ASX

SEC Filing Summary: Advanced Semiconductor Engineering, Inc. (ASE)

Business Context and Reporting Period

This Form 6-K, filed on May 25, 2007, contains the agenda and materials for the 2007 Annual Shareholders' Meeting of Advanced Semiconductor Engineering, Inc. (ASE), a Taiwan-based global leader in semiconductor packaging and testing. The filing includes the 2006 Business Report, audited financial statements for the years ended December 31, 2006 and 2005, and proposals for capital increases and corporate governance revisions.

Key Financial Metrics (Year Ended Dec 31, 2006)

Note: Consolidated net revenues for the group were reported as NT$100.4 billion in the business report, reflecting the inclusion of subsidiaries.

Material Changes vs. Prior Period

• Profitability Turnaround: The company shifted from a net loss of NT$4.69 billion in 2005 to a net profit of NT$17.42 billion in 2006. This was driven by a 20% increase in consolidated revenue and a significant improvement in gross margin (from 16% to 27%).
• Fire Damage Resolution: In 2005, the company recorded a loss of NT$11.85 billion due to a fire at its Chung Li facility. In 2006, the insurance settlement was finalized, resulting in a net gain of NT$3.54 billion recognized in the current period.
• Debt Reduction: Total liabilities decreased significantly from NT$50.73 billion in 2005 to NT$34.83 billion in 2006. Long-term debts dropped from NT$29.2 billion to NT$16.6 billion.
• Strategic Spin-off: On August 1, 2006, the company spun off its packaging materials business into a subsidiary, Advanced Semiconductor Engineering Electronics Inc., to focus on core packaging and testing operations.

Guidance, Outlook, and Management Commentary

• 2007 Outlook: Management estimates 2007 sales volume of approximately 4.9 billion packaging units and 800 million testing units. The company anticipates continued growth in the packaging and testing market through 2008, driven by demand for high-end packaging and the 2008 Olympics.
• Capital Increase Proposals:
  • Surplus Distribution: Proposed a capital increase of 747.6 million shares (approx. 15% of existing shares) using retained earnings and employee bonuses. This includes a cash dividend of NT$1.5 per share and a stock dividend of 150 shares per 1,000 shares held.
  • Future Fundraising: Shareholders are asked to authorize the Board to raise funds via cash capital increases, Global Depository Receipts (GDR), or Convertible Corporate Bonds (ECB) up to 500 million shares to repay loans and expand capacity.
• Corporate Governance: Proposals include revising the "Procedure for Acquisition or Disposal of Assets" to align with new Financial Supervisory Commission guidelines and updating the Articles of Incorporation to increase authorized capital from NT$70 billion to NT$80 billion.

Investor Verification Checklist

• Insurance Settlement Finality: Verify the final cash impact of the 2005 fire damage insurance settlement and the reversal of impairment charges recorded in 2006.
• Consolidated vs. Parent Metrics: Distinguish between the parent company's financials (NT$63B revenue) and the consolidated group's financials (NT$100.4B revenue) when analyzing growth rates.
• Dilution Impact: Assess the impact of the proposed 15% stock dividend and potential future GDR/ECB issuances on earnings per share.
• China Expansion: Review the status of the indirect investments in Mainland China (ASE Kunshan and Global Advanced Packaging Technology) and their contribution to future revenue.
• Derivative Trading Limits: Confirm the revised limits on derivative trading contracts (hedging and non-hedging) as outlined in the revised asset disposal procedures.