major tax jurisdiction				September 30, 2009
	Singapore			2003 and forward
	United States of America			2006 and forward

11.		Long-term Debt and Obligations under Capital Leases

Long-term debt consists of:

		As of
		December 31,				September 30,
		2008				2009
Floating rate loans:
$653,131 EXIM Guaranteed Loan		$	459,771			$	335,981
$609,733 EXIM Guaranteed Loan			90,463				262,400
Société Générale Term Loan			119,234				95,387
JBIC/SMBC Term Loan (Tranche B)			71,841				71,841
Fixed rate loans:
5.645% JBIC/SMBC Term Loan (Tranche A)			71,841				71,841
5.75% senior notes due 2010			373,546				374,215
6.00% amortizing bonds due 2010			20,351				10,476
6.25% senior notes due 2013			298,125				298,418
6.375% senior notes due 2015			247,397				247,641
Others			7,775				6,388
			1,760,344				1,774,588
Less: Current installments of long-term debt			(157,512	)			(558,568	)
Long-term debt, excluding current installments		$	1,602,832			$	1,216,020

Obligations under capital leases:

		As of
		December 31,				September 30,
		2008				2009
Minimum future lease payments		$	121,497			$	166,804
Amount representing interest at rates of 5.1% to 7.8%			(41,381	)			(57,003	)
Present value of minimum future lease payments			80,116				109,801
Less: Current installments			(5,720	)			(7,177	)
Obligations under capital leases, excluding current installments		$	74,396			$	102,624
Current installments of:
Long-term debt		$	157,512			$	558,568
Obligations under capital leases			5,720				7,177
		$	163,232			$	565,745
Non-current portion, excluding current installments:
Long-term debt		$	1,602,832			$	1,216,020
Obligations under capital leases			74,396				102,624
		$	1,677,228			$	1,318,644

		Weighted Average
		Interest Rates as of
		December 31,				September 30,
		2008				2009
Debt obligations at floating rates			3.25	%			1.00	%
Debt obligations at fixed rates			6.05	%			6.05	%
Obligations under capital leases			7.10	%			6.54	%

		The Company made a repayment of $61,895 each in both January 2009 and July 2009 on the $653,131 Export-Import Bank of the United States (“EXIM”) Guaranteed Loan.
		The Company made the second and third drawdowns of $91,229 and $80,708 in February 2009 and September 2009, respectively, from the first tranche of the $609,733 EXIM Guaranteed Loan. As of September 30, 2009, the remaining amount available for drawdown under this facility is $347,333.
		The Company made a principal repayment of $11,923 each in both March 2009 and September 2009 on tranche A of the $189,871 term loan facility from Société Générale, with Atradius Dutch State Business NV (“Atradius”) as the export credit insurer.
		In the second quarter of 2009, the Company entered into a new contract for supply of gases used by the fabrication facilities of the Company, which was included as obligations under capital leases. The Company has assessed that this supply contract contains a lease pursuant to ASC 840-10 on leases, and accounts for this as a capital lease. As of September 30, 2009, the present value of the remaining minimum lease payments under this contract is $32,386.

12.		Share Unit Plans

(a)

RSU Plan

		In May 2009, 2,659 RSUs were granted under the RSU Plan, including 22 RSUs which were granted to employees of Silicon Manufacturing Partners Pte Ltd (“SMP”). In August 2009, an additional 161 RSUs were granted under the RSU Plan, of which none were granted to employees of SMP.
		The RSUs vest according to the vesting schedule, and ordinary shares will be issued provided the employee remains employed by the Company through the vesting dates; otherwise the unvested RSUs are forfeited. The grant-date fair value of awards granted under the RSU Plan is based on the average of the high and low quotes of the Company’s ordinary shares at the date of grant. SMP reimburses the Company for the share-based compensation expense in respect of the RSUs that were granted to its employees.
		The weighted-average grant-date fair value of RSUs granted in May 2009 and in August 2009 is $1.54 and $1.57, respectively. Total share-based compensation expense recognized for the RSUs granted in May 2009 and August 2009 for the

		three and nine months ended September 30, 2009 was $340 and $450, respectively. As of September 30, 2009, the total compensation expense related to unvested RSUs not yet recognized is estimated at approximately $3,719 which is expected to be recognized over the weighted-average period of 2.7 years.
		Pre-vesting forfeitures for RSUs granted in May 2009 and in August 2009 were estimated to be approximately 0% to 3.08% for both the three and nine months ended September 30, 2009 based on historical and expected attrition rates.
		As share-based compensation expense does not satisfy the conditions for tax deduction in Singapore, the recognition of the share-based compensation expense did not result in recognition of an income tax benefit.

(b)

PSU Plan

		In May 2009, a total of 376 base number of PSUs was granted under the PSU Plan that may be awarded at the end of a three-year performance period except for 36 PSUs which vested immediately upon grant date. The offer of PSUs is communicated to eligible employees via the grant notice (“PSU Agreement”).
		The vesting of the PSUs granted in May 2009, except for PSUs which vested immediately upon grant date, is contingent upon the achievement of pre-determined levels of Longer Term Break-Even Utilisation (“BEU”), Absolute Total Shareholder Return (“TSR”) and Relative TSR as those measures are defined in the PSU Agreement. All pre-determined levels have been established at the grant date. All conditions are determined based on the BEU to be achieved for the financial year of 2011, the average of three financial years’ Absolute TSR and the average of three financial years’ Relative TSR. The BEU is calculated by measuring the breakeven utilization rate of the Company. The Absolute TSR is calculated by adding the dividend yield to the change in the opening and closing share price of the Company’s ordinary shares for the performance period. The Relative TSR is calculated by comparing the TSR of the Company against the TSR of a pre-defined peer in the semiconductor industry. The achievement of BEU is a performance condition while the achievement of Absolute TSR and Relative TSR are market conditions. 50% of the base number of PSUs will vest according to the achievement of the BEU, 25% will vest according to the achievement of the Absolute TSR and 25% will vest according to the achievement of the Relative TSR. The number of PSUs that will ultimately vest range from 0% to 150% of the base number of PSUs awarded, or zero, subject to the achievement of either of the abovementioned performance condition or market conditions, as applicable.
		The weighted-average grant-date fair value of PSUs granted in May 2009 is $1.64. Total share-based compensation expense recognized for the PSUs granted in May 2009 for the three and nine months ended September 30, 2009 was $22 and $85, respectively. Depending upon the Company’s performance against target performance measures specified in the award agreements, as of September 30, 2009, the total compensation expense related to unvested PSUs not yet recognized is estimated to be approximately $255 which is expected to be recognized over a weighted-average period of 2.8 years.
		The grant-date fair value for the performance-based portion of the award was based on the average of the high and low quotes of the Company’s ordinary shares at the date of grant.
		The grant-date fair value for the market-based portions of the award is calculated by an independent third-party appraiser which adopted the Monte-Carlo valuation model with the following assumptions:

		Three and Nine Months
		ended September 30,
		2009
Risk-free interest rate			0.78	%
Expected volatility			50.0	%
Dividend yield			0.0	%

		The risk-free rate is based upon observed interest rates appropriate for the term of the Company’s PSUs. Expected volatility is based on historical volatility rates of the Company’s ordinary shares.
		Pre-vesting forfeitures for PSUs granted in May 2009 were estimated to be approximately 0% to 3.86% for both the three and nine months ended September 30, 2009 based on historical and expected attrition rates.
		As share-based compensation expense does not satisfy the conditions for tax deduction in Singapore, the recognition of the share-based compensation expense did not result in recognition of an income tax benefit.

(c)

Supplement Retention Plan

		In June 2009, the Company approved an additional retention plan (“supplemental plan”) intended to act as a supplement to the Company’s existing retention plan which was implemented in 2007. This supplemental plan only covers selected management personnel.
		The supplemental plan is comprised of a cash and a RSU component. The cash component is awarded in accordance to an approved schedule, and will be paid over 4 years based on the specified payment dates provided the employee remains

		employed by the Company through the approved payment dates, otherwise the unpaid amount is forfeited.
		4,501 RSUs have been awarded pursuant to the RSU component with vesting based on performance and service conditions of two to three year period. The RSUs grants and conditions have been communicated to eligible employees via the letter of award (“RSU Agreement”).
		These RSUs vest according to the vesting schedule, and ordinary shares will be issued provided the employee remains employed by the Company through the vesting dates; otherwise the unvested RSUs are forfeited. The grant-date fair value for the award was based on the average of the high and low quotes of the Company’s ordinary shares at the date of the grant.
		The vesting of the RSUs granted in June 2009 is contingent upon the achievement of pre-determined levels of technological roadmap progress and market share for high-end products as those measures defined in the RSU Agreement. All conditions are determined based on the technological roadmap progress and market share for high-end products to be achieved at the end of a two year period in December 31, 2010. The technological roadmap progress is measured against pre-determined targets on certain selected technology nodes. The market share for high-end products is calculated by the average of the Company’s total revenue and the sum of total revenue of pre-determined peers in the semiconductor industry at the end of financial year of 2010. The achievement of the technological roadmap progress and market share for high-end products are performance conditions. 50% of the base number of RSUs will vest according to the achievement of the technological roadmap progress and 50% will vest according to the achievement of the market share for high-end products.
		Total share-based compensation expense recognized for the RSUs granted in June 2009 for the three and nine months ended September 30, 2009 was $561 and $748, respectively. As of September 30, 2009, the total compensation expense related to unvested RSUs not yet recognized is estimated at approximately $5,988 which is expected to be recognized over the weighted-average period of 2.7 years.
		Pre-vesting forfeitures for RSUs granted in June 2009 were estimated to be nil based on historical and expected attrition rates. As share-based compensation expense does not satisfy the conditions for tax deduction in Singapore, the recognition of the share-based compensation expense did not result in recognition of an income tax benefit.

(d)

Effects of Proposed Acquisition

Upon the Scheme becoming effective, the vesting period of all RSUs and PSUs awards will be accelerated, such that all granted and outstanding RSUs and PSUs will be fully vested. In addition, all outstanding share options granted under the 1999 Option Plan will be cancelled with no replacement award or other form of consideration.

13.		Derivative Instruments and Hedging Activities

		ASC 815-10 on derivatives and hedging requires disclosures about a company’s derivative activities and how the related hedged items affect a company’s financial position, financial performance and cash flows. To meet the objectives, ASC 815-10 requires qualitative disclosures about the Company’s objectives and strategies for using derivative instruments and quantitative disclosures for fair value amounts of gains and losses associated with derivative instruments.
		The Company’s exposure to financial market risks is derived primarily from changes in interest rates and foreign exchange rates. 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. To manage interest rate risk, the Company may utilize interest rate derivative instruments to modify the interest characteristics of its outstanding debts. 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.
		The Company is exposed to credit risk and market risk by using derivative instruments to hedge exposures of changes in foreign currency rates and interest rates. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, is not exposed to credit risk. The Company anticipates, however, that counterparties will be able to fully satisfy their obligations under the contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of counterparties.
		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 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.

		On the date a derivative contract is entered into, the Company will consider if the derivative instrument is part of a hedging relationship. Once a hedging relationship is established, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or a foreign currency fair value or cash flow hedge (“foreign currency” hedge). The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions, at the hedge’s inception. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
		Changes in the fair value of derivatives that are highly effective and that are designated and qualify as fair value hedges are recorded in earnings, along with the loss or gain on the hedged assets or liabilities or unrecognized firm commitment of the hedged item that are attributable to the hedged risks. Changes in the fair value of derivatives that are highly effective and that are designated and qualify as cash flow hedges are recorded in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged items. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign currency hedges are recorded in either earnings or other comprehensive income (loss), depending on whether the hedge transaction is a fair-value hedge or a cash flow hedge. Changes in the fair value of derivative instruments that are not designated as part of a hedging relationship are reported in current period earnings.
		The Company discontinues hedge accounting prospectively when it determines that a derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised, the derivative is de-designated as a hedging instrument because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the Company no longer adjusts the hedged asset or liability for changes in fair value. The adjustment of the carrying amount of the hedged asset or liability is accounted for in the same manner as other components of the carrying amount of that asset or liability. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Company removes any asset or liability that was recorded pursuant to recognition of the firm commitment from the balance sheet and recognizes any gain or loss in earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, gains and losses that were accumulated in other comprehensive income (loss) are recognized immediately in earnings. In all situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the balance sheet, and recognizes any changes in its fair value in earnings.
		The Company uses foreign currency forward contracts to manage identified foreign currency risks resulting from its foreign currency purchase contracts or relating to groups of forecasted foreign currency denominated payments. Most of these foreign currency forward contracts are formally designated as foreign currency cash flow hedges which match the terms of the individual foreign currency exposures. As a result, any ineffectiveness of the Company’s hedges is negligible. The maximum tenure for these transactions is 18 months. Amounts included in other comprehensive income (loss) related to hedges of foreign currency purchase contracts are reclassified into earnings (“Cost of revenue”) upon the commencement of depreciation of the asset related to the purchase contracts over the remaining useful life of the asset.
		There are certain foreign currency forward contracts and embedded foreign currency derivatives in purchase contracts which are not formally designated as hedges. These certain foreign currency forward contracts relate to groups of forecasted foreign currency denominated payments and a portion of the proceeds of the rights offerings which are primarily denominated in Singapore dollars. While the Company expects the forward contracts which have not been formally designated as hedges to be effective in hedging the variability in cash flows resulting from changes in foreign exchange rates, it does not believe it is practicable to formally document the hedging relationship and link the derivatives to specific forecasted transactions. The embedded foreign currency derivatives are in purchase contracts for which payments are denominated in currencies other than the functional currency or the local currency of the parties to the contracts or, in some cases, their parent company where the parent company provides the majority of resources required under the contract on behalf of the subsidiary who is a party to the contract. Gains and losses on these certain foreign currency forward contracts and embedded foreign currency derivatives in purchase contracts are included in “Other operating expenses, net”. The Company does not have any fair value hedges as of September 30, 2009.

The table below provides information about the Company’s derivative instruments as of September 30, 2009.

Derivative Instrument

Average

as of September 30, 2009

Notional Amount

Rate/Price

Maturity

Forward Contracts

(Receive Yen/Pay US$)

Yen Forward Contracts

5,148,755

93.7331/USD

2009/2010

(Receive S$/Pay US$)

SGD Forward Contracts

42,574

1.4191/USD

2009

(Receive Euro/Pay US$)

Euro Forward Contracts

25,767

1.4145/Euro

2009/2010

Embedded derivatives

Denominated in Yen

368,597

—

—

The following table presents the fair values and locations of derivative instruments recorded in the balance sheet as of September 30, 2009:

		Fair Value of Derivative Instruments
		Assets Derivatives								Liabilities Derivatives
		Balance Sheet								Balance Sheet
As of September 30, 2009		Location				Fair Value				Location				Fair Value
Derivatives designated as hedging instruments under ASC 815-10
Forward foreign exchange contracts		Other current assets				$	3,754			Other current liabilities				$	—
Total derivatives designated as hedging instruments under ASC 815-10						$	3,754							$	—
Derivatives not designated as hedging instruments under ASC 815-10
Forward foreign exchange contracts		Other current assets				$	276			Other current liabilities				$	3
Other contracts		Other current assets				$	—			Other current liabilities				$	337
Total derivatives not designated as hedging instruments under ASC 815-10						$	276							$	340
Total derivatives						$	4,030							$	340

The following table presents the effect of derivative instruments on other comprehensive income (loss) (“OCI”) and results of operations for the three and nine months ended September 30, 2009:

The Effect of Derivative Instruments on the Unaudited Condensed Consolidated Statement of Operations

for the Three Months Ended September 30, 2009

Amount of Gains

(Losses)

Location of

Amount of Gains

Recognized in

Gains (Losses)

(Losses)

Accumulated

Reclassified from

Reclassified from

OCI on

Accumulated

Accumulated

Derivative

OCI into Income

OCI into Income

(Effective

(Effective

(Effective

Portion)

Portion)

Portion)

Derivatives Designated as Hedging Instruments under ASC 815-10 — Cash Flow Hedging Relationships

Forward foreign exchange contracts

$

(441

)

Cost of revenue

$

(280

)

Total

$

(441

)

$

(280

)

The Effect of Derivative Instruments on the Unaudited Condensed Consolidated Statement of Operations

for the Nine Months Ended September 30, 2009

Amount of Gains

(Losses)

Location of

Amount of Gains

Recognized in

Gains (Losses)

(Losses)

Accumulated

Reclassified from

Reclassified from

OCI on

Accumulated

Accumulated

Derivative

OCI into Income

OCI into Income

(Effective

(Effective

(Effective

Portion)

Portion)

Portion)

Derivatives Designated as Hedging Instruments under ASC 815-10 — Cash Flow Hedging Relationships

Forward foreign exchange contracts

$

6

Cost of revenue

$

(282

)

Total

$

6

$

(282

)

The net unrealized cash flow hedging gains (losses) are not adjusted for income taxes because such gains (losses) are not taxable (deductible) to the Company under relevant tax laws.

						Amount of Gains (Losses)
						Recognized in Income on
						Derivative
						Three months				Nine months
		Location of Gains (Losses)				ended				ended
		Recognized in Income on				September 30,				September 30,
		Derivative				2009				2009
Derivatives Not Designated as Hedging Instruments under ASC 815-10
Forward foreign exchange contracts		Other operating expenses, net				$	362			$	26
Other contracts		Other operating expenses, net				$	(232	)		$	(58	)
Total						$	130			$	(32	)

The components of accumulated other comprehensive income (loss) related to derivative and hedging activities consist of the following:

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
Beginning		$	(1,144	)		$	(1,593	)
Reclassification of cash flow hedging losses into earnings			280				282
Net unrealized gains (losses) on change in cash flow hedging fair values			(441	)			6
Ending		$	(1,305	)		$	(1,305	)