Filed Pursuant to Rule 424(b)(1)
                                                      Registration No. 333-91641

PROSPECTUS

Exchange Offer for $150,000,000
12 3/4% Senior Subordinated Notes Due 2009
of ChipPAC International Company Limited

Guaranteed by ChipPAC, Inc., ChipPAC Liquidity Management Hungary Limited
Liability Company, ChipPAC Luxembourg S.a.R.L., ChipPAC Korea Company Ltd.,
ChipPAC Limited, and ChipPAC (Barbados) Ltd.

                               ----------------

                          Terms of the Exchange Offer:

                                     . We will not receive any proceeds
 . The exchange offer expires 5:00         from the exchange offer.
  p.m., New York City time, May 30,
  2000, unless extended.


                                        . The terms of the notes to be
 . You may withdraw your tender of         issued are identical to the
  notes at any time before the            outstanding notes, except for the
  expiration of the exchange offer.       transfer restrictions and
                                          registration rights relating to
                                          the outstanding notes.

 . We will exchange all of the
  outstanding notes that you
  validly tender and do not validly
  withdraw.

                                        . There is no existing market for
                                          the exchange notes, and we do not
                                          intend to apply for their listing
                                          on any securities exchange.

 . We believe that the exchange of
  the notes will not be a taxable
  exchange for U.S. federal income
  tax purposes.


   You should carefully consider the risks described beginning on page 12
before tendering your notes.

                               ----------------

   Neither the Securities and Exchange Commission nor any state securities
commission has approved the notes to be distributed in the exchange offer, nor
have any of these organizations determined that this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

                               ----------------

              The date of this prospectus is April 28, 2000.


                               TABLE OF CONTENTS


                                                                            Page
                                                                            ----
                                                                         
Prospectus Summary........................................................    1

Risk Factors..............................................................   12

Forward-Looking Statements................................................   20

Industry Data.............................................................   20

Use of Proceeds...........................................................   21

Capitalization............................................................   22

The Exchange Offer........................................................   23

Pro Forma Condensed Financial Data........................................   31

Selected Historical Financial Data........................................   35

Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   37

Industry..................................................................   46

Business..................................................................   48

Management................................................................   60

Principal Shareholders....................................................   66

The Recapitalization......................................................   69

Significant Relationships and Related Transactions........................   72

Description of Other Financing Arrangements...............................   76

Description of the Exchange Notes.........................................   80

Material Income Tax Consequences..........................................  121

Plan of Distribution......................................................  122

Where You Can Find More Information.......................................  123

Legal Matters.............................................................  123

Experts...................................................................  123

Index to Financial Statements.............................................  F-1

Glossary..................................................................  G-1


   You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

   We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the
information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.

                                       i


                               PROSPECTUS SUMMARY

   This summary highlights selected information from the prospectus. It does
not contain all of the information that is important to you in order to
understand this exchange offer or the terms of the exchange notes. Unless the
context requires otherwise, "ChipPAC," "Company," "we," "our," "ours" and "us"
refer to ChipPAC, Inc. and its subsidiaries. ChipPAC International Company
Limited, the issuer of the notes in the exchange offer, is a wholly owned
subsidiary of ChipPAC, Inc. ChipPAC reports on a calendar year basis. See the
"Glossary" section for a description of other technical terms used in this
prospectus.

                            Overview of Our Business

   We are one of the world's largest providers of packaging and test services
for manufacturers in the semiconductor industry. We offer a complete portfolio
of packaging and test solutions. We are one of the largest providers of high-
margin, ball grid array packages, or BGA packages, which is the most advanced
mass-produced type of semiconductor package. A semiconductor package is a
container that protects and insulates the enclosed semiconductor chip and
attaches to a printed circuit board. As a result, packages are an integral part
of the basic functionality of semiconductors and contribute to their overall
performance. We provide packaging and test services to approximately 76
customers worldwide, including approximately 41 customers in the United States.
Our customers include many of the world's largest and most prominent
semiconductor manufacturers, including Atmel Corporation, Intel Corporation,
International Business Machines Corporation, LSI Logic Corp., Lucent
Technologies, Inc., Samsung Electronics Co., Ltd. and STMicroelectronics N.V.
Today, most major semiconductor manufacturers use independent packaging and
test service providers for a portion of their packaging and test needs. We
expect this outsourcing trend to continue as semiconductor manufacturers focus
on their core strengths, including chip design and wafer fabrication.

   Our executive and sales headquarters are in the United States and our
packaging and test facilities are in Korea and China. During 1998, we packaged
over 792.9 million units and generated $334.1 million in revenues, $63.7
million in gross profit, $32.3 million in net income and $86.3 million in
earnings before interest, taxes, depreciation and amortization ("EBITDA"). In
1999, we packaged over 1,308 million units and generated $375.5 million in
revenues, $58.0 million in gross profit, $7.3 million in net loss and $81.2
million in EBITDA. In 1999, we incurred one time charges for a change of
control expense and loss from early extinguishment of debt in the amount of
$11.8 million and $1.4 million, respectively.

   In 1984, our semiconductor packaging business began operating as a separate
division of Hyundai Electronics, one of the world's largest seminconductor
manufacturers and a member of the Hyundai Group, the Korean conglomerate. As of
August 5, 1999, we are no longer majority-owned by Hyundai Electronics as a
result of the recapitalization and other transactions described in this
prospectus.

                                   Operations

   We offer our customers a full array of semiconductor packages for both
traditional and advanced semiconductor products. The semiconductor production
process can be broadly divided into three fundamental stages:

  .fabricating a wafer;

  . slicing the wafer into multiple die and processing those die into
    finished devices, which is referred to as "packaging"; and

  .testing of finished devices and other back-end processes.

   We provide outsourced services for the final two stages of this
semiconductor production process. We offer the following packaging and test
services to our customers:

                                       1



   Substrate, or BGA, packaging, was 68.1% of our 1999 revenues. Substrate
packaging, also referred to as BGA packaging, represents the newest and fastest
growing area in the semiconductor packaging industry and is characterized by a
semiconductor die placed directly on a plastic or tape laminate substrate,
which is a miniature printed circuit board. We are continuously developing new
BGA packaging services and BGA assembly techniques, including chip scale BGA
packaging, which is characterized by a package size of less than 1.2 times the
size of the device. Benefits of BGA packaging over traditional leaded packaging
include:

  .  smaller size;

  .  higher pin count, or number of connections to a printed circuit board;

  .  greater reliability;

  .  better electrical signal integrity; and

  .  easier attachment to a printed circuit board.

   Leaded packaging was 29.1% of our 1999 revenues. Traditional leaded packages
are the most widely used packaging type, are found in almost every electronics
application and are characterized by a semiconductor die encapsulated in a
plastic mold compound with metal leads surrounding the perimeter of the device.
We offer a wide range of lead counts and body sizes for use in many different
applications.

   Test services, was 2.8% of our 1999 revenues. Semiconductor testing measures
and ensures the performance, functionality and reliability of a packaged
device, and requires knowledge of the specific applications and functions of
the devices being tested. We provide our customers with semiconductor test
services for a number of device types, including logic, mixed signal and memory
devices.

                             Competitive Strengths

   We believe the following attributes have helped us become one of the world's
largest providers of packaging and test services for semiconductor
manufacturers:

   .  demonstrated technology leadership;

   .  growing customer base;

   .  low-cost infrastructure;

   .  efficiency and quality leader;

   .  major investments in packaging facilities; and

   .  experienced management team.

                               Business Strategy

   Our business strategy focuses on:

   .  maintaining high-quality customer service;

   .  increasing market share with existing customers;

   .  expanding our customer base through technology leadership; and

   .  maintaining a low-cost structure.

                              The Recapitalization

   On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a
portfolio concern of Citicorp Venture Capital Ltd., which we refer to
collectively as the "Equity Investors," and management acquired a controlling
interest in ChipPAC from Hyundai Electronics and Hyundai Electronics America
through a series of

                                       2


transactions, including a merger into ChipPAC, Inc. of a special purpose
corporation organized by the Equity Investors. The merger was structured to be
accounted for as a recapitalization. Specifically:

  .  the Equity Investors, and other parties, invested $92.0 million to
     acquire common stock of ChipPAC, Inc. which represented approximately
     90.2% of its common stock outstanding immediately following the
     recapitalization;

  .  the prior stockholders of ChipPAC, Inc. retained a portion of their
     common stock in ChipPAC, Inc. equal to $10.0 million, or approximately
     9.8% of ChipPAC, Inc.'s common stock outstanding immediately following
     the recapitalization; and

  .  the prior stockholders received as consideration for the remainder of
     their common stock (a) net $384 million in cash and (b) mandatorily
     redeemable convertible preferred stock payable for up to an aggregate of
     $70.0 million.

   We collectively refer to these events as the "Recapitalization." You should
refer to the information in the section entitled "The Recapitalization" for a
more detailed description of the transactions summarized above.

   As part of the Recapitalization, we entered into several agreements with
Hyundai Electronics and Hyundai Electronics America by which we received
licenses to use technologies used in our business and also transitional
operational, administrative and utility services. We have also leased
facilities from Hyundai Electronics and Hyundai Electronics America. See
"Significant Relationships and Related Transactions" for more information on
these agreements.

   In order to finance the recapitalization, we completed the transactions
described in the section entitled "Use of Proceeds."

   Our current corporate structure after giving effect to the recapitalization
is as follows:

[CHART OF CORPORATE STRUCTURE]

                                       3


                               The Exchange Offer

   The exchange offer relates to the exchange of all of ChipPAC International
Company Limited's outstanding 12 3/4% Senior Subordinated Notes due 2009 (the
outstanding notes) for an equal aggregate principal amount of ChipPAC
International Company Limited's new 12 3/4% Series B Senior Subordinated Notes
due 2009 (the "exchange notes").

Registration Rights         You have the right to exchange your outstanding
Agreement.................  notes for registered notes with terms that are
                            identical in all material respects. This
                            exchange offer is intended to satisfy this
                            right. After this exchange offer is complete,
                            you will no longer be entitled to the benefits
                            of the exchange or registration rights granted
                            under the registration rights agreement which
                            we entered into as part of the offering of the
                            outstanding notes.

The Exchange Offer........  We are offering to exchange $1,000 principal
                            amount of exchange notes, which have been
                            registered under the Securities Act, for each
                            $1,000 principal amount of outstanding notes.
                            Your outstanding notes must be properly
                            tendered and accepted to be exchanged. All
                            outstanding notes that are validly tendered and
                            not validly withdrawn will be exchanged.

                            $150,000,000 in aggregate principal amount of
                            our notes is currently outstanding.

                            We will issue the registered exchange notes on
                            or promptly after the expiration of this
                            exchange offer.

Expiration Date...........
                            This exchange offer will expire at 5:00 p.m.,
                            New York City time, on May 30, 2000, unless we
                            decide to extend the expiration date.

Conditions to the           We will not complete this exchange offer if it
Exchange Offer............  violates applicable law or staff
                            interpretations of the Securities and Exchange
                            Commission. This exchange offer is not
                            conditioned upon any minimum principal amount
                            of our outstanding notes being tendered.

Resale of the Exchange      We believe that the exchange notes may be
Notes.....................  offered for resale, resold and otherwise
                            transferred by you without compliance with the
                            registration and prospectus delivery provisions
                            of the Securities Act. We have based this
                            belief on letters issued in connection with
                            past offerings of this kind in which the staff
                            of the Securities and Exchange Commission has
                            interpreted the laws and regulations relating
                            to the resale of notes to the public without
                            the requirement of further registration under
                            the Securities Act. In order for the exchange
                            notes to be offered for resale, resold or
                            otherwise transferred:

                            . you must acquire the exchange notes in the
                              ordinary course of your business;

                            . you must not intend to participate, and have no
                              arrangement or understanding with any person to
                              participate, in the distribution of the exchange
                              notes issued to you in this exchange offer;

                                       4



                            . you must not be a broker-dealer who purchased
                              your outstanding notes directly from us for
                              resale under Rule 144A or any other available
                              exemption under the Securities Act; and

                            . you must not be an "affiliate" of ours as defined
                              in of Rule 405 under the Securities Act.

                            If you do not meet the above conditions, you
                            may incur liability under the Securities Act if
                            you transfer any exchange note without
                            delivering a prospectus meeting the
                            requirements of the Securities Act. We will not
                            indemnify you against this liability.

                            Each broker-dealer that is issued exchange
                            notes in this exchange offer for its own
                            account in exchange for outstanding notes which
                            were acquired by that broker-dealer as a result
                            of market-making or other trading activities
                            must acknowledge that it will deliver a
                            prospectus meeting the requirements of the
                            Securities Act in connection with any resale of
                            the exchange notes.

                            A broker-dealer may use this prospectus for an
                            offer to resell, resale or other transfer of
                            the exchange notes issued to it in this
                            exchange offer. We have agreed that, for a
                            period of 180 days after the date this exchange
                            offer is completed, we will make this
                            prospectus and any amendment or supplement to
                            this prospectus available to a broker-dealer
                            for use in connection with resales.

                            We are not offering to exchange with you, and
                            will not accept surrenders for exchange from
                            you, in any jurisdiction in which this exchange
                            offer or its acceptance would not comply with
                            the securities or blue sky laws of that
                            jurisdiction. Furthermore, if you acquire the
                            exchange notes, you are responsible for
                            compliance with securities or blue sky laws
                            regarding resales. We assume no responsibility
                            for compliance with these requirements.

Accrued Interest on the
Exchange Notes and the
Outstanding Notes.........
                            Each exchange note will bear interest from its
                            issuance date. The holders of outstanding notes
                            that are accepted for exchange will receive, in
                            cash, accrued interest on those notes to, but
                            not including, the issuance date of the
                            exchange notes. This interest will be paid with
                            the first interest payment on the exchange
                            notes. Interest on the outstanding notes
                            accepted for exchange will cease to accrue upon
                            issuance of the exchange notes.

                            Consequently, if you exchange your outstanding
                            notes for exchange notes you will receive the
                            same interest payment that you would have
                            received if you had not accepted this exchange
                            offer.

Procedures for Tendering    If you wish to tender your notes for exchange,
Notes.....................  you must either:

                                       5



                            . complete, sign and date the accompanying letter
                              of transmittal, or a facsimile of that letter and
                              deliver the documentation, together with your
                              outstanding notes, to the exchange agent at the
                              address provided on the cover page of the letter
                              of transmittal; or

                            . arrange for the Depositary Trust Company to
                              transmit the required information to the exchange
                              agent for this exchange offer in connection with
                              a book-entry transfer.

                            In addition, you must deliver to the notes
                            exchange agent on or before the expiration
                            date:

                            . if you are effecting delivery by book-entry
                              transfer, a timely confirmation of book-entry
                              transfer of your outstanding notes into the
                              account of the notes exchange agent at The
                              Depository Trust Company as required by the
                              procedures for book-entry transfers described in
                              this prospectus under the heading "The Exchange
                              Offer--Procedures for Tendering"; or

                            . if necessary, the documents required for
                              compliance with the guaranteed delivery
                              procedures described in this prospectus under the
                              heading "The Exchange Offer--Guaranteed Delivery
                              Procedures."

                            By executing and delivering the accompanying
                            letter of transmittal or effecting delivery by
                            book-entry transfer, you are representing to us
                            that, among other things:

                            . you are acquiring the exchange notes in the
                              exchange offer in the ordinary course of your
                              business;

                            . you are not participating, do not intend to
                              participate, and have no arrangement or
                              understanding with any person to participate in
                              the distribution of the exchange notes issued to
                              you in the exchange offer; and

                            . you are not an "affiliate" of ours.

Procedures for Beneficial   If you are a beneficial owner of outstanding
Owners....................  notes that are registered in the name of a
                            broker, dealer or other nominee and you wish to
                            tender your notes in this exchange offer, you
                            should promptly contact the person in whose
                            name your notes are registered and instruct
                            that person to tender on your behalf.

Guaranteed Delivery         If you wish to tender your outstanding notes
Procedures................  and:

                            . time will not permit your notes or other required
                              documents to reach the notes exchange agent by
                              the expiration date; or

                            . the procedure for book-entry transfer cannot be
                              completed on time;

                            you may tender your notes in compliance with
                            the guaranteed delivery procedures described in
                            this prospectus under the heading "The Exchange
                            Offer--Guaranteed Delivery Procedures."

Withdrawal Rights.........
                            You may withdraw the tender of your outstanding
                            notes at any time before 5:00 p.m., New York
                            City time, on May 30, 2000 which is the
                            expiration date.

                                       6



Acceptance of Outstanding
Notes and Delivery of
Exchange Notes............
                            Except under the circumstances described above
                            under "Conditions to the Exchange Offer," we
                            will accept for exchange any and all
                            outstanding notes which are properly tendered
                            and not validly withdrawn before 5:00 p.m., New
                            York City time, on the expiration date. The
                            exchange notes issued in this exchange offer
                            will be delivered promptly following the
                            expiration date.

United States Federal Tax
Consequences..............
                            Based on the advice of our counsel, we believe
                            the exchange of your outstanding notes for the
                            exchange notes will not be a taxable exchange
                            for United States federal income tax purposes.
                            See "Material Income Tax Considerations."

Exchange Agent............  Firstar Bank of Minnesota, N.A. is serving as
                            the notes exchange agent in connection with the
                            exchange offer. The notes exchange agent will
                            assist us in the exchange offer by performing
                            various administrative functions on our behalf.

                                       7


                               The Exchange Notes

Issuer....................  ChipPAC International Company Limited, a wholly
                            owned subsidiary of ChipPAC, Inc.

General...................  The form and terms of the exchange notes are
                            identical in all material respects to the form
                            and terms of the outstanding notes except that:

                            . the exchange notes will bear a Series B
                              designation to differentiate them from the
                              outstanding notes;

                            . the exchange notes have been registered under the
                              Securities Act and, therefore, will not bear
                              legends restricting their transfer; and

                            . the holders of exchange notes will not be
                              entitled to rights under the registration rights
                              agreement.

                            The exchange notes will evidence the same debt
                            as the outstanding notes and will be entitled
                            to the benefits of the same indenture under
                            which the outstanding notes were issued.

Total Amount of Exchange
Notes Securities Offered..
                            $150,000,000 aggregate principal amount of 12
                            3/4% Series B Senior Subordinated Notes Due
                            2009.

Maturity Date.............  August 1, 2009.

Interest Payment Dates....  February 1 and August 1 of each year, beginning
                            February 1, 2000.

Optional Redemption.......  Until August 1, 2002, we can choose to redeem
                            the exchange notes in an amount not to exceed
                            35.0% of the exchange notes with money ChipPAC,
                            Inc. raises in equity offerings at the price
                            listed in "Description of the Exchange Notes--
                            Optional Redemption" section of this
                            prospectus, plus accrued but unpaid interest to
                            the date of redemption.

                            On or after August 1, 2004, we can redeem some
                            or all of the exchange notes at the redemption
                            prices listed in the "Description of the
                            Exchange Notes--Optional Redemption" section of
                            this prospectus, plus accrued but unpaid
                            interest to the date of redemption.

Change of Control.........  If a Change of Control of ChipPAC, Inc. occurs,
                            we may be required to allow holders of the
                            exchange notes to sell to us their exchange
                            notes at a purchase price of 101.0% of the
                            principal amount of the exchange notes, plus
                            accrued and unpaid interest. The term "Change
                            of Control" is defined in the "Description of
                            the Exchange Notes--Change of Control" section
                            of the prospectus.

Ranking...................  The exchange notes will be our senior
                            subordinated unsecured obligations. They will
                            rank senior in right of payment with any of our
                            future Subordinated Indebtedness, equal in
                            right of payment with any of our existing and
                            future Senior Subordinated Indebtedness and

                                       8


                            subordinated in right of payment to any of our
                            existing and future Senior Indebtedness. The
                            exchange notes are effectively subordinated to
                            indebtedness and other liabilities of ChipPAC,
                            Inc.'s subsidiaries which are not guarantors.
                            As of December 31, 1999, we had approximately
                            $150 million of Senior Indebtedness, and none
                            of our subsidiaries had any Senior
                            Indebtedness. The terms "Senior Indebtedness,"
                            "Senior Subordinated Indebtedness" and
                            "Subordinated Indebtedness" are defined in the
                            "Description of the Exchange Notes--Certain
                            Definitions" section of this prospectus.

Guaranties................  The Issuer's parent, ChipPAC, Inc., and the
                            following direct, and indirect subsidiaries of
                            ChipPAC, Inc. are guarantors of the exchange
                            notes:

                               . ChipPAC (Barbados) Ltd.,

                               . ChipPAC Limited,

                               . ChipPAC Korea Company Ltd.,

                               . ChipPAC Luxembourg S.a.R.L. and

                               . ChipPAC Liquidity Management Hungary Limited
                                 Liability Company.

                            Each guarantor has provided a full and
                            unconditional, joint and several guarantee of
                            the payment of the principal, premium and
                            interest on the exchange notes on a senior
                            subordinated basis.

                            The guaranties by the guarantors are
                            subordinated to all existing and future Senior
                            Indebtedness of the guarantors.

Basic Covenants of the      The indenture governing the exchange notes
Indenture.................  contains covenants that limit our ability and
                            the ability of our subsidiaries, except our
                            Chinese operating subsidiaries, to:

                               . incur or guarantee additional indebtedness;

                               . pay dividends and make distributions;

                               . make investments and other restricted
                                 payments;

                               . permit payment or dividend restrictions on
                                 our subsidiaries;

                               . transfer or sell assets;

                               . create liens;

                               . engage in transactions with affiliates; and

                               . consolidate or merge.

                            These restrictions and prohibitions have a
                            number of important qualifications and
                            exceptions. See "Description of the Exchange
                            Notes--Significant Covenants."

Use of Proceeds...........  We will not receive any cash proceeds from the
                            issuance of the exchange notes.

   For more complete information about the exchange notes, see "Description of
the Exchange Notes."

                          Principal Executive Offices

   ChipPAC, Inc.'s executive offices are located at 3151 Coronado Drive, Santa
Clara, California 95054 and its telephone number is (408) 486-5900. ChipPAC
International Company Limited's executive offices are located at Craigmuir
Chambers, Road Town, Tortola, British Virgin Islands and its telephone number
is (284) 494-2233.

                                       9


         Summary Historical and Pro Forma Financial and Operating Data

   The following summary financial historical data for the four years ended
December 31, 1999 were derived from the audited financial statements of ChipPAC
included elsewhere in this prospectus.

   The summary pro forma statements of operations and other operating data for
the year ended December 31, 1999 give effect to the recapitalization as if it
had occurred on January 1, 1998. Our historical information reflected in the
Pro Forma Financial Statements represents the accounts and operations of
Hyundai Electronics relating to ChipPAC. During the periods covered by our
financial statements, its activities were conducted as part of Hyundai
Electronics' overall operations, and separate financial statements were not
prepared. Our financial statements were prepared from the historical accounting
records of Hyundai Electronics and include various allocations for costs and
expenses. Therefore, the Statement of Operations of ChipPAC may not be
indicative of the results of operations that would have resulted if ChipPAC had
operated on a stand-alone basis. All of the allocations and estimates reflected
in our financial statements are based on assumptions that we believe are
reasonable under the circumstances and that have been reviewed by Hyundai
Electronics America. "EBITDA" as presented below has been adjusted to exclude
historical charges and credits described in the footnotes below. EBITDA is not
intended to be a performance measure that should be regarded as an alternative
to, or more meaningful than, either operating income or net income as an
indicator of operating performance or cash flow as a measure of liquidity, as
determined by application of GAAP.

   The following summary pro forma financial data are intended for
informational purposes and should not be considered indicative of either the
future results of operations or the results that might have occurred if the
recapitalization had been consummated on the indicated date or had been in
effect for the period presented. The following table should be read in
conjunction with "Capitalization," "Pro Forma Condensed Financial Data,"
"Selected Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical financial
statements and the related notes included elsewhere in this prospectus.


                                  Fiscal Year Ended December 31,
                           -----------------------------------------------------
                                                                       Pro Forma
                             1996        1997        1998      1999      1999
                           --------    --------    --------  --------  ---------
                                      (Dollars in thousands)
                                                        
Statement of Operations
 Data:
Revenue..................  $191,655    $289,429    $334,081  $375,530  $375,530
Gross profit.............    24,990      60,191      63,716    58,042    58,042
Selling, general and
 administrative,
 including management
 fees charged to Hyundai.    14,753      19,052      15,595    21,219    21,219
Research and development.     2,617       4,052       7,692    12,362    12,362
Write-down of impaired
 assets (1)..............       --       11,569         --        --        --
Change of control expense
 (2).....................       --          --          --     11,842       --
                           --------    --------    --------  --------  --------
Operating income.........  $  7,620    $ 25,518    $ 40,429  $ 12,619  $ 24,461
                           ========    ========    ========  ========  ========
Balance Sheet Data (at December 31, 1999):
Cash and cash equivalents....................................            32,117
Accounts receivable..........................................            30,003
Inventories..................................................            17,497
Total assets.................................................           343,429
Total debt...................................................           300,000
Total shareholders' deficit..................................          (126,751)
Cash Flows Data:
Operating activities.....  $ 19,252    $ 43,215    $ 98,747  $ 45,932  $ 30,435
Investing activities.....  (104,119)   (110,676)    (59,967)  (56,509)  (56,509)
Financing activities.....    84,705      63,572      15,481   (26,847)  (13,793)
Other Financial Data:
Depreciation and
 amortization............  $ 26,632    $ 40,682    $ 45,855  $ 57,475  $ 57,475
Capital expenditures,
 including capital
 leases..................   118,971     136,594      63,523    57,856    57,856
Ratio of earnings to
 fixed charges (3).......       -- (3)      -- (3)      4.3x      0.8x      0.5x
EBITDA (4)...............  $ 34,252    $ 77,769    $ 86,284    81,162    81,162
Total cash interest
 expense (5).............                                      21,241    32,413
Ratio of EBITDA to total
 cash interest expense
 (6).....................                                        3.8x       2.5x

- --------
   Footnotes to table appear on following page.

                                       10


Footnotes to table on previous page.
(1) At December 1997, in compliance with SFAS No. 121, Accounting for the
    Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
    of, we recorded a charge of $11.6 million to write down the value of those
    assets which had been identified as economically impaired, as a result of
    management's decision to discontinue particular product lines or which were
    judged to be in excess of foreseeable requirements.
(2) As a result of the recapitalization, the Company was contractually required
    to make a one-time change of control payment to its unionized Korean
    employees of approximately $11.6 million, and $0.2 million to other
    employees.
(3) For purposes of this computation, earnings are defined as income (loss)
    before provision for income taxes and fixed charges. Fixed charges are the
    sum of (a) interest costs, (b) the portion (approximately one-third) of
    operating lease rental expenses that are representative of the interest
    factor and (c) the pre-tax effect of preferred stock dividend requirements.
    Earnings for 1996, and 1997 were inadequate to cover fixed charges by $2.7
    million and $55.8 million, respectively. Earnings for the year ended
    December 31, 1997 included a non-cash foreign currency loss of $69.7
    million and a non-cash asset impairment charge of $11.6 million.
(4) "EBITDA" is defined as operating income plus depreciation, amortization,
    non-cash charges related to write-downs of impaired assets in 1997, and
    change of control expense in 1999. EBITDA is presented because we believe
    it is a widely accepted financial indicator of a company's ability to
    service and/or incur indebtedness. However, EBITDA should not be considered
    as an alternative to net income as a measure of operating results or to
    cash flows as a measure of liquidity in compliance with generally accepted
    accounting principles. Because EBITDA is not calculated identically by all
    companies, the presentation in this prospectus may not be comparable to
    those disclosed by other companies. See footnote (6) in "Pro Forma
    Condensed Financial Data" for the reconciliation of net income to EBITDA as
    defined above.
(5) Total cash interest expense represents the pro forma interest expense less
    amortization of deferred debt issuance costs.
(6) For purposes of this computation, EBITDA is defined at (3) and cash
    interest expense is defined at (4). For 1999 we generated pro forma EBITDA
    of $81.2 million and incurred pro forma cash interest expense of $32.4
    million resulting from pro forma interest charges of $34.2 million less
    debt issuance amortization of $1.8 million.

                                       11


                                  RISK FACTORS

   You should carefully consider the risks described below in addition to the
other information provided in this prospectus before making an investment in
the exchange notes. The realization of any of the risks described below could
limit our ability to pay interest or principal on the exchange notes.

Holders of outstanding notes who fail to exchange them may be unable to resell
them.

   We did not register the outstanding notes under the federal or any state
securities laws, nor do we intend to register them following the exchange
offer. As a result, the outstanding notes may only be transferred in limited
circumstances under the securities laws. If the holders of outstanding notes do
not exchange their notes in the exchange offer, they may lose their right to
have their notes registered under the federal securities laws. As a result, a
holder of outstanding notes after the exchange offer may be unable to sell
their notes.

Our substantial indebtedness could adversely affect our financial health, make
us vulnerable to adverse economic and industry conditions and prevent us from
fulfilling our obligations under these exchange notes.

   To finance the recapitalization, we incurred a significant amount of
indebtedness. The following chart provides important credit information,
assuming we had completed this offering as of the date, or at the beginning of
the periods, specified below and applied the proceeds as intended:



                                                            At December 31, 1999
                                                            --------------------
                                                               (in thousands)
                                                         
      Total indebtedness...................................       $300,000
      Shareholders' deficit................................       $122,886




                                                     Years Ended December 31,
                                                     --------------------------
                                                     1995  1996 1997 1998  1999
                                                     ----  ---- ---- ----  ----
                                                            
      Ratio of earnings to fixed charges............ 1.4x   --   --  4.3x  0.8x


   The ratios provided above are often used by investors to evaluate a
company's capital structure and its ability to make payments on its debt. The
ratio of earnings to fixed charges attempts to capture the relative protection
that operating profitability provides our noteholders by permitting them to
assess the probability of our failing to make required principal and interest
payments on the notes. If adverse economic and industry conditions adversely
affect our operating earnings, the subsequent worsening of this ratio would
indicate to our noteholders that we are at a greater risk of failing to meet
our interest payment obligations.

   For the years ended December 31, 1996 and 1997, earnings were insufficient
to cover fixed charges by $2.7 million and $55.8 million respectively.

   Our substantial indebtedness could have important consequences to you. For
example, it could:

    . make it more difficult for us to satisfy our obligations relating to
      the exchange notes;

    . increase our vulnerability to general adverse economic and industry
      conditions by limiting our flexibility in planning for, or reacting
      to, changes in our business and the industry in which we operate;

    . require us to dedicate a substantial portion of our cash flow from
      operations to payments on our indebtedness, thus reducing the
      availability of our cash flow to fund working capital, capital
      expenditures, research and development efforts and other general
      corporate purposes;

    . place us at a competitive disadvantage relative to our competitors
      that have less debt; and

                                       12


    . limit, along with the financial and other restrictive covenants in
      our indebtedness, our ability to borrow additional funds.
      Furthermore, failing to comply with those covenants could result in
      an event of default which, if not cured or waived, could have a
      material adverse effect on our ability to increase our revenues and
      profitability and meeting our growth objectives.

   For purposes of the computation of pro forma ratio of earnings to fixed
charges in the table above, earnings are defined as income (loss) before
provision for income taxes and fixed charges. Fixed charges are the sum of (a)
interest costs and (b) the portion, which is approximately one-third, of
operating lease rental expenses that are representative of the interest factor.

Despite our current levels of indebtedness, we still may be able to incur
substantially more debt which could increase the risks created by our
substantial indebtedness.

   We may be able to incur substantial additional indebtedness in the future.
For example, our senior credit facilities permit us to borrow up to an
additional $70.0 million to finance working capital requirements and capital
expenditures, and for trade letters of credit. All of these borrowings will be
secured by all of our assets and those of our subsidiaries, except those of our
Chinese operating subsidiaries. The addition of new debt to our current debt
levels could intensify the debt-related risks that we now face that are
described above.

Your right to receive payments on the exchange notes is junior to ChipPAC
International Company Limited's existing and, possibly future, senior
indebtedness and all of the guarantors' senior indebtedness. It is possible,
therefore, that you may receive no compensation of any kind relating to the
exchange notes if there is a bankruptcy, liquidation or similar proceeding
affecting us.

   We may not have sufficient funds to satisfy our obligations relating to the
exchange notes. The exchange notes and the guarantees rank behind all of our
existing indebtedness and all of our future borrowings, except any future
indebtedness that expressly provides that it ranks with, or subordinated in
right of payment to, the exchange notes and the guarantees. As a result, upon
any distribution to our creditors, in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or our property, we will
have to pay the holders of debt senior to the exchange notes in full before we
can make any payment on the exchange notes.

   In addition, all payments on the exchange notes and the guarantees will be
blocked in the event of a payment default on our senior debt, including
borrowings under the senior credit facilities, and may be blocked for specified
periods in the event of non-payment defaults on senior debt.

   As a holder of the exchange notes, you will typically have equal rights to
your ratable share, along with all of our suppliers and vendors to which we owe
money, who are commonly referred to as trade creditors, and other holders of
debt of the same class as the exchange notes, of any assets remaining after we
have paid off all of the debt senior to the exchange notes. However, the
indenture requires that amounts otherwise payable to holders of exchange notes
in a bankruptcy, liquidation or similar proceeding be paid to holders of debt
senior to the exchange notes instead. Consequently, holders of the exchange
notes may receive less, ratably, than holders of trade payables or other debt
of the same class in this type of proceeding.

ChipPAC International Company Limited, the issuer of the exchange notes, will
rely on intercompany loans through ChipPAC, Inc.'s direct and indirect
subsidiaries to satisfy obligations of its indebtedness; as a result, if these
subsidiaries are not able to make payments on these intercompany loans, we may
not be able to pay you interest on the exchange notes when due.

   ChipPAC International Company Limited has no business operations of its own
and its only assets are intercompany notes and the capital stock of its
subsidiaries, none of which have any substantial assets other than intercompany
loans or conduct any business of their own other than intercompany financing.
Thus, the only source of cash for ChipPAC International Company Limited to pay
principal and interest on the exchange notes will be through payments of
interest and principal on intercompany notes, capital contributions from

                                       13


ChipPAC, Inc. or dividends or distributions from ChipPAC, Inc.'s subsidiaries,
which dividends or distributions would be funded through payments on
intercompany notes. We will rely principally on funds generated by ChipPAC,
Inc.'s operating subsidiaries to fund payments on the exchange notes and other
indebtedness. If these subsidiaries are unable to make payments on their
intercompany loans, we may not be able to satisfy obligations under our debt
instruments, including payment of interest on the senior credit facilities and
the exchange notes.

Our ability to pay our obligations under the exchange notes may be reduced
because ChipPAC's Chinese operating subsidiaries, which hold 24.4% of our
consolidated assets and generated 4.5% of our consolidated revenues for the
year ended December 31, 1999, are not guarantors of the exchange notes.

   ChipPAC's Chinese subsidiaries are not guarantors of the exchange notes.
However, the historical combined financial information and the pro forma
combined financial information included in this prospectus are presented on a
combined basis and include the Chinese entities. After giving effect to the
recapitalization, the aggregate revenue and EBITDA for the Chinese entities,
for the year ended December 31, 1999, would have been approximately $17.0
million and a loss of $1.8 million, respectively, and their combined fixed
assets at December 31, 1999 would have been approximately $78.0 million. Our
Chinese subsidiaries held 24.4% of our consolidated assets and generated
approximately 4.5% of our consolidated revenues for the year ended December 31,
1999.

   Claims of creditors of our Chinese operating subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness or guaranties
issued by these subsidiaries, will generally have priority on the assets and
earnings of these subsidiaries over the claims of creditors of our company,
including holders of the notes, even if the obligations of our Chinese
operating subsidiaries do not constitute senior indebtedness. Since ChipPAC's
Chinese subsidiaries will not guarantee the exchange notes, holders of the
exchange notes will have to rely solely on dividends or distributions from
ChipPAC's Korean and British Virgin Islands subsidiaries to satisfy their
respective obligations under the exchange notes should ChipPAC's Chinese
subsidiaries be unable to make dividends or distributions.

The exchange notes will not be secured by any of our assets. Obligations under
the senior credit facilities are secured by our assets and those of most of our
subsidiaries; thus the senior lenders, and not holders of the exchange notes,
will have a claim to our assets if we become insolvent, are liquidated or if
our senior secured indebtedness is accelerated.

   The exchange notes and the guarantees will not be secured by any of our
assets. Our obligations under the senior credit facilities will be secured by a
first priority pledge of all our capital stock, a perfected first priority
security interest in substantially all of our assets and those of our
subsidiaries and a first priority pledge of all intercompany loans among:

    . ChipPAC International Company Limited and each of ChipPAC Luxembourg
      S.a.R.L., ChipPAC Assembly and Test (Shanghai) Company, Ltd. and
      ChipPAC Limited, respectively;

    . ChipPAC Luxembourg S.a.R.L. and ChipPAC Liquidity Management Hungary
      Limited Liability Company; and

    . ChipPAC Liquidity Management Hungary Limited Liability Company and
      ChipPAC Korea Company, Ltd.

   If we become insolvent or are liquidated, or if payment under the senior
credit facilities or under other secured senior indebtedness is accelerated,
the lenders under the senior credit facilities or holders of other secured
senior indebtedness will be entitled to exercise the remedies available to a
secured lender under applicable law and under documents pertaining to the
senior credit facilities or other senior debt. Accordingly, holders of secured
senior indebtedness will have a prior claim to our assets.

                                       14


The senior credit facilities and the indenture governing the exchange notes
impose limitations on how we conduct our business; as a result, we may not be
able to pursue strategies that could be in the best interests of holders of the
exchange notes.

   The senior credit facilities and the indenture governing the exchange notes
contain restrictions on us that could increase our vulnerability to general
adverse economic and industry conditions by limiting our flexibility in
planning for and reacting to changes in our business and industry.
Specifically, these restrictions limit our ability, to:

    . incur additional debt;

    . pay dividends and make other distributions;

    . prepay subordinated debt;

    . make investments and other restricted payments;

    . enter into sale and leaseback transactions;

    . create liens;

    . sell assets; and

    . enter into transactions with affiliates.

   As a result of these restrictions, we may not be able to pursue business
strategies that could be in the best interests of holders of the exchange
notes.

If our relationship with Hyundai, our owner prior to the recapitalization,
deteriorates, our business operations could be interrupted.

   Our facilities in Ichon, Korea occupy a portion of a building located on
property owned by Hyundai, our former owner. In addition, our operations at
this site are dependent upon various service and support personnel employed by
Hyundai. An unfavorable change in our relations with Hyundai could prevent us
from gaining access to and effectively managing this facility and its
operations, which could adversely affect our revenues and profitability.

The cyclicality of the semiconductor industry and decreases in selling prices
for our services could decrease our gross profits.

   Our operations are substantially affected by market conditions in the
semiconductor industry, which is highly cyclical and, at various times, has
experienced significant economic downturns characterized by reduced product
demand, rapid erosion of average selling prices and production overcapacity.
Beginning in 1997 and continuing through the end of 1998, intense competition
and a general slowdown in the semiconductor industry worldwide resulted in
decreases in the average selling prices of many of our packaging services. We
expect that average selling prices for our services will continue to decline in
the future. A decline in average selling prices for these services, if not
offset by reductions in the costs of providing those services or by a shift to
higher margin services, would decrease our gross profits and could make it more
difficult for us to meet our obligations to pay interest and principal on the
exchange notes.

   In addition, we increase our level of operating expenses and investment in
packaging services capacity based on customer demand forecast(s) and
anticipated revenue growth. If our revenues do not grow as anticipated or the
forecasts upon which we rely are inaccurate, and we are unable to decrease
these expenses, we may not be able to meet our obligations to pay interest and
principal on the exchange notes.

If we are unable to develop and market new technologies, we may not remain
competitive within the semiconductor packaging industry.

   The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of packaging services. As a result,
we expect that we will need to continually introduce more

                                       15


advanced package designs in order to respond to competitive industry conditions
and customer requirements. The requirement to develop and maintain advanced
packaging capabilities and equipment could require significant research and
development and capital expenditures in future years. In addition, advances in
technology typically lead to rapid and significant price decreases and lower
margins for older packaging types and may lead to our current services becoming
less competitive. Any failure by us to achieve advances in package design or to
obtain access to advanced package designs developed by others could reduce our
profits which, in turn, could prevent us from paying interest and principal on
the notes.

Our research and development efforts may not yield profitable and commercially
viable services for years; thus, we may have significant short-term research
and development expenses which will not necessarily result in increases in
revenue, if at all, for one to two years.

   Our research and development efforts may not yield commercially viable
packages or test services, if at all, for anywhere from one to two years. The
qualification process is conducted in various stages which may take up to an
additional year to complete, and during each stage there is a substantial risk
that we will have to abandon a potential package or test service which is no
longer marketable and in which we have invested significant resources. In the
event we are able to qualify new packages, a significant amount of time will
have elapsed between our investment in new packages and the receipt of any
related revenues.

The intensity of competition in our industry could result in downward pressure
on pricing, or loss of our customers, either of which could adversely affect
our revenues and profits.

   We face substantial competition from a number of established independent
packaging companies and with the internal capabilities of many of our largest
customers. Each of our primary competitors has significant operational
capacity, financial resources, research and development operations, and
established relationships with many large semiconductor companies which are
current or potential customers of ours. The presence of these competitors may
result in downward price pressure in our industry. Furthermore, our competitors
may in the future capture our existing or potential customers through superior
responsiveness, service quality, product design, technical competence or other
factors which we view as principal elements of competition in our industry. In
addition, our primary customers may, in the future, shift more of their
packaging and test service demand internally. As a result, we may have reduced
revenue and, thus, may not meet our obligations to pay interest and principal
on the exchange notes.

We could lose customers, and thus revenue, if we cannot maintain the quality of
our services.

   The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the operational environment, human
error, equipment malfunction, use of defective materials and plating services
and inadequate sample testing. From time to time, we expect to experience lower
than anticipated yields as a result of these factors, particularly in
connection with any expansion of capacity or change in processing steps. In
addition, our yield on new packaging will be lower during the period necessary
for us to develop the requisite expertise and experience with these processes.
Any failure by us to maintain high quality standards or acceptable yields, if
significant and sustained, could result in the loss of customers, delays in
shipments, increased costs and cancellation of orders.

Our business may be adversely affected by the loss of, or reduced purchases by,
Intel, Atmel Corporation, LSI Logic or any other large customer. Additionally,
we may encounter difficulties in soliciting new customers.

   In 1999, sales of packaging and test services to Intel, Atmel Corporation
and LSI Logic accounted for approximately 61.9%, 7.6% and 6.5% of our net
revenues, respectively, and sales to our top five customers in the aggregate
accounted for approximately 83.4% of total net revenues. If any of our main
customers were to purchase significantly less of our services in the future,
these decreased level of purchases could, ultimately,

                                       16


harm our operating results, thereby making it more difficult for us to meet our
obligations to pay interest and principal on the exchange notes.

   Semiconductor packaging companies must pass a lengthy and rigorous
qualification process that can take up to six months at a cost to the customer
of $250,000 to $300,000. If we fail to qualify packages with potential
customers or customers with which we have recently become qualified do not use
our services, then our customer base could become more concentrated with a
limited number of customers accounting for a significant portion of our
revenues. Moreover, we believe that once a semiconductor company has selected a
particular packaging company's services, the former generally relies on that
vendor's packages for specific applications and, to the extent possible,
subsequent generations of that vendor's packages. Accordingly, it may be
difficult to achieve significant sales to a particular or potential customer
once another vendor's packages have been selected by that customer unless there
are compelling reasons to do so.

Economic crisis in the Pacific Rim region where our suppliers are located could
prevent us from securing adequate supplies of materials which could, in turn,
prevent us from meeting the demands of our customers; any resulting decrease in
our revenues could impair our ability to pay interest and principal on the
exchange notes.

   All of our materials suppliers are located in the Pacific Rim. Historically,
over half of our substrate costs were incurred from the purchase of materials
from Japanese suppliers. In the future, we expect that a growing portion of
these materials will be supplied by sources in Korea and Taiwan. Several
countries in this region have experienced currency devaluation and/or
difficulties in financing short-term obligations. We cannot assure you that the
effect of this economic crisis on our suppliers will not impact operations, or
that the effect on our customers in that region will not adversely affect both
the demand for our services and the collectibility of receivables.

   We obtain the direct materials to fill orders for our packaging and test
services directly from vendors. To maintain competitive packaging operations,
we must obtain from our vendors, in a timely manner, sufficient quantities of
acceptable materials at expected prices. We source most of our materials,
including critical materials like lead frames, laminate substrates and gold
wires, from a limited group of suppliers. We purchase all of our materials on a
purchase order basis and have no long-term contracts with any suppliers. From
time to time, vendors have extended lead times or limited the supply of
required materials to us because of vendor capacity constraints and,
consequently, we have experienced difficulty in obtaining acceptable materials
on a timely basis. Our business and results could be negatively impacted if our
ability to obtain sufficient quantities of materials and other supplies in a
timely manner were substantially diminished or if there were significant
increases in the costs of materials that we could not pass on to our customers.
If that were to occur, we may not be able to meet our obligations to pay
interest and principal on the exchange notes.

We license critical technology from Hyundai and Motorola. Our net revenues
could be very adversely affected if we cannot extend the BGA sublicense once it
expires on December 31, 2002.

   We seek to protect our proprietary information and know-how through the use
of trade secrets, confidentiality agreements and other security measures.
Regarding patents, we cannot assure you that any applications we file for
patent protection will be granted, or, if granted, will offer meaningful
protection. Additionally, we cannot assure you that our competitors will not
develop, patent or gain access to similar know-how and technology, or reverse
engineer our packaging services, or that any confidentiality agreements upon
which we rely to protect our trade secrets and other proprietary information
will be adequate to protect our proprietary technology.

   Any patents and utility model, design right and computer program right
registrations obtained relating to technology that we developed prior to the
recapitalization are owned by Hyundai Electronics. In connection with the
recapitalization, we entered into a patent and technology license agreement by
which Hyundai Electronics granted us a license to use specific intellectual
property rights in our semiconductor packaging and

                                       17


test activities. We expect to seek patents and utility model, design right and
computer program right registrations, as applicable, on new packaging process
and package design technologies that we develop as a means of protecting
technology and market position.

   We have a non-exclusive sublicense from Hyundai to use patented BGA
technologies owned by Motorola. Motorola may also license these patents to
others, including our competitors. These BGA technologies contributed to 68.1%
of our net revenues in 1999. After expiration of this sublicense on December
31, 2002, we may be unable to utilize these BGA technologies if this sublicense
is not extended or otherwise renewed. Alternatively, if we are able to renew
this arrangement, we cannot assure you that it will be on the same terms as
currently exist. Any failure to extend or renew the sublicense arrangement
relating to Motorola's patented BGA technologies could cause us to incur
substantial liabilities and to suspend the packaging services and processes
that utilize these technologies.

The loss of our skilled personnel or our key executive officers could have a
material adverse effect on our research and development, marketing and sales
efforts.

   Our competitiveness within our industry will depend in large part upon
whether we can attract and retain skilled technical and marketing personnel and
can retain members of our executive team. Competition for skilled personnel is
intense, and we cannot assure you that we will be successful in attracting and
retaining the technical personnel or executive managers we require to develop
new and enhanced packaging and test services and to continue to grow and
operate profitably. If we cannot attract skilled personnel, we may not be able
to operate successfully in the future.

If we encounter future labor problems, we may fail to deliver our products in a
timely manner which could adversely affect our revenues and profitability.

   As of December 31, 1999, over half of our employees were represented by the
ChipPAC Korea Labor Union. In addition, one of our Chinese subsidiaries
experienced labor protests and a two day work stoppage in July 1998 in
connection with proposed work force reductions. We cannot assure you that
issues with the labor union or other employees will be resolved favorably for
us in the future, that we will not experience significant work stoppages in
future years or that we will not record significant charges related to those
work stoppages.

New laws and regulations, currency devaluation and political instability in
foreign countries, particularly in Asia, could make it more difficult for us to
operate successfully.

   For 1996, 1997, 1998 and 1999, we generated approximately 38.2%, 17.6%, 7.2%
and 16.3% of total revenues, respectively, from international markets,
primarily from customers in the Pacific Rim. In addition, all of the facilities
currently used to provide our packaging services are located in Korea and China
and many of our customers' operations are located in countries outside of the
United States. We cannot determine if our future operations and earnings will
be affected by new laws, new regulations: a volatile political climate, changes
in or new interpretations of existing laws or regulations or other consequences
of doing business outside the U.S., particularly in Korea and China. If future
operations are negatively affected by these changes, our sales may suffer and
we may not be able to meet our obligations to pay interest and principal on the
exchange notes.

Fluctuations in the exchange rate of the U.S. dollar and foreign currencies
could have a material adverse effect on our financial performance and
profitability.

   A portion of our costs and revenues are denominated in foreign currencies,
like the South Korean Won and the Chinese RMB. As a result, changes in the
exchange rates of these currencies or any other applicable currencies to the
U.S. dollar will affect our costs of goods sold and operating margins and could
result in exchange losses. We cannot fully predict the impact of future
exchange rate fluctuations on our profitability. From time to time, we have
engaged in, and may continue to engage in, exchange rate hedging activities in
an

                                       18


effort to mitigate the impact of exchange rate fluctuations. However, we cannot
assure you that any hedging technique we may implement will be effective. If it
is not effective, we may experience reduced operating margins which could
affect our ability to meet our obligations to pay interest and principal on the
exchange notes.

We could suffer adverse tax and other financial consequences if U.S. or foreign
taxing authorities do not agree with our interpretation of applicable tax laws.

   Our corporate structure is based, in part, on assumptions about the various
tax laws, including withholding tax, and other relevant laws of applicable non-
U.S. jurisdictions. We cannot assure you that foreign taxing authorities will
agree with our interpretations or that they will reach the same conclusions.
Our interpretations are not binding on any taxing authority and, if these
foreign jurisdictions were to change or to modify the relevant laws, we could
suffer adverse tax and other financial consequences or have the anticipated
benefits of our corporate structure materially impaired.

We are controlled by two principal shareholders and they may require us to take
actions, as increasing our indebtedness, which may not be in the best interests
of holders of the exchange notes.

   ChipPAC International Company Limited, the issuer of the outstanding notes
and the exchange notes, is a wholly owned subsidiary of ChipPAC, Inc.
Affiliates of Bain Capital, Inc. and SXI Group LLC, together with members of
our management, own approximately 90% of the issued and outstanding voting
stock of ChipPAC, Inc. Consequently, these owners will have the ability to
control our business and affairs by virtue of their ability to elect a majority
of ChipPAC, Inc.'s board of directors. The directors have the authority to make
decisions affecting ChipPAC, Inc.'s capital structure, including the issuance
of additional indebtedness. In addition, a shareholders agreement that was
signed at the closing of the recapitalization entitles affiliates of Bain
Capital, Inc. and the SXI Group LLC to fill six of eight seats on the board of
directors of ChipPAC, Inc. We cannot assure you that the interests of Bain
Capital, Inc. and SXI Group LLC do not or will not conflict with the interests
of the holders of the outstanding notes or of the exchange notes.

You may not be able to resell your exchange notes or may have to sell them at a
discount if an active trading market does not develop.

   The exchange notes are new securities for which there currently is no
market. We have been informed by the initial purchasers of the outstanding
notes, Credit Suisse First Boston Corporation and Donaldson Lufkin & Jenrette
Securities Corporation, that they intend to make a market in the exchange
notes. However, they are not obligated to do so and may cease their market-
making activities at any time. Accordingly, we cannot make predictions
regarding the development or liquidity of any market for the exchange notes.
The exchange notes are expected to be eligible for trading by qualified buyers
in the PORTAL market. The PORTAL market acts as a facilitator of SEC Rule 144A
and provides regulatory oversight for the clearance and settlement of domestic
and foreign debt and equity securities through designated clearing and
depository organizations. We do not intend to apply for listing of the exchange
notes on any securities exchange or for quotation through The Nasdaq National
Market. In addition, both the liquidity and the market price quoted for the
exchange notes may be adversely affected by changes in the overall market for
high-yield securities and by changes in our financial performance or prospects,
or in the prospects for companies in our industry generally. As a result, we
cannot assure you that an active or stable trading market will develop for the
exchange notes.

                                       19


                           FORWARD-LOOKING STATEMENTS

   This prospectus includes forward-looking statements regarding our financial
condition and business strategy. Also, statements that contain the words
"believes," "expects," "anticipates," "intends," "estimated" or similar
expressions are forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future events.
While we believe that these expectations and projections are reasonable,
forward-looking statements are affected by risks, uncertainties and assumptions
about us, including:

    . our dependence on continuous introduction of new services based on
      the latest technology;

    . our ability to compete in the intensely competitive semiconductor and
      personal computer component industries;

    . risks associated with our international business activities and with
      acquisitions and integration of acquired companies;

    . our dependence on proprietary information and technology and key
      personnel;

    . our fluctuating quarterly results and product liability exposure;

    . our response to general economic conditions, including economic
      conditions related to the semiconductor and personal computer
      industries; and

    . those other risks identified in the "Risk Factors" section of this
      prospectus.

   We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

                                 INDUSTRY DATA

   In this prospectus, we rely on and refer to information regarding the
semiconductor market and its segments and competitors from Electronic Trends
Publications and The McClean Report (1999 edition), market research reports,
analyst reports and other publicly available information. Although we believe
that this information is reliable, we cannot guarantee the accuracy and
completeness of the information and have not independently verified it. None of
the sources that we rely on for information about the semiconductor market has
consented to the disclosure and use of their information in this prospectus.

                                       20


                                USE OF PROCEEDS

   We used the gross proceeds of approximately $476 million from the offering
of the outstanding notes, the senior credit facility and the equity investment
made with the recapitalization, together with cash on hand:

    . to pay approximately $311 million in recapitalization consideration
      which may be adjusted after closing based on working capital, capital
      expenditures, research and development expenditures and our EBITDA in
      each of the four calendar years following the recapitalization.

    . to repay approximately $133 million of existing Hyundai debt; and

    . to pay fees and expenses associated with the merger and related
      transactions of approximately $32 million.

   We will not receive any cash proceeds from the issuance of the exchange
notes in the exchange offer. In consideration for issuing these exchange notes
as contemplated in this prospectus, we will receive outstanding notes in like
principal amount, the terms of which are the same in all material respects to
the exchange notes. The outstanding notes surrendered in exchange for the
exchange notes will be retired, canceled and not reissued. Accordingly, the
issuance of the exchange notes will not result in any increase or decrease in
our debt.

                                       21


                                 CAPITALIZATION

   The following table describes our capitalization as of December 31, 1999.
The information in the following table should be read in conjunction with the
"Pro Forma Condensed Combined Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections and the
historical combined financial statements and the related notes included
elsewhere in this prospectus. As of the date of this prospectus, the Revolving
Credit Facility and the CapEx Facility described below remain undrawn.



                                                                         At
                                                                    December 31,
                                                                        1999
                                                                    ------------
                                                                       Actual
                                                                    ------------
                                                                        (in
                                                                     millions)
                                                                 
Long-term debt (including current portion):
Existing senior credit facility and capital leases.................       --
Senior Credit Facilities:
  Revolving Credit Facility........................................       --
  CapEx Facility...................................................       --
  Term Loan Facilities.............................................    $150.0
  Senior Subordinated Notes Due 2009...............................     150.0
                                                                       ------
    Total long-term debt...........................................     300.0
Hyundai Redeemable Preferred Stock.................................      73.6
Intel Redeemable Preferred Stock...................................       9.4
Shareholders' deficit..............................................    (122.9)
                                                                       ------
    Total capitalization...........................................    $260.1
                                                                       ======

   Hyundai Electronics may receive up to an additional $55.0 million in cash
during the four-year period beginning January 1, 1999 if we exceed certain
levels of EBITDA as provided in the recapitalization agreement. Also, the
Hyundai Preferred Stock is mandatorily redeemable on the eleventh anniversary
of the closing of the recapitalization, and will accrue dividends from the date
of issuance at a rate of 12.5% per annum over the life of the notes, will not
pay cash dividends during the five years and six months following the
recapitalization.

                                       22


                               THE EXCHANGE OFFER

   This is a summary of the material provisions of the registration rights
agreement entered into by and among ChipPAC International Company Limited, the
guarantors and the initial purchasers as of July 29, 1999. It does not purport
to be complete and reference is made to the provisions of the registration
rights agreement which has been filed as an exhibit to the registration
statement of which this prospectus forms a part.

General

   In connection with the issuance of the outstanding notes under a purchase
agreement dated as of July 22, 1999 by and among ChipPAC International Company
Limited, the guarantors and the initial purchasers, the initial purchasers and
their respective assignees became entitled to the benefits of the registration
rights agreement.

   The registration rights agreement requires us to file the registration
statement of which this prospectus is a part for a registered exchange offer
relating to an issue of exchange notes identical in all material respects to
the outstanding notes but containing no restrictive legend. Under the
registration rights agreement, ChipPAC International Company Limited is
required to:

    . use its reasonable best efforts to file a registration statement not
      later than 150 days following the date of original issuance of the
      outstanding notes, which we refer to here as, the "Issue Date";

    . use its reasonable best efforts to cause the registration statement
      to become effective no later than 210 days after the Issue Date;

    . use its reasonable best efforts to keep the exchange offer effective
      for not less than 30 days, or longer if required by applicable law,
      after the date that notice of the exchange offer is first mailed to
      holders of the outstanding notes; and

    . use its reasonable best efforts to consummate the exchange offer on
      or prior to the 60th day following the date on which the exchange
      offer registration statement is initially declared effective.

   The exchange offer being made under this prospectus, if commenced and
consummated within the time periods described above, will satisfy those
requirements under the registration rights agreement.

   Upon the terms and conditions described in this prospectus and in the Letter
of Transmittal, we will accept any and all outstanding notes validly tendered
and not validly withdrawn prior to 5:00 p.m., New York City time, on the
expiration date which is May 30, 2000, or a later date and time as to which the
exchange offer has been extended. We will issue $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of outstanding
notes accepted in the exchange offer. Holders may tender any portion, or all,
of their outstanding notes in the exchange offer. However, outstanding notes
may be tendered only in integral multiples of $1,000.

   The form and terms of the exchange notes are substantially the same as the
form and terms of the outstanding notes except that:

    . the exchange notes bear an exchange note designation and a different
      CUSIP number from the outstanding notes;

    . the exchange notes have been registered under the federal securities
      laws and will not bear legends restricting their transfer as the
      outstanding notes do; and

    . the holders of the exchange notes will generally not be entitled to
      rights under the registration rights agreement, which rights
      generally will be satisfied when the exchange offer is consummated.


                                       23


   The exchange notes will evidence the same debt as the tendered outstanding
notes and will be entitled to the benefits of the same indenture under which
the outstanding notes were issued. As of the date of this prospectus,
$150,000,000 aggregate principal amount of outstanding notes were outstanding.

   Holders of outstanding notes do not have any appraisal or dissenters' rights
under the laws of the Territory of the British Virgin Islands or the indentures
relating to the exchange notes in connection with the exchange offer. We intend
to conduct the exchange offer in compliance with requirements of the Securities
Exchange Act of 1934, and the related rules and regulations of the SEC.

   We will have accepted validly tendered outstanding notes when, as and if we
have given oral or written notice of acceptance to the exchange agent. We will
confirm any oral notice in writing to the exchange agent. The exchange agent
will act as agent for the tendering holders for the purpose of receiving the
exchange notes from our company.

   If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, or otherwise, the certificates for any unaccepted
outstanding notes will be returned, without expense, to the tendering holder as
promptly as practicable after the expiration date.

   Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, as indicated in the
instructions in the Letter of Transmittal, transfer taxes on the exchange of
outstanding notes in the exchange offer. We will pay all charges and expenses,
other than transfer taxes in several circumstances, in connection with the
exchange offer. For additional information, please refer to the "--Fees and
Expenses" section of this prospectus.

Expiration Date; Extensions; Amendments

   The expiration date is 5:00 p.m., New York City time, on May 30, 2000,
unless we extend the exchange offer, in which case the expiration date will be
the latest date and time to which the exchange offer is extended.

   In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice, to the exchange agent. We will confirm
in writing any oral notice with notice if given orally to be confirmed in
writing to the exchange agent and we will issue a press release or other public
announcement, each prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.

   We reserve the right:

    . to delay accepting any outstanding notes, to extend the exchange
      offer or to terminate the exchange offer if any of the conditions
      described below under "--Conditions" shall not have been satisfied,
      by giving oral or written notice, of a delay, extension or
      termination to the exchange agent, or

    . to amend the terms of the exchange offer in any manner.

   Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders.

Interest on the Exchange Notes

   Interest on the outstanding notes is payable semi-annually on each February
1 and August 1, commencing February 1, 2000. Interest on the exchange notes is
payable semi-annually on each February 1 and August 1, commencing February 1,
2000. The exchange notes will bear interest from their date of issuance. On
August 1, 2000, holders of outstanding notes that are accepted for exchange
will receive, in cash, accrued but unpaid interest

                                       24


on the outstanding notes from February 1, 2000. Interest on the outstanding
notes accepted for exchange will cease to accrue upon issuance of the exchange
notes.

   Interest on the exchange notes is payable semi-annually on each February 1
and August 1, commencing on February 1, 2000.

Procedures for Tendering

   Only a registered holder of outstanding notes may tender exchange notes in
the exchange offer. To tender in the exchange offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile of it, have the
signatures thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver the Letter of Transmittal or a facsimile, together with
the outstanding notes and any other required documents, or cause The Depository
Trust Company to transmit an agent's message as described below in connection
with a book-entry transfer, to the exchange agent prior to the expiration date.
To be tendered effectively, the outstanding notes, the Letter of Transmittal or
agent's message and other required documents must be completed and received by
the exchange agent at the address provided below under "--Exchange Agent" prior
to the expiration date. Delivery of the outstanding notes may be made by book-
entry transfer in compliance with the procedures described below. Confirmation
of a book-entry transfer must be received by the exchange agent prior to the
expiration date.

   The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that a book-entry transfer facility
has received an express acknowledgment from the participant in the book-entry
transfer facility tendering the outstanding notes that a participant has
received and agrees:

    . to participate in the Automated Tender Option Program;

    . to be bound by the terms of the Letter of Transmittal; and

    . that we may enforce the agreement against the participant.

   The tender by a holder and the acceptance by us will constitute agreement
between the holder and the company upon the terms and conditions described in
this prospectus and in the Letter of Transmittal or agent's message.

   The method of delivery of outstanding notes and the Letter of Transmittal or
agent's message and all other required documents to the exchange agent is at
the election and sole risk of the holder. As an alternative to delivery by
mail, holders may wish to consider overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the exchange
agent before the expiration date. No Letter of Transmittal or outstanding notes
should be sent to any of ChipPAC International Company Limited or any of its
affiliates. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the above transactions for
holders.

   Any beneficial owner whose outstanding notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. For additional
information, please refer to the "Instructions to Registered and/or Book-Entry
Transfer Facility Participant from Beneficial Owner" included with the Letter
of Transmittal.

   Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an eligible institution referred to below, unless
the outstanding notes are tendered by a registered holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal, or for the account of an eligible
institution. If signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, the guarantee
must be by a member firm of the Medallion System, which we refer to as an
"eligible institution."


                                       25


   If the Letter of Transmittal is signed by a person other than the registered
holder of any outstanding notes, the notes must be endorsed or accompanied by a
properly completed bond power, signed by the registered holder as the
registered holder's name appears on the notes with the signature thereon
guaranteed by an eligible institution.

   If the Letter of Transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, they should so indicate when signing, and evidence to our
satisfaction of their authority to so act must be submitted with the Letter of
Transmittal.

   We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts relating to the outstanding notes
at the book-entry transfer facility, The Depository Trust Company, which we
refer to as the "book-entry transfer facility," for the purpose of facilitating
the exchange offer, and if established, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of outstanding notes by causing the book-entry transfer facility to
transfer the outstanding notes into the exchange agent's account for the
outstanding notes in compliance with the book-entry transfer facility's
procedures for the transfer. Although delivery of the outstanding notes may be
effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, unless an agent's message is transmitted to and
received by the exchange agent in compliance with the Automated Tender Option
Program on or prior to the expiration date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under these procedures, the tender of the notes will not be valid. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the exchange agent.

   All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by ChipPAC International Company Limited,
in its sole discretion, which determination will be final and binding. ChipPAC
International Company Limited reserves the absolute right to reject any and all
outstanding notes not properly tendered or any outstanding notes our acceptance
of which would, in the opinion of ChipPAC International Company Limited's
counsel, be unlawful. ChipPAC International Company Limited also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular outstanding notes. ChipPAC International Company Limited may not
waive any condition to the exchange offer unless that condition is legally
waivable. In the event a waiver by ChipPAC International Company Limited gives
rise to the legal requirement to do so, ChipPAC International Company Limited
will hold the exchange offer open for at least five business days thereafter.
ChipPAC International Company Limited's interpretation of the terms and
conditions of the exchange offer, including the instructions in the Letter of
Transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within the time ChipPAC International Company Limited shall determine.
Although ChipPAC International Company Limited intends to notify holders of
defects or irregularities in tenders of outstanding notes, neither ChipPAC
International Company Limited, the exchange agent nor any other person shall
incur any liability for failure to give notification. Tender of outstanding
notes will not be deemed to have been made until the defects or irregularities
have been cured or waived. Any outstanding notes received by the exchange agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the exchange agent to the
tendering holders, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the expiration date.

Guaranteed Delivery Procedures

   Holders who wish to tender their outstanding notes and whose outstanding
notes are not immediately available, who cannot deliver their outstanding
notes, the Letter of Transmittal or any other required documents

                                       26


to the exchange agent, or who cannot complete the procedures for book-entry
transfer, prior to the expiration date, may effect a tender if:

      (a) the tender is made through an eligible institution;

      (b) prior to the expiration date, the exchange agent receives by
  facsimile transmission, mail or hand delivery from an eligible institution
  a properly completed and duly executed Notice of Guaranteed Delivery,
  setting forth the name and address of the holder, the certificate number(s)
  of the outstanding notes and the principal amount of outstanding notes
  tendered, stating that the tender is being made by the Notice of Guaranteed
  Delivery and guaranteeing that, within three New York Stock Exchange
  trading days after the expiration date, the Letter of Transmittal, or
  facsimile of it, or, in the case of a book-entry transfer, an agent's
  message, together with the certificate(s) representing the outstanding
  notes, or a confirmation of book-entry transfer of notes into the exchange
  agent's account at the Book-Entry Transfer Facility, and any other
  documents required by the Letter of Transmittal will be deposited by the
  eligible institution with the exchange agent; and

      (c) the certificate(s) representing all tendered outstanding notes in
  proper form for transfer, or a confirmation of a book-entry transfer of
  outstanding notes into the exchange agent's account at the book entry
  transfer facility, together with a Letter of Transmittal, of facsimile of
  it, properly completed and duly executed, with any required signature
  guarantees, or, in the case of a book-entry transfer, an agent's message,
  are received by the exchange agent within three New York Stock Exchange
  trading days after the expiration date of the exchange offer.

Withdrawal of Tenders

   Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer.

   To validly withdraw a tender of outstanding notes in the exchange offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address provided in this prospectus prior
to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
Any notice of withdrawal must:

    . specify the name of the person having deposited exchange notes to be
      withdrawn, which we refer to as the "depositor";

    . identify the notes to be withdrawn, including the certificate
      number(s) and principal amount of the notes, or, in the case of
      outstanding notes transferred by book-entry transfer, the name and
      number of the account at the book entry transfer facility to be
      credited;

    . be signed by the holder in the same manner as the original signature
      on the Letter of Transmittal by which the notes were tendered,
      including any required signature guarantees, or be accompanied by
      documents of transfer sufficient to have the trustee for the
      outstanding notes register the transfer of notes into the name of the
      person withdrawing the tender; and

    . specify the name in which any outstanding notes are to be registered,
      if different from that of the depositor.

   All questions as to the validity, form and eligibility, including time of
receipt, of notices will be determined by us and shall be final and binding on
all parties. Any outstanding notes so withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer, and no exchange notes will
be issued unless the outstanding notes so withdrawn are validly retendered. Any
outstanding notes which have been tendered but which are not accepted for
exchange will be returned to the holder without cost to the holder as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn outstanding notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.


                                       27


Conditions

   Notwithstanding any other term of the exchange offer, ChipPAC International
Company Limited shall not be required to accept for exchange, or exchange notes
for, any outstanding notes, and may terminate or amend the exchange offer as
provided in this prospectus before the acceptance of the outstanding notes, if:

    . any action or proceeding is instituted or threatened in any court or
      by or before any governmental agency relating to the exchange offer
      which, in ChipPAC International Company Limited's sole judgment,
      might materially impair ChipPAC International Company Limited's
      ability to proceed with the exchange offer, or any material adverse
      development has occurred in any existing action or proceeding
      relating to ChipPAC International Company Limited or any of its
      subsidiaries; or

    . any law, statute, rule, regulation or interpretation by the staff of
      the SEC is proposed, adopted or enacted, which, in ChipPAC
      International Company Limited's sole judgment, might materially
      impair ChipPAC International Company Limited's ability to proceed
      with the exchange offer or materially impair the contemplated
      benefits of the exchange offer; or

    . any governmental approval has not been obtained, which approval
      ChipPAC International Company Limited shall, in its sole discretion,
      deem necessary for the completion of the exchange offer.

   If ChipPAC International Company Limited determines, in its sole discretion,
that any of the conditions are not satisfied, ChipPAC International Company
Limited may:

    . refuse to accept any outstanding notes and return all tendered
      outstanding notes to the tendering holders;

    . extend the exchange offer and retain all outstanding notes tendered
      prior to the expiration of the exchange offer, subject, however, to
      the rights of holders to withdraw outstanding notes as described in
      "--Withdrawal of Tenders" above; and

    . waive any unsatisfied conditions relating to the exchange offer and
      accept all properly tendered outstanding notes which have not been
      withdrawn.

Exchange Agent

   Firstar Bank of Minnesota, N.A. has been appointed as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the exchange agent
addressed as follows:

   By Registered or Certified Mail or                    By Hand:
   Overnight Courier: Firstar Bank of     Firstar Bank of Minnesota, N.A. 101
 Minnesota, N.A. 101 East Fifth Street   East Fifth Street St. Paul, Minnesota
  St. Paul, Minnesota 55101-1860 Attn:   55101-1860 Attn: Frank P. Leslie, III
          Frank P. Leslie, III

                                 By Facsimile:
                        (For Eligible Institutions Only)
                                 (651) 229-6415

                             Confirm by Telephone:
                                 (651) 229-2600

   Delivery to an address other than provided above will not constitute a valid
delivery.

                                       28


Fees and Expenses

   The expenses of soliciting tenders will be borne by ChipPAC International
Company Limited. The principal solicitation is being made by mail however,
additional solicitation may be made by telegraph, telecopy, telephone or in
person by officers and regular employees of ChipPAC International Company
Limited and its affiliates.

   ChipPAC International Company Limited has not retained any dealer-manager in
connection with the exchange offer and will not make any payments to brokers,
dealers, or others soliciting acceptances of the exchange offer. ChipPAC
International Company Limited, however, will pay the exchange agent reasonable
and customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.

   ChipPAC International Company Limited will pay the cash expenses to be
incurred in connection with the exchange offer. Expenses include fees and
expenses of the exchange agent and trustee, accounting and legal fees and
printing costs.

Accounting Treatment

   The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in ChipPAC International
Company Limited's accounting records on the date of exchange. Accordingly,
ChipPAC International Company Limited will recognize no gain or loss for
accounting purposes. The expenses of the exchange offer will be capitalized as
deferred financing costs and amortized as additional interest expense over the
term of the exchange notes.

Consequences of Failure to Exchange

   The outstanding notes that are not exchanged for exchange notes in the
exchange offer will remain restricted securities. Accordingly, outstanding
notes not exchanged may be resold only:

    . to ChipPAC International Company Limited, upon redemption of the
      notes or otherwise;

    . so long as the outstanding notes are eligible for resale under Rule
      144A under the Securities Act, to a person inside the United States
      whom the seller reasonably believes is a qualified institutional
      buyer as defined in Rule 144A in a transaction meeting the
      requirements of Rule 144A;

    . in compliance with Rule 144 under the Securities Act;

    . outside the United States to a foreign person in a transaction
      meeting the requirements of Rule 904 under the Securities Act;

    . under another exemption from the registration requirements of the
      Securities Act, and based upon an opinion of counsel reasonably
      acceptable to ChipPAC International Company Limited; or

    . under an effective registration statement under the Securities Act,
      in each case in compliance with any applicable securities laws of any
      state of the United States.

Resale of the Exchange Notes

   Based on interpretations by the SEC's staff in no-action letters issued to
other parties, we believe that holders of exchange notes may transfer the
exchange notes without complying with the registration requirements of
Securities Act and without delivering a prospectus that meets the requirements
of Section 10 of the Securities Act if the holders:

    . are not affiliates of ours as defined in Rule 405 under the
      Securities Act,

    . acquired the exchange notes in the ordinary course of their business,

    . are not engaged in, and do not intend to engage in, and have no
      arrangement or understanding with any person to participate in, a
      distribution of the exchange notes,

                                       29


    . are not broker-dealers that acquired outstanding notes directly from
      us, and

    . are not broker-dealers that acquired outstanding notes as a result of
      market-making activities or other trading activities.

   Each holder of outstanding notes that participates in the exchange offer
will be required to make representations to us in the Letter of Transmittal of
the items listed above.


                                       30


                       PRO FORMA CONDENSED FINANCIAL DATA

   The following pro forma condensed statements of operations for the years
ended December 31, 1999 and 1998, which we refer to as the "Pro Forma Financial
Statements," have been derived by the application of pro forma adjustments to
our combined results included elsewhere in this prospectus.

   The Pro Forma statements of operations give effect to the recapitalization
as if it had occurred on January 1, 1998. EBITDA as presented below has been
adjusted to exclude historical charges and credits as described in Note 6.

   The Pro Forma Financial Statements do not purport to represent what our
financial position or results of operations would have actually been had the
recapitalization in fact occurred on the dates, or to project results of
operations for any future period. The Pro Forma Financial Statements should be
read in conjunction with the "Capitalization," "Prospectus Summary--Summary
Historical and Pro Forma Financial and Operating Data," "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" sections and the historical combined financial
statements and the related notes included elsewhere in this prospectus.

   During the periods covered by our Financial Statements, our activities were
conducted as part of Hyundai Electronics' overall operations, and separate
financial statements were not prepared. Our Financial Statements were prepared
from the historical accounting records of Hyundai Electronics and include
various allocations for costs and expenses. Therefore, our Statement of
Operations may not be indicative of the results of operations that would have
resulted if we had operated on a stand-alone basis. All of the allocations and
estimates reflected in our Financial Statements are based on assumptions that
we believe are reasonable under the circumstances and that have been reviewed
by Hyundai Electronics America.



                                                Year Ended December 31, 1999
                                               -------------------------------
                                                           Pro Forma    Pro
                                               Historical Adjustments  Forma
                                               ---------- ----------- --------
                                                       (in thousands)
                                                             
Pro Forma Condensed Statement of Operations:
Revenues......................................  $375,530        --    $375,530
Costs of revenues.............................   317,488        --     317,488
                                                --------   --------   --------
Gross profit..................................    58,042        --      58,042
Operating expenses:
  Selling, general and administrative (1).....    21,219        --      21,219
  Research and development....................    12,362        --      12,362
  Change of control expense (2)...............    11,842   $(11,842)       --
                                                --------   --------   --------
Operating income..............................    12,619    (11,842)    24,461
Interest expense (3)..........................    21,241     12,976     34,217
Interest income...............................    (2,751)       --      (2,751)
Foreign currency gain.........................    (1,224)       --      (1,224)
Other income..................................      (650)       --        (650)
                                                --------   --------   --------
Loss before provision for income taxes and
 extraordinary item...........................    (3,997)    (1,134)    (5,131)
Provision (benefit) for income taxes (4)......     1,938        --       1,938
Extraordinary loss, net of income tax benefit
 (5)..........................................     1,373     (1,373)       --
                                                --------   --------   --------
Net loss......................................  $ (7,308)  $   (311)  $ (7,069)
                                                ========   ========   ========
Other Data:
EBITDA (6)....................................       --         --    $ 81,162
Depreciation and amortization (7).............       --         --      56,701
Capital expenditures (including capital
 leases)......................................       --         --      57,856
Dividends accreted on Hyundai Redeemable
 Preferred Stock (8)..........................       --         --       8,750
Dividends accreted on Intel Redeemable
 Preferred Stock (9)..........................       --         --         406
Accretion of recorded value of the Intel
 warrant......................................       --         --         260


                                       31




                                               Year Ended December 31, 1998
                                              -------------------------------
                                                          Pro Forma    Pro
                                              Historical Adjustments  Forma
                                              ---------- ----------- --------
                                                      (in thousands)
                                                            
Pro Forma Condensed Combined Statement of
 Operations:
Revenues.....................................  $334,081        --    $334,081
Costs of revenues............................   270,365        --     270,365
                                               --------   --------   --------
Gross profit.................................    63,716        --      63,716
Operating expenses:
  Selling, general and administrative (1)....    15,595        --      15,595
  Research and development...................     7,692        --       7,692
                                               --------   --------   --------
Operating income.............................    40,429                40,429
Interest expense (3).........................    13,340   $ 20,877     34,217
Interest income..............................    (1,276)       --      (1,276)
Foreign currency gain........................   (24,670)       --     (24,670)
Other expense................................       168        --         168
                                               --------   --------   --------
Income before provision for income taxes.....    52,867     20,877     31,990
Provision (benefit) for income taxes (4).....    20,564    (14,166)     6,398
                                               --------   --------   --------
Net income (loss)............................  $ 32,303   $ (6,711)  $ 25,592
                                               ========   ========   ========
Other Data:
EBITDA (6).......................................................... $ 86,284
Depreciation and amortization.......................................   45,855
Capital expenditures (including capital leases).....................   63,523
Dividends on Hyundai Preferred Stock (8)............................    8,750


                                       32


                          NOTES TO PRO FORMA CONDENSED
                            STATEMENT OF OPERATIONS

                     Years Ended December 31, 1999 and 1998

   1. In connection with the recapitalization, we entered into advisory
agreements with the Equity Investors by which the Equity Investors will provide
financial, advisory and consulting services. In exchange for these services,
the Equity Investors are entitled to receive fees billed at the Equity
Investors' customary rates for actual time spent performing these services plus
reimbursement for out-of-pocket expenses. There are no minimum levels of
service required to be provided. Commencing with the fiscal quarter ended March
31, 2000, when and if we achieve EBITDA for the preceding twelve-month period
in excess of $81.2 million, the Equity Investors will be entitled to an annual
advisory fee, the amount of which is limited by our senior credit agreements.
As there are no minimum levels of required service and because the annual
advisory fee would not commence until after December 31, 1999 and is dependent
upon achieving a specific EBITDA level, no amounts related to the Equity
Investors' advisory fees have been included in the pro forma operating results.

   2. As a result of the recapitalization, the Company was contractually
required to make a one-time change of control payment to its unionized Korean
employees of approximately $11.8 million. The payment was recorded as an
operating expense during the quarter ended September 30, 1999. This amount has
been excluded from the pro forma operating results for the year ended December
31, 1999, as it represents a one-time charge directly related to the
recapitalization transaction.

   3. The increase to pro forma interest expense as a result of the
recapitalization is summarized as follows:



                                               Year Ended        Year Ended
                                            December 31, 1999 December 31, 1998
                                            ----------------- -----------------
                                                      (in thousands)
                                                        
   Interest on Term Loan Facilities--
    8.86%.................................       $13,288           $13,288
   Interest on Exchange Notes--12.75%.....        19,125            19,125
   Interest on Revolving Credit Facility--
    8.54%.................................           --                --
   Interest on CapEx Facility--8.54%......           --                --
   Bank commitment fees/Capital leases....           --                --
                                                 -------           -------
   Cash interest expense..................        32,413            32,413
   Amortization of debt issuance costs....         1,804             1,804
   ($14.4 million over an average 8 year
    amortization period)
                                                 -------           -------
   Interest expense from recapitalization
    debt requirements.....................        34,217            34,217
   Less: historical interest expense......        21,241            13,340
                                                 -------           -------
   Net increase...........................       $12,976           $20,877
                                                 =======           =======


   An increase or decrease in the assumed weighted average interest rate on the
senior credit facilities of 0.125% would change pro forma interest expense by
$187,500 for each of the years ended December 31, 1999 and 1998.

   4. Under the terms of the recapitalization agreement, Hyundai Electronics
was required to reorganize the ChipPAC entities into a distinct group of
subsidiaries owned by ChipPAC, Inc. If the reorganization had taken place on
January 1, 1998, ChipPac would have had an effective tax rate of approximately
20% for 1998. Based on the 1999 results, the effective tax rate for 1999 is
approximately (39%). These adjustments reflect the income tax adjustment
required to result in a pro forma income tax provision based on these effective
tax rates and the tax effects of the pro forma adjustments described in this
prospectus.

   5. The Company incurred an extraordinary loss of $1.4 million, net of income
tax benefit, related to the early retirement of debt upon the recapitalization
of the Company. This amount has been excluded from the pro-forma operating
results from the year ended December 31, 1999.

                                       33


                   NOTES TO PRO FORMA CONDENSED--(Continued)
                            STATEMENT OF OPERATIONS

                     Years Ended December 31, 1999 and 1998

   6. "EBITDA" is defined in this prospectus as operating income, plus
depreciation and amortization, non-cash charges related to write-downs of
impaired assets in 1997 and change of control expense in 1999. EBITDA is
presented because we believe it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness. However, EBITDA should
not be considered as an alternative to net income as a measure of operating
results or to cash flows as a measure of liquidity in compliance with generally
accepted accounting principles. Because EBITDA is not calculated identically by
all companies, the presentation in this prospectus may not be comparable to
those disclosed by other companies. The following table reconciles net income
(loss) as reported with EBITDA for the historical statements of operations for
each of the four years ended December 31, 1999 and the pro-forma Statement of
Operations for the year ended December 31, 1999.



                                                                     Pro Forma
                                                                     Year Ended
                                   Year Ended December 31,          December 31,
                              ------------------------------------  ------------
                               1996      1997     1998      1999        1999
                              -------  --------  -------  --------  ------------
                                              (in thousands)
                                                     
Net income (loss) as
 reported...................  $(5,625) $(46,118) $32,303  $ (7,308)   $(7,069)
Provision for (benefit from)
 income taxes...............    2,883    (9,671)  20,564     1,938      1,938
Loss from early
 extinguishment of debt, net
 of related income tax
 benefit....................      --        --       --      1,373        --
Non-operating (income)
 expense items:
  Foreign currency (gains)
   losses...................    5,041    69,669  (24,670)   (1,224)    (1,224)
  Interest income...........     (108)      (96)  (1,276)   (2,751)    (2,751)
  Interest expense..........    5,780    10,972   13,340    21,241     34,217
  Other (income) expenses,
   net......................     (351)      762      168      (650)      (650)
                              -------  --------  -------  --------    -------
Operating income as
 reported...................    7,620    25,518   40,429    12,619     24,461
Adjustments to arrive at
 EBITDA as defined:
  Depreciation and
   amortization.............   26,632    40,682   45,855    56,701     56,701
  Write-down of impaired
   assets...................      --     11,569      --        --         --
  Change of control expense.      --        --       --     11,842        --
                              -------  --------  -------  --------    -------
EBITDA as defined above.....  $34,252  $ 77,769  $86,284  $ 81,162    $81,162
                              =======  ========  =======  ========    =======


   7. Depreciation and amortization for the year ended December 31, 1999
excludes $0.8 million of amortization of debt issuance cost. This amount is
included as interest expense.

   8. Dividends on the Hyundai Preferred Stock accrue on a daily basis at a
rate of 12.5% per annum. Until February 5, 2005, dividends will not be paid in
cash, but will be capitalized as accumulated and unpaid dividends as part of
Mandatorily Redeemable Preferred Stock.

   9. Dividends on the Intel Preferred Stock accrue on a daily basis at a rate
of 10% per annum. Dividends are paid annually on August 1, and accumulated and
unpaid dividends as at the balance sheet date are capitalized as part of
Mandatorily Redeemable Preferred Stock.

                                       34


                       SELECTED HISTORICAL FINANCIAL DATA

   The following table presents our selected historical statements of
operations, balance sheet and other data for the periods presented. No separate
financial information for ChipPAC International Company Limited has been
provided in this prospectus because (a) ChipPAC International Company Limited
does not itself conduct any operations but rather all operations of ChipPAC,
Inc. are conducted by ChipPAC, Inc. or by its direct or indirect subsidiaries;
(b) ChipPAC International Company Limited has no material assets; and (c)
ChipPAC, Inc. and its subsidiaries (excluding the Chinese operating
subsidiaries) are unconditionally, jointly and severally guaranteeing the
exchange notes on an unsecured, senior subordinated basis. This information
should only be read in conjunction with our audited and unaudited combined
financial statements and the related notes, "Pro Forma Condensed Financial
Data," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," all included elsewhere in this prospectus. The
Statement of Operations data for each of the four years ended December 31, 1999
and the balance sheet data as of December 31, 1997, 1998, and 1999 have been
derived from ChipPAC's financial statements which have been audited by
PricewaterhouseCoopers LLP, the Company's independent accountants whose report
appears elsewhere in this prospectus.



                                       Year Ended December 31,
                          ------------------------------------------------------
                            1995       1996         1997        1998      1999
                          --------  -----------  -----------  --------  --------
                                    (Dollars in thousands)
                                                         
Statement of Operations
 Data:
Revenue.................  $179,234  $   191,655  $   289,429  $334,081  $375,530
Costs and expenses:
 Cost of revenue........   158,527      166,665      229,238   270,365   317,488
 Selling, general and
  administrative
  expenses..............    11,805       11,431       15,853    15,067    21,219
 Research and
  development expenses..     1,724        2,617        4,052     7,692    12,362
 Management fees charged
  by affiliate..........       138        3,322        3,199       528       --
 Write-down of impaired
  assets (1)............       --           --        11,569       --        --
 Change in control
  expenses (2)..........       --           --           --        --     11,842
                          --------  -----------  -----------  --------  --------
Operating income........     7,040        7,620       25,518    40,429    12,619
Interest expense........     3,151        5,780       10,972    13,340    21,241
Interest income.........       --          (108)         (96)   (1,276)   (2,751)
Foreign currency (gains)
 losses (3).............     1,012        5,041       69,669   (24,670)   (1,224)
Other (income) expense,
 net....................       802         (351)         762       168      (650)
                          --------  -----------  -----------  --------  --------
Income (loss) before
 income taxes...........     2,075       (2,742)     (55,789)   52,867    (3,997)
Provision for (benefit
 from) income taxes.....     1,977        2,883       (9,671)   20,564     1,938
Extraordinary item:
 Loss from early
  extinguishment of
  debt, net of related
  income tax benefit
  (4)...................       --           --           --        --      1,373
                          --------  -----------  -----------  --------  --------
Net income (loss).......  $     98  $    (5,625) $   (46,118) $ 32,303  $ (7,308)
Accretion of dividends
 on mandatorily
 redeemable preferred
 stock..................       --           --           --        --     (3,960)
                          --------  -----------  -----------  --------  --------
Net income (loss)
 available to common
 shareholders...........  $     98  $    (5,625) $   (46,118) $ 32,303  $(11,268)
                          ========  ===========  ===========  ========  ========
Balance Sheet Data (at
 end of period):
Cash and cash
 equivalents............  $  2,602  $     2,323  $     3,067  $ 68,767  $ 32,117
Working capital.........                             (20,240)  (29,637)    7,184
Total assets............   127,984      215,932      233,241   359,472   343,429
Total long-term debt,
 including current
 portion................    52,468      109,053      152,410   133,715   300,000
Mandatorily redeemable
 preferred stock........       --           --           --        --     82,970
Total shareholders'
 equity (deficit).......    11,559       53,692        9,472   113,191  (122,886)
Other Financial Data:
Capital expenditures....    51,462      118,971      136,594    63,523    57,856
Ratio of earnings to
 fixed charges (5)......       1.4x         --           --        4.3x      0.8x

- --------
Footnotes to table appear on the following page.

                                       35


Footnotes to table on the previous page

(1) At December 1997, consistent with SFAS No. 121, Accounting for the
    Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
    of, ChipPAC recorded a charge of $11.6 million to write down the value of
    those assets which had been identified as economically impaired, as a
    result of management's decision to discontinue particular product lines or
    which were judged to be in excess of foreseeable requirements.
(2) The $11.8 million change in control charge in the nine-month period ended
    September 30, 1999 was a special bonus paid to employees of ChipPAC's
    Korean subsidiary arising from the change in control in the
    recapitalization transaction.
(3) The foreign currency gains and losses were primarily the result of U.S.
    Dollar denominated debt of ChipPAC's Korean subsidiary. Consistent with
    U.S. GAAP, as the U.S. Dollar/South Korean Won exchange rates change,
    resulting foreign currency exchange gains/(losses) are recorded in
    ChipPAC's Combined Statement of Operations.
(4) The extraordinary loss of $1.4 million, net of tax effects, represents
    costs related to the early retirement of debt, necessary under the
    recapitalization of the company on August 5, 1999.
(5) For purposes of this computation, earnings are defined as income (loss)
    before provision for income taxes and fixed charges. Fixed charges are the
    sum of (a) interest costs and (b) the portion (approximately one-third) of
    operating lease rental expenses that are representative of the interest
    factor. Earnings for 1996 and 1997 were inadequate to cover fixed charges
    by $2.7 million and $55.8 million, respectively. Earnings for the year
    ended December 31, 1997 included a non-cash foreign currency loss of $69.7
    million and a non-cash asset impairment charge of $11.6 million.

                                       36


               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

   The following discussion and analysis of the financial condition and results
of operations covers periods prior to the completion of the recapitalization.
As part of the recapitalization, we entered into financing arrangements and, as
a result, we have a different capital structure. Accordingly, the results of
operations for periods subsequent to the recapitalization will not necessarily
be comparable to prior periods. The following discussion should be read in
conjunction with the combined financial statements contained elsewhere in this
prospectus.

Overview

   We are one of the world's largest providers of packaging and test services
to the semiconductor industry. We offer complete portfolios of packaging and
test solutions and are one of the largest providers of high-margin, BGA
packages, the most advanced mass-produced semiconductor packages. We provide
packaging and test services to approximately 76 customers worldwide, including
approximately 41 in the United States. Our customers include many of the
world's largest and most prominent semiconductor manufacturers, including Atmel
Corporation, Intel Corporation, International Business Machines Corporation,
LSI Logic Corp., Lucent Technologies, Inc., Samsung Electronics Co., Ltd. and
STMicroelectronics N.V. In 1999, sales of packaging and test services to Intel,
Atmel Corporation and LSI Logic accounted for approximately 61.9%, 7.6% and
6.5% of our net revenues, respectively, and sales to our top five customers in
the aggregate accounted for approximately 83.4% of our total net revenues. We
maintain executive and sales headquarters in the United States and our
packaging and test facilities are located in Korea and China. We maintain sales
offices in Asia, Europe, and the United States. Research and development
activities are conducted in Korea and the United States.

   In 1984, our packaging business began operating as a separate division of
Hyundai Electronics, one of the world's largest semiconductor manufacturers and
a member of the Hyundai Group, the Korean conglomerate. In 1997, ChipPAC, Inc.
was incorporated as a distinct entity and established as the parent of a stand-
alone worldwide business. Following the recapitalization, Hyundai Electronics
continues to own approximately 10.0% of our outstanding common stock and also
holds redeemable preferred stock having an aggregate liquidation preference of
approximately $70.0 million. In addition, Hyundai Electronics may receive up to
an additional $55.0 million of cash during the four-year period beginning
January 1, 1999 if we exceed specified levels of EBITDA as described in the
recapitalization agreement. Hyundai Electronics is entitled to receive 33.3% of
the amount by which our EBITDA, which is defined in the recapitalization
agreement, exceeds $116.5 million, $171.3 million, $198.5 million and $231.8
million, respectively, in each of the first four years following the
recapitalization. In the event the final $20.0 million of this $55.0 million in
cash is required to be paid to Hyundai Electronics, it shall be paid by the
mandatory redemption of an equal amount, including dividends, of Hyundai
Preferred Stock.

   Our revenues consist of fees charged to our customers for the packaging and
testing of their integrated circuits, which we refer to as ICs. From 1995 to
1999, net revenues increased from $179.2 million to $375.5 million, primarily
from the growth of BGA packaging. We are the second largest provider of
outsourced BGA packaging services worldwide, and one of two main suppliers of
BGA packaging services to Intel, whom we believe represents over 40% of the
independent packaging market today. The capital investments made by Hyundai
Electronics from 1995 to 1997 totaled approximately $300 million and provided
us with the capacity necessary to support this growth in advanced packaging
services, along with providing capacity to support future growth. By 1998, we
possessed the scale required to provide our services to other customers who
required BGA packaging services. We also have a significant business in leaded
packaging, which accounted for 29.1% of our sales in 1999.

                                       37


   The following table describes the composition of revenue by product group
and test services, as a percentage of total revenues:


                                                            Fiscal Year Ended
                                                              December 31,
                                                            -------------------
                                                            1997   1998   1999
                                                            -----  -----  -----
                                                                 
BGA........................................................  37.7%  61.8%  68.1%
Leaded.....................................................  59.5   35.5   29.1
Testing....................................................   2.8    2.7    2.8
                                                            -----  -----  -----
  Total.................................................... 100.0% 100.0% 100.0%
                                                            =====  =====  =====


   Historically, our foreign currency gains and losses have arisen primarily
from the holding of monetary assets and liabilities denominated in U.S. Dollars
by ChipPAC Korea. ChipPAC Korea's U.S. Dollar denominated liabilities consist
primarily of long- and short-term debt, and accounts payable, while its U.S.
Dollar monetary assets consist primarily of intercompany receivables from other
ChipPAC entities. From 1995 until December 31, 1998, ChipPAC Korea's U.S.
Dollar-denominated liabilities exceeded its U.S. Dollar monetary assets. From
December 31, 1998 through July 31, 1999 ChipPAC Korea's U.S. Dollar monetary
assets exceeded its U.S. Dollar-denominated liabilities. From August 1, 1999
until December 31, 1999, ChipPAC Korea's U.S. Dollar-denominated liabilities
exceeded its U.S. Dollar monetary assets.

   Upon the recapitalization, the Equity Investors invested $92 million in
ChipPAC, Inc. in exchange for 90.2% of the voting stock of the company. It is
expected that additional equity funds will also be raised in the U.S. and that
the funds will be transferred to the Korean and Chinese entities (in U.S.
Dollars). Previously, the Chinese and Korean entities were wholly owned
subsidiaries of HEI, a Korean company, and received equity contributions from
it denominated primarily in Korean Won.

   The level of U.S. Dollar-denominated debt held by the combined ChipPAC
entities increased significantly from approximately $126 million under Hyundai
to $300 million subsequent to the recapitalization. The reorganization was
structured so that the Korean and Chinese entities will be funded on a cost
plus basis only, so that a greater level of profitability and cash flow will
remain in ChipPAC's U.S. Dollar-denominated subsidiaries to service the
increased debt load. Previously, a majority of the profits were returned to the
Korean entity and its parent, HEI.

   During 1999 the Korean entity began purchasing packaging substrate material,
the key raw component in advanced BGA packages, in U.S. Dollars. Previously
these transactions had been denominated in several currencies including Korean
Won and Japanese Yen. As a result over 95% of the Korean entity purchases are
now denominated in U.S. Dollars. The Korean entity performs the majority of
material purchasing for the Chinese entities. Material costs represent the
majority of production costs.

   Given the circumstances described in the preceding three paragraphs,
management decided to change the functional currency of ChipPAC Korea and
ChipPAC China from the respective local currencies to the US Dollar, effective
October 1, 1999. The consolidated effect of this change was to reduce net
income for the year ended December 31, 1999, by $4.8 million and to reduce both
total assets and shareholders' equity as at December 31, 1999, by $9.5 million.
This change had no effect on cash flows from operations or net cash flows for
the year ended December 31, 1999.

                                       38


Quarterly Results (Unaudited)

   The following table describes our unaudited historical quarterly sales,
gross profit and EBITDA in thousands of U.S. Dollars. EBITDA margin represents
EBITDA, as defined in this prospectus, as operating income plus depreciation,
amortization and, in 1997, non cash charges related to write downs of impaired
assets, as a percentage of revenue.



                                    1997                                1998                                1999
                       ----------------------------------  ----------------------------------  ---------------------------------
                         Q1       Q2       Q3       Q4       Q1       Q2       Q3       Q4       Q1       Q2      Q3       Q4
                       -------  -------  -------  -------  -------  -------  -------  -------  -------  ------  -------  -------
                                                                                     
Revenues.............. $53,130  $67,662  $82,052  $86,585  $77,130  $78,020  $82,818  $96,113  $85,548  80,853  101,270  107,859
Intel Revenue.........  18,854   26,545   41,939   41,770   39,914   48,053   60,562   75,422   65,276  51,190   61,074   54,928
% of Total Revenues...    35.5%    39.2%    51.1%    48.2%    51.7%    61.6%    73.1%    78.5%    76.3%   63.3%    60.3%    50.9%
Gross profit..........   3,228   13,298   19,308   24,357   23,196   12,862   15,911   11,747   13,417   9,684   16,791   18,150
EBITDA................   5,795   17,826   24,768   29,380   27,180   18,827   22,423   17,854   19,368  15,273   23,808   22,715
Gross margin..........     6.1%    19.7%    23.5%    28.1%    30.1%    16.5%    19.2%    12.2%    15.7%   12.0%    16.6%    16.8%
EBITDA margin.........    10.9%    26.3%    30.2%    33.9%    35.2%    24.1%    27.1%    18.6%    22.6%   18.9%    23.5%    21.1%


   The above table illustrates the cyclical and seasonal nature of our
financial performance, although management believes that as a provider of
packaging and test services, we are less susceptible to cyclical fluctuations
than the semiconductor industry as a whole. We have historically experienced
steadily rising revenue levels during the course of the year, peaking in the
fourth quarter, due to a peak in demand from the personal computer industry in
the fourth quarter of the year.

   BGA packaging revenues have risen steadily throughout the period as a result
of increased sales to Intel, our largest customer. The decline in leaded
packaging revenue in 1998 arose from soft market conditions prevalent
throughout the semiconductor industry and from our decision to discontinue
several unprofitable product lines.

Results of Operations

   The following table describes our results of operations based on the
percentage relationship of operating and other financial data to revenues
during the periods shown:



                                                  Year Ended December 31,
                                                ------------------------------
                                                1996   1997    1998     1999
                                                -----  -----  -------  -------
                                                           
Weighted average exchange rate of Won per U.S.
 Dollar........................................ 804.7  939.0  1,388.9  1,189.3
                                                =====  =====  =======  =======
Historical Statement of Operations Data:
Revenue........................................ 100.0% 100.0%   100.0%   100.0%
Gross margin...................................  13.0   20.8     19.1     15.5
Selling, general & administrative..............   6.0    5.5      4.5      5.7
Research & development.........................   1.4    1.4      2.3      3.3
Write down of impaired assets..................   --     4.0      --       --
Management fees................................   1.7    1.1      0.2      --
Change of control expenses.....................   --     --       --       3.2
                                                -----  -----  -------  -------
Operating income...............................   3.9%   8.8%    12.1%     3.4%
                                                =====  =====  =======  =======
Other Financial Data:
Depreciation & amortization....................  13.9%  14.1%    13.7%    15.3%
Capital expenditures...........................  62.1   47.2     19.0     15.4


                                       39


Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

   Revenues: Net revenues in 1999 increased 12.4% to $375.5 million, compared
with $334.1 in 1998. This increase came primarily from sales growth in BGA
packaging services, revenues from which increased by 23.6% from $206.9 million
to $255.8 million. This increase was partially offset by a decline in revenues
from leaded packages services from $127.2 million to $109.3 million. The strong
growth in BGA revenues was driven primarily by higher volumes of BGA packaging
services sold to Intel, ChipPAC's leading customer, partially offset by lower
average selling prices. Additionally, ChipPAC started to ship BGA packages to
new customers including nVIDEA, IBM, Lucent and Level One during 1999. The
decline in leaded product revenues was driven by the continuing soft market
conditions in the semiconductor industry present during the second half of
1998, and has been partially offset by strengthening market conditions during
1999.

   Gross Profit: Gross profit decreased to $58.0 million in 1999 from $63.7
million in 1998, resulting in gross margin of 15.5% in 1999 compared to 19.1%
for 1998. The gross profit experienced during 1998 was significantly higher
than usual due to the large depreciation of the Korean Won which averaged
1,372.1 Won per U.S. Dollar during 1998 compared to an average exchange rate of
1,189.3 Won per U.S. Dollar during 1999. This exchange rate resulted in lower
costs for overhead and labor in Korea in 1998.

   Selling, General and Administrative: Selling, general and administrative
expenses increased 40.8% to $21.2 million in 1999 compared to $15.1 million
during 1998. As a percentage of sales, these expenses increased from 4.5% to
5.6% of sales during the same period. This increase was due to the additional
expenses associated with hiring new personnel in the areas of administration,
sales and marketing necessary to strengthen our worldwide infrastructure.

   Research and Development: Research and development expenses increased to
$12.4 million in 1999 compared to $7.7 million in 1998. As a percentage of
sales, these expenses increased to 3.3% of sales in 1999 as compared to 2.3% of
sales in 1998. The increase in the level of research and development expenses
was due to establishment of a prototype development center in Santa Clara,
California at the end of 1998. Expenses of the prototype development center
increased by $1.7 million during 1999 over 1998.

   Change of Control Expense: As result of the recapitalization, the Company
was contractually required to make a one-time change of control payment to its
unionized Korean employees of approximately $11.8 million. The payment was
recorded as an operating expense during the quarter ended September 30, 1999.

   Extraordinary Loss: The Company incurred an extraordinary loss of $1.4
million, net of tax benefit, related to the early retirement of debt upon the
recapitalization of the Company.

   Management fees charged by affiliate: From 1995 to June 30, 1998, Hyundai
charged fees to ChipPAC for the use of technology and technical support for our
facility in China. This agreement was terminated on June 30, 1998. ChipPAC is
fully capable of providing this support today.

   Interest Income: For 1999, interest income increased to $2.8 million from
$1.3 million for 1998. Most of the interest income was earned from cash
invested in time deposits. During 1999, ChipPAC maintained an average cash
balance of $51.0 million. During 1998, ChipPAC did not have a significant cash
balance as substantially all cash was transferred to Hyundai, the then sole
shareholder, at its request. ChipPac was a wholly-owned subsidiary at the time
of the transfer. ChipPAC does not expect to maintain significant cash balances
going forward.

   Interest Expense: Interest expense for 1999 increased 59.2% to $21.2 million
from $13.3 million for 1998. This is primary due to interest expense on the
debt raised as part of the recapitalization.

   Foreign Currency (Gains) Losses: During 1998, ChipPAC incurred a net non-
cash foreign currency gain of $24.7 million which arose from ChipPAC Korea's
holding of U.S. Dollar-denominated liabilities in excess of U.S. Dollar
monetary assets and from an appreciation in the value of the Won. During 1999,
ChipPAC incurred a non-cash foreign currency gain of $1.2 million.

                                       40


   Other Income (Expense): Other expense increased from $0.2 million in 1998 to
income of $0.6 million 1999. The increase in other income arose principally
from a increase in the gains from the sale of excess production equipment and
scrap material.

   Income Taxes: Income tax expense was $1.9 million in 1999 compared to $20.6
million expense for 1998. The effective tax rate is approximately 48% in 1999
versus the historic effective tax rate of approximately 38.9% in 1998. The
effective tax rates during both periods were adversely affected by losses by
ChipPAC's operations in China, for which no tax benefit was realized.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

   Revenues: Net revenues in 1998 increased 15.4% to $334.1 million from $289.4
million in 1997. This increase was primarily due to sales growth in BGA
packaging, which grew approximately 89.2% for 1998 as compared to the prior
year. As a percentage of total revenues, BGA packaging revenues increased from
37.7% in 1997 to 61.8% in 1998. Revenues from leaded packaging services
declined to $127.2 million in 1998 from $172.1 million in 1997. The decline in
revenues from leaded packaging services arose from a combination of soft market
conditions in the semiconductor industry in 1998 and from management's decision
to discontinue several unprofitable product lines in the fourth quarter of
1997. Testing revenues increased from $8.2 million to $9.3 million as a result
of management's efforts to increase sales in the test area.

   Gross Profit: Gross profit increased 5.9% to $63.7 million in 1998 from
$60.2 million in 1997. Gross margin declined to 19.1% in 1998 from 20.8% in
1997. The decline in gross margin arose primarily from soft market conditions
prevailing in the semiconductor industry during 1998, which led to lower
average selling prices. The decline of gross margin was partially offset by
higher volumes of BGA packaging services sold, reductions in materials costs
from suppliers, cost reduction programs and a decline in labor and overhead
costs due to devaluation of the Won against the U.S. Dollar.

   Selling, General and Administrative: Selling, general and administrative
expenses decreased 5.0% to $15.1 million in 1998 from $15.9 million in 1997. As
a percentage of sales, these expenses decreased to 4.5% in 1998 from 5.5% in
1997. The decrease in selling, general and administrative expenses arose
primarily from a weaker Won which was partially offset by an increase in
administrative and sales infrastructure costs incurred in connection with the
implementation of a new corporate infrastructure, including the addition of the
new senior management team.

   Research and Development: Research and development expenses increased to
$7.7 million in 1998 from $4.1 million in 1997. As a percentage of sales, these
expenses increased to 2.3% in 1998 from 1.4% in 1997. Research and development
costs grew in 1998 primarily due to the effect from having a full year's
expenses from the R&D center established at Chandler, Arizona, and from
additional spending for BGA development. The 1998 increases in R&D costs
attributable to the Chandler R&D center and to spending for BGA development
were $2.2 million and $0.9 million, respectively.

   Management fees charged by affiliate: From 1995 to June 30, 1998, Hyundai
charged us fees for the use of technology and technical support for our
facility in China. In 1998, the management fees charged by Hyundai declined to
$0.5 million from $3.2 million charged in 1997. The decline in the level of
management fees reflects the decline in the need for support from Hyundai,
which led to the termination of the agreement effective June 30, 1998.

   Write down of impaired assets: Consistent with U.S. GAAP, management reviews
all assets for possible impairment arising from changes in technology and
market conditions. At December 1997, we recorded a charge of $11.6 million to
write down particular equipment as a result of a combination of management's
decision to discontinue unprofitable product lines and from the identification
of particular production equipment judged to be in excess of foreseeable
requirements. There were no assets identified as impaired during 1998.

                                       41


   Interest Income: Interest income increased to $1.3 million in 1998 compared
to $0.1 million during 1997. Prior to July 1, 1998, our Korean operations did
not have any significant cash balances because it existed as a division of
Hyundai. As a division, almost all cash receipts and disbursements were handled
through Hyundai. Most of the interest income earned in 1998 was earned during
the second half of 1998 by our investments of surplus cash in time deposits.

   Interest Expense: Interest expense for 1998 increased to $13.3 million from
$11.0 million during 1997. The increase arose from a combination of an increase
in the average level of bank debt from approximately $157 million during 1997
to $168 million in 1998 and from increases in the interest rates charged to us
by our lenders.

   Foreign Currency (Gains) Losses: During 1998, we incurred a non-cash gain of
$24.7 million as the value of the Korean Won increased from 1,696 Won per
Dollar at December 31, 1997 to 1,196 Won per Dollar at December 31, 1997.

   Other Income (Expense): Net other expense declined to $0.2 million in 1998
from $0.8 million in 1997. Most of the 1997 net other expense consisted of
losses recorded on the disposition of surplus equipment. There were no
significant gains or losses on disposition of equipment during 1998.

   Income Taxes: We recorded a provision for income taxes of $20.6 million
during 1998 compared with a tax benefit of $9.7 million on a pretax loss of
$55.8 million for 1997. Our effective tax rate was 38.9% in 1998. Our effective
tax rate in 1997 was significantly impacted by non-deductible operating losses
in 1997. The effective tax rates during both periods were adversely affected by
losses incurred by our operations in China, for which no tax benefit was
realized.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

   Revenues: Revenues increased 51.0% to $289.4 million in 1997 from $191.7
million in 1996. This increase was due to the mass production of a newly
developed BGA package causing revenues from BGA packaging services to increase
from $6.8 million in 1996 to $109.1 million in 1997. Revenues from leaded
packaging services declined 2.6% to $172.1 million in 1997 from $176.7 million
in 1996. Revenues from test services remained flat at $8.2 million.

   Gross Profit: Gross profit increased 140.9% to $60.2 million in 1997 from
$25.0 million in 1996. Gross margin as a percentage of revenue increased to
20.8% in 1997 compared to 13.0% for 1996. Gross profit in 1997 increased from
1996 primarily due to the emergence of BGA packaging services which carried
higher margins and economies of scale arising from the substantially higher
level of sales of BGA packaging services, primarily to Intel.

   Selling, General and Administrative: Selling, general and administrative
expenses increased 38.7% to $15.9 million in 1997 from $11.4 million in 1996.
As a percent of sales, these expenses decreased to 5.5% in 1997 from 6.0% in
1996. The increase in the level of expenses arose from the establishment of a
new corporate management staff based in the United States, from an increase in
the level of customer support costs in Korea, and from an increase in the level
of administrative expense allocated by Hyundai. Of this increase, $2.6 million
is attributable to new corporate management staff, $1.2 million is attributable
to the increase in customer support costs in Korea, and $1.8 million is
attributable to the increase in administrative fees allocated by Hyundai.

   Research and Development: Research and development expenses increased 54.8%
to $4.1 million in 1997 from $2.6 million in 1996. As a percent of sales, these
expenses remained level at 1.4% for both 1996 and 1997. The increase in the
level of research and development expenses reflected our efforts to develop
capabilities in BGA packaging services.

                                       42


   Management fees charged by affiliate: Management fees represented fees
charged by Hyundai for technology and technical support for our facility in
China. The fees charged in 1997 which were $3.2 million was approximately the
same as the $3.3 million charged in 1996.

   Inventory reserves: The Company reserves for excess and obsolete inventory
in the normal course of business using a consistent methodology. The increase
in the inventory reserve during the year ended December 31, 1997 was primarily
due to significantly higher levels of inventory at the Korean facility at
December 31, 1997, which had risen by approximately 200% in local currency
value over that held at the prior year end, and a significant devaluation of
the Korean Won against the US Dollar over the same period.

   Write down of impaired assets: Consistent with U.S. GAAP, management reviews
all assets for possible impairment arising from changes in technology and
market conditions. At December 1997, we recorded a charge of $11.6 million to
write down particular equipment as a result of a combination of management's
decision to discontinue unprofitable product lines and from the identification
of particular production equipment judged to be in excess of foreseeable
requirements.

   Interest Income: Interest income earned during 1997 and 1996 was
insignificant because, as a division of Hyundai, we did not have any
significant cash balances.

   Interest Expense: Interest expense for 1997 increased to $11.0 million from
$5.8 million during 1996. The increase arose from net additional borrowing made
during 1996 and 1997 for capital equipment.

   Foreign Currency (Gains) Losses: During 1997, we incurred a non-cash loss of
$69.7 million as the Korean Won devalued from 845 Won per Dollar at December
31, 1996 to 1,696 Won per Dollar at December 31, 1997. During 1996, we incurred
a non-cash loss of $5.0 million as the Korean Won devalued from 775 Won per
Dollar at December 31, 1995 to 845 Won per Dollar at December 31, 1996.

   Other Income (Expense): We had net other expense of $0.8 million in 1997
compared to net other income of $0.4 million in 1996. In 1997, the $0.8 million
arose largely from losses taken on the disposition of surplus production
equipment. In 1996, we had $0.4 million of miscellaneous income.

   Income Taxes: We recorded a tax benefit of $9.7 million in 1997 compared to
a tax expense of $2.9 million in 1996. In both years, the effective tax is
impacted by pre-tax operating losses.

Liquidity and Capital Resources

   We have a borrowing capacity of $50.0 million for working capital and
general corporate purposes under the revolving credit facility. In addition,
borrowings of up to $20.0 million are available for acquiring equipment and
making other specified capital expenditures under the capex facility. We may
borrow and repay under the capex facility until August 5, 2001. Amounts that we
repay under the capex facility after August 5, 2001 may not be reborrowed by us
later. The final maturity for both these facilities will be on August 5, 2005.
We did not draw upon these facilities in connection with the recapitalization.

   Our ongoing primary cash needs are for operations and equipment purchases.
Prior to the recapitalization, we met a significant portion of our cash
requirements from a combination of (1) short- and long-term bank loans and (2)
capital contributions from Hyundai. All short and long-term debt, loans, leases
and other credit facilities existing prior to the recapitalization were repaid
and terminated at the recapitalization date. Subsequent to year end, there was
an initial borrowing of $13.5 million on line of credit.

   Hyundai Electronics has invested significant amounts of capital to increase
our packaging and test services capacity. The capital investments made by
Hyundai Electronics from 1995 to 1997 totaled approximately $300 million. We
intend to spend approximately $54 million in capital expenditures in 2000. We
spent approximately $57.9 million in capital expenditures in 1999, a decline of
8.8% from the $63.5 million spent in capital expenditures in 1998, and a
decline of 57.6% from the $136.6 million spent in 1997. Through 2000, we intend

                                       43


to spend approximately $10.0 million in capital expenditures to increase
capacity for our micro BGA packaging in order to support our three-year
contract with Hyundai to package an agreed upon amount of their RDRAM devices.
If Hyundai does not provide the agreed upon RDRAM devices, then Hyundai will
reimburse us for the underutilized equipment which will be depreciated over
three years.

   At the closing of the recapitalization, our debt consisted of $300 million
of borrowings which were comprised of $150 million in term loan facilities and
$150 million of senior subordinated notes. We also have $70 million of
preferred stock and approximately $92 million of newly contributed equity. Net
payment to Hyundai of $384 million, included capital redemption of $311 million
and debt retirement of $133 million, offset by Hyundai investment of $40
million in mandatorily redeemable preferred stock, and capital contribution of
$20 million.

   We believe that our existing cash balances, cash flows from operations,
available equipment lease financing, and the net proceeds from the
recapitalization will be sufficient to meet our projected capital expenditures,
working capital and other cash requirements for the next twelve months. In view
of the ongoing cash needs for operating cash flows and capital expenditures of
our foreign subsidiaries we do not foresee any repatriation of dividends from
any subsidiary during fiscal year 2000. ChipPAC, Inc. (the parent company)
incurs management, sales and marketing, and research and development expenses
and generates operating revenue from services provided to ChipPAC Limited under
a management services agreement, a pre and post sales support services
agreement, and a contract research and development agreement, and therefore is
not a holding company.

   The term loans and the revolving and capital expenditure lines (the Senior
Credit Facilities) require that we meet specified financial tests, including,
without limitation, a maximum leverage ratio, a minimum interest coverage ratio
and minimum fixed charge coverage ratio. These facilities also contain
covenants, which restrict the Company's ability to :

    . make capital expenditures;

    . incur liens or engage in sale-leaseback transactions;

    . transact with affiliates;

    . incur indebtedness and contingent obligations;

    . declare dividends or redeem or repurchase capital stock;

    . prepay, redeem or repurchase indebtedness;

    . change the business being conducted;

    . make loans and investments; and;

    . engage in mergers, acquisitions, consolidations and asset sales.

   The Senior Credit Facilities also require that we satisfy customary
affirmative covenants and provide customary indemnifications in favor of the
senior lenders. These credit facilities contain customary events of default,
including, without limitation, payment defaults, breaches of representations
and warranties in all material respects, covenant defaults, some events of
bankruptcy and insolvency, ERISA violations, judgment defaults, cross-defaults
to other indebtedness and a change in control.

   There were no violations of these loan convenants through December 31, 1999
and the Company expects to comply with all covenants pursuant to these Senior
Credit Facilities during the next twelve months. Therefore the Company's
liquidity and capital resources are not expected to be impacted by these loan
covenants.

Year 2000 Compliance

   We recognize the need to ensure that our operations will not be adversely
impacted by year 2000 computer hardware and software failures and embedded chip
or processor failures. Issues relating to the year 2000 are the result of
computer programs and embedded-chip systems being written or developed using
two digits rather

                                       44


than four to define the applicable year. Any computer programs or embedded-chip
systems that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of our operations, including, a
temporary inability to process transactions, obtain materials, provide
packaging and test services, generate invoices, or engage in similar normal
business activities.

   As of December 31, 1999, we had completed a formal review of all of the
computer hardware, software systems, communication equipment and equipment used
in our packaging and test processes. Our review included analysis of all
potentially affected business and process systems. Computer code which was non-
compliant was replaced or corrected, and when this was not possible, the
systems were replaced. Additionally, the systems have been tested for
compliance. We believe that all of our systems and equipment necessary for our
packaging and test process are 100% year 2000 compliant in all material
respects.

   As of March 13, 2000 we have not experienced any significant issues as a
result of year 2000 problems and we do not anticipate incurring material
incremental costs in future periods due to these issues.

Derivative Financial Instruments

   Since October 1998, we have entered into foreign forward contracts to
mitigate the effect of foreign currency movements on the cost of materials and
equipment. The contracts entered into require the purchase of Korean Won or
Japanese Yen, and the delivery of U.S. Dollars, and generally have maturities
which do not exceed three months. Because the contracts entered into to date do
not qualify as hedges under generally accepted accounting principles, the gains
and losses from these contracts have been recorded as foreign currency gains
and losses. We had a net gain of $2.2 million and no gain or loss arising in
1998 and 1999, respectively, from forward foreign currency contracts.

Recent Accounting Pronouncements

   In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of FASB Statement No. 133." SFAS 137 amends Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," to defer its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS 133
establishes accounting and reporting standards for derivative instruments
including standalone instruments, as forward currency exchange contracts and
interest rate swaps or embedded derivatives and requires that these instruments
be market-to-market on an ongoing basis. These market value adjustments are to
be included either in the income statement or stockholders' equity, depending
on the nature of the transaction. ChipPAC is required to adopt SFAS 133 in the
first quarter of its fiscal year 2001. The company is in process of evaluating
the effect of SFAS 133 on its financial statements.

   In December 1999, the Securities and Exchange Commission issued SAB No. 101,
"Revenue Recognition in Financial Statements," which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements
filed with the SEC. SAB No. 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. We believe that the impact of SAB No. 101 will have no
material effect on our financial position or results of operations.

Quantitative and Qualitative Disclosure about Market Risk

   We are exposed to financial market risks, including changes in interest
rates and foreign currency exchange rates. We utilize derivative financial
instruments but do not use derivative financial instruments for speculative or
trading purposes. We have long-term debt that carries fixed and variable
interest rates. A fluctuation in interest rates of 1% would increase our annual
interest charge by $1.5 million. A majority of our revenue and capital spending
is transacted in U.S. dollars. We do, however, enter into transactions in other
currencies, primarily the Korean Won. With effect from October 1, 1999 we have
changed the functional currency of ChipPAC Korea and ChipPAC China from their
respective local currencies to the U.S. Dollar. The use of the U.S. Dollar as
the functional currency will result in much lower level of foreign exchange
gains and losses in the overseas subsidiaries.

                                       45


                                    INDUSTRY

General

   The production of a semiconductor is a complex process that requires
increasingly sophisticated expertise. The production process can be broadly
divided into three primary stages:

  . fabricating a wafer;

  . slicing the wafer into multiple die and processing these die into
    finished devices, which is referred to as "packaging"; and

  . testing of finished devices and other back-end processes.

   According to International Data Corporation, worldwide semiconductor market
revenues were approximately $125.0 billion during 1998. Since 1993, the global
semiconductor market has expanded at a compound annual growth rate of
approximately 10.4%. The worldwide semiconductor market can be divided into
three segments:

    . microcomponents, including microprocessors and microcontrollers,
      which process data, such as the Pentium Microprocessor;

    . memory devices, which store data, such as Dynamic Random Access
      Memory, which is referred to as DRAM; and

    . moving and shaping devices, which move and share electronic signals
      around a printed circuit board, such as logic, analog, discrete and
      power devices and chipsets.

   According to International Data Corporation, the semiconductor industry's
revenues are expected to grow at a compound annual growth rate of 13.2% from
1998 to 2003. Semiconductor growth continues to be driven by strong end-user
demand for computers, telecommunications and consumer products, which require
semiconductors characterized by greater functionality, increased speed and
smaller size. In 1998, according to Electronic Trends Publications, total
packaging revenues for the semiconductor industry were $16.1 billion of which
revenues from independent packaging companies, like us, represented $6.1
billion, or 38.0%, of total packaging revenues. Independent packaging revenues
are expected to grow at a compound annual growth rate of 16.2% from 1998 to
2003. Revenues for BGA packaging services, the fastest growing component of the
independent packaging market, are expected to grow at a compound annual growth
rate of 32.6% over the same period. Today, most major semiconductor
manufacturers use independent packaging and test service providers for at least
a portion of their packaging and test needs. We expect this outsourcing trend
to continue as semiconductor manufacturers focus on their core strengths, like
chip design and wafer fabrication.

Industry Trend Toward Outsourcing

   Historically, semiconductor companies primarily manufactured semiconductors
in their own facilities. In recent years, however, the need for semiconductor
companies to outsource their semiconductor packaging and test needs has grown
dramatically. Principal factors contributing to this are as follows:

    . Significant Capital Expenditures Are Required For Semiconductor
      Manufacturing. Semiconductor packaging and test services have evolved
      into increasingly complex processes that require a substantial
      investment in specialized equipment and facilities. For example, the
      capital investment in facilities and equipment necessary for a
      processing line capable of packaging 100 million BGA packages per
      year can be as much as $200 million. As a result of these substantial
      costs, equipment must be utilized at a high capacity level in order
      to be cost effective. Independent providers of packaging and test
      services, like us, can use existing equipment at high utilization
      levels over a longer period of time by providing services for a broad
      range of customers.

                                       46


     Moreover, as the cost to build a new wafer fabrication facility has
     increased to over $1 billion, semiconductor companies have been forced
     to concentrate their capital resources on core wafer manufacturing
     activities. As a result, semiconductor companies are increasingly
     using independent packaging and test providers who are able to invest
     capital to develop new packaging and test capacity.

    . Time-to-Market Pressures are Increasing For Semiconductor
      Companies. End-users are increasingly demanding more sophisticated
      electronic products in a market in which product life cycles are
      becoming shorter. As a result, semiconductor companies are
      increasingly seeking to shorten their time-to-market for new
      products. Having the right packaging technology and capacity in place
      is a critical factor in reducing time-to-market. Semiconductor
      companies frequently do not have the equipment or expertise to
      implement new packaging solutions or sufficient time to develop these
      capabilities before introducing a new product into the market. For
      this reason, semiconductor companies are increasingly utilizing the
      resources and capabilities of independent packaging and test
      companies to deliver their new products to market more quickly.

    . ""Fabless'' Semiconductor Companies are Focusing Exclusively on
      Semiconductor Design Process. There has been a recent growth of
      "fabless" semiconductor companies, which are companies that outsource
      all of their manufacturing and all of their packaging and test
      service needs. The significant growth in the number of fabless
      semiconductor companies has been driven in large part by the ability
      of these companies to effectively outsource virtually every
      significant step of the semiconductor manufacturing process. This
      development has allowed fabless semiconductor companies to introduce
      new semiconductors very quickly without committing significant
      amounts of capital and other resources to manufacturing. We believe
      that increases in the number of fabless semiconductor companies will
      continue to be a significant driver of growth in the independent
      semiconductor manufacturing industry.

    . Sophisticated Expertise and Technological Innovation Are
      Necessary. Semiconductor companies are facing ever-increasing demands
      for miniaturization, higher lead counts for more connections and
      improved thermal and electrical performance from IC packaging. As a
      result, semiconductor packaging now requires sophisticated expertise
      and technological innovation. Independent providers, like us, of
      packaging and test services have developed substantial expertise in
      packaging and test technology.

                                       47


                                    BUSINESS

Company Overview

   We are one of the world's largest providers of packaging and test services
for manufacturers in the semiconductor industry. We offer complete portfolios
of packaging and test services and are one of the largest providers of high-
margin, ball grid array, or BGA, packages, which are the most advanced mass-
produced semiconductor packages. A semiconductor package is a container that
protects and insulates the enclosed semiconductor chip and attaches to a
printed circuit board. As a result, packages are an integral part of the basic
functionality of semiconductors and contribute to their overall performance. We
provide packaging and test services to approximately 76 customers worldwide,
including approximately 41 customers in the United States. Our customers
include many of the world's largest and most prominent semiconductor
manufacturers, like:

    . Atmel Corporation;

    . Intel;

    . International Business Machines Corporation;

    . LSI Logic Corp.;

    . Lucent Technologies, Inc.;

    . Samsung Electronics Co., Ltd.; and

    . STMicroelectronics N.V.

   Today, most major semiconductor manufacturers use independent packaging and
test service providers for at least a portion of their packaging and test
needs. We expect this outsourcing trend to continue. Our executive and sales
headquarters are in the United States and our packaging facilities are in Korea
and China. During 1999, we packaged over 1,308 million units and generated
$375.5 million in revenues and $81.2 million in EBITDA.

   In 1984, our packaging business began operating as a separate division of
Hyundai Electronics, one of the world's largest semiconductor manufacturers and
a member of the Hyundai Group, the Korean conglomerate. At that time, we began
providing packaging and test services to third parties. In 1995, we identified
an opportunity to become a leader in providing, advanced substrate packaging
services, like BGA. From 1995 to 1997, Hyundai Electronics invested
approximately $300 million in plant and equipment in order to give us the
capacity necessary to provide advanced packaging and test services. As a result
of this strategic shift to BGA packaging services, we have developed strong
relationships with leading semiconductor companies in the various market
segments of the semiconductor industry and have become a leader in BGA
technology. In 1997, ChipPAC, Inc. was established as a stand-alone, worldwide
business and was incorporated as a distinct entity. Since the year ended
December 31, 1995 through December 31, 1999, our revenues have grown at a
compound annual growth rate of 20.3%, and our EBITDA has grown at a compound
annual growth rate of 23.4%.

Competitive Strengths

   Demonstrated technology leadership. We are the world's second largest
provider of outsourced, advanced BGA packaging services. We offer one of the
most complete lines of packaging and test solutions in the industry, with
approximately 68.1% of our revenues in 1999 derived from BGA packaging
services. BGA is currently the industry's most advanced mass produced packaging
technology and outsourced BGA revenues are currently expected to grow at a
compound annual growth rate of 32.6% from 1998 through 2003. We also continue
to invest in research and development of next-generation packaging like flip
chip technology. The recent opening of our state-of-the-art research and
development facilities in Chandler, Arizona and Santa Clara, California
demonstrate our commitment to maintaining a technology leadership position.
These facilities allow us to better service our customers through the
development of new packaging services.


                                       48


   Growing customer base. We are a leading supplier of packaging services to
many large semiconductor manufacturers, including Intel, LSI Logic and Atmel,
and we are expanding our list of customers. New customers include IBM, Lucent,
nVIDIA, Level One and NEC. These new customers generated significant revenues
in 1999. Our close relationships with our customers help to improve our
technology and allow us to benefit from the high unit volumes of these major
semiconductor manufacturers. Additionally, to become a qualified packager, a
packaging company must pass a lengthy and rigorous qualification process that
can take up to nine months for each packaging type. As a result, we believe
semiconductor companies are generally reluctant to switch packaging suppliers
once suppliers have been qualified.

   Low-cost infrastructure. Our packaging facilities are located in Korea and
China, affording us a highly competitive cost structure. Currently, BGA
packaging services are provided in Korea, while most of our higher volume
leaded packaging services are provided in China.

   Efficiency and quality leader. We consistently rank among the top service
providers to our customers. We have received numerous quality awards from our
customers, including supplier of the year recognition from Atmel and LSI Logic
and, most recently, Intel's Preferred Quality Supplier Award. We are one of the
most efficient packagers as measured by yields, cycle time, delivery and
quality. Throughout 1999, we maintained a 99.8% yield on BGA packaging
services. Our customers monitor the yield we are achieving on their ICs on a
real time basis. This efficiency is due to:

    . our engineers' skills in providing our customers with unique,
      specialized solutions;

    . our operational excellence program, which focuses on quality, cycle
      time and continuous improvement; and

    . our state-of-the-art facilities and equipment.

   Major investments in packaging facilities. Most of our major investments in
plant and capital equipment are already in place. From 1995 to 1997, Hyundai
Electronics invested approximately $300 million in our plant and equipment in
order to give us the necessary capacity to provide advanced packaging and test
services. Investments included the purchase of advanced capital equipment and
the construction of our packaging facility in China, which allows us to move
most of our high-volume leaded packaging services operations to China from
Korea. As a result, we believe that our facilities have sufficient capacity to
allow us to grow without significant capital expenditures in the near future.

   Experienced management team. Our management team averages over 23 years of
semiconductor industry experience. Our President and Chief Executive Officer,
Dennis McKenna, has over 26 years of industry experience and has held various
management positions at TRW, Inc., Oki Semiconductor (a division of Oki
America, Inc.) and Hyundai Electronics. Under his tenure, which began in 1995,
we have significantly increased our revenues and earnings and also procured the
Intel account, our largest customer. As a result, we are one of the world's top
two providers of BGA packaging services.

Business Strategy

   Maintain high-quality customer service. To achieve the highest possible
customer satisfaction, we employ a high concentration of resources for each
customer through a team approach. Each team is comprised of business
development, technical solutions and order management professionals who are
familiar with a customer's specific organization, product, procedural and
logistical requirements. In addition, we plan to engage in electronic commerce
with many of our customers to transfer documents, collaborate on product design
and development, receive detailed forecasts from our customers, receive
customer orders, track our customers' work-in-process and furnish invoices to
our customers. Also, in late 1997, we established a design and

                                       49


materials characterization center to provide BGA and leaded packaging designs,
as well as electrical and thermal modeling services, in order to better assist
our customers in shortening their product development cycles.

   Increase share with existing customers. Our goal is to increase our share of
our customers' packaging business by providing superior customer service,
providing quality packaging with the highest yield rates and providing new and
advanced, high-quality packaging services, like BGA. Our customers today are
leading semiconductor companies, including AMD, IBM, Intel, LSI Logic, Lucent,
Samsung Electronics and STMicroelectronics, which are leaders in multiple
semiconductor market segments, including flash memory, personal computer
chipsets, memory chips, system ICs, wireless ICs, communications ICs, and mass
storage ICs. According to The McClean Report (1999 edition), these companies
accounted for approximately 38% of worldwide semiconductor revenues in 1998.
All of these customers compete in large segments within the semiconductor
industry and are on the leading edge of the trend to smaller, thinner, lighter
and higher performance packaging.

   Expand customer base through technology leadership. We believe that the key
to expanding our customer base will be the development of new packaging
technology. Within the last two years, we have introduced the following six new
packages:

    . mBGA(TM), or micro BGA,

    . PBGA,

    . TBGA,

    . M/2/BGA(TM),

    . EconoCSP(TM) and

    . FBGA-T

During 1999, we have either qualified or begun the qualification process for 16
new customers, including nVIDIA Corporation and Broadcom Corporation. In 1999,
we established a U.S. research and development center that allows customers to
validate future packaging options early in the development process. Research
and development spending was approximately 3.3% of revenues during 1999, which
is comparable to that of the independent packaging industry, but is
significantly lower than that of most semiconductor manufacturing companies. We
have 89 engineers dedicated to new packaging development.

   Maintain low-cost structure. We believe that a low-cost infrastructure is
critical to our ongoing success in a highly competitive marketplace. As a
result, we have initiated several programs to further increase the efficiency
of our packaging processes, like adopting a standard set of equipment to handle
and process existing and potential packaging types. This equipment set strategy
will reduce our requirements for space, utilities, materials and manpower.

   We are also taking steps to streamline our cost structure for existing
processes, including initiating a materials cost reduction program, including
gold wire diameter reduction, process simplification and use of quick cure mold
compound; and adopting new inventory management, materials procurement and
logistics procedures.

Our Services

   We offer semiconductor packaging and test services to the semiconductor
industry. During 1998, approximately 97.3% and 2.7% of our revenues were
derived from packaging and test services, respectively. During 1999,
approximately 97.2% and 2.8% of our revenues were derived from packaging and
test services, respectively.

                                       50


Packaging

   We have provided semiconductor packaging and test services to third parties
since 1984, and offer a broad range of packaging formats for a wide variety of
electronics applications. Our two types of packaging services, leaded and
substrate, or BGA, contributed to approximately 29.1% and 68.1% of revenues,
respectively, for 1999.

   Leaded Packaging. Leaded packaging is the most widely used packaging type
and is used in almost every electronics application, including automobiles,
household appliances, desktop and notebook computers, and telecommunications.
Leaded packages have been in existence since semiconductors were first
produced, and in 1998 comprised over half of the total industry packaging
volume. Leaded packages are characterized by a semiconductor die encapsulated
in a plastic mold compound with metal leads surrounding the perimeter of the
package. With leaded packages the die is attached to a leadframe, which is a
flat lattice of wires. The die is then encapsulated in a plastic or ceramic
package, with the ends of the leadframe wires protruding from the edges of the
package to enable connection to a printed circuit board. This packaging type
has evolved from packages designed to be plugged into the printed circuit board
by inserting the leads into holes on the printed circuit board to the more
modern surface-mount design, in which the leads or pins are soldered to the
surface of the printed circuit board. Specific packaging customization and
evolutionary improvements are continually being engineered to improve
electrical and thermal performance, shrink package sizes and enable multi-chip
capability.

   We offer a wide range of lead counts and body sizes within this packaging
group to satisfy customer die size variations. Our traditional leaded packages
are at least three millimeters in thickness and include MQFP, PDIP, PLCC and
SOIC. Our advanced leaded packages are thinner than our traditional leaded
packages, approximately 1.4 millimeters in thickness, and have a finer pitch
because the leads are closer together, allowing for a higher pin count and
greater functionality in a smaller package size. Our advanced leaded packages
include TQFP, TSOP, TSSOP and SSOP.

Leaded Package Profile
                       (LOGO OF LEADED PACKAGE PROFILE])
                               (LOGO OF ChipPAC)

   Substrate, or BGA, Packaging. BGA packaging represents the newest and
fastest growing area in the packaging industry and is used primarily in high-
growth end markets, including computing platforms and networks, hand held
consumer products such as wireless technologies, personal digital assistants
and video cameras, and home electronics, like DVDs and home video game
machines. BGA technology was first introduced as a solution to problems
associated with the increasingly high lead counts required for advanced
semiconductors. As the number of leads surrounding the integrated circuit
increased, high lead count packages experienced significant electrical shorting
problems. The BGA methodology solved this problem by effectively creating leads
on the bottom surface of the package in the form of small bumps or balls. In a
typical BGA package, the semiconductor die is placed on top of a plastic or
tape laminate substrate rather than a leadframe. The die is connected to the
circuitry in the substrate by a series of fine gold wires that are bonded to
the top of the substrate near its edges. On the bottom of the substrate is a
grid of metal balls that connect the packaged device to a printed circuit
board. Benefits of BGA packaging over leaded packaging include:

    . smaller size;

    . greater pin count, or number of connections to the printed circuit
      board;

                                       51


    . greater reliability;

    . better electrical signal integrity; and

    . easier attachment to a printed circuit board.

   We supply our customers with substantially the entire family of BGA
packaging services offered in the marketplace today, including:

    . Standard BGA. Standard BGA packaging has a grid array of balls on the
      underside of the integrated circuit, and is utilized in high-
      performance applications, like personal computer chipsets, graphic
      controllers and microprocessors. A standard BGA package generally has
      a high pin count, usually greater than 100 pins. Standard BGA
      packages have better thermal and electrical performance than leaded
      packages. They also feature more advanced surface mount technology,
      allowing for easier handling in the packaging process. Standard BGA
      packaging services accounted for all of our BGA packaging revenues in
      1998.

BGA Package Profile
                         (LOGO OF BGA PACKAGE PROFILE)
(LOGO OF ChipPAC)

    . Chip Scale BGA. Chip scale BGA packaging includes all packages where
      the package is less than 1.2 times the size of the silicon die. Chip
      scale BGA is a substrate-based package that is designed for memory
      devices and other high pin count semiconductors, which generally
      contain fewer than 100 pins, and require dense ball arrays in very
      small package sizes, like wireless telephones and personal digital
      assistants, video cameras, digital cameras and wireless pagers. We
      recently secured a three-year contract with Hyundai Electronics to
      package their RDRAM devices using mBGA(TM), or micro BGA, packaging,
      a chip scale BGA packaging technology. Although none of our 1998 BGA
      revenues were derived from chip scale BGA packaging, we expect that
      chip scale packaging will contribute to our future revenues as a
      result of the Hyundai Electronics mBGA(TM), or micro BGA, contract
      and contracts with other customers requiring the smaller chip scale
      BGA package.

   We are continually developing new BGA technologies and BGA packaging
techniques. One of our research and development facilities is working to
develop prototypes of flip chip BGA packaging whereby the silicon die is
directly attached to the substrate using solder rather than wire bonds. This
improves heat dissipation and the electrical performance of the chip. Flip chip
BGA technology can be used in a wide array of applications ranging from
consumer products to highly sophisticated application specific integrated
circuits, referred to as "ASIC," digital signal processors, referred to as
"DSPs," and memory packages. While we believe that flip chip BGA represents the
next generation of BGA packaging technology, we believe that standard BGA and
chip scale BGA packaging will continue to experience long life cycles like many
of our leaded packaging solutions.

                                       52


   The following chart summarizes the packaging services we offer. The full
names of each packaging type are provided in the "Glossary."



        Percentage
         of 1999
        Packaging
         Revenues         Packaging Types*         Applications                  Pin Count
        ----------        ----------------         ------------                  ---------
                                                                     
Leaded    24.6%    Traditional: PDIP, PLCC, QFP,   Telecommunications,              8-304
                                MQFP, SOIC, SOJ,   automobiles, household
                                TSOC, LQFP, SSOP   appliances, and desktop and
                                and iQUAD(TM)      notebook computers

           4.5%    Advanced: TQFP, TSOP and TSSOP  Personal computers and          32-176
                                                   telecommunications

BGA       65.2%    Standard BGA: PBGA,             Personal computer chipsets,    119-371
                                 M/2/BGA(TM),      graphic controllers and
                                 TBGA, EPBGA       microprocessors

           2.9%    Chip Scale BGA: EconoCSP(TM),   Wireless telephones,            36-280
                                   eBGA(TM),       personal digital assistants,
                                   M2CSP(TM) and   video cameras and wireless
                                   FBGA-T          pagers

           --      Flip Chip BGA: FlipPAC(TM),     High-end consumer products,    36-1732
                                  RamPAC(TM) and   application specific
                                  FlashPAC(TM)     integrated circuits, digital
                                                   signal processors and memory
                                                   packages

- --------
*The full names of these packages are set forth in the "Glossary."

 Testing Services

   We also provide our customers with semiconductor test services for a number
of device types, including logic, mixed signal and memory devices.
Semiconductor testing measures and ensures the performance, functionality and
reliability of a packaged device, and requires knowledge of the specific
applications and functions of the devices being tested. In order to enable
semiconductor companies to improve their time-to-market, streamline their
operations and reduce costs, there has been an increasing trend toward
outsourcing both packaging and test services. We have begun to capitalize on
this trend by enhancing our test service capabilities.

   In order to test the capability of a semiconductor device, a semiconductor
company will provide us with its proprietary test program and specify the test
equipment to run that program. In the alternative, however, our customers may
consign their test equipment to us. Our test operators place devices to be
tested on a socketed load board and insert the load board into the test
equipment which then tests the devices using software programs developed and
supplied by our customers. The cost of any specific test and the time, usually
measured in seconds, to run a test vary depending on the complexity of the
semiconductor device and the customer's test program. When we provide test
services for a packaging type, we run the test against every device it
packages.

   In addition to final test services, we also provide "burn in" test services.
Through "burn in," a semiconductor is inserted into a socket and subjected to
extreme hot and cold temperatures over a period of time. "Burn in" tests are
typically conducted to determine overall reliability under extreme conditions.

   We expect test services to become an important component of our revenues
during the next several years as customers seek to reduce the time-to-market
for their products by outsourcing both their packaging and test services.

 Other Services

   We also provide a full range of other related services, including:

    . Design and Characterization Services. We offer design and
      characterization services at our Chandler, Arizona and Ichon, Korea
      facilities. When the selection of a package is critical to the
      overall development of a semiconductor device, our design engineers
      at these facilities select, design and develop the appropriate
      package for that device by simulating the semiconductor's performance
      and end-use environment.

    . Dry Pack Services. In order to prevent the failure of any
      semiconductors due to exposure to moisture during shipping, we "dry
      pack" most of our packaged integrated circuits in specially-sealed,
      environmentally-secure containers.

                                       53


    . Tape and Reel Services. Many electronic assembly lines utilize "tape
      and reel" methods whereby semiconductors are attached to a tape to
      enable faster attachment to the printed circuit board. We offer a
      service whereby we ship packaged and tested devices on a tape and
      reel mechanism rather than on a tray, to facilitate the assembly
      process.

    . Drop Shipment. In order to enable semiconductor companies to improve
      their time-to-market and reduce supply chain and management costs, we
      offer drop shipment services whereby we ship packaged semiconductor
      devices directly to those companies that purchase devices from our
      customers.

Customers

   We provide packaging and test services to over 76 customers worldwide,
including approximately 41 in the United States. Our customers include many of
the world's largest and most prominent semiconductor manufacturers including:

    . Atmel Corporation,

    . Intel Corporation,

    . International Business Machines Corporation,

    . LSI Logic Corp.,

    . Lucent Technologies, Inc.,

    . Samsung Electronics Co., Ltd. and

    . STMicroelectronics N.V.

   In 1998, approximately 67.0% of our revenues were derived from Intel, and
10.1% and 9.8% of our revenues were derived from Atmel and LSI, respectively.
During, 1999, approximately 61.9%, 7.6% and 6.5% of our revenues were derived
from Intel, Atmel and LSI, respectively. We anticipate that this customer
concentration will decrease as new customers for which we have already become
qualified and customers with which we are undergoing qualification, including
International Business Machines, Lucent Technologies Inc. and nVIDIA
Corporation, begin to ship semiconductor devices to us for packaging. In 1999,
we derived approximately 79.0% of our revenues from sales in the U.S., 16.3% in
Asia and 4.7% in Europe.

   In general, our customers principally rely on at least two independent
packagers. A packaging company must pass a lengthy and rigorous qualification
process that can take up to three months for a typical leaded package and cost
the customer $100,000 to $200,000 or can take more than six months for a
typical BGA package and cost the customer $250,000 to $300,000. Once a primary
packager has been selected, that packager gains insight into its customer's
business operations and an understanding of its products while strengthening
the overall working relationship. These factors, combined with the pressures of
a semiconductor company to meet the time-to-market demands of its customers,
results in high switching costs for semiconductor companies, making them
adverse to changing suppliers or adding additional suppliers. We have been
successful in attracting new customers because we are one of a few independent
packaging and test companies that offers a complete line of BGA packaging
services.

   Our success in becoming one of the world leaders in BGA technology is due in
significant part to our being selected as one of the key suppliers to Intel.
BGA technology is used in almost every personal computer that is built today,
and Intel was the first semiconductor company to demand BGA technology
solutions from independent packagers. In 1998, Intel accounted for
approximately 90.0% of the industry's worldwide personal computer chipset
revenues and approximately 80.0% of worldwide personal computer chipset units.
Due to the significant volume of Intel semiconductors sold worldwide, in 1998,
we believe Intel accounted for more than 40.0% of worldwide BGA packaging
consumption. We are currently one of two suppliers of BGA packaging technology
to Intel. In 1999, we were awarded Intel's Preferred Quality Supplier award.

   As a result of the Intel account, we have been able to grow our
infrastructure to support the development of advanced BGA technology. In doing
so, we have gained an early advantage relative to our competitors in:

    . packaging capability;

    . yield enhancement;

                                       54


    . quality; and

    . reliability.

Furthermore, we have developed the expertise to use BGA technology across
almost all Intel business groups, including personal computer chipsets, graphic
controllers, memory, networking and communications. Intel does not currently
outsource packaging services for any of its microprocessors, including the
Pentium and Celeron lines. Both Intel and ChipPAC have resources dedicated to
continuing the support of BGA packaging.

Marketing, Sales and Customer Support

   We provide sales support to our customers through an international network
of offices located in:

    . United States

     . Santa Clara, California (our executive offices)

     . San Diego, California

     . Chandler, Arizona

     . Boston, Massachusetts

     . Dallas, Texas

    . Kampen, The Netherlands

    . Tokyo, Japan

    . Shanghai, China

    . Ichon, Korea

    . Singapore

   Our account managers, applications engineers, customer service
representatives and sales support personnel form teams that focus on a specific
customer or geographic region. Our 60 marketing, sales support and customer
service personnel's performance is measured by each team's revenue achievements
and number of design "wins," providing a new service to an existing customer or
signing up a new customer. As is industry practice, we have no long-term
customer contracts; rather, customers deliver near-term forecasts to guide us
on anticipated volumes. As a result, we have no meaningful backlog statistics.
Because substantially all of our materials inventory is purchased based on
customer forecasts, we carry small quantities of inventory and we have
relatively low finished goods inventory.

   Our marketing efforts focus on creating a brand awareness and familiarity
with ChipPAC and its advanced device packaging technologies and an
understanding of its end-user market applications in networking, memory,
storage, graphics and wireless. We emphasize that we are a leader in advanced
packaging and test technology, supplying a broad line of packaging and test
services to the semiconductor industry. We target engineers and executive level
decision makers through the delivery of "white papers" at industry conferences,
quarterly mailings of technical brochures and newsletters, advertisements in
trade journals and our website.

   We engage in semi-annual and quarterly reviews of all of our customers; we
regularly collect data from different segments of the semiconductor industry,
for example, personal computers, wireless telephony, video and digital cameras,
etc.. When possible, we work closely with our customers to design and develop
packaging and test solutions for their new products. These "co-development" or
"sponsorship" projects can be critical when customers seek large scale early
market entry with a significant, new product. Task teams assigned by both
ChipPAC and its customers work together to design and develop new solutions and
to analyze and review the outcomes to ascertain if a project's objectives are
being met in a cost-effective manner. Depending on the project, the cost of
development may be borne entirely by us or may be shared with the customer.

Suppliers

   Our packaging operations depend upon obtaining adequate supplies of
materials on a timely basis. The principal materials used in our packaging
process are lead frames, rigid and flexible substrates, gold wire and

                                       55


molding compound. We purchase materials based on the stated demand forecasts of
our customers. Our customers are responsible for the costs of unique materials
which go unused, particularly those lead frames and substrates that are ordered
on the basis of customer-supplied forecasts. We work closely with our primary
materials suppliers to insure the availability and timeliness of materials
supplies, and we are not dependent on any one supplier for a substantial
portion of our materials requirements. We have no significant supply contracts
or arrangements with any supplier of materials, and we typically purchase
materials by entering into written purchase orders. Historically, over half of
our substrate costs were incurred from the purchase of materials from Japan. We
expect that a growing portion of these substrate materials in the next several
years will be supplied by sources in Korea and, to a lesser extent, Taiwan.

   Our packaging operations and expansion plans also depend on obtaining
adequate supplies of equipment on a timely basis. To that end, we work closely
with our major equipment suppliers to insure that equipment deliveries are on
time and the equipment meets our stringent performance specifications.

Operations and Facilities

   Our packaging process begins by cutting customer supplied wafers into
individual die using a high speed precision saw. For leaded packaging, the
individual die are then mounted onto metal strips called lead frames, which are
generally made of copper with selective silver plating on which a pattern of
input/output, or I/O, leads has been cut. For BGA packaging, individual die are
placed onto plastic or tape laminate substrates which are miniature printed
circuit boards. Next, very fine gold wires, with an average diameter of about
0.001 inch, are attached to the die and the lead frame or substrate, as
applicable. These gold wires provide the electrical connection between the
electronic circuits on the die and the I/O points of the lead frame or
substrate. Each die is then encapsulated in a plastic casing and marked.

   For leaded packaging, the next step consists of plating the protruding leads
with a tin alloy which facilitates soldering when the finished chips are placed
onto a printed circuit board. The die then go through a series of mechanical
stamping processes where the leads are then trimmed and formed into the
requisite finished shape. For BGA packaging, the next step consists of
attaching tiny solder balls to the bottom of the substrates. The completed
devices then undergo a final inspection before being packed and shipped to
customers according to customers' specifications. We are not responsible for
shipping customer packaged products; customers either retrieve their finished
packaged products directly from our facilities or third parties deliver the
finished packaged products to the airport to be retrieved by customers.

   Our operations are conducted through five operating facilities under
contracts entered into by ChipPAC Limited, our British Virgin Islands operating
subsidiary. Our corporate headquarters are located in Santa Clara, California,
and we provide all packaging, warehousing and test services through our
facilities in Ichon and Chungju, Korea and Shanghai, China. Our Chungju
facility provides electroplating services on chips from the Ichon facility. Our
Chungju facility was founded in 1983 and is both ISO-9002 and QS-9000
certified. The Ichon facility was founded in 1985 and is both ISO-9002 and QS-
9000 certified. The Shanghai facility was founded in 1994 and is also ISO-9002
certified and QS-9000 certified. The following chart summarizes our packaging
and research and development facilities:



                                                                      Principal Packaging or
                                                                             Service
                          Owned/                                        Provided or Being
   Facility Location      Leased Sq. Ft.     Functions/Services             Developed
   -----------------      ------ ------- -------------------------- --------------------------
                                                        
Santa Clara, California.  Leased  40,000 Executive offices,         Flip Chip BGA and Quick-
                                         Research and               Turn BGA Development
                                         Development, Sales and
                                         Marketing
Chandler, Arizona.......  Leased   5,000 Research and Development,  Design and
                                         Sales and Marketing        Characterization Services
Shanghai, China.........   Owned 442,000 Packaging and Test         Traditional Leaded BGA
                                         Services                   Packaging and Test
                                                                    Services
Ichon, Korea............  Leased 474,000 Packaging and Test         Advanced Leaded and BGA
                                         Services; Research and     Packaging and Test
                                         Development                Services
Chungju, Korea..........  Leased 129,000 Electroplating chips from              --
                                         Ichon, Korea


                                       56


Competition

   The packaging and test industry is highly fragmented. Our primary
competitors and their locations are as follows:

    . Advanced Semiconductor Engineering, Inc. -- Taiwan

    . ASE Test Limited -- Taiwan and Malaysia

    . Amkor Technology, Inc. -- USA

    . ASAT, Ltd. -- Hong Kong

    . Hana Microelectronics Public Co., Ltd. -- Hong Kong and Thailand

    . Siliconware Precision Industries Co., Ltd. -- Taiwan

    . Shinko Electric Industries Co., Ltd. -- Japan

    . ST Assembly Test Services Limited -- Singapore

   Each of these companies has significant packaging capacity, financial
resources, research and development operations, marketing and other
capabilities, and has some degree of operating experience. These companies also
have established relationships with many large semiconductor companies which
are current or potential customers of ours. We also compete with the internal
packaging and test capabilities of many of our largest customers. We believe
the principal elements of competition in the independent semiconductor
packaging market include time-to-market, breadth of packaging services,
technical competence, design services, quality, yield, customer service and
price. We believe that we generally compete favorably in these areas.

   Due in significant part to the lengthy and costly process of qualifying a
supplier, most semiconductor manufacturers generally have two sources of
packaging services.

Research and Development

   Our research and development efforts are focused on developing new packaging
designs and process capabilities and on improving the efficiency and
capabilities of our existing packaging and test services. We believe that
technology development is one of the key success factors in the packaging
market and we believe that we have a distinct advantage in this area. Within
the last two years, we have introduced the following six new packages:
    . mBGA(TM),

    . PBGA,

    . TBGA,

    . M/2/BGA(TM),

    . EconoCSP(TM) and

    . FBGA-T.

   In 1999, we established a U.S. research and development center that allows
customers to validate future flip chip packaging options early in the
development process by giving customers direct access to flip chip materials,
equipment and our engineering expertise.

   As of December 31, 1999, we employed approximately 89 full-time research and
development personnel. Since we partner with the semiconductor manufacturers
that are our customers, research and development costs have not historically
represented a material percentage of our revenues. During 1999, we spent
approximately $12.4 million on research and development.

Employees

   As of December 31, 1999, we employed 4,084 full-time employees, of whom
approximately 89 were employed in research and development, 3,763 in packaging
and test services and 232 in marketing, sales, customer service and
administration.


                                       57


   Approximately 2,009 of our employees at the Ichon, Korea facility are
represented by ChipPAC Korea Labor Union and are covered by a collective
bargaining agreement which provides for salary and wages through May 1, 2000
and expires on May 1, 2001. We believe that we have good relationships with our
employees and unions.

Intellectual Property

   Our ability to develop and provide advanced packaging technologies and
designs for our customers depends in part on our proprietary know-how, trade
secrets and other non-patented, confidential technologies, which we either own
or license from third parties. We also have licenses to use numerous third
party patents, patent applications and other technology rights, as well as
trademark rights, in the operation of our business. Under the patent and
technology license agreement that ChipPAC Limited entered into with Hyundai
Electronics, which we refer to as the Hyundai Electronics License, in
connection with the recapitalization, we obtained a non-exclusive license to
use intellectual property in connection with our packaging activities.
Following expiration of its initial term on December 31, 2003, the Hyundai
Electronics License may be extended by us from year to year upon payment of a
nominal annual license fee. Hyundai Electronics may terminate the Hyundai
Electronics License prior to December 31, 2003 if we breach the Hyundai
Electronics License and do not cure within the applicable time period, or in
the event of our bankruptcy or similar event, or if a force majeure event
prevents performance of the agreement.

   ChipPAC Limited has entered into a License Agreement with Tessera, Inc.
which we refer to as the Tessera License, under which we have obtained a
worldwide, royalty-bearing, non-exclusive license under specified Tessera
patents, technical information and trademarks relating to Tessera's proprietary
IC packages, most significantly its mBGA(TM), or micro BGA, packages. The
Tessera License will run until the expiration of the last Tessera patent
licensed under the Tessera License. The expiration of the Tessera will not
occur until sometime after February, 2018 which is the first expiration date of
a patent we license under the Tessera license.

   Further, in connection with the recapitalization, ChipPAC Limited obtained a
non-exclusive, royalty-free sub license from Hyundai Electronics under patents
owned by Motorola for use in connection with our BGA packaging process. The
initial term of our sub license under the Motorola patents will expire on
December 31, 2002. This sublicense requires Hyundai Electronics to use
commercially reasonable efforts to extend or renew its license from Motorola
prior to its expiration on December 31, 2002 and obtain from Motorola the right
to grant ChipPAC Limited a sublicense on the same terms and conditions as those
of any extended or renewed license.

   Our primary trademark and trade name is "ChipPAC." We own or are licensed to
use other secondary trademarks, but none of these trademarks are considered of
primary importance to our business.

Environmental Matters

   Our business is affected by liabilities and compliance obligations arising
under environmental, health and safety laws. These laws impose various controls
on the quality of our air and water discharges and on the generation, storage,
handling, discharge, treatment, transportation and disposal of chemicals which
we use, and on employee exposure to hazardous substances in the workplace. It
is our policy to comply with all applicable environmental, health and safety
laws and regulations, and we believe we are currently in material compliance
with all applicable laws and regulations. In September 1996, we received ISO
14001 certification for our facilities in Ichon and Chongju by Lloyd's Register
Quarterly Assurance.

   Significant regulatory and public attention has been focused on the
environmental impact of semiconductor packaging operations and the risk of
chemical releases from these operations. Environmental, health and safety laws
could require us to incur capital and operational costs to maintain compliance
and could impose liability to remedy the effects of hazardous substance
contamination. We do not anticipate making material

                                       58


environmental capital expenditures in fiscal years 2000 and 2001. There can be
no assurance that applicable environmental, health and safety laws will not in
the future impose the need for additional capital equipment or other process
requirements upon us, curtail our operations, or restrict our ability to expand
operations. The adoption of new environmental, health and safety laws, the
failure to comply with new or existing laws, or issues relating to hazardous
substances could result in future material liability for us.

Legal Proceedings

   We are not involved in any legal proceedings, the outcome of which we
believe would have a material adverse effect on our business, financial
condition or results of operations. From time to time, however, we are involved
in claims that arise in the ordinary course of business, and we maintain
insurance that we believe to be adequate to cover these claims.

                                       59


                                   MANAGEMENT

Directors and Executive Officers

   The following table provides information about the persons who are the
directors and executive officers of ChipPAC, Inc.



            Name         Age                      Position
            ----         ---                      --------
                       
      Dennis P. McKenna  50  President, Chief Executive Officer and Director,
                             ChipPAC, Inc.
      Robert Krakauer    34  Senior Vice President and Chief Financial Officer,
                             ChipPAC, Inc.
      Gregory S.         43  Vice President, Worldwide Sales, ChipPAC, Inc.
       Bronzovic
      Marcos Karnezos    55  Vice President, Technology, ChipPAC, Inc.
      (Peter) Phang Guk  51  President, ChipPAC Assembly
       Bing                  and Test (Shanghai) Company Ltd.
      S. N. Lee          55  President and Chief Executive Officer, ChipPAC
                             Korea Company, Ltd.
      David Dominik      43  Director, ChipPAC, Inc.
      Edward Conard      42  Director, ChipPAC, Inc.
      Prescott Ashe      32  Director, ChipPAC, Inc.
      Michael A.         45  Director, ChipPAC, Inc.
       Delaney
      Paul C. Schorr IV  32  Director, ChipPAC, Inc.
      Joseph Martin      51  Director, ChipPAC, Inc.
      Chong Sup Park     51  Director, ChipPAC, Inc.


   Dennis P. McKenna has been President and Chief Executive Officer of ChipPAC,
Inc. since October 1997; he was appointed to these positions when ChipPAC, Inc.
was incorporated as a separate United States corporation. From October 1995 to
January 1997, he served as Senior Vice President of the Components Group for
Hyundai Electronics. He joined Hyundai Electronics in January 1993 and served
as Vice President and General Manager of the Semiconductor Group until October
1995. Prior to joining Hyundai Electronics, Mr. McKenna, who has over 28 years
of industry experience, held management positions at TRW, Inc. and Oki
Semiconductor, a division of Oki America, Inc.

   Robert Krakauer has been Senior Vice President and Chief Financial Officer,
ChipPAC, Inc. since November 1999. Prior to that time, he served as Vice
President, Finance, and Chief Financial Officer at Allied Signal Electronic
Materials from May 1998 to November 1999. From June 1996 to May 1998, he served
as Corporate Controller at Altera Corporation. From June 1993 to June 1996, he
was Vice President, Finance and Chief Financial Officer at Alphatec Electronics
USA.

   Gregory S. Bronzovic joined ChipPAC, Inc. in April 1998 and has served as
Vice President North American Sales, ChipPAC, Inc. since that time. From
September 1998 to the present he has also served as Vice President, Worldwide
Sales, ChipPAC, Inc. From January 1995 until April 1998, he was Director of
Sales, Hyundai America; prior to that time he served as Western Area Manager,
Hyundai America from February 1994.

   Marcos Karnezos has been Vice President, Technology of ChipPAC, Inc. since
October 1998. From December 1996 to October 1998, he served as Vice President,
Technology at Signetics KP. Prior to that, he was Vice President, Technology at
ASAT, Ltd. from October 1992 to December 1996.

   (Peter) Phang Guk Bing was appointed as President, ChipPAC Assembly and Test
(Shanghai) Company Ltd. in November 1999. From July 1998 to October 1999, he
served as Vice President of Operations at ChipPAC (Shanghai) Company Ltd. From
September 1994 to June 1998, he was employed by Silicon Systems Singapore,
where he was Director of Manufacturing Support Engineering and, prior to that,
Director of Assembly Operations.

                                       60


   S. N. Lee has been President and Chief Executive Officer, ChipPAC Korea
Company, Ltd. since July 1998. Mr. Lee served as Senior Vice President from
April 1986 through December 1995, and as Executive Vice President from October
1996 through June 1998 of the Assembly and Test Division of Hyundai
Electronics, the predecessor of ChipPAC Korea Company, Ltd. From January 1996
to October 1996, Mr. Lee served as Senior Vice President of the LCD Division of
Hyundai Electronics.

   David Dominik joined Bain Capital in 1990 as a Managing Director. Prior to
joining Bain Capital, Mr. Dominik was a general partner of Zero Stage Capital,
a venture capital firm focused on early-stage companies. Previously, Mr.
Dominik was a venture capital investor and assistant to the Chairman of Genzyme
Corporation, a biotechnology firm. From 1982 to 1984, Mr. Dominik was a
management consultant at Bain & Company. Mr. Dominik serves on the board of
directors of Therma-Wave, Inc., Dynamic Details, Incorporated and OneSource
Information Services, Inc.

   Edward Conard joined Bain Capital in 1993 as a Managing Director. Prior to
joining Bain Capital, Mr. Conard was a director of Wasserstein Perella from
1990 to 1992 where he headed the firm's Transaction Development Group.
Previously, Mr. Conard was a Vice President at Bain & Company, where he headed
the firm's operations practice and managed major client relationships in the
industrial manufacturing and consumer goods industries. Mr. Conard currently
serves on the boards of Waters Corporation, Cambridge Industries, Dynamic
Details Inc., Medical Specialties Group, Inc., Alliance Commercial Laundry,
Inc. and U.S. Synthetics, Inc.

   Prescott Ashe joined Bain Capital in 1991 and has been a Principal of Bain
Capital since 1998. Prior to Bain Capital, Mr. Ashe was a management consultant
at Bain & Company. Mr. Ashe currently serves on the board of directors of
Dynamic Details, Incorporated.

   Michael A. Delaney has been Managing Director of Citicorp Venture Capital
Ltd., an investor in the SXI Group LLC, since 1989. Mr. Delaney is also a
director of GVC Holding, JAC Holdings, CORT Business Services, Inc., Palomar
Technologies, Inc., SC Processing, Inc., Triumph Group, Inc., CLARK Material
Handling Inc., MSX International, Delco Remy International, Inc., International
Knife and Saw, Inc., Fabri-Steel Products, Inc., Aetna Inc., AmeriSource Health
Corporation and Allied Digital Technologies Inc.

   Paul C. Schorr IV has been Vice President, Equity Investments for Citicorp
Venture Capital Ltd., an investor in the SXI Group LLC, since June 1996. Prior
to that, Mr. Schorr was Engagement Manager in Management Consulting at McKinsey
& Company. Mr. Schorr serves on the board of directors of KEMET Corporation,
Sybron Chemicals and Fairchild Semiconductor Corporation.

   Joseph Martin has been Executive Vice President and Chief Financial Officer
of Fairchild Semiconductor Corp. since 1997, prior to which time he was Vice
President of Finance, Worldwide Operations for National Semiconductor Corp.
since 1989. Mr. Martin is also a director of Fairchild Semiconductor Corp.

   Chong Sup Park joined Hyundai Electronics in 1983 and was named President
and Chief Executive Officer, Hyundai Electronic Industries Company, Limited, in
March 2000. Prior to this, he was Chairman of Hyundai Electronics America since
November 1999 to February 2000. From February 1995 to October 1999, he served
as President and Chief Executive Officer of Hyundai Electronics America and
Maxtor Corporation. Mr. Park is also a director of Maxtor Corporation, Dot Hill
Systems Corporation, and Viador, Inc.

Compensation of Directors

   We reimburse members of the board of directors for any out-of-pocket
expenses incurred by them in connection with services provided in this
capacity.

   In addition, we pay Mr. Martin and Mr. Park compensation that is
commensurate with arrangements offered to directors of companies that are
similar to ChipPAC, Inc. for their services as directors.

   We have entered into agreements with Mr. Martin and Mr. Park for the grant
of stock options to purchase shares of our Class A common stock. The options
granted pursant to these agreements will begin vesting in August 2000.

                                       61


Executive Compensation

                           Summary Compensation Table

   The following table provides, for the year ended December 31, 1999, the
compensation paid to the Chief Executive Officer and the four next most highly
compensated executive officers of ChipPAC whose total annual salary and bonus
was in excess of $100,000 for fiscal year 1999. For ease of reference, we refer
to each of these executive officers throughout this section as a "named
executive officer" and collectively as the "named executive officers."



                                       Annual Compensation                Long-Term Compensation (2)
                               ------------------------------------   --------------------------------------------
                                                          Other       Restricted      Restricted       Securities
                                                          Annual        Stock           Stock          Underlying   All Other
        Name and         Year                          Compensation    Awards          Awards         Options/SARS Compensation
   Principal Position    Ended   Salary       Bonus        (1)           ($)             (#)              (#)          (3)
   ------------------    ----- ----------- ----------- ------------   ----------      ----------      ------------ ------------
                                                                                           
Dennis P. McKenna....... 1999  $376,480.40 $277,520.90  $ 7,200.00     $66,660(5)(6)   600,000(5)(6)    680,000     $46,741.54
 President and Chief
 Executive Officer,
 ChipPAC, Inc.
Tony Lin................ 1999   183,420.36  105,085.64    6,000.00      16,665(5)(6)   150,000(5)(6)    150,000      20,884.12
 Vice President,
 Manufacturing
 Finance
Gregory S. Bronzovic.... 1999   190,040.28   70,710.46    6,000.00      11,110(5)(6)   100,000(5)(6)    100,000      10,972.94
 Vice President,
 Worldwide Sales,
 ChipPAC, Inc.
Marcos Kamezos.......... 1999   186,252.05   55,985.32    6,000.00      11,110(5)(6)   100,000(5)(6)    100,000       7,803.10
 Vice President,
 Technology, ChipPAC,
 Inc.
Peter Phang(4).......... 1999   155,533.46   26,240.19   80,800.00(4)   11,110(5)(6)   100,000(5)(6)    100,000       3,150.00
 Managing Director and
 President ChipPAC
 Shanghai

- -------
(1) Includes a car allowance but excludes perquisites and other personal
    benefits or property aggregating less than the lesser of either: (i)
    $50,000 or (ii) 10% of the total annual salary and bonus reported for the
    applicable named officer.
(2) At the closing of the recapitalization on August 5, 1999, all options held
    by the named executive officers were canceled in the case of unexercised
    options, or converted into the right to receive cash, in the case of vested
    options. Please see "Other Compensation" for more information about cash
    payments made to our named executive officers in return for their vested
    options. A new ChipPAC, Inc. 1999 Stock Purchase and Option Plan was issued
    as of August 5, 1999 and to date none of these options have been exercised.
(3) Includes amounts contributed (a) under our 401(k) plan for 1999 as follow:
    Mr. McKenna--$4,325; Mr. Lin--$3,787; Mr. Kamezos--$2,137 and Mr.
    Bronzovic--$2,026, (b) for premiums for a life insurance policy as follow:
    Mr. McKenna--$1,917; Mr. Lin--$1,347; Mr. Karnezos--$2,291; and Mr.
    Bronzovic--$509, and (c) for cancelation of vested stock options from the
    1997 ChipPAC Stock Option Plan as follow: Mr. McKenna--$40,500; Mr. Lin--
    $15,570; Mr. Kamezos--$3,375; Mr. Bronzovic--$8,438; and Mr. Phang--$3,150.
(4) Includes an overseas allowance of $15,300 and a housing allowance of
    $65,500 for Mr. Phang.
(5) Represents shares of Class A common stock with a fair value of $.1111 per
    share as determined by the board of directors based upon a good faith
    estimate on the date of conversion as noted below. Each of the named
    executive officers purchased these shares at a purchase price of $.1111 per
    share on the conversion noted below. Twenty percent of the stock vests at
    the end of the first year, an additional twenty percent vests at the end of
    the second year, an additional thirty percent vests at the end of the third
    year and the remaining thirty percent vests at the end of the fourth year.
(6) These shares previously represented options for Class A common stock which
    were converted into restricted shares of the Class A common stock upon
    notification of the intention to convert from the named executive officers
    during the year ended December 31, 1999.

                                       62


   The following table sets forth the option grants during the year ended
December 31, 1999 for the individuals named in the Summary Compensation table.

                       Option Grants in Last Fiscal Year

                               Individual Grants



                                                                                Potential Realizable
                                                                                  Value at Assumed
                                                                                Annual Rates of Stock
                          Number of                                              Price Appreciation
                         Securities    % of Total                                        for
                         Underlying  Options Granted Exercise or                   Option Term (3)
                           Options   to Employees in Base Price    Expiration   ---------------------
Name                     Granted (1) Fiscal Year (2)  ($/Share)       Date       5% ($)     10% ($)
- ----                     ----------- --------------- ----------- -------------- --------- -----------
                                                                        
Dennis P. McKenna.......   680,000        19.5%         $2.10    August 4, 2009 $ 898,062 $ 2,275,863
Tony Lin................   150,000         4.3           2.10    August 4, 2009   198,102     502,029
Gregory S. Bronzovic....   100,000         2.9           2.10    August 4, 2009   132,068     334,686
Marcos Kamezos..........   100,000         2.9           2.10    August 4, 2009   132,068     334,686
Peter Phang.............   100,000         2.9           2.10    August 4, 2009   132,068     334,686

- --------
(1) These options for Class A common stock were granted under the ChipPAC, Inc.
    1999 Stock Purchase and Option Plan. Twenty percent of the options vests at
    the end of the first year, an additional twenty percent vests at the end of
    the second year, an additional thirty percent vests at the end of the third
    year and the remaining thirty percent vests at the end of the fourth year.
(2) For purposes of calculating this percentage, options for Class A common
    stock which were converted into restricted shares of the Class A common
    stock were not counted as options granted to employees during the year
    ended December 31, 1999.
(3) Amounts reflect assumed rates of appreciation set forth in the executive
    compensation disclosures rules of the SEC. Actual gains, if any, on stock
    option exercises depend on future performance of our stock and overall
    market conditions.

                Aggregated Option Exercises in Last Fiscal Year
                       and Fiscal Year End Option Values



                                             Number of Securities    Value of
                                                  Underlying       Unexercised
                                                 Unexercised       In-the-Money
                                              Options at Fiscal     Options at
                                               Year End (#) (1)   FY-End ($) (2)
                                             -------------------- --------------
                                                 Exercisable/      Exercisable/
      Name                                      Unexercisable     Unexercisable
      ----                                   -------------------- --------------
                                                            
      Dennis P. McKenna.....................      0/680,000            $0/0
      Tony Lin..............................      0/150,000             0/0
      Gregory S. Bronzovic..................      0/100,000             0/0
      Marcos Kamezos........................      0/100,000             0/0
      Peter Phang...........................      0/100,000             0/0

- --------
(1) At the closing of the recapitalization on August 5, 1999, all options held
    by the named executive officers were canceled in the case of unexercised
    options, or converted into the right to receive cash, in the case of vested
    options. A new ChipPAC, Inc. 1999 Stock Purchase and Option Plan was issued
    and these options were granted under that plan.
(2) The fair market value of the common stock at December 31, 1999 as
    determined by the board of directors based upon a good faith estimate was
    equal to the exercise price of the options.

                                       63


Employment Agreements

 Mr. McKenna

   Mr. McKenna is employed under an employment agreement with us. The agreement
provides that Mr. McKenna will serve as our President and Chief Executive
Officer. The initial term of the agreement terminates on December 31, 2001 and
automatically renews for successive one-year periods unless either party
notifies the other of his or its intention not to renew the agreement. Under
the agreement, we pay Mr. McKenna a base salary of $400,000 per year, which may
be increased if approved by the board of directors, plus a bonus of up to 80%
of his base salary upon attainment by us of financial performance targets
described in the agreement. Mr. McKenna will receive a pro rated bonus for the
remainder of 1999. The agreement also provides for customary fringe benefits.

   We have agreed to pay Mr. McKenna a bonus equal to twice his base salary
plus a portion of his annual bonus if we terminate Mr. McKenna for any reason
other than cause, or if Mr. McKenna terminates his employment for good reason.
If Mr. McKenna dies before the end of his employment period, we will pay his
estate a pro rated portion of the bonus he would have earned in the year of his
death.

   The agreement also provides that, should Mr. McKenna continue to serve as
President and Chief Executive Officer following a change of control of ChipPAC,
the provisions of the employment agreement shall remain in force and effect
following the change of control.

 Mr. Lin, Mr. Bronzovic, Mr. Karnezos, Mr. Krakauer and Mr. Phang

   Mr. Lin, Mr. Bronzovic, Mr. Krakauer and Mr. Phang are employed under letter
agreements with us. Mr. Lin's, Mr. Bronzovic's and Mr. Karnezos' letter
agreements provide that Mr. Lin, Mr. Bronzovic and Mr. Karnezos are employees-
at-will and that either party has the right to terminate the employment
relationship at anytime with or without cause.

   Mr. Lin's letter agreement provides that he serves as Chief Financial
Officer, a position that he no longer holds. Mr. Lin's current base salary is
$185,229. In addition to his base salary, Mr. Lin is eligible to earn an annual
bonus targeted at 30% of his base salary based on the attainment of ChipPAC and
personal performance goals.

   Mr. Bronzovic's letter agreement provides that he serves as Vice President,
Worldwide Sales. Mr. Bronzovic's current base salary is $201,350. In addition
to his base salary, Mr. Bronzovic is eligible to earn an annual bonus targeted
at $100,000.

   Mr. Karnezos' letter agreement provides that he serves as Vice President,
Technology. Mr. Karnezos' current base salary is $198,132. In addition to his
base salary, Mr. Karnezos is eligible to earn an annual bonus targeted at 30%
of his base salary based on the attainment of ChipPAC and personal performance
goals.

   Mr. Krakauer's letter agreement provides that he serves as Senior Vice
President and Chief Financial Officer. Mr. Krakauer's current base salary is
$235,000. In addition to his base salary, Mr. Krakauer is eligible to earn an
annual bonus targeted at $117,500. For 2000 only he will receive a minimum
bonus of $82,250. In the event of termination by the company for reasons other
than cause, he is eligible to receive eight months of severance. This severance
amount may be reduced by any other employment compensation he receives from
another company during that eight month period.

   Mr. Phang's letter agreement provides that he serves as President, ChipPAC
Assembly and Test (Shanghai) Company Ltd. Mr. Phang's current base salary is
$175,000. In addition to his base salary, Mr. Phang is eligible to receive an
annual bonus targeted at $52,500. Mr. Phang also receives a monthly housing
allowance of $7,500 and an overseas allowance of $17,500, which is payable upon
completion of each 12 months of his assignment. Mr. Phang's assignment is for 4
years renewable by mutual agreement. Mr. Phang's assignment may be terminated
by either party with three months written notice if Mr. Phang voluntarily
terminates or six months written notice if ChipPAC terminates for reasons other
than cause. If ChipPAC terminates for reasons other than cause, ChipPAC will
pay for Mr. Phang's relocation back to Singapore, and any unvested options held
by Mr. Phang would immediately vest upon this termination.

                                       64


   Mr. Lin's, Mr. Bronzovic's, Mr. Karnezos', Mr. Krakauer's and Mr. Phang's
letter agreements provides for perquisites, like automobile allowances, and
customary personal benefits.

Other Compensation

   Following the recapitalization, we paid cash to the named executive officers
in return for the vested options held by each of these officers. The amount of
those cash payments was $40,500, $15,750, $3,375, $3,150 and $8,438 in the case
of Messrs. McKenna, Lin, Karnezos, Phang and Bronzovic, respectively.

   Mr. McKenna and Mr. Lin also received special bonuses of $100,000 and
$50,000, respectively, in connection with the closing of the recapitalization.

Option Grants

   Under the recapitalization agreement, each option to purchase our common
stock that was outstanding prior to the recapitalization was, in the case of
unvested options, canceled, and in the case of vested options, converted into
the right to receive cash from ChipPAC, Inc. immediately prior to the
recapitalization.

1999 Stock Purchase and Option Plan

   Our board of directors has adopted the ChipPAC, Inc. 1999 Stock Purchase and
Option Plan, or the "1999 Stock Plan," which authorizes the granting of stock
options and the sale of Class A common stock or Class L common stock to current
or future employees, directors, consultants or advisors of ChipPAC, Inc. or its
subsidiaries. Under the 1999 Stock Plan, a committee of the board of directors
is authorized to sell or otherwise issue Class A common stock or Class L common
stock at any time prior to the termination of the 1999 Stock Plan in a
quantity, at a price, on terms and conditions as established by the committee
up to an aggregate of 15,500,000 shares of Class A common stock and 500,000
shares of Class L common stock, including shares of common stock for which
options may be granted, which may be adjusted upon the occurrence of specified
events to prevent any dilution or expansion of the rights of participants that
might otherwise result from the occurrence of these events. As of December 31,
1999, shares of Class A common stock and Class L common stock and options to
purchase stock were granted under the 1999 Stock Plan as depicted in Management
Equity Sales below and in the Principal Shareholders section. To date, none of
these shares or options has vested.

Qualified 401(k) and Profit Sharing Plan

   We maintain a qualified 401(k) and profit sharing plan. Employees are
permitted to contribute up to 15.0% of their annual compensation to our 401(k)
plan, not to exceed $10,000 per year. Under the plan, we make matching
contributions of up to 50.0% of the first 6.0% of annual deferral per
participant, limited by IRS rules. We contributed and expensed $175,000 in
1999, $119,000 in 1998 and $49,000 in 1997.

Pension Plans and Deferred Compensation Plans

   We do not maintain any pension plans or deferred compensation plans other
than the 401(k) and profit sharing plan described above. In connection with the
recapitalization members of management may receive deferred compensation
arrangements. The terms of these arrangements have not yet been finalized.

Management Equity Sale

   Under the 1999 Stock Plan, we entered into purchased stock agreements, which
we refer to as purchase agreements, with many of our senior employees,
including Mr. McKenna, Mr. Krakauer, Mr. Karnezos, Mr. Lin, Mr. Bronzovic and
Mr. Lee. Under the purchase agreements, these senior-level employees purchased
shares of our Class A common stock and Class L common stock. We have loaned
these senior-level employees up to 50% of the purchase price of the common
stock purchased under these purchase agreements. These loans are represented by
promissory notes between the employee and us. The common stock purchased under
the purchase agreements must vest before being issued and may be repurchased by
us upon termination of the employee's employment. The purchased shares of Class
A common stock and Class L common stock are included in the Principal
Shareholders section, however, none of these shares have vested to date.


                                       65


                             PRINCIPAL SHAREHOLDERS

   ChipPAC International Company Limited is a wholly-owned subsidiary of
ChipPAC, Inc. ChipPAC, Inc.'s outstanding equity securities consist of Class A
common stock, Class L common stock, Hyundai Preferred Stock and Intel Preferred
Stock. The shares of Class A common stock entitle the holder to one vote per
share on all other matters to be voted upon by shareholders. The Class L common
stock is identical to the Class A common stock except that the Class L common
stock is nonvoting and is entitled to a preference over the Class A common
stock on any distribution to holders of our capital stock, equal to the
original cost of a share plus an amount which accrues at a rate of 12.5% per
annum, compounded quarterly. The Class L Common Stock is convertible into Class
A Common Stock upon an initial public offering. See "Significant Relationships
and Related Transactions."

   Hyundai Electronics and Hyundai Electronics America own all of the issued
and outstanding Hyundai Preferred Stock. Intel owns all of the issued and
outstanding Intel Preferred Stock. Holders of the Hyundai Preferred Stock and
the Intel Preferred Stock have no right to vote on any matters to be voted on
by the stockholders of ChipPAC, Inc.

   The following table provides information as of December 31, 1999 regarding
the approximate beneficial ownership of (1) each person known to us to own more
than 5% of the outstanding voting securities of ChipPAC, Inc. and (2) the
voting securities of ChipPAC, Inc. held by each director of ChipPAC, Inc., each
executive officer and all of the directors and executive officers as a group.
Unless otherwise noted, to our knowledge, each stockholder has sole voting and
investment power as to the shares shown. Unless otherwise indicated, the
address of each director and named executive officer is 3151 Coronado Drive,
Santa Clara, California 95054.



                                                         Class A Common Stock
                                                         Shares Beneficially
                                                                Owned
                                                       ------------------------
                                                         Number of   Percentage
Name and Address                                          Shares     of Class*
- ----------------                                       ------------- ----------
                                                               
Principal Stockholders:
Bain Capital Funds (1)................................ 40,995,003.17    44.7%
 c/o Bain Capital, Inc.
 Two Copley Place
 Boston, Massachusetts 02116
SXI Group LLC (2).....................................    40,500,000    44.1%
 c/o Citicorp Venture Capital, Ltd. 399 Park Avenue
 New York, NY 10043
Hyundai Electronics America...........................     9,000,000     9.8%
 3101 North First Street
 San Jose, California 95134
Directors and Executive Officers:
Dennis P. McKenna (9).................................           --      --
Robert Krakauer (9)...................................           --      --
Tony Lin (9)..........................................           --      --
Gregory S. Bronzovic (9)..............................           --      --
Marcos Karnezos (9)...................................           --      --
(Peter) Phang Guk Bing (9)............................           --      --
S. N. Lee (9).........................................           --      --
David Dominik (3).....................................  8,468,975.98     9.2%
Edward Conard (4).....................................  8,468,975.98     9.2%
Prescott Ashe (5).....................................  8,468,975.98     9.2%
Michael A. Delaney (6)................................    40,500,000    44.1%
Paul C. Schorr IV (7).................................    40,500,000    44.1%
Joseph Martin (8).....................................    40,500,000    44.1%
Chong Sup Park (9)....................................           --      --
All Directors and executive officers as a group (14
 persons)............................................. 48,968,975.98    53.3%


                                       66


- --------
*  For purposes of calculating this percentage, 4,454,000 shares of common
   stock issued but not yet vested are not deemed outstanding.
(1)  Includes: (a) 31,520,958.49 shares of Class A common stock owned by Bain
     Capital Fund VI, L.P. ("Fund VI"), whose sole general partner is Bain
     Capital Partners VI, L.P., whose sole general partner is Bain Capital
     Investors VI, Inc., a Delaware corporation wholly owned by W. Mitt Romney;
     (b) 4,617,715.49 shares of Class A common stock owned by BCIP Associates
     II ("BCIP II"), whose managing partner is Bain Capital, Inc., a Delaware
     corporation wholly owned by W. Mitt Romney; (c) 728,085.59 shares of Class
     A common stock owned by BCIP Associates II-B ("BCIP II-B"), whose managing
     partner is Bain Capital, Inc., a Delaware corporation wholly owned by W.
     Mitt Romney; (d) 1,156,306.49 shares of Class A common stock owned by BCIP
     Trust Associates II, L.P. ("BCIP Trust II"), whose general partner is Bain
     Capital, Inc., a Delaware corporation wholly owned by W. Mitt Romney; (e)
     329,309.41 shares of Class A common stock owned by BCIP Trust Associates
     II-B ("BCIP Trust II-B"), whose general partner is Bain Capital, Inc., a
     Delaware corporation wholly owned by W. Mitt Romney; (f) 1,637,559 shares
     of Class A common stock owned by BCIP Associates II-C ("BCIP II-C"), whose
     managing partner is Bain Capital, Inc., a Delaware corporation wholly
     owned by W. Mitt Romney; (g) 105,068.70 shares of Class A common stock
     owned by PEP Investments Pty, Ltd. ("PEP"), whose controlling persons are
     Timothy J. Sims, Richard J. Gardell, Simon D. Pillar and Paul J.
     McCullagh; and (h) 900,000 shares of Class A common stock by Sankaty High
     Yield Asset Partners, L.P. ("Sankaty"), whose sole general partner is
     Sankaty High Yield Asset Investors, LLC, whose managing member is Sankaty
     High Yield Asset Investors, Ltd., a Bermuda corporation wholly owned by W.
     Mitt Romney.
(2)  SXI Group LLC is a portfolio concern of Citicorp Venture Capital Ltd.
(3)  Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP
     II, a Delaware general partnership of which Mr. Dominik is a general
     partner; (b) 1,156,306.49 shares of Class A common stock owned by BCIP
     Trust II, a Delaware limited partnership of which Mr. Dominik is a general
     partner; (c) 105,068.70 shares of Class A common stock owned by PEP, a New
     South Wales limited company for which Mr. Dominik has a power of attorney.
     Mr. Dominik disclaims beneficial ownership of any shares in which he does
     not have a pecuniary interest. Mr. Dominik's address is c/o Bain Capital,
     Inc., Two Copley Place, Boston, Massachusetts 02116.
(4)  Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP
     II, a Delaware general partnership of which Mr. Conard is a general
     partner, (b) 1,156,306.49 shares of Class A common stock owned by BCIP
     Trust II, a Delaware limited partnership of which Mr. Conard is a general
     partner; (c) 105,068.70 shares of Class A common stock owned by PEP, a New
     South Wales limited company for which Mr. Conard has a power of attorney.
     Mr. Conard disclaims beneficial ownership of any shares in which he does
     not have a pecuniary interest. Mr. Conard's address is c/o Bain Capital,
     Inc., Two Copley Place, Boston, Massachusetts 02116.
(5)  Includes: (a) 4,617,715.49 shares of Class A common stock owned by BCIP
     II, a Delaware general partnership of which Mr. Ashe is a general partner,
     (b) 728,085.59 shares of Class A common stock owned by BCIP II-B, a
     Delaware limited partnership of which Mr. Ashe is a general partner; (c)
     1,156,306.49 shares of Class A common stock owned by BCIP Trust II, a
     Delaware limited partnership of which Mr. Ashe is a general partner; and
     (d) 329,301.41 shares of Class A common stock owned by BCIP Trust II-B, a
     Delaware limited partnership of which Mr. Ashe is a general partner. Mr.
     Ashe disclaims beneficial ownership of any shares in which he does not
     have a pecuniary interest. Mr. Ashe's address is c/o Bain Capital, Inc.,
     Two Copley Place, Boston, Massachusetts 02116.
(6)  Includes all shares of Class A common stock owned by SXI Group LLC, a
     portfolio concern of Citicorp Venture Capital, Ltd. Mr. Delaney is both an
     investor in SXI Group LLC, a member of its Board of Representatives and a
     Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr.
     Delaney may be deemed to beneficially own all shares held by SXI Group
     LLC. Mr. Delaney disclaims beneficial ownership of any shares in which he
     does not have a pecuniary interest. Mr. Delaney's address is c/o Citicorp
     Venture Capital, Ltd., 399 Park Avenue, New York, New York 10043.

                                       67


(7)  Includes all shares of Class A common stock owned by SXI Group LLC, a
     portfolio concern of Citicorp Venture Capital, Ltd. Mr. Schorr is both an
     investor in SXI Group LLC, a member of its Board of Representatives and a
     Managing Director of Citicorp Venture Capital, Ltd. Accordingly, Mr.
     Schorr may be deemed to beneficially own all shares held by SXI Group LLC.
     Mr. Schorr disclaims beneficial ownership of any shares in which he does
     not have a pecuniary interest. Mr. Schorr's address is c/o Citicorp
     Venture Capital, Ltd., 399 Park Avenue, New York, New York 10043.
(8)  Includes all shares of Class A common stock owned by SXI Group LLC, a
     portfolio concern of Citicorp Venture Capital, Ltd. Mr. Martin is an
     investor in SXI Group LLC and, accordingly, may be deemed to beneficially
     own all shares held by SXI Group LLC. Mr. Martin disclaims beneficial
     ownership of any shares in which he does not have a pecuniary interest.
     Mr. Martin's address is c/o Fairchild Semiconductor Corporation, 333
     Western Avenue, South Portland, Maine 04106.
(9)  Excludes shares of common stock issuable upon exercise of stock options
     that are not exercisable and shares of common stock issued but not yet
     vested prior to or within 60 days of December 31, 1999.

                                       68


                              THE RECAPITALIZATION

   Prior to the recapitalization, Hyundai Electronics Co., Ltd. owned:

    . all of the outstanding equity of ChipPAC Korea Company, Ltd., which
      we refer to as ChipPAC Korea, and which leases our Ichon, Korea and
      Chungju, Korea facilities;

    . all of the outstanding equity of Hyundai Electronics (Shanghai)
      Company Ltd. which was renamed ChipPAC (Shanghai) Company Limited
      after the recapitalization and which we refer to as ChipPAC China I
      and which owns ChipPAC's Shanghai, China facility; and

    . 82.0% of the outstanding equity of Hyundai Electronics America. The
      remaining 18% was owned by another 100% owned Hyundai subsidiary.
      Hyundai Electronics directly owns many of the intellectual property
      rights used in our business.

    . Hyundai Electronics America, in turn, owned all of the outstanding
      stock of ChipPAC, Inc. prior to the recapitalization. ChipPAC, Inc.
      owned all of the outstanding equity of ChipPAC Assembly and Test
      (Shanghai) Company, Ltd., which we refer to as ChipPAC China II.

   The recapitalization and related transactions resulted in:

    . the Equity Investors and other parties owning approximately 90.2% of
      the outstanding common stock of ChipPAC, Inc. and Hyundai Electronics
      and Hyundai Electronics America owning approximately 9.8% of the
      outstanding common stock;

    . the creation of several new foreign subsidiaries of ChipPAC, Inc.,
      including ChipPAC International Company Limited, the issuer of the
      exchange notes;

    . the organization of the new direct and indirect subsidiaries and the
      existing direct and indirect subsidiaries of ChipPAC, Inc. into a
      distinct group of operating subsidiaries and a distinct group of
      borrowing subsidiaries; and

    . the issuance of the preferred stock to Hyundai and the implementation
      of the new senior credit facilities described under "Description of
      Other Financing Arrangements--Senior Credit Facilities."

   Please see the diagram on the following page relating to our structure prior
to August 5, 1999.

                                       69


   The following diagram depicts the corporate structure of ChipPAC, Inc. and
related entities prior to the August 5, 1999 recapitalization:


   The steps described below were taken in order to complete the
recapitalization. Please refer to the diagram at the end of this section for
information on our current corporate structure.

    . Through a series of restructuring transactions involving entities
      controlled by Hyundai Electronics and Hyundai Electronics America,
      ChipPAC, Inc. became the indirect owner of all of the outstanding
      equity of ChipPAC Korea, ChipPAC China I and ChipPAC China II.

    . Hyundai Electronics formed ChipPAC Limited as a new subsidiary and
      ChipPAC (Barbados) Ltd. as a new subsidiary of ChipPAC, Inc. ChipPAC
      (Barbados) Ltd. is now a wholly-owned subsidiary of ChipPAC, Inc. and
      ChipPAC Limited is now a wholly-owned subsidiary of ChipPAC
      (Barbados) Ltd. ChipPAC Limited owns all of the outstanding equity of
      ChipPAC China I and ChipPAC China II and 99.9% of the outstanding
      equity of ChipPAC Korea. ChipPAC (Barbados) Ltd. owns the remaining
      0.1% of the outstanding equity of ChipPAC Korea.

    . Hyundai sold the rights to substantially all of the intellectual
      property used in our business, including rights under our agreements
      with Intel Corporation, to ChipPAC Limited.

    . Hyundai Electronics formed a subsidiary of ChipPAC, Inc. named
      ChipPAC Operating Limited, which owned all of the outstanding equity
      of two additional entities formed by Hyundai Electronics, ChipPAC
      Luxembourg S.a.R.L. and ChipPAC Liquidity Management.

    . The Equity Investors, together with other investors, invested an
      aggregate of approximately $92.0 million cash in ChipPAC, Inc.
      through the merger of ChipPAC Merger Corp., a newly-formed, wholly-
      owned subsidiary of the Equity Investors, in exchange for
      approximately 90.2% of the common stock of ChipPAC, Inc. after the
      completion of the recapitalization steps.

    . ChipPAC International Limited, the issuer of the outstanding notes
      and the exchange notes was merged with and into ChipPAC Operating
      Limited and renamed ChipPAC International Company Limited.


                                       70


    . Concurrently with the recapitalization described above, we borrowed
      $150 million under the term loan facilities. We used all the proceeds
      from the term loan facilities, the issuance of the outstanding notes
      and the equity issuance to repay existing third party indebtedness
      and to purchase most of Hyundai Electronics and Hyundai Electronics
      America's equity interest in us and our subsidiaries and the
      intellectual property used in our business and to pay other accounts
      in conjunction with the recapitalization.

   Our current corporate structure is as follows:

                    [CORPORATE STRUCTURE CHART APPEARS HERE]

                                       71


               SIGNIFICANT RELATIONSHIPS AND RELATED TRANSACTIONS

   Because this is a summary, it does not contain all of the information that
maybe important to you. You should read the complete document before making an
investment decision. These documents have been filed as exhibits to the
registration statement of which this prospectus forms a part. See "Where You
Can Find Additional Information."

Recapitalization Agreement

   On March 13, 1999, ChipPAC, Inc., ChipPAC Merger Corp., Hyundai Electronics
and Hyundai Electronics America entered into the recapitalization agreement, as
amended. Under the recapitalization agreement, the transactions described in
"The Recapitalization" section were consummated. As part of the
recapitalization, we also paid fees and expenses related to the financing of
the recapitalization.

   Under the recapitalization agreement, Hyundai Electronics and Hyundai
Electronics America agreed to jointly indemnify us against any and all losses
resulting from any misrepresentation or breach of warranty made by ChipPAC in
the recapitalization agreement, a claim for which must generally be made no
later than 24 months after the closing of the recapitalization. The
indemnification obligations of Hyundai Electronics and Hyundai Electronics
America under the recapitalization agreement have a $3.84 million minimum
aggregate threshold amount and are limited to a maximum aggregate amount
payable of no more than $38.4 million; provided, however, that in cases where
indemnification obligations are not affected by this payment limitation, if the
amount of any indemnification obligation would exceed 50.0% of the total
consideration to be paid to Hyundai Electronics and Hyundai Electronics
America, then the recapitalization may be rescinded. In addition, Hyundai
Electronics and Hyundai Electronics America have jointly agreed to indemnify us
for any and all losses and liabilities:

    . that are owed to third parties and are in the nature of "successor
      liability" or which are caused by the pre-closing conduct of Hyundai
      Electronics or its affiliates; and

    . that (a) we may incur within ten years of the recapitalization and
      (b) which relate to patent infringement claims brought by specified
      third parties; in this case the indemnification obligations are
      limited to $5.0 million.

   In addition, we will indemnify Hyundai Electronics and Hyundai Electronics
America against any and all losses arising out of a breach of any of ChipPAC
Merger Corp.'s representations or warranties, covenants or agreements described
in the recapitalization agreement, with limitations.

   Hyundai Electronics and Hyundai Electronics America have also agreed for a
period of four years after the closing of the recapitalization not to provide
semiconductor packaging or test services to any person or any entity anywhere
in the world, except for fabricated products for its semiconductor units.
Hyundai Electronics and Hyundai Electronics America have also agreed for a
period of two years after the closing of the recapitalization not to offer
employment to or hire any of our current or former employees, other than any
employee that was terminated by us on or prior to December 1, 1998.

   As part of the transfer of control of ChipPAC, Inc. and its subsidiaries in
the recapitalization, Hyundai Electronics and Hyundai Electronics America, or
their affiliates, entered into or amended a number of ancillary agreements with
our parent company and operating subsidiaries, including:

    . utility and service agreements with ChipPAC Korea to provide it with
      utility service at its Ichon and Chungju, Korea facilities;

    . an information technology services agreement relating to maintenance
      and support of our computer hardware and software; and

    . a lease for our Ichon and Chungju, Korea facilities and a sublease
      for our Santa Clara, California facility.

   All of these ancillary agreements are on terms we believe are market and
customary.

                                       72


Advisory Agreements

   At the time of the recapitalization, we entered into advisory agreements
with the Equity Investors. Under these agreements, Equity Investors may provide
financial, advisory and consulting services to us. In exchange for these
services, the Equity Investors will be entitled to receive fees billed at the
Equity Investors' customary rates for actual time spent performing these
services plus reimbursement for out-of-pocket expenses; provided that,
commencing with the quarter ended March 31, 2000, when and if we achieve
EBITDA, as calculated through the twelve-month period ended March 31, 2000, in
excess of $81.2 million, the Equity Investors will each be entitled to an
annual advisory fee, the amount of which will be limited by our senior credit
agreements, for the remaining term of the advisory agreement. There are no
minimum levels of service required to be provided under the advisory
agreements. At the time of the recapitalization, the Equity Investors each
received a one-time fee of 1.0% of the aggregate value of the recapitalization,
which fees are included in the $32 million of fees and expenses identified in
"Use of Proceeds." In addition, the Equity Investors will each receive a fee
not to exceed 1.0% of the aggregate value of any acquisition, divestiture or
financing transaction of ChipPAC, Inc. in which the Equity Investors are
involved. Each advisory agreement will remain in effect for an initial term of
ten years, but they may be terminated by the Equity Investors or us upon
written notice 90 days prior to the expiration of the initial term or any
extension. Each advisory agreement includes customary indemnification
provisions in favor of each of the Equity Investors.

Shareholders Agreement

   At the time of the recapitalization, ChipPAC, Inc., each of the Equity
Investors and all of the other non-management equity holders, including Hyundai
Electronics, Hyundai Electronics America and Intel, entered into a shareholders
agreement that provides for restrictions on the transfer of shares and
specified preemptive rights. Also under the shareholders agreement, our board
of directors will be comprised of

    . the chief executive officer of ChipPAC, Inc.,

    . three representatives designated by Bain Capital,

    . three representatives designated by SXI Group LLC and

    . one representative designated collectively by Hyundai Electronics and
      Hyundai Electronics America.

Registration Agreement

   ChipPAC, Inc., the Equity Investors and their designees, Hyundai
Electronics, Hyundai Electronics America and Intel entered into a registration
agreement which provides for "demand' registration rights to cause us to
register under the Securities Act all or part of the shares of our stock, as
well as "piggyback' registration rights. Specifically, the registration
agreement provides that:

    . the holders of a majority of our registrable securities may require
      us, at our expense, to register any or all of the stock held by them
      on a "long-form' registration statement or, if available, a "short-
      form' registration statement;

    . after an offering of our stock to the public, with specified
      exceptions, (a) at any time, the holders of a majority of the
      registrable securities held by Hyundia Electronics or Hyundai America
      may require one "long form' or "short form' registration at our
      expense and (b) before August 5, 2006, the holders of a majority of
      the registrable securities held by Intel may also require one "long
      form' or "short form' registration at our expense; and

    . all holders of registrable securities may request that their eligible
      stock be included whenever we register any of our securities under
      the Securities Act, with specified exceptions.

                                       73


   We have agreed to indemnify all holders of registered securities against
specified liabilities, including liabilities under the Securities Act.

Transition Services Agreement

   We entered into a transition services agreement with Hyundai Electronics and
Hyundai Electronics America whereby Hyundai Electronics and Hyundai Electronics
America will continue to provide administrative and other services to us for
amounts to be determined depending upon the type and number of services
performed. Services to be provided by Hyundai Electronics and Hyundai
Electronics America under the transition services agreement include:

    . purchasing assistance;

    . transit insurance;

    . water freight services;

    . uniform and travel services;

    . office space in Tokyo, Japan;

    . services of employees located in Tokyo, Japan; and

    . consulting services.

Patent and Technology License Agreement

   We entered into a patent and technology license agreement with Hyundai
Electronics, under which we received a non-exclusive license to use
intellectual property in connection with our semiconductor packaging
activities. Following the expiration of its initial term on December 31, 2003,
the patent and technology license agreement may be extended by us from year to
year upon payment of a nominal annual license fee. Hyundai Electronics may
terminate the patent and technology license agreement prior to December 31,
2003 if we breach the agreement and do not cure within the applicable time
period, or in the event of bankruptcy or similar event, or if a force majeure
event prevents performance of the agreement.

Services Agreement

   We entered into an agreement with Hyundai Electronics for the packaging of
Hyundai Electronics' (mu)BGA, or micro BGA, chips. Under the services
agreement, we must procure sufficient capital equipment to meet Hyundai's
packaging requests. The initial term of the agreement expires on June 30, 2002,
but may be terminated for cause.

Intel Materials Agreement

   On August 5, 1999, ChipPAC Limited and Intel entered into the Intel
Materials Agreement under which Intel will outsource to ChipPAC Limited a
portion of its semiconductor packaging needs. In return, we will provide Intel
with rebates based upon the volume of packaging services outsourced to us.
Rebates are deducted from revenue and accrued as current liabilities when the
sale is made. The rebate percentage applied in computing the accrual is based
on projected total sales and the relevant rebate percentages for the periods
stated in the agreement. The Intel Materials Agreement covers semiconductor
packaging services for which Intel has an ongoing purchasing requirement and
for which we are a qualified source and where costs, yields and quality are
equal to that of the same services provided by other semiconductor packaging
companies.

   The Intel Materials Agreement also provides that Intel will not enter into
other agreements for packaging services that contain provisions relating to
competitive pricing and volume guarantees similar to those contained in the
Intel Materials Agreement. This restriction only applies to agreements with
semiconductor packaging companies that (a) are qualified to provide packaging
services to Intel and (b) provide the same type of packaging services provided
by us.

                                       74


   The Intel Materials Agreement also obligates us to first offer to Intel
rights to use intellectual property related to new packaging services
technology developed by us. Following the expiration of its initial term on
December 31, 2001, the Intel Materials Agreement may be extended upon the
mutual consent of ChipPAC Limited and Intel.

Intel Stock Purchase Agreement

   Immediately following the recapitalization, we entered into the stock
purchase agreement with Intel. Under this agreement, we issued to Intel (a) the
Intel Preferred Stock, which has an initial aggregate liquidation preference of
$10.0 million, and (b) the Intel Warrant, which entitles Intel to purchase $5.0
million of our common stock at a 20.0% discount to the initial public offering
price, when and if we complete an initial public offering of our common stock.
Accordingly, we have valued the Intel warrant at $1.25 million and this amount
has been recorded as equity. The Intel Preferred Stock has been recorded net of
this amount and is being accreted to redemption value over the period to August
1, 2001, the first date at which the Intel Preferred Stock becomes redeemable.
See "Description of Other Financing Arrangements--Intel Preferred Stock; Intel
Warrant."

                                       75


                  DESCRIPTION OF OTHER FINANCING ARRANGEMENTS

Senior Credit Facilities

   General. On August 5, 1999, as part of the recapitalization, ChipPAC
International Company Limited entered into several senior loan facilities,
which we refer to as the Senior Credit Facilities, with Credit Suisse First
Boston, New York Branch, or CSFB, as administrative agent, and other specified
financial institutions, which we refer to as the senior lenders. The Senior
Credit Facilities Consist of:

    . two tranches of term loans, which we refer to as the Term Loan
      Facilities, of $70.0 million, which we refer to as "Term Loan A" and
      $80.0 million, which we refer to as "Term Loan B";

    . a revolving loan, which we refer to as the Revolving Credit Facility,
      including letters of credit, of up to $50.0 million; and

    . a capital expenditure facility, which we refer to as the Capex
      Facility, in an amount of up to $20.0 million.

   Purposes. We must use the amounts available under the senior credit
facilities as follows:

    . the Term Loan Facilities must be used to pay a portion of the cash
      consideration to be paid in the recapitalization and to pay related
      fees and expenses;

    . the Revolving Credit Facility may be used for our working capital and
      general corporate purposes;

    . the Capex Facility may be used only for acquiring equipment or making
      other specific capital expenditures.

   Repayment and Final Maturity. The different senior credit facilities are due
as follows:

    . Revolving Credit Facility will mature on July 31, 2005.

    . CapEx Facility will mature on July 31, 2005 and will amortize
      beginning 25.5 months after the closing of the recapitalization over
      approximately four years.

    . Term Loan A will amortize in each of the first five years according
      to a schedule to be determined with the balance maturing on July 31,
      2005.

    . Term Loan B will amortize in each of the first six years according to
      a schedule to be determined with the balance maturing on July 31,
      2006.

   We may repay any portion of the Revolving Credit Facility which is
outstanding without premium or penalty from time to time, other than payment of
breakage costs and reimbursement of the senior lenders' actual re-deployment
costs, if applicable.

   Also, it is mandatory that we repay any outstanding borrowings under the
Senior Credit Facilities out of a portion of net cash proceeds we receive from
types of asset sales, insurance recovery and condemnation events, specified
equity issuances and annual excess cash flow.

   Availability. The entire amount of the Term Loan Facilities was drawn at the
closing of the recapitalization; any amount of the Term Loan Facilities that we
repay may not be reborrowed by us later. We may borrow under the Revolving
Credit Facility until final maturity and letters of credit will be available
until the fifth business day prior to final maturity of the Revolving Credit
Facility. We may reborrow any amounts of the Revolving Credit Facility that we
repay. We may borrow and repay under the Capex Facility until July 31, 2001.
Amounts of the Capex Facility that we repay after July 31, 2001 may not be
borrowed by us later.

   Security; Guaranty. The Senior Credit Facilities provide that all of our
indebtedness be secured as fully as is permitted by applicable law by
substantially all of the assets of ChipPAC, Inc., ChipPAC International Company
Limited, and the assets of each of ChipPAC, Inc.'s present and future direct
and indirect subsidiaries, including without limitation:

    . a first priority pledge of all the capital stock of all present and
      future subsidiaries; and

                                       76


    . perfecting a first priority security interest in, and mortgages on,
      substantially all tangible and intangible assets, to the extent
      permitted by applicable law, of ChipPAC, Inc. and each of its present
      and future direct and indirect subsidiaries.

   In addition, in order to maximize tax benefits under applicable withholding
tax treaties among several of the jurisdictions in which subsidiaries of ours
are located, we made a series of direct and indirect intercompany loans among
these subsidiaries, which we refer to as the Intercompany Loans. Each of the
Intercompany Loans is evidenced by an intercompany note, which will be pledged
to the senior lenders as part of the assets of each of ChipPAC's subsidiaries,
and each of the borrowers under the Intercompany Loans has executed security
agreements in favor of the lenders of these loans.

   Finally, each present and future subsidiary of ours, other than our
subsidiaries in China has, to the extent permitted by applicable law,
guaranteed our obligations under the Senior Credit Facilities by executing a
guaranty in favor of the senior lenders.

   Interest. The interest rates under the Senior Credit Facilities are, at our
option, either (a) the base rate, which is the higher of the administrative
agent's prime lending rate and the federal funds effective rate plus 0.5%, plus
a margin or (b) adjusted LIBOR plus a margin.

   The margins of the different loans under the senior credit facilities,
except Term Loan B, were set initially as described below. In the future,
however, the margins on Term Loan A, the Revolving Credit Facility and the
Capex Facility will vary according to a pricing grid based upon our
consolidated leverage ratio.

    . the initial margin on Term Loan A, the revolving credit facility and
      the capex facility are 2.25% over the base rate and 3.25% over
      adjusted LIBOR; and

    . the margin on Term Loan B is 3.00% over the base rate and 4.00% over
      adjusted LIBOR.

   Fees. We have agreed to pay fees in connection with the Senior Credit
Facilities, including:

    . letter of credit fees;

    . agency fees; and

    . commitment fees.

   Covenants. The Senior Credit Facilities require that we meet specified
financial tests, including, without limitation, a maximum leverage ratio, a
minimum interest coverage ratio and minimum fixed charge coverage ratio. The
Senior Credit Facilities also contain covenants which restrict our ability to:

    . incur liens or engage in sale-leaseback transactions;

    . transact with affiliates;

    . incur indebtedness and contingent obligations;

    . declare dividends or redeem or repurchase capital stock;

    . prepay, redeem or repurchase indebtedness;

    . change the business being conducted;

    . make loans and investments;

    . engage in mergers, acquisitions, consolidations and asset sales; and

    . make capital expenditures.

   The Senior Credit Facilities also require that we satisfy customary
affirmative covenants and provide customary indemnifications in favor of the
senior lenders.

   Events of Default. The Senior Credit Facilities contain customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties in all material respects, covenant defaults,
events of bankruptcy and insolvency, ERISA violations, judgment defaults,
cross-defaults to other indebtedness and a change in control.

                                       77


Hyundai Preferred Stock

   As part of the recapitalization, we issued to Hyundai Electronics and
Hyundai Electronics America 70,000 shares of Class B preferred stock, which we
refer to as the Hyundai Preferred Stock, which has an initial aggregate
liquidation preference of $70.0 million. Dividends on the Hyundai Preferred
Stock accrue on a daily basis from August 5, 1999 at a rate of 12.5% per annum.
Until February 5, 2005, dividends will not be paid in cash, but will be
capitalized as accumulated and unpaid dividends. All dividends accruing on the
Hyundai Preferred Stock from and after this period will be paid in cash,
semiannually, beginning after February 5, 2005. In the event we fail to pay any
dividend when due, the dividend rate on the Hyundai Preferred Stock will
immediately increase by 2.5% per annum and the holders of a majority of the
outstanding Hyundai Preferred Stock will have the exclusive right to nominate
and elect one additional member of our board of directors, in each case until
there is no longer any default. The Hyundai Preferred Stock has a scheduled
redemption date of August 5, 2010 and is otherwise redeemable by us at any time
in our sole discretion. All of the shares of Hyundai Preferred Stock will be
held by either Hyundai Electronics or Hyundai Electronics America. The prior
written consent of the holders of a majority of the outstanding Hyundai
Preferred Stock are required to amend, modify or waive the terms of the Hyundai
Preferred Stock. The exchange notes will be senior in right of payment to the
Hyundai Preferred Stock.

   In addition, Hyundai Electronics may receive up to an additional $55.0
million in cash during the four-year period beginning January 1, 1999 if we
exceed specified levels of EBITDA as described in the recapitalization
agreement. Hyundai Electronics is entitled to receive 33.3% of the amount by
which our EBITDA, defined in the recapitalization agreement as net income
before interest, taxes, depreciation, amortization, extraordinary items and
advisory fees exceeds $116.5 million, $171.3 million, $198.5 million and $231.8
million, respectively, in each of the first four years following the
recapitalization. In the event the final $20.0 million of this $55.0 million in
cash is required to be paid to Hyundai Electronics, it shall be paid by the
mandatory redemption of an equal amount of Hyundai Preferred Stock.

Intel Preferred Stock

   Under the Intel Stock Purchase Agreement, we issued 10,000 shares of Class A
10.0% preferred stock to Intel, which we refer to as the "Intel Preferred
Stock."

   Dividends on the Intel Preferred Stock accrue on a daily basis from the date
of issuance at a rate of 10.0% per annum, payable when and as declared by the
board of directors; provided, however, that dividends will be paid prior to the
payment of any dividends or any of our capital stock or equity securities which
we refer to as junior securities, other than the Hyundai Preferred Stock.
Dividends on each share of Intel Preferred Stock will accrue from the date of
issuance of the Intel Preferred Stock to the first to occur of:

  .  the date upon which the face value ($1,000 per share) of a share of
     Intel Preferred Stock plus all accrued but unpaid dividends is paid;

  .  the date upon which a share of Intel Preferred Stock is converted into
     common stock, as described below; or

  .  the date upon which a share of Intel Preferred Stock is acquired by us.

   At any time, and from time to time, holders of the Intel Preferred Stock may
convert all or any portion of the Intel Preferred Stock into shares of common
stock at an initial conversion price equal to 150.0% of the weighted average
price per share of common stock paid by the Equity Investors in connection with
the recapitalization, although the purchase price may be adjusted. The Intel
Preferred Stock is convertible into not less than 6.25% of our Class L common
stock and Class A common stock, before taking into account any shares of our
common stock issued or issuable to employees, officers or directors of ChipPAC,
Inc. or our subsidiaries or financing sources.


                                       78


   In the event of any liquidation, dissolution or winding up of ChipPAC, Inc.,
holders of the Intel Preferred Stock will be entitled to receive, prior to any
distribution to the holders of junior securities, an amount equal to the face
value of $1,000 per share of the Intel Preferred Stock, plus all accrued and
unpaid dividends thereon. In addition, each of the following will be deemed a
liquidation, dissolution or winding up of ChipPAC, Inc.:

    . any sale by us of all or substantially all of its assets;

    . any consolidation or merger of ChipPAC, Inc. as a result of which
      holders of our common stock possessing the voting power to elect a
      majority of the board of directors immediately prior to a
      consolidation or merger cease to own capital stock of the surviving
      corporation possessing the voting power to elect a majority of the
      surviving corporation's board of directors; or

    . any issuance, sale or transfer to any third party of our capital
      stock as a result of which holders of our outstanding capital stock
      possessing the voting power to elect a majority of the board of
      directors immediately prior to a sale cease to own capital stock of
      ChipPAC, Inc. possessing the voting power to elect a majority of the
      board of directors, each of which we refer to as a Liquidation Event.

   At any time and from time to time after August 1, 2005, we have the right to
redeem all or any portion of the Intel Preferred Stock then outstanding at a
redemption price per share equal to the greater of (a) its fair market value
and (b) its face value of $1,000 per share, plus all accrued and unpaid
dividends thereon plus a redemption premium of 10.0%. The premium shall
decrease ratably from year to year and shall be zero on or after August 1,
2010. In addition, if we do not complete an underwritten initial public
offering of shares of our common stock with gross proceeds in excess of $50.0
million on or prior to August 1, 2001, holders of not less than a majority of
the Intel Preferred Stock may require us to redeem all or a portion of the
Intel Preferred Stock at a price per share equal to a stock's face value plus
all accrued and unpaid dividends thereon; provided, however, that any
redemption will be limited by all restrictions of applicable law and our debt
and equity financing arrangements.

   Each share of Intel Preferred Stock has that number of votes equal to the
number of shares of voting common stock then issuable upon the conversion of
that share of Intel Preferred Stock. Except as required by law or as provided
in the following sentence, holders of the Intel Preferred Stock are entitled to
vote on all matters submitted to the stockholders for a vote and will vote
together with holders of our common stock as a single class. The prior written
consent of the holders of at least 66.7% of the outstanding Intel Preferred
Stock is required for:

    . any amendment or change of the rights, preferences, privileges or
      powers of, or the restrictions provided for the benefits of, the
      Intel Preferred Stock;

    . any action that authorized, created or issued any new shares of any
      class of stock having preferences superior to the Intel Preferred
      Stock, other than any issuance of the Hyundai Preferred Stock; or

    . any action that reclassifies any outstanding shares of capital stock
      into shares having preferences or priority as to dividends or assets
      senior to the preference of the Intel Preferred Stock.

   The exchange notes are senior in right of payment to the Intel Preferred
Stock.

Intel Warrant

   Under the Intel Stock Purchase Agreement we issued the Intel Warrant to
Intel. The Intel Warrant provides that, for 180 days after we have completed
our first underwritten public offering, Intel is entitled to purchase $5.0
million of our common stock at a 20.0% discount to its initial public offering
price. This right may expire prior to completion of the 180 day period on the
earlier of (a) our sale or (b) August 5, 2009, Intel, at its election, may
exercise the Intel Warrant in whole or in part and on one or more occasions.
The warrant has been assigned a value of $1.25 million.

                                       79


                       DESCRIPTION OF THE EXCHANGE NOTES

General

   You can find the definition of terms used in this description that are not
defined when first used under the subheading of "Definitions." In this section
of the prospectus, unless the context requires otherwise, the words "ChipPAC,"
"Company," "we," "our," "ours" and "us" refer only to ChipPAC, Inc. and not to
any of its subsidiaries. The "Issuer" refers to ChipPAC International Company
Limited, a wholly owned subsidiary of ChipPAC, Inc.

   ChipPAC International Company Limited will issue the exchange notes under an
indenture dated July 29, 1999 by and among itself, ChipPAC, Inc. and Firstar
Bank of Minnesota, N.A., as trustee. The terms of the exchange notes include
those stated in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939, as amended.

   The form and terms of the exchange notes are identical in all material
respects to the form and terms of the outstanding notes except that:

    . the exchange notes will bear a Series B designation;

    . the exchange notes have been registered under the Securities Act and,
      therefore, will not bear legends restricting their transfer; and

    . the holders of the exchange notes will not have most of the rights
      under the registration rights agreement, including the provision
      providing for liquidated damages relating to the timing of this
      exchange offer.

   The exchange notes will evidence the same debt as the outstanding notes and
will be entitled to the benefits of the indenture. The exchange notes will rank
equally with the outstanding notes if all of the outstanding notes are not
exchanged in this exchange offer.

   The following description is only a summary of the material provisions of
the indenture, which is filed as an exhibit to the registration statement of
which this prospectus forms a part. We urge you to read the indenture because
it, and not this description, defines your rights as holders of the exchange
notes. You may request copies of these agreements at our address provided under
"Where You Can Find More Information."

Brief Description of the Exchange Notes and the Guaranties

 The Exchange Notes

   These exchange notes:

    . are unsecured senior subordinated obligations of ChipPAC
      International Company Limited;

    . rank equally in right of payment with any future senior subordinated
      Indebtedness of ChipPAC International Company Limited;

    . are subordinated in right of payment to all existing and future
      Senior Indebtedness of ChipPAC International Company Limited; and

    . are senior in right of payment to any future Subordinated Obligations
      of ChipPAC International Company Limited and preferred dividends.

 The Guaranties

   The Company Guaranty and each Subsidiary Guaranty:

    . unconditionally guarantee on a joint and several basis the
      obligations of ChipPAC International Company Limited under the
      exchange notes;

                                       80


    . rank equally in right of payment with any future senior subordinated
      Indebtedness of the Guarantor; and

    . are senior subordinated obligations of the Company and the relevant
      Subsidiary Guarantor, as the case may be.

Principal, Maturity and Interest

   The exchange notes

    . will be limited in aggregate principal amount to $150.0 million,

    . will be issued in denominations of $1,000 and any integral multiple
      of $1,000,

    . will mature on August 1, 2009.

   Contingent upon our compliance with the covenant described under the caption
"--Significant Covenants--Limitation on Indebtedness," we are permitted to
issue more notes, which we refer to as "Additional Notes", under the indenture
in an unlimited principal amount. Any Additional Notes that are actually issued
will be treated as issued and outstanding exchange notes and as the same class
as the outstanding notes for all purposes of the indenture and this
"Description of the Exchange Notes," unless the context indicates otherwise.

   Interest on these exchange notes will accrue at the rate of 12 3/4% per
annum and will be payable semiannually in arrears on August 1 and February 1,
commencing on last interest payment date on which interest was paid on the
existing note surrendered for exchange. We will make each interest payment to
the holders of record of these exchange notes on the immediately preceding July
15 and January 15. We will pay interest on overdue principal at 1% per annum in
excess of the above rate and will pay interest on overdue installments of
interest at a higher rate to the extent lawful. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.

Optional Redemption

   Except as provided below under this section or under the section "Redemption
for Changes in British Virgin Islands Withholding Taxes," we will not be
entitled to redeem the exchange notes at our option prior to August 1, 2004.

   On and after August 1, 2004, we will be entitled at our option to redeem all
or a portion of these exchange notes. We can do so by providing between 30 and
60 days' notice of our intent to redeem. The redemption prices, which are
expressed as percentages of principal amount, are specified below if redeemed
during the 12-month period beginning on August 1 in the years indicated below:



      Year                                                            Percentage
      ----                                                            ----------
                                                                   
      2004...........................................................  106.375%
      2005...........................................................  104.250%
      2006...........................................................  102.125%
      2007 and thereafter............................................  100.000%


   In addition, prior to August 1, 2002, we may at our option on one or more
occasions redeem exchange notes, including Additional Notes, if any, in an
aggregate principal amount not to exceed 35% of the aggregate principal amount
of exchange notes, including Additional Notes, if any, originally issued under
the indenture. These notes can be redeemed at a redemption price of 112 3/4% of
their principal amount with the net cash proceeds from one or more Equity
Offerings. If the Equity Offering is an offering by the Company, a portion of
the Net Cash Proceeds equal to the amount required to redeem any exchange notes
is contributed to the equity capital of ChipPAC International Company Limited.
Following this redemption:

     (1) at least 65% of the aggregate principal amount of exchange notes,
  which includes Additional Notes, if any, must remain outstanding
  immediately after the occurrence of each redemption, other than exchange
  notes held, directly or indirectly, by us or our Affiliates; and

     (2) each redemption must occur within 60 days after the date of the
  closing of the related Equity Offering.

                                       81


Selection and Notice of Redemption

   If we are redeeming less than all the exchange notes at any time, the
trustee will select exchange notes on a pro rata basis, by lot or by another
method as the trustee in its sole discretion shall deem to be fair and
appropriate.

   Exchange notes redeemed in part will be redeemed only in principal amounts
of $1,000. We will cause notices of redemption to be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each holder
of exchange notes to be redeemed at its registered address.

   If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that note shall state the portion of the principal
amount to be redeemed. We will issue a new exchange note in principal amount
equal to the unredeemed portion of the original exchange note in the name of
the holder upon cancellation of the original exchange note. Exchange notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on exchange notes or portions of
them called for redemption.

Withholding Taxes

   All payments made under the exchange notes or under the Guaranties must be
made free and clear of and without withholding or deduction for any present or
future tax, duty, levy, impost, assessment or other governmental charge of
whatever nature. These charges, which we refer to as "taxes," include
penalties, interest and other related liabilities, imposed by any jurisdiction
from or through which payment is made or in which the payor is organized,
resident or engaged in business for tax purposes, unless any of ChipPAC
International Company Limited or the guarantors is required to withhold or
deduct taxes by law. If ChipPAC International Company Limited or a guarantor is
required to withhold or deduct any amount for any taxes from any payment made
under the exchange notes or under a Guaranty, ChipPAC International Company
Limited or guarantor, will pay additional amounts to make up for these taxes.
These additional amounts cannot be made to any holder connected with the
British Virgin Islands. The procedures for reimbursing holders for these
additional amount are specified in the indenture.

   ChipPAC International Company Limited or the guarantors will pay any taxes,
that arise in any jurisdiction from the execution, delivery, enforcement or
registration of the exchange notes or a Guaranty, or the receipt of any
payments on the exchange notes or a Guaranty, imposed by any jurisdiction other
than:

    . the British Virgin Islands,

    . any other jurisdiction in which any of ChipPAC International Company
      Limited or the guarantors is organized, resident or engaged in
      business for tax purposes,

    . any jurisdiction in which any successor to ChipPAC International
      Company Limited or the guarantors is organized, resident or engaged
      in business for tax purposes or

    . any jurisdiction in which a paying agent is located.

   In addition, ChipPAC International Company Limited and the guarantors will
agree to indemnify the Holders, on an after-tax basis, for any taxes paid by
these Holders.

   The obligations described under this heading shall survive any termination,
defeasance or discharge of the indenture.

Redemption for Changes in British Virgin Islands Withholding Taxes

   The exchange notes may be redeemed, at the option of ChipPAC International
Company Limited, at any time as a whole at 100% of the principal amount, in the
event ChipPAC International Company Limited has become or will become obligated
to pay for, any withholding taxes on additional amounts as a result of a change
in or an amendment to the laws or regulations of the British Virgin Islands.
The redemption must be made within 30 to 60 days from the date of notice of the
redemption. No notice of redemption may be given earlier than 60 days prior to
the earliest date on which additional amounts are due and payable on the
exchange notes.

                                       82


   Prior to giving any notice of redemption under this provision, ChipPAC
International Company Limited will deliver to the applicable trustee:

    . an Officers' Certificate stating that it is entitled to effect the
      redemption and setting forth a statement of facts showing that the
      conditions precedent to its right to so redeem have occurred and

    . an Opinion of Counsel in the British Virgin Islands that ChipPAC
      International Company Limited has become or will become obligated to
      pay the Additional Amounts as a result of the amendment or change.

Guaranties

   We and each of the Subsidiary Guarantors will jointly and severally
guarantee, on a senior subordinated basis, our obligations under the exchange
notes. Each Subsidiary Guaranty will be limited as necessary to prevent a
Subsidiary Guaranty from being rendered voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.

   Each Subsidiary Guarantor that makes a payment under its Subsidiary Guaranty
will be entitled to a contribution from each other Subsidiary Guarantor in an
amount equal to the other Subsidiary Guarantor's pro rata portion of the
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of the payment determined consistent with GAAP.

   If a Subsidiary Guaranty were to be rendered voidable, it could be
subordinated by a court to all other indebtedness, including guarantees and
other contingent liabilities, of the applicable Subsidiary Guarantor. Depending
on the amount of the indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guaranty could be reduced to zero.

   Under the indenture, ChipPAC International Company Limited, ChipPAC, Inc. or
a Subsidiary Guarantor may consolidate with, merge with or into, or transfer
all or substantially all its assets to any other Person to the extent described
below under "--Significant Covenants--Merger and Consolidation." However, that
if the surviving Person is not ChipPAC International Company Limited, ChipPAC,
Inc. or the Subsidiary Guarantor, as the case may be, ChipPAC International
Company Limited's obligations under the exchange notes, our obligations under
the Company Guaranty or the Subsidiary Guarantor's obligations under its
Subsidiary Guaranty, as the case may be, must be expressly assumed by the
surviving Person.

   A Subsidiary Guarantor will be released and relieved from all its
obligations under its Subsidiary Guaranty:

    . upon the sale or other disposition, including by way of consolidation
      or merger, of all or substantially all the capital stock of the
      Subsidiary Guarantor in one or more related transactions; or

    . upon the sale, assignment, transfer or disposition of all or
      substantially all the assets of the Subsidiary Guarantor in one or
      more related transactions;

in each case other than to ChipPAC International Company Limited or an
Affiliate of ChipPAC International Company Limited and as permitted by the
indenture.

Ranking

 Exchange Notes and Guaranties versus Senior Indebtedness.

   The indebtedness evidenced by the exchange notes, the Company Guaranty and
the Subsidiary Guaranties will be senior subordinated obligations. The payment
of the principal of, premium, if any, and interest on the exchange notes and
the payment of the Company Guaranty and any Subsidiary Guaranty is subordinate
in right of payment to the prior payment in full in cash when due of all
Obligations on Senior Indebtedness, including the obligations under the Credit
Agreement.

                                       83


   As of December 31, 1999,

    . the Senior Indebtedness of ChipPAC International Company Limited was
      $150.0 million, all of which is secured indebtedness under the Credit
      Agreement;

    . the Senior Indebtedness of ChipPAC, Inc. was $150.0 million,
      consisting of our senior guaranty of ChipPAC International Company
      Limited's obligations under the Credit Agreement; and

    . the Senior Indebtedness of the Subsidiary Guarantors was
      approximately $150.0 million, consisting of the Subsidiary
      Guarantors' senior guaranty of ChipPAC International Company
      Limited's obligations under the Credit Agreement.

In addition, ChipPAC International Company Limited has additional availability
of $70.0 million for borrowings of Senior Indebtedness under the Credit
Agreement. Although the indenture contains limitations on the amount of
additional Indebtedness that ChipPAC International Company Limited, ChipPAC,
Inc. and the Subsidiary Guarantors may be able to incur an amount of the
Indebtedness that is substantial and, in any case, the Indebtedness may be
Senior Indebtedness. See "--Significant Covenants--Limitation on Indebtedness."

 Guaranties versus Other Liabilities of Subsidiaries.

   All of our operations are conducted through our subsidiaries that are not
subsidiaries of ChipPAC International Company Limited. Our Chinese subsidiaries
are not guaranteeing the exchange notes or ChipPAC International Company
Limited's obligations under the Credit Agreement. Claims of creditors of the
non-guarantor subsidiaries, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by the non-guarantor
subsidiaries, and claims of preferred stockholders, if any, of the non-
guarantor subsidiaries generally will have priority on the assets and earnings
of the non-guarantor subsidiaries over the claims of creditors of ChipPAC
International Company Limited, including holders of the exchange notes, even if
the obligations do not constitute Senior Indebtedness. The exchange notes, the
Company Guaranty and each Subsidiary Guaranty, therefore, will be effectively
subordinated to creditors, including trade creditors, and preferred
stockholders of the non-guarantor subsidiaries of the Company.

   As of December 31, 1999, the total liabilities of our non-guarantor
subsidiaries were approximately $70.9 million. Although the indenture limits
the incurrence of Indebtedness and preferred stock of our subsidiaries, the
limitation is significantly qualified. Moreover, the indenture does not impose
any limitation on the incurrence by the subsidiaries of liabilities that are
not considered Indebtedness or Preferred Stock under the indenture. See "--
Significant Covenants--Limitation on Indebtedness."

 Exchange Notes and Guaranties versus Other Senior Subordinated Indebtedness.

   Only Indebtedness of ChipPAC International Company Limited, ChipPAC, Inc. or
a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the
exchange notes, the Company Guaranty and the relevant Subsidiary Guaranty
consistent with the provisions of the indenture. The exchange notes, the
Company Guaranty and each Subsidiary Guaranty will in all respects rank equally
with all other Senior Subordinated Indebtedness of ChipPAC International
Company Limited, ChipPAC, Inc. and the relevant Subsidiary Guarantor,
respectively. All Indebtedness of a Subsidiary of ours that is not a Subsidiary
Guarantor will be structurally senior to the exchange notes.

   ChipPAC International Company Limited, ChipPAC, Inc. and each Subsidiary
Guarantor have agreed in the indenture that they will not Incur, directly or
indirectly, any Indebtedness that is subordinate or junior in ranking in right
of payment to its Senior Indebtedness unless the Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be
subordinated or junior to Secured Indebtedness merely because it is unsecured.


                                       84


 Payment of Exchange Notes.

   We are not permitted to pay principal of, premium, if any, or interest on,
the exchange notes or defease, repurchase, redeem or otherwise retire any
exchange notes, which we collectively refer to as, "pay the exchange notes", if
either of the following, which we refer to as a "Payment Default," occurs:

    . any Obligations under Senior Indebtedness are not paid in full when
      due; or

    . any other default on Senior Indebtedness occurs and the maturity of
      the Senior Indebtedness is accelerated consistent with its terms.

We may, however pay the exchange notes if, the Payment Default has been cured
or waived and any acceleration has been rescinded in writing or the Senior
Indebtedness has been paid in full in cash. Notwithstanding the provisions of
the first sentence of this paragraph, We are permitted to pay the exchange
notes if ChipPAC International Company Limited and the trustee receive written
notice approving the payment from the representative of the Senior Indebtedness
relating to the Payment Default that has occurred and is continuing.

   During the continuance of any Designated Senior Indebtedness default, other
than a Payment Default, resulting in immediate acceleration, we are not
permitted to pay the exchange notes for a 179-day payment blockage period. The
payment blockage period will end earlier if terminated:

    . by written notice to the trustee and ChipPAC International Company
      Limited from the Person or Persons who gave the payment blockage
      notice;

    . because no defaults continue in existence which would permit the
      acceleration of the maturity of any Designated Senior Indebtedness at
      that time; or

    . because the Designated Senior Indebtedness has been repaid in full in
      cash.

   Notwithstanding these provisions, unless the Designated Senior Indebtedness
has accelerated or any Payment Default exists, we are permitted to resume
payments on the exchange notes after the end of the payment blockage period.
There cannot be more than one payment blockage period in any consecutive 360-
day period, no matter how many defaults on Designated Senior Indebtedness
result during the period. If any blockage notice is delivered to the trustee by
or on behalf of holders of Designated Senior Indebtedness, other than holders
of the Bank Indebtedness, a representative of holders of Bank Indebtedness may
give another blockage notice within the period. However, in no event may the
total number of days during which any payment blockage period or periods is in
effect exceed 179 days in the aggregate during any 360 consecutive day period,
and there must be 181 days during any 360-day consecutive period during which
no payment blockage period is in effect.

   Upon any payment or distribution by ChipPAC International Company Limited
upon any liquidation, dissolution, winding up, assignment for the benefit of
creditors or marshaling of assets of ChipPAC International Company Limited or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to ChipPAC International Company Limited or its property:

     (1) the holders of Senior Indebtedness will be entitled to receive
  payment in full in cash of all Obligations relating to the Senior
  Indebtedness before the noteholders are entitled to receive any payment or
  distribution; and

     (2) until all Obligations under the Senior Indebtedness are paid in full
  in cash, any payment or distribution to which noteholders would be entitled
  but for the subordination provisions of the indenture will be made to
  holders of the Senior Indebtedness as their interests may appear, except
  that holders of exchange notes may receive Capital Stock and subordinated
  debt obligations.

   If a distribution is made to noteholders that, due to the subordination
provisions, should not have been made to them, the noteholders are required to
hold it in trust for the holders of Senior Indebtedness and pay it over to them
as their interests may appear.

                                       85


   If payment of the exchange notes is accelerated because of an Event of
Default, we or the trustee shall promptly notify the holders of Designated
Senior Indebtedness or the Representative of holders of the acceleration. If
any Designated Senior Indebtedness is outstanding at the time of acceleration,
none of ChipPAC International Company Limited, ChipPAC, Inc. nor any Subsidiary
Guarantor may pay the exchange notes until five Business Days after the
Representatives of all the issues of Designated Senior Indebtedness receive
notice of acceleration and, thereafter, may pay the exchange notes only if the
indenture otherwise permits payment at that time.

   Our obligations under the Company Guaranty and of a Subsidiary Guarantor
under its Subsidiary Guaranty are senior subordinated obligations. Accordingly,
the rights of noteholders to receive payment by the Company or by a Subsidiary
Guarantor under the Company Guaranty or a Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior
Indebtedness of the Company or the Subsidiary Guarantor, as the case may be.
The terms of the subordination provisions described above relating to ChipPAC
International Company Limited's obligations under the exchange notes apply
equally to the Company and a Subsidiary Guarantor and the obligations of the
Company and the Subsidiary Guarantor under the Company Guaranty or a Subsidiary
Guaranty, as the case may be.

   By reason of the subordination provisions contained in the indenture, in the
event of insolvency, creditors of ChipPAC International Company Limited, the
Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of
ChipPAC International Company Limited, the Company or a Subsidiary Guarantor,
as the case may be, may recover more, ratably, than the noteholders, and
creditors of ChipPAC International Company Limited who are not holders of
Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the noteholders.

   The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in
trust by the trustee for the payment of principal of and interest on the
exchange notes under the provisions described under "--Defeasance," if these
subordination provisions were not violated at the time the respective amounts
were deposited under the defeasance provisions.

Book-Entry, Delivery and Form

   We will initially issue the exchange notes in the form of one or more global
exchange notes, which we refer to as the "Global Note". The Global Note will be
deposited with, or on behalf of, the Depository and registered in the name of
the Depository or its nominee. Except as provided below, the Global Note may be
transferred, in whole and not in part, only to the Depository or another
nominee of the Depository. You may hold your beneficial interests in the Global
Note directly through the Depository if you have an account with the Depository
or indirectly through organizations which have accounts with the Depository.

   The Depository has advised ChipPAC International Company Limited as follows:

  . The Depository is a limited-purpose trust company organized under the
    laws of the State of New York, a member of the Federal Reserve System, a
    "clearing corporation" as defined in the New York Uniform Commercial
    Code, and "a clearing agency" registered under the provisions of Section
    17A of the Exchange Act.

  . The Depository was created to hold securities of institutions that have
    accounts with the Depository which we refer to as "participants," and to
    facilitate the clearance and settlement of securities transactions among
    its participants in securities through electronic book-entry changes in
    accounts of the participants, eliminating the need for physical movement
    of securities certificates.

  . The Depository's participants include securities brokers and dealers,
    which may include the initial purchasers, banks, trust companies,
    clearing corporations and other organizations.

  . Access to the Depository's book-entry system is also available to others
    as banks, brokers, dealers and trust companies, which we refer to
    collectively, as the "indirect participants", that clear through or
    maintain a custodial relationship with a participant, whether directly or
    indirectly.

                                       86


   ChipPAC International Company Limited expects that the Depository will
credit, on its book-entry registration and transfer system, the principal
amount of exchange notes represented by the Global Note to the accounts of
participants. Ownership of beneficial interests in the Global Note will be
limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Note will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository. These records relate to the laws
of various jurisdictions may require that purchasers of securities take
physical delivery of securities in definitive form. These limits and laws may
impair the ability to transfer or pledge beneficial interests in the Global
Note.

   So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or the nominee, as the case may be,
will be considered the sole legal owner and holder of any related exchange
notes evidenced by the Global Note. Except as provided below, as an owner of a
beneficial interest in the Global Note,

  . you will not be entitled to have the exchange notes represented by the
    Global Note registered in your name;

  . you will not receive or be entitled to receive physical delivery of
    certificated exchange notes; and

  . you will not be considered to be the owner or holder of any exchange
    notes under the Global Note.

   We understand that under existing industry practice, in the event an owner
of a beneficial interest in the Global Note desires to take any action that the
Depository the Depository would authorize the participants to take action, and
the participants would authorize beneficial owners owning through participants
to take action or would otherwise act upon the instructions of beneficial
owners owning through them.

   We will make payments of principal of, premium, if any, and interest on
exchange notes represented by the Global Note registered in the name of and
held by the Depository or its nominee to the Depository or its nominee, as the
case may be, as the registered owner and holder of the Global Note.

   We expect that the Depository or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest on the Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests. We also expect that payments by participants
or indirect participants to owners of beneficial interests in the Global Note
held through these participants will be governed by standing instructions and
customary practices and will be the responsibility of these participants. We
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Note for any note or for maintaining, supervising or reviewing any
records relating to these procedures.

   Although the Depository has agreed to these procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform these
procedures. These procedures may be discontinued at any time. Neither the
trustee nor ChipPAC International Company Limited will have any responsibility
or liability for the performance by the Depository or its participants or
indirect participants of their obligations under the rules and procedures
governing their operations.

Certificated Exchange Notes

   Contingent upon conditions specified in the indenture, the exchange notes
represented by the Global Note are exchangeable for certificated exchange notes
in definitive form in denominations of $1,000 and integral multiples of $1,000
if:

  . the Depository notifies ChipPAC International Company Limited that it is
    unwilling or unable to continue as Depository for the Global Note or if
    at any time the Depository ceases to be a clearing agency registered
    under the Exchange Act and, in either case, we are unable to appoint a
    qualified successor within 90 days;

                                       87


  . we in our discretion at any time determine not to have all the exchange
    notes represented by the Global Note; or

  . a default entitling the holders of the exchange notes to accelerate their
    maturity has occurred and is continuing.

   Any note that is exchangeable as described above is exchangeable for
certificated exchange notes issuable in authorized denominations and registered
in those names as the Depository shall direct. The Global Note is not
exchangeable, except for a Global Note of the same aggregate denomination to be
registered in the name of the Depository or its nominee.

Same-Day Payment

   The indenture requires us to make payments on the exchange notes, including
principal, premium, if any, and interest, by wire transfer of immediately
available funds to the accounts specified by the holders or, if no account is
specified, by mailing a check to each holder's registered address.

                                       88


Change of Control

   Upon the occurrence of any of the following events, each of which we refer
to as a "Change of Control," each holder shall have the right to require that
ChipPAC International Company Limited repurchase the holder's exchange notes.
The purchase price shall be in cash and equal to 101% of the holder's principal
amount of notes. The change of control events are:

     (1) any "person," as the term is used in Sections 13(d) and 14(d) of the
  Exchange Act, other than one or more Permitted Holders, is or becomes the
  beneficial owner, directly or indirectly, of more than 50% of the total
  voting power of the Voting Stock of the Company,

      (2) individuals who on the Issue Date constituted the Board of
  Directors, together with any new directors:

       (A) whose election by the Board of Directors or whose nomination for
    election by the stockholders of the Company was approved by a vote of a
    majority of the directors of the Company then still in office who were
    either directors on the Issue Date or whose election or nomination for
    election was previously so approved or

       (B) who were elected to the Board of Directors under the
    Shareholders Agreement, as amended, modified or supplemented from time
    to time, cease for any reason to constitute a majority of the Board of
    Directors then in office; or

     (3) the merger or consolidation of the Company with or into another
  Person or the merger of another Person with or into the Company, or the
  sale of all or substantially all the assets of the Company to another
  Person, in each case other than a Person that is controlled by the
  Permitted Holders, if the 100% of the aggregate voting power of the Voting
  Stock of the Company are changed into or exchanged for cash, securities or
  property, and do not represent, at least a majority of the aggregate voting
  power of the Voting Stock of the surviving Person or transferee.

   For the purposes of this clause (1), the person will be considered to
beneficially own any Voting Stock of a Person held by a "parent entity" if the
Person is the beneficial owner, directly or indirectly, of more than 50% of the
voting power of the Voting Stock of the parent entity.

   Within 30 days following any Change of Control, but contingent upon
compliance with the immediately succeeding paragraph, ChipPAC International
Company Limited shall mail a notice to each holder with a copy to the trustee
stating:

     (1) that a Change of Control has occurred and that the holder has the
  right to require ChipPAC International Company Limited to purchase the
  holder's notes at a purchase price in cash equal to 101% of the holder's
  principal amount of notes plus any accrued and unpaid interest to the date
  of purchase, limited by holders of record on the relevant record date to
  receive interest on the relevant interest payment date;

     (2) the circumstances and relevant facts regarding a Change of Control;

     (3) the repurchase date which shall be no earlier than 30 days nor later
  than 60 days from the date the notice is mailed; and

     (4) the instructions determined by ChipPAC International Company
  Limited, consistent with this covenant, that a holder must follow in order
  to have its notes purchased.

   If the terms of the Credit Agreement prohibit ChipPAC International Company
Limited from making this offer upon a Change of Control or from purchasing any
notes, ChipPAC International Company Limited covenants to:

     (1) repay in full all indebtedness outstanding under the Credit
  Agreement or offer to repay in full that indebtedness and repay the
  indebtedness of each lender who has accepted the offer; or

     (2) obtain the requisite consent under the Credit Agreement to permit
  the purchase of the notes as described above.


                                       89


   ChipPAC International Company Limited must first comply with the covenant in
the prior paragraph before it will be required to purchase notes in the event
of a Change of Control; provided, however, that ChipPAC International Company
Limited's failure to comply with the covenant in the prior paragraph or to make
a Change of Control offer because of any failure shall constitute a Default. As
a result, a holder of notes may not be able to compel ChipPAC International
Company Limited to purchase the notes unless ChipPAC International Company
Limited is able at the time to refinance all indebtedness outstanding under the
Credit Agreement or obtain requisite consents under the Credit Agreement.

   The Change of Control purchase feature was a result of negotiations between
ChipPAC International Company Limited and the initial purchasers. We have no
present intention to engage in a transaction involving a Change of Control,
although we could decide to do so in the future. We may, in the future, be able
to enter into specified types of transactions, including acquisitions,
refinances or other recapitalizations, that would not constitute a Change of
Control under the indenture, but that could increase the amount of indebtedness
outstanding at that time or otherwise affect our capital structure or credit
ratings. Restrictions on our ability to incur additional Indebtedness are
contained in the covenants described under "--Significant Covenants--Limitation
on Indebtedness." These restrictions can only be waived with the consent of the
holders of a majority in principal amount of the notes then outstanding. Except
for the limitations contained in these covenants, however, the indenture will
not contain any covenants or provisions that may provide holders of the notes
protection in the event of a highly leveraged transaction.

   The Credit Agreement prohibits us from purchasing any notes, and provided
that the occurrence of change of control events constitute a default under the
Credit Agreement. In the event a Change of Control occurs at a time when
ChipPAC International Company Limited is prohibited from purchasing notes,
ChipPAC International Company Limited could seek the consent of its lenders to
the purchase of notes or could attempt to refinance the borrowings that contain
this prohibition. If ChipPAC International Company Limited does not obtain a
consent or repay these borrowings, ChipPAC International Company Limited will
remain prohibited from purchasing notes. In that case, ChipPAC International
Company Limited's failure to comply with this covenant would constitute a
Default under the indenture which would, in turn, constitute a default under
the Credit Agreement. In these circumstances, the subordination provisions in
the indenture would likely restrict payment to the holders of notes.

   Future indebtedness that we may incur may contain prohibitions on the
occurrence of events that would constitute a Change of Control or require that
this indebtedness be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require us to repurchase the notes
could cause a default under this indebtedness, even if the Change of Control
itself does not, due to the financial effect of the repurchase on us. Finally,
our ability to pay cash to the holders of notes following the occurrence of a
Change of Control may be limited by our then existing financial resources.
There can be no assurance that sufficient funds will be available when
necessary to make any required repurchases. The provisions under the indenture
relating to our obligation to make an offer to repurchase the notes as a result
of a Change of Control may be waived or modified with the written consent of
the holders of a majority in principal amount of the notes.

Significant Covenants

   The indenture contains covenants which include the following:

   Limitation on Indebtedness. (a) We shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness,
except that ChipPAC and ChipPAC International Company Limited may Incur
Indebtedness if, after giving pro forma effect to the Incurrence, the
Consolidated Coverage Ratio exceeds 2.0 to 1.0.

   (b) Notwithstanding the provisions of paragraph (a), ChipPAC and its
Restricted Subsidiaries may Incur the following Indebtedness:

     (1) Indebtedness of us or any Restricted Subsidiary Incurred under any
  Revolving Credit Facility; provided, however, that, immediately after
  giving effect to the Incurrence, the aggregate principal amount

                                       90


  of all Indebtedness incurred under this clause (1) and then outstanding
  does not exceed the greater of (A) $50.0 million and (B) the sum of (x)
  $20.0 million, (y) 50% of the book value of our inventory and that of our
  Restricted Subsidiaries and (z) 80% of the book value of our accounts
  receivables and that of our Restricted Subsidiaries; provided, however,
  that the Indebtedness may only be Incurred by a Restricted Subsidiary if
  the Indebtedness, when added together with the amount of all other
  Indebtedness Incurred by Restricted Subsidiaries under this clause (1) and
  then outstanding, does not exceed an amount equal to 50% of the greater of
  (x) the amount in clause (A) above and (y) the amount determined in clause
  (B) above;

     (2) Indebtedness of ChipPAC International Company Limited Incurred under
  any Term Loan Facilities; provided, however, that, after giving effect to
  the Incurrence, the aggregate principal amount of all Indebtedness Incurred
  under this clause (2) and then outstanding does not exceed $190.0 million
  less the aggregate sum of all principal payments actually made from time to
  time after the Issue Date relating to the Indebtedness under paragraph
  (a)(3)(A) of the covenant described under "--Limitation on Sales of Assets
  and Subsidiary Stock";

     (3) Indebtedness of ChipPAC International Company Limited Incurred prior
  to August 5, 2001 under any Capital Expenditure Facility (and Refinancing
  Indebtedness of that Indebtedness) in an aggregate principal amount not to
  exceed $20.0 million;

     (4) Indebtedness of us or any Restricted Subsidiary owed to and held by
  us or a Restricted Subsidiary; provided, however, that any subsequent
  issuance or transfer of any Capital Stock which results in a Restricted
  Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer
  of the Indebtedness (other than to the Company or another Restricted
  Subsidiary) will be considered, in each case, to constitute the Incurrence
  of the Indebtedness by the issuer of that Indebtedness;

     (5) Indebtedness consisting of the exchange notes, other than Additional
  Notes;

     (6) Indebtedness outstanding on the Issue Date, other than Indebtedness
  described in clause (1), (2), (3), (4) or (5) of this covenant;

     (7) Refinancing Indebtedness relating to Indebtedness Incurred under
  paragraph (a) or under clause (4), (5), (6), (8) or this clause (7) of this
  paragraph (b); provided, however, that to the extent the Refinancing
  Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
  Incurred under clause (8), the Refinancing Indebtedness shall be Incurred
  only by that Subsidiary;

     (8) Indebtedness of a Person Incurred and outstanding on or prior to the
  date on which the Person was acquired by the Company or a Restricted
  Subsidiary, other than Indebtedness Incurred in anticipation of, in
  connection with, or to provide all or any portion of the funds or credit
  support utilized to consummate, the transaction or series of related
  transactions where the Person was acquired by the Company or a Restricted
  Subsidiary; provided, however, that after giving pro forma effect to the
  transaction or series of related transactions, (a) the Consolidated
  Coverage Ratio increases as a consequence of the incurrence and related
  acquisition and (b) the Consolidated Coverage Ratio is at least 1.5 to 1.0;

     (9) Hedging Obligations of ours or any Restricted Subsidiary under
  Interest Rate Agreements and Currency Agreements entered into in the
  ordinary course of business and not for the purpose of speculation;

     (10) Indebtedness of ours or any Restricted Subsidiary in the form of
  performance bonds, completion guarantees and surety or appeal bonds entered
  into by us and our Restricted Subsidiaries in the ordinary course of their
  business;

     (11) Indebtedness consisting of the Guaranties and Guarantees of other
  Indebtedness otherwise permitted to be Incurred under the indenture;

     (12) Indebtedness of ours or any Restricted Subsidiary arising from the
  honoring by a bank or other financial institution of a check, draft or
  similar instrument inadvertently (except in the case of daylight
  overdrafts) drawn against insufficient funds in the ordinary course of
  business, provided that the Indebtedness is satisfied within five business
  days of Incurrence;

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     (13) Indebtedness, including Capital Lease Obligations, Incurred by us
  or any of our Restricted Subsidiaries to finance the purchase, lease or
  improvement of real or personal property or equipment, whether through the
  direct purchase of assets or the Capital Stock of any Person owning the
  assets, in an aggregate principal amount which, when added together with
  the amount of Indebtedness Incurred under this clause (13) and then
  outstanding, does not exceed the greater of (A) $15.0 million and (B) 5% of
  Total Assets (in each case including any Refinancing Indebtedness of that
  Indebtedness);

     (14) Indebtedness Incurred by us or any of our Restricted Subsidiaries
  constituting reimbursement obligations under letters of credit issued in
  the ordinary course of business including, without limitation, letters of
  credit to procure raw materials, or relating to workers' compensation
  claims or self-insurance, or other Indebtedness relating to reimbursement-
  type obligations regarding workers' compensation claims;

     (15) Indebtedness of ours issued to any of our directors, employees,
  officers or consultants or a Restricted Subsidiary in connection with the
  redemption or purchase of Capital Stock that, by its terms, is subordinated
  to the exchange notes, is not secured by any of our assets or our
  Restricted Subsidiaries and does not require cash payments prior to the
  Stated Maturity of the exchange notes and Refinancing Indebtedness of that
  Indebtedness, in an aggregate principal amount which, when added together
  with the amount of Indebtedness Incurred under this clause (15) and then
  outstanding, does not exceed $5.0 million;

     (16) Indebtedness arising from agreements of ours or a Restricted
  Subsidiary providing for indemnification, adjustment of purchase price,
  earn-out or other similar obligations, in each case, incurred or assumed in
  connection with the disposition of any business, assets or a Restricted
  Subsidiary of ours, other than guarantees of Indebtedness incurred by any
  Person acquiring all or any portion of the business, assets or Restricted
  Subsidiary for the purpose of financing the acquisition; provided that the
  maximum assumable liability of all the Indebtedness shall at no time exceed
  the gross proceeds actually received by us and our Restricted Subsidiaries
  in connection with the disposition;

     (17) Indebtedness arising from the Recapitalization Agreement providing
  for indemnification, adjustment of purchase price, earn-out or other
  similar business obligations; and

     (18) Indebtedness of ours or a Restricted Subsidiary in an aggregate
  principal amount which, together with all other Indebtedness of ChipPAC and
  the Restricted Subsidiaries outstanding on the date of Incurrence (other
  than Indebtedness permitted by clauses (1) through (17) above or paragraph
  (a) above) does not exceed $20.0 million.

   (c) Notwithstanding this provision, we shall not, and shall not permit any
Restricted Subsidiary to, Incur any Refinancing Indebtedness under the prior
paragraph (b) if the proceeds from the Refinancing Indebtedness are used,
directly or indirectly, to Refinance any Subordinated Obligations unless the
Indebtedness shall be subordinated to the exchange notes or the relevant
Guaranty, as applicable, to at least the same extent as the Subordinated
Obligations.

   (d) For purposes of determining compliance with this covenant,

     (1) if an item of Indebtedness meets the criteria of more than one of
  the types of Indebtedness described above, ChipPAC International Company
  Limited, in its sole discretion, will classify the item of Indebtedness at
  the time of its Incurrence and only be required to include the amount and
  type of the Indebtedness in one of the above clauses; and

     (2) an item of Indebtedness may be divided and classified in more than
  one of the types of Indebtedness described above.

   (e) Notwithstanding paragraphs (a) and (b) above, neither we nor ChipPAC
International Company Limited shall, and we shall not permit any Subsidiary
Guarantor to, Incur (1) any Indebtedness if the Indebtedness is subordinate or
junior in ranking in any respect to any Senior Indebtedness of ChipPAC
International Company Limited, the ChipPAC or the Subsidiary Guarantor, as
applicable, unless the Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness
or (2) any Secured Indebtedness (other than trade payables incurred in the
ordinary course of business) that is not Senior Indebtedness unless
contemporaneously therewith effective provision is

                                       92


made to secure the exchange notes or the relevant Guaranty, as applicable,
equally and ratably with the Secured Indebtedness for so long as the Secured
Indebtedness is secured by a Lien.

   (f) For purposes of determining compliance with any U.S. dollar denominated
restriction on the Incurrence of Indebtedness where the Indebtedness Incurred
is denominated in a different currency, the amount of the Indebtedness will be
the U.S. Dollar Equivalent determined on the date of the Incurrence of the
Indebtedness, provided, however, that if any of the Indebtedness denominated in
a different currency is governed by a Currency Agreement relating to U.S.
dollars, covering all principal, premium, if any, and interest payable on the
Indebtedness, the amount of Indebtedness expressed in U.S. dollars will be as
provided in the Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to
the extent that (i) the U.S. Dollar Equivalent was determined based on a
Currency Agreement, in which case the Refinancing Indebtedness will be
determined compliance the preceding sentence, and (ii) the principal amount of
the Refinancing Indebtedness exceeds the principal amount of the Indebtedness
being Refinanced, in which case the U.S. Dollar Equivalent of the excess will
be determined on the date the Refinancing Indebtedness is Incurred.

   Limitation on Restricted Payments. (a) We shall not, and shall not permit
any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment
if at the time that we or the Restricted Subsidiary makes the Restricted
Payment:

     (1) a Default shall have occurred and be continuing (or would result as
  a result of making the Restricted Payment);

     (2) we are not able to Incur an additional $1.00 of Indebtedness under
  paragraph (a) of the covenant described under "--Limitation on
  Indebtedness;" or

     (3) the aggregate amount of the Restricted Payment and all other
  Restricted Payments since the Issue Date would exceed the sum, without
  duplication, of:

       (A) 50% of the Consolidated Net Income accrued during the period,
    treated as one accounting period, from the beginning of the fiscal
    quarter immediately following the fiscal quarter during which the notes
    are originally issued to the end of the most recent fiscal quarter for
    which internal financial statements are available on or prior to the
    date of the Restricted Payment, or, in case Consolidated Net Income
    shall be a deficit, minus 100% of the deficit;

       (B) the aggregate Net Cash Proceeds received by us from the issuance
    or sale of, or capital contribution relating to, its Capital Stock,
    other than Disqualified Stock, subsequent to the Issue Date, other than
    an issuance or sale to a Subsidiary of ours and other than an issuance
    or sale to an employee stock ownership plan or to a trust established
    by us or any of our Subsidiaries for the benefit of employees to the
    extent that the purchase by the plan or trust is financed by
    Indebtedness of the plan or trust to us or any Subsidiary or
    Indebtedness Guaranteed by us or any Subsidiary, and the fair market
    value, as determined in good faith by resolution of our Board of
    Directors, of property, other than cash that would constitute Temporary
    Cash Equivalents or a Related Business, received by us or a Restricted
    Subsidiary subsequent to the Issue Date as a contribution to its common
    equity capital, other than from a Subsidiary or that was financed with
    loans from us or any Restricted Subsidiary;

       (C) the amount by which Indebtedness of ours or any Restricted
    Subsidiary is reduced on our consolidated balance sheet upon the
    conversion or exchange, other than by a Subsidiary of ours subsequent
    to the Issue Date of any Indebtedness of ours or any Restricted
    Subsidiary convertible or exchangeable for our Capital Stock, other
    than Disqualified Stock, less the amount of any cash, or the fair value
    of any other property, distributed by us or any Restricted Subsidiary
    upon the conversion or exchange; and

       (D) an amount equal to the sum of (i) the net reduction in
    Investments in any Person resulting from dividends, repayments of loans
    or advances or other transfers of assets subsequent to the Issue Date,
    in each case to us or any Restricted Subsidiary from the Person, and
    (ii) the portion,

                                       93


    proportionate to our equity interest in the Subsidiary, of the fair
    market value of the net assets of an Unrestricted Subsidiary at the
    time the Unrestricted Subsidiary is designated a Restricted Subsidiary;
    provided, however, that this sum shall not exceed, in the case of any
    Person, the amount of Investments previously made, and treated as a
    Restricted Payment, by us or any Restricted Subsidiary in the Person.

   (b) The provisions of the prior paragraph (a) shall not prohibit:

     (1) any Restricted Payment made by exchange for, or out of the proceeds
  of the substantially concurrent sale of, or capital contribution relating
  to, our Capital Stock, other than Disqualified Stock and other than Capital
  Stock issued or sold to a Subsidiary of ours or an employee stock ownership
  plan or to a trust established by us or any of our Subsidiaries for the
  benefit of employees to the extent that the purchase by the plan or trust
  is financed by Indebtedness of the plan or trust to us or any Subsidiary of
  ours or Indebtedness Guaranteed by us or any Subsidiary of ours; provided,
  however, that (A) the Restricted Payment shall be excluded in the
  calculation of the amount of Restricted Payments and (B) the Net Cash
  Proceeds from the sale shall be excluded from the calculation of amounts
  under clause (3)(B) of paragraph (a) above;

     (2) any purchase, repurchase, redemption, defeasance or other
  acquisition or retirement for value of Subordinated Obligations made by
  exchange for, or out of the proceeds of the substantially concurrent sale
  of, Indebtedness which is permitted to be Incurred under the covenant
  described under "--Limitation on Indebtedness;" provided, however, that the
  purchase, repurchase, redemption, defeasance or other acquisition or
  retirement for value shall be excluded in the calculation of the amount of
  Restricted Payments;

     (3) any purchase or redemption of Disqualified Stock of ChipPAC or a
  Restricted Subsidiary made by exchange for, or out of the proceeds of the
  substantially concurrent sale of, Disqualified Stock of ChipPAC or a
  Restricted Subsidiary which is permitted to be Incurred under the covenant
  described under "--Limitation on Indebtedness;" provided, however, that the
  purchase or redemption shall be excluded in the calculation of the amount
  of Restricted Payments;

     (4) any purchase or redemption of Subordinated Obligations from Net
  Available Cash to the extent permitted by the covenant described under "--
  Limitation on Sales of Assets and Subsidiary Stock;" provided, however,
  that the purchase or redemption shall be excluded in the calculation of the
  amount of Restricted Payments;

     (5) upon the occurrence of a Change of Control and within 60 days after
  the completion of the offer to repurchase the notes under the covenant
  described under "Change of Control" above, including the purchase of the
  exchange notes tendered, any purchase or redemption of Subordinated
  Obligations required under the terms of the Subordinated Obligations as a
  result of the Change of Control at a purchase or redemption price not to
  exceed the outstanding principal amount of the Subordinated Obligations,
  plus any accrued and unpaid interest; provided, however, that

       (A) at the time of the purchase or redemption no Default shall have
    occurred and be continuing or would result from the purchase or
    redemption;

       (B) we would be able to Incur an additional $1.00 of Indebtedness
    under paragraph (a) of the covenant described under "--Limitation on
    Indebtedness" after giving pro forma effect to the Restricted Payment;
    and

       (C) the purchase or redemption shall be included in the calculation
    of the amount of Restricted Payments.

      (6) dividends paid within 60 days after the date of declaration of the
  dividends if, at the date of declaration, the dividends would have complied
  with this covenant; provided, however, that the dividends shall be included
  in the calculation of the amount of Restricted Payments;

     (7) the repurchase or other acquisition of shares of, or options to
  purchase shares of, common stock of the Company or any of its Subsidiaries
  from employees, former employees, consultants, former

                                       94


  consultants, directors or former directors of the Company or any of its
  Subsidiaries, or permitted transferees of these employees, former
  employees, consultants, former consultants, directors or former directors),
  under the terms of the agreements, including employment and consulting
  agreements, or plans, or amendments approved by the Board of Directors
  under which these individuals purchase or sell or are granted the option to
  purchase or sell, shares of the common stock; provided, however, that the
  aggregate amount of the repurchases shall not exceed the sum of:

       (x) $5.0 million;

       (y) the Net Cash Proceeds from the sale of Capital Stock to members
    of management or directors of the Company and its Subsidiaries that
    occurs after the Issue Date, to the extent the Net Cash Proceeds from
    the sale have not otherwise been applied to the payment of Restricted
    Payments by virtue of clause (3)(B) of paragraph (a) above; and

       (z) the cash proceeds of any "key man" life insurance policies that
    are used to make the repurchases; provided further, however, that (A)
    the repurchases shall be excluded in the calculation of the amount of
    Restricted Payments and (B) the Net Cash Proceeds from the sale shall
    be excluded from the calculation of amounts under clause (3)(B) of
    paragraph (a) above.

     (8) payments required under the terms of the Recapitalization Agreement
  to consummate the recapitalization; provided, however, that the payments
  shall be excluded in the calculation of the amount of Restricted Payments;

     (9) payments relating to the Hyundai Earn-out under the terms of the
  Recapitalization Agreement as in effect on the Issue Date; provided,
  however, that the payments shall be excluded in the calculation of the
  amount of Restricted Payments;

     (10) payments of in-kind dividends when due or the accrual or cumulation
  of dividends on the Hyundai Preferred Stock under the terms of the Hyundai
  Preferred Stock as in effect on the Recapitalization Closing Date;
  provided, however, that the payments shall be excluded in the calculation
  of the amount of Restricted Payments;

       (11) payments of cash dividends when due on and after 5 1/2 years from
  the Recapitalization Closing Date on the Hyundai Preferred Stock under the
  terms of the Hyundai Preferred Stock as in effect on the Recapitalization
  Closing Date; provided, however, that the payments shall be included in the
  calculation of the amount of Restricted Payments;

       (12) repurchases of Capital Stock deemed to occur upon the exercise of
  stock options if the Capital Stock represents a portion of the exercise
  price of the stock options; provided, however, that the payments shall be
  excluded in the calculation of the amount of Restricted Payments;

     (13) payments not to exceed $200,000 in the aggregate solely to enable
  us to make payments to holders of our Capital Stock in lieu of the issuance
  of fractional shares of our Capital Stock; provided, however, that the
  payments shall be excluded in the calculation of the amount of Restricted
  Payments;

       (14) Restricted Payments not to exceed $15.0 million payable on
  Capital Stock, including Disqualified Stock, issued to customers, clients,
  suppliers or purchasers or sellers of goods or services of ours or a
  Restricted Subsidiary in connection with a strategic investment in us or a
  Restricted Subsidiary by the customers, clients, suppliers or purchasers or
  sellers of goods or services; provided, however, that the payments shall be
  included in the calculation of the amount of Restricted Payments;

     (15) Restricted Payments not exceeding $15.0 million in the aggregate
  for any purchase, repurchase, redemption, defeasance or other acquisition
  or retirement for value of Subordinated Obligations; provided, however,
  that (A) at the time of the Restricted Payments, no Default shall have
  occurred and be continuing or result from the Restricted Payments, and (B)
  the Restricted Payments shall be included in the calculation of the amount
  of Restricted Payments; or

     (16) the distribution, as a dividend or otherwise, of shares of Capital
  Stock or assets of an Unrestricted Subsidiary provided that the fair market
  value, as determined in good faith by our Board of Directors, of the shares
  of Capital Stock or assets shall not exceed the amount of the Investments
  that were

                                       95


  made, and not subsequently reduced under clause (3)(D) of paragraph (a)
  above, by us in the Unrestricted Subsidiary and were treated as Restricted
  Payments or were included in the calculation of the amount of Restricted
  Payments previously made; provided, however, that (A) the distributions
  shall be excluded in the calculation of the amount of Restricted Payments
  and (B) any net reduction in Investments in the Unrestricted Subsidiary
  resulting from the distribution shall be excluded from the calculation of
  amounts under clause (3)(D) of paragraph (a) above;

     (17) Restricted Payments not exceeding $7.5 million in the aggregate;
  provided, however, that (A) at the time of the Restricted Payments, no
  Default shall have occurred and be continuing or result from the restricted
  payments and (B) the Restricted Payments shall be included in the
  calculation of the amount of Restricted Payments.

   Limitation on Restrictions on Distributions from Restricted Subsidiaries. We
shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to us or any
Restricted Subsidiary or pay any Indebtedness owed to ChipPAC International
Company Limited or us, (b) make any loans or advances to ChipPAC International
Company Limited or us or (c) transfer any of its property or assets to ChipPAC
International Company Limited or us, except:

     (1) any encumbrance or restriction under an agreement in effect at or
  entered into on the Issue Date, including the indenture, the exchange notes
  and the Guaranties, or, in the case of the Credit Agreement, as in effect
  on the Recapitalization Closing Date;

     (2) any encumbrance or restriction relating to a Restricted Subsidiary
  under an agreement relating to any Indebtedness Incurred by the Restricted
  Subsidiary on or prior to the date on which the Restricted Subsidiary was
  acquired by us, other than Indebtedness Incurred as consideration in, or to
  provide all or any portion of the funds or credit support utilized to
  consummate, the transaction or series of related transactions where the
  Restricted Subsidiary became a Restricted Subsidiary or was acquired by us,
  and outstanding on that date;

     (3) any encumbrance or restriction under an agreement (A) evidencing
  Indebtedness Incurred without violation of the indenture or (B) effecting a
  Refinancing of Indebtedness Incurred under an agreement referred to in
  clause (1) or (2) of this covenant or this clause (3) or contained in any
  amendment to an agreement referred to in clause (1) or (2) of this covenant
  or this clause (3); provided, however, that in the case of clauses (A) and
  (B), the encumbrances and restrictions relating the Restricted Subsidiary
  contained in the refinancing agreement or amendment are, in the good faith
  judgment of the Board of Directors, no more restrictive in any material
  respect than the encumbrances and restrictions relating to the Restricted
  Subsidiary contained in agreements of the Restricted Subsidiary in effect
  at, or entered into on, the Issue Date or the Recapitalization Closing
  Date;

     (4) any encumbrance or restriction consisting of customary non-
  assignment provisions in leases governing leasehold interests to the extent
  the provisions restrict the transfer of the lease or the property leased
  thereunder or in licenses entered into in the ordinary course of business
  to the extent the licenses restrict the transfer of the license or the
  property licensed under the license;

     (5) in the case of clause (c) above, restrictions contained in security
  agreements or mortgages securing Indebtedness of a Restricted Subsidiary so
  long as the restrictions solely restrict the transfer of the property
  governed by the security agreements or mortgages;

     (6) restrictions on the transfer of assets under any Lien permitted
  under the indenture imposed by the holder of the Lien;

     (7) purchase money obligations for property acquired in the ordinary
  course of business that impose restrictions on the property so acquired of
  the nature described in clause (c) above;

     (8) provisions relating to the disposition or distribution of assets or
  property in joint venture agreements and other similar agreements entered
  into in the ordinary course of business;


                                       96


     (9) any restriction relating to a Restricted Subsidiary imposed under an
  agreement entered into for the sale or disposition of all or substantially
  all the Capital Stock or assets of the Restricted Subsidiary pending the
  closing of the sale or disposition;

     (10) any restriction arising under applicable law, regulation or order;

     (11) any agreement or instrument governing Capital Stock, other than
  Disqualified Stock, of any Person that is in effect on the date the Person
  is acquired by us or a Restricted Subsidiary;

     (12) any restriction on cash or other deposits or net worth imposed by
  customers under contracts entered into in the ordinary course of business;
  and

     (13) any restriction in any agreement that is not more restrictive than
  the restrictions under the terms of the Credit Agreement as in effect on
  the Recapitalization Closing Date.

   Limitation on Sales of Assets and Subsidiary Stock. (a) We shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless:

     (1) we or the Restricted Subsidiary receives consideration at the time
  of the Asset Disposition at least equal to the fair market value, including
  as to the value of all non-cash consideration, as determined in good faith
  by the Board of Directors, of the shares and assets that are part of the
  Asset Disposition;

     (2) at least 75% of the consideration received by us or the Restricted
  Subsidiary from the Asset Disposition is in the form of cash or cash
  equivalents; and

     (3) an amount equal to 100% of the Net Available Cash from the Asset
  Disposition is applied by us or the Restricted Subsidiary, as the case may
  be, in one or more of the following ways:

       (A) to the extent we elect or are required by the terms of any
    Indebtedness, to prepay, repay, redeem or purchase Senior Indebtedness
    of ChipPAC International Company Limited or Indebtedness, other than
    any Disqualified Stock, of ours or another Restricted Subsidiary of
    ours, in each case other than Indebtedness owed to the Company or an
    Affiliate of the Company, within one year from the later of the closing
    date of the Asset Disposition and the receipt of the Net Available
    Cash;

       (B) to the extent we elect, to acquire Additional Assets within one
    year from, or enter into a binding commitment to acquire Additional
    Assets; provided that the commitment shall be subject only to customary
    conditions, other than financing, and the acquisition shall be
    consummated within two years from the later of the closing date of the
    Asset Disposition and the receipt of the Net Available Cash; and

       (C) to the extent we elect, or to the extent of the balance of the
    Net Available Cash after application in compliance with clauses (A) and
    (B), to make an offer to the holders of the exchange notes and to
    holders of other Senior Subordinated Indebtedness of ChipPAC
    International Company Limited designated by ChipPAC International
    Company Limited to purchase exchange notes and the other Senior
    Subordinated Indebtedness in compliance with the conditions contained
    in the indenture;

provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness under clause (A) or (C) above, we or the Restricted
Subsidiary shall permanently retire the Indebtedness and, in the case of any
revolving facility, shall cause the related loan commitment, if any, to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the provisions of this paragraph, we and
the Restricted Subsidiaries shall not be required to apply any Net Available
Cash in compliance with this paragraph except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
compliance with this paragraph exceeds $10.0 million. Pending application of
Net Available Cash under this covenant, the Net Available Cash shall be
invested in Permitted Investments or used to temporarily reduce loans
outstanding under any revolving credit facility.

   For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:

     (x) the assumption of Indebtedness of ours or any Restricted Subsidiary
  and the release of us or the Restricted Subsidiary from all liability on
  the Indebtedness as part of the Asset Disposition,

                                       97


     (y) securities, exchange notes or other obligations received by us or
  any Restricted Subsidiary from the transferee that are promptly converted
  by us or the Restricted Subsidiary into cash; and

     (z) any Additional Assets, so long as the Additional Assets were
  acquired for fair market value in connection with the transaction giving
  rise to the Asset Disposition, as determined in good faith by the board of
  directors of the Company or the Restricted Subsidiary, as applicable, which
  Additional Assets will be considered to have been acquired under clause (A)
  of the preceding paragraph as part of the Asset Disposition.

   (b) In the event of an Asset Disposition that requires the purchase of the
exchange notes under clause (a)(3)(C) above, and the purchase of other Senior
Subordinated Indebtedness, ChipPAC International Company Limited will be
required to purchase exchange notes tendered in an offer by ChipPAC
International Company Limited for the exchange notes, and other Senior
Subordinated Indebtedness, at a purchase price of 100% of their principal
amount, without premium, plus accrued but unpaid interest, or, relating to the
other Senior Subordinated Indebtedness, the lesser price, if any, as may be
provided for by the terms of the Senior Subordinated Indebtedness in
compliance with the procedures, including prorating in the event of
oversubscription, in the indenture. If the aggregate purchase price of the
exchange notes, and any other Senior Subordinated Indebtedness, tendered
exceeds the Net Available Cash allotted to the purchase of the exchange notes,
and any other Senior Subordinated Indebtedness, ChipPAC International Company
Limited will select the exchange notes, and any other Senior Subordinated
Indebtedness, to be purchased on a pro rata basis but in denominations of
$1,000 or multiples of $1,000. ChipPAC International Company Limited shall not
be required to make an offer to purchase exchange notes, and other Senior
Subordinated Indebtedness, under this covenant if the Net Available Cash
available for the offer is less than $10.0 million, which lesser amount shall
be carried forward for purposes of determining whether an offer is required
for the Net Available Cash from any subsequent Asset Disposition.

   (c) ChipPAC International Company Limited shall comply with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of exchange notes under
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, ChipPAC International
Company Limited shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this clause as a result of complying with the provisions of any securities
laws or regulations.

   Limitation on Affiliate Transactions. (a) We shall not, and shall not
permit any Restricted Subsidiary to, enter into or permit to exist any
transaction, including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service, with any
Affiliate of ours involving aggregate consideration in excess of $2.5 million
(an "Affiliate Transaction") unless the terms of that transaction:

     (1) are no less favorable to us or the Restricted Subsidiary than those
  that could be obtained at the time of the transaction in arm's-length
  dealings with a Person who is not an Affiliate;

     (2) have been approved by a majority of the disinterested members of the
  Board of Directors; and

     (3) if the Affiliate Transaction involves an amount in excess of $10.0
  million, have been determined by (A) a nationally recognized investment
  banking firm to be fair, from a financial standpoint, to us and our
  Restricted Subsidiaries or (B) an accounting or appraisal firm nationally
  recognized in making determinations of this kind to be on terms that are
  not less favorable to us and our Restricted Subsidiaries than the terms
  that could be obtained in an arms-length transaction from a Person that is
  not our Affiliate.

   (b) The provisions of the prior paragraph (a) shall not prohibit;

     (1) any Restricted Payment permitted to be paid under the covenant
  described under "--Limitation on Restricted Payments;"

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     (2) any issuance of securities, or other payments, awards or grants in
  cash, securities or otherwise under, or the funding of, employment
  arrangements, stock options and stock ownership plans approved by the Board
  of Directors;

     (3) the grant of stock options or similar rights to our employees and
  directors or those of our Restricted Subsidiaries under plans or agreements
  approved by the Board of Directors;

     (4) loans or advances to employees, directors, officers or consultants
  (A) in the ordinary course of business or (B) otherwise in an aggregate
  amount not to exceed $5.0 million in the aggregate outstanding at any one
  time;

     (5) reasonable fees, compensation or employee benefit arrangements to
  and indemnity provided for the benefit of employees, directors, officers or
  consultants of ours or any Subsidiary in the ordinary course of business;

     (6) any transaction exclusively between or among us and our Restricted
  Subsidiaries or between or among Restricted Subsidiaries; provided,
  however, that the transactions are not otherwise prohibited by the
  indenture;

     (7) the payment of management, consulting and advisory fees and related
  expenses made under the Advisory Agreements as in effect on the
  Recapitalization Closing Date and the payment of other customary
  management, consulting and advisory fees and related expenses to the
  Principals and their Affiliates made under any financial advisory,
  financing, underwriting or placement agreement or under other investment
  banking activities, including, without limitation, in connection with
  acquisitions or divestitures which fees and expenses are made under
  arrangements approved by our board of directors or that of the Restricted
  Subsidiary in good faith;

     (8) any Affiliate Transaction with Hyundai Electronics and its
  Affiliates under written agreements in effect on the Recapitalization
  Closing Date and as amended, renewed or extended from time to time;
  provided, however, that any amendment, renewal or extension shall not
  contain terms which are materially less favorable to us and our Restricted
  Subsidiaries than those in the agreements in effect on the Recapitalization
  Closing Date;

     (9) any agreement with us or any Restricted Subsidiary as in effect as
  of the Recapitalization Closing Date or any amendment or replacement or any
  transaction contemplated thereby, including under any amendment, so long as
  any amendment or replacement agreement is not more disadvantageous to us or
  the Restricted Subsidiary in any material respect than the original
  agreement as in effect on the Recapitalization Closing Date;

     (10) the existence of, or the performance by us or any of our Restricted
  Subsidiaries of obligations under the terms of, the Shareholders Agreement
  and any similar agreements which it may enter into thereafter; provided,
  however, that the existence of, or the performance by us or any of our
  Restricted Subsidiaries of obligations under, any future amendment to any
  existing agreement or under any similar agreement entered into after the
  Recapitalization Closing Date shall only be permitted by this clause (10)
  to the extent that the terms of the amendment or new agreement are not more
  disadvantageous to us or the Restricted Subsidiary in any material respect;

     (11) transactions with customers, clients, suppliers, joint venture
  partners or purchasers or sellers of goods or services, in each case in the
  ordinary course of business, including, without limitation, under joint
  venture agreements, and otherwise in compliance with the terms of the
  indenture which are fair to us and our Restricted Subsidiaries, in the
  reasonable determination of the board of directors or the senior management
  thereof, or are on terms at least as favorable as might reasonably have
  been obtained at the time from an unaffiliated party; and

     (12) the issuance or sale of any of our Capital Stock, other than
  Disqualified Stock.

                                       99


   Merger and Consolidation. Neither ChipPAC International Company Limited nor
we shall consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of related transactions, all or substantially
all its assets to, any Person, unless:

     (1) the resulting, surviving or transferee Person, that we refer to as a
  "Successor Company", shall be a Person organized and existing under the
  laws of the British Virgin Islands or of the United States of America, any
  State thereof or the District of Columbia and the Successor Company, if not
  us or ChipPAC International Company Limited, shall expressly assume, by a
  supplemental indenture executed and delivered to the trustee, in form
  satisfactory to the trustee, all the obligations of ChipPAC International
  Company Limited or us, as applicable, under the indenture and the Company
  Guaranty or the exchange notes, as applicable;

     (2) immediately after giving effect to the transaction, and treating any
  Indebtedness which becomes an obligation of the Successor Company or any
  Subsidiary as a result of the transaction as having been Incurred by the
  Successor Company or the Subsidiary at the time of the transaction, no
  Default shall have occurred and be continuing;

     (3) immediately after giving effect to the transaction, (A) the
  Successor Company would be able to Incur an additional $1.00 of
  Indebtedness under paragraph (a) of the covenant described under "--
  Limitation on Indebtedness" or (B) the Consolidated Coverage Ratio for the
  Successor Company and its Restricted Subsidiaries would be equal to or
  greater than the same ratio for us and our Restricted Subsidiaries
  immediately prior to the transaction;

     (4) ChipPAC International Company Limited or us, as applicable, shall
  have delivered to the trustee an Officers' Certificate and an Opinion of
  Counsel, each stating that the consolidation, merger or transfer and any
  supplemental indenture comply with the indenture;

     (5) If the merging corporation is organized and existing under the laws
  of the British Virgin Islands and the Successor Company is organized and
  existing under the laws of the United States of America, any State thereof
  or the District of Columbia or if the merging corporation is organized and
  existing under the laws of the United States of America, any State thereof
  or the District of Columbia and the Successor Company is organized and
  existing under the laws of the British Virgin Islands, which (we refer to
  any of the previous events as a "Foreign Jurisdiction Merger", ChipPAC
  International Company Limited or ChipPAC, as applicable, shall have
  delivered to the trustee an Opinion of Counsel that the Holders will not
  recognize income, gain or loss for U.S. Federal income tax purposes as a
  result of the transaction and will be governed by U.S. Federal income tax
  on the same amounts and at the same times as would have been the case if
  the transaction had not occurred; and

     (6) In the event of a Foreign Jurisdiction Merger, ChipPAC International
  Company Limited or ChipPAC, as applicable, shall have delivered to the
  trustee an Opinion of Counsel in the British Virgin Islands or other
  applicable jurisdiction that (A) any payment of interest or principal under
  or relating to the exchange notes or the Guaranties will, after the
  consolidation, merger, conveyance, transfer or lease of assets, be exempt
  from the Taxes described under "--Withholding Taxes" and (B) no other taxes
  on income, including capital gains, will be payable under the laws of the
  British Virgin Islands or any other jurisdiction where the Successor
  Company is or becomes organized, resident or engaged in business for tax
  purposes relating to the acquisition, ownership or disposition of the
  exchange notes, including the receipt of interest or principal thereon,
  provided that the holder does not use or hold, and is not deemed to use or
  hold the exchange notes in carrying on a business in the British Virgin
  Islands or other jurisdiction where the Successor Company is or becomes
  organized, resident or engaged in business for tax purposes.

provided, however, that clause (3) above shall not apply (x) if, in the good
faith determination of the Board of Directors, whose determination shall be
evidenced by a resolution of the Board of Directors, the principal purpose and
effect of the transaction is to change the jurisdiction of incorporation of
ChipPAC International Company Limited or the Company or (y) in the case of a
merger of ChipPAC International Company Limited or the Company with or into a
Wholly Owned Subsidiary of ours.

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   The Successor Company shall be the successor to us or ChipPAC International
Company Limited, as the case may be, and shall succeed to, and be substituted
for, and may exercise every right and power of, ChipPAC International Company
Limited or us under the indenture, and the predecessor Issuer or Company,
except in the case of a lease, shall be automatically released from its
obligations under the Company Guaranty, the exchange notes and the indenture.

   We will not permit any Subsidiary Guarantor to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless:

     (1) the resulting, surviving or transferee Person if not the Subsidiary
  shall be a Person organized and existing under the laws of the jurisdiction
  under which the Subsidiary was organized or under the laws of the United
  States of America, or any State thereof or the District of Columbia, and
  the Person shall expressly assume, by executing a supplemental indenture or
  Guaranty Agreement, as applicable, all the obligations of the Subsidiary
  under the indenture or its Subsidiary Guaranty and under the exchange notes
  and the indenture;

     (2) immediately after giving effect to the transaction or transactions
  on a pro forma basis, and treating any Indebtedness which becomes an
  obligation of the resulting, surviving or transferee Person as a result of
  the transaction as having been issued by the Person at the time of the
  transaction, no Default shall have occurred and be continuing; and

     (3) we deliver to the trustee an Officers' Certificate and an Opinion of
  Counsel, each stating that the consolidation, merger or transfer and the
  supplemental indenture or Guaranty Agreement, if any, complies with the
  indenture.

   The provisions of clauses (1) and (2) above shall not apply to any one or
more transactions involving a Subsidiary Guarantor which constitute an Asset
Disposition if we have complied with the applicable provisions of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock" above.

   Future Guarantors. If, after the Issue Date, we form or otherwise acquire,
directly or indirectly, any Restricted Subsidiary, we shall cause the
Restricted Subsidiary to Guarantee the exchange notes under a Subsidiary
Guaranty on the terms and conditions in the indenture and the Subsidiary
Guaranty Agreement; provided, however, in the event we or a Restricted
Subsidiary forms or otherwise acquires, directly or indirectly, a Restricted
Subsidiary organized under the laws of a jurisdiction other than the United
States and the jurisdiction prohibits by law, regulation or order the
Restricted Subsidiary from providing a Guarantee, we shall use all commercially
reasonable efforts, including pursuing required waivers, over a period up to
one year, to provide the Guarantee; provided, however, that we shall not be
required to use commercially reasonable efforts relating to the subsidiaries
for more than a one-year period or a shorter period as we shall determine in
good faith that we have used all commercially reasonable efforts. If we or the
Restricted Subsidiary is unable during the period to obtain an enforceable
Guarantee in the jurisdiction, then the Restricted Subsidiary shall not be
required to provide a Guarantee of the exchange notes under to the Subsidiary
Guaranty so long as the Restricted Subsidiary does not Guarantee any other
Indebtedness of ours and our Restricted Subsidiaries.

   Limitation on Assets of Non-Subsidiary Guarantors. We shall not permit our
Restricted Subsidiaries that are not Subsidiary Guarantors, excluding ChipPAC
Assembly and Test (Shanghai) Company, Ltd. and ChipPAC (Shanghai) Company Ltd.
or any successors, to collectively hold at any one time more than 33 1/3% of
the consolidated assets of ours and our Restricted Subsidiaries.

   Limitation on Sale of the Capital Stock of ChipPAC International Company
Limited. For so long as any of the exchange notes are outstanding, ChipPAC
International Company Limited will continue to be, directly or indirectly, a
Wholly Owned Subsidiary of ours.

   SEC Reports. Whether or not we must comply with the reporting requirements
of Section 13 or 15(d) of the Exchange Act, we will file with the SEC and
provide the trustee and noteholders with annual reports and information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and

                                      101


applicable to a U.S. corporation that would be required to make these filings,
at the times specified for the filings under these Sections. However, we will
not be required to file any reports, documents or other information if the SEC
will not accept a filing.

Defaults

   Each of the following is an Event of Default:

     (1) a default in the payment of interest or any Additional Amounts on
  the exchange notes when due, continued for 30 days;

     (2) a default in the payment of principal of any note when due at its
  Stated Maturity, upon redemption, upon required repurchase, upon
  declaration or otherwise;

     (3) the failure by us, ChipPAC International Company Limited or any
  Subsidiary Guarantor to comply with its obligations under "--Significant
  Covenants--Merger and Consolidation" above;

     (4) the failure by us or any Restricted Subsidiary to comply for 30 days
  after notice with any of its obligations in the covenants described above
  under "--Change of Control," other than a failure to purchase the exchange
  notes, or under "--Significant Covenants" under "--Limitation on
  Indebtedness," "--Limitation on Restricted Payments," "--Limitation on
  Restrictions on Distributions from Restricted Subsidiaries," "--Limitation
  on Sales of Assets and Subsidiary Stock," other than a failure to purchase
  the exchange notes, "--Limitation on Affiliate Transactions," "--Future
  Guarantors," "--Limitation on Assets of Non-Subsidiary Guarantors," "--
  Limitation on Sale of the Capital Stock of ChipPAC International Company
  Limited" or "--SEC Reports;"

     (5) the failure by us or any Restricted Subsidiary to comply for 60 days
  after notice with our or its other agreements contained in the indenture;

     (6) Indebtedness of ours, ChipPAC International Company Limited or any
  Significant Subsidiary is not paid within any applicable grace period after
  final maturity or is accelerated by the holders thereof because of a
  default and the total amount of the Indebtedness unpaid or accelerated
  exceeds $10.0 million which we refer to as the "cross acceleration
  provision";

      (7) events of bankruptcy, insolvency or reorganization of us, ChipPAC
  International Company Limited or a Significant Subsidiary as specified in
  the indenture, which we refer to as the "bankruptcy provisions";

     (8) any judgment or decree for the payment of money in excess of $10.0
  million is entered against us, ChipPAC International Company Limited or a
  Significant Subsidiary, remains outstanding for a period of 60 days
  following the judgment and is not discharged, waived or stayed within 10
  days after notice which we refer to as the "judgment default provision"; or

     (9) the Company Guaranty or any Subsidiary Guaranty of a Significant
  Subsidiary ceases to be in full force and effect, other than in compliance
  with the terms of the Company Guaranty or the Subsidiary Guaranty or the
  ChipPAC or any Significant Subsidiary that is a Subsidiary Guarantor denies
  or disaffirms its obligations under the Company Guaranty or its Subsidiary
  Guaranty, as the case may be.

   However, a default under clauses (4), (5) and (8) will not constitute an
Event of Default until the trustee or the holders of 25% in principal amount of
the outstanding exchange notes notify ChipPAC International Company Limited and
us of the default and ChipPAC International Company Limited or ChipPAC does not
cure the default within the time specified after receipt of the notice.

   If an Event of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the outstanding exchange notes may
declare the principal of and accrued but unpaid interest on all the exchange
notes to be due and payable. Upon a declaration, the principal and interest
shall be due and payable immediately; provided, however, that if upon the
declaration there are any amounts outstanding under the Credit Agreement and
the amounts thereunder have not been accelerated, the principal and interest
shall be

                                      102


due and payable upon the earlier of the time the amounts are accelerated or
five Business Days after receipt by ChipPAC International Company Limited and
us and the Representative under the Credit Agreement of the declaration. If an
Event of Default relating to specific events of bankruptcy, insolvency or
reorganization of us or ChipPAC International Company Limited occurs and is
continuing, the principal of and interest on all the exchange notes will become
and be immediately due and payable without any declaration or other act on the
part of the trustee or any holders of the exchange notes. The holders of a
majority in principal amount of the outstanding exchange notes may rescind any
acceleration relating to the exchange notes and its consequences.

   Contingent upon the provisions of the indenture relating to the duties of
the trustee, in case an Event of Default occurs and is continuing, the trustee
will be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the exchange
notes unless the holders have offered to the trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium, if any, or interest when due, no holder
of a note may pursue any remedy under the indenture or the exchange notes
unless:

     (1) the holder has previously given the trustee notice that an Event of
  Default is continuing;

     (2) holders of at least 25% in principal amount of the outstanding
  exchange notes have requested the trustee to pursue the remedy;

     (3) the holders have offered the trustee reasonable security or
  indemnity against any loss, liability or expense;

     (4) the trustee has not complied with the request within 60 days after
  receiving the request and the offer of security or indemnity; and

     (5) the holders of a majority in principal amount of the outstanding
  exchange notes have not given the trustee a direction inconsistent with the
  request within the 60-day period.

   If conditions in the indenture are met, holders of a majority in principal
amount of the outstanding exchange notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or of exercising any trust or power conferred on the trustee. The
trustee, however, may refuse to follow any direction that conflicts with law or
the indenture or that the trustee determines is unduly prejudicial to the
rights of any other holder of a note or that would involve the trustee in
personal liability.

   The indenture provides that if a Default occurs and is continuing and is
known to the trustee, the trustee must mail to each holder of the exchange
notes notice of the Default within 90 days after it occurs. Except in the case
of a Default in the payment of principal of or interest on any note, the
trustee may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is not opposed to the interest of the
holders of the exchange notes. In addition, ChipPAC International Company
Limited is required to deliver to the trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether its signers know of any
Default that occurred during the previous year. ChipPAC International Company
Limited also is required to deliver to the trustee, within 30 days, written
notice of any event which would constitute specific types of Defaults, their
status and what action ChipPAC International Company Limited is taking or
proposes to take.

Amendments and Waivers

   If conditions in the indenture are met, the indenture may be amended with
the consent of the holders of a majority in principal amount of the exchange
notes then outstanding, including consents obtained in connection with a tender
offer or exchange for the exchange notes, and any past default or compliance
with any provisions may also be waived with the consent of the holders of a
majority in principal amount of the exchange notes then outstanding. However,
without the consent of each holder of an outstanding note so affected, no
amendment may:

     (1) reduce the amount of exchange notes whose holders must consent to an
  amendment;

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     (2) reduce the rate of or extend the time for payment of interest on any
  note;

     (3) reduce the principal of or extend the Stated Maturity of any note;

     (4) reduce the premium payable upon the redemption of any note or change
  the time at which any note may be redeemed as described under "--Optional
  Redemption" or "--Redemption for Changes in British Virgin Islands
  Withholding Taxes" above;

     (5) make any note payable in money other than that stated in the note;

     (6) impair the right of any holder of the exchange notes to receive
  payment of principal of and interest on the holder's exchange notes on or
  after the due dates therefor or to institute suit for the enforcement of
  any payment on or relating to the holder's exchange notes;

     (7) make any change in the amendment provisions which require each
  holder's consent or in the waiver provisions; or

     (8) make any change in the Company Guaranty or any Subsidiary Guaranty
  that would adversely affect the Noteholders.

   In addition, any amendment to the subordination provisions of the indenture
that would adversely affect the holders of the exchange notes will require the
consent of the holders of at least 75% in aggregate principal amount of the
exchange notes then outstanding. However, no amendment may be made to the
subordination provisions of the indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding unless the holders of that
Senior Indebtedness, or their Representative, consents to the change.

   Without the consent of any holder of the exchange notes, ChipPAC
International Company Limited and trustee may amend the indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by
a successor corporation of the obligations of ChipPAC International Company
Limited under the indenture, provided, that ChipPAC International Company
Limited or ChipPAC delivers to the trustee the Opinions of Counsel described in
clauses five and six of "Significant Covenants--Merger and Consolidation" if
the opinions are required by the provisions of these clauses, to provide for
uncertificated exchange notes in addition to or in place of certificated
exchange notes, provided that the uncertificated exchange notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner that
the uncertificated exchange notes are described in Section 163(f)(2)(B) of the
Code, to add guarantees of the exchange notes, to release a Subsidiary Guaranty
when permitted by the indenture, to secure the exchange notes, to add to our
covenants and those of our Restricted Subsidiaries for the benefit of the
holders of the exchange notes or to surrender any right or power conferred upon
us and our Restricted Subsidiaries, to make any change that does not adversely
affect the rights of any holder of the exchange notes or to comply with any
requirement of the SEC in connection with the qualification of the indenture
under the Trust Indenture Act.

   The consent of the holders of the exchange notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if the consent approves the substance of the proposed amendment.

   After an amendment under the indenture becomes effective, ChipPAC
International Company Limited is required to mail to holders of the exchange
notes a notice briefly describing the amendment. However, the failure to give
notice to all holders of the exchange notes, or any defect in the notice, will
not impair or affect the validity of the amendment.

Transfer

   The exchange notes will be issued in registered form and will be
transferable only upon the surrender of the exchange notes being transferred
for registration of transfer. ChipPAC International Company Limited may require
payment of a sum sufficient to cover any tax, assessment or other governmental
charge payable in connection with transfers and exchanges.


                                      104


Defeasance

   ChipPAC International Company Limited and ChipPAC at any time may terminate
all of our obligations under the exchange notes and the indenture, which we
refer to as "legal defeasance," except for obligations respecting the
defeasance trust and obligations to register the transfer or exchange of the
exchange notes, to replace mutilated, destroyed, lost or stolen exchange notes
and to maintain a registrar and paying agent for the exchange notes. ChipPAC
International Company Limited or ChipPAC at any time may terminate our
obligations under "--Change of Control" and under the covenants described under
"--Significant Covenants," other than the covenant described under "--Merger
and Consolidation," the operation of the cross acceleration provision, the
bankruptcy provisions relating to Significant Subsidiaries and the judgment
default provision described under "--Defaults" above and the limitations
contained in clause (3) of the first paragraph under "--Significant Covenants--
Merger and Consolidation" above, which we refer to as "covenant defeasance."

   ChipPAC International Company Limited and ChipPAC may exercise our legal
defeasance option notwithstanding the prior exercise of their covenant
defeasance option. If ChipPAC International Company Limited or ChipPAC
exercises its legal defeasance option, payment of the exchange notes may not be
accelerated because of an Event of Default. If ChipPAC International Company
Limited or ChipPAC exercises its covenant defeasance option, payment of the
exchange notes may not be accelerated because of an Event of Default specified
in clause (4), clause (6), clause (7) with respect only to Significant
Subsidiaries or clause (8) under "--Defaults" above or because of the failure
of us to comply with clause (3) of the first paragraph under "--Significant
Covenants--Merger and Consolidation" above or the failure of ChipPAC
International Company Limited or any Subsidiary Guarantor to comply with the
limitation under the third paragraph under "--Significant Covenants--Merger and
Consolidation" above. If ChipPAC International Company Limited or ChipPAC
exercises its legal defeasance option or its covenant defeasance option, we and
each Subsidiary Guarantor will be released from all of our obligations relating
to the Company Guaranty or its Subsidiary Guaranty, as the case may be.

   In order to exercise either defeasance option, ChipPAC International Company
Limited or ChipPAC must irrevocably deposit in trust, which we refer to as the
"defeasance trust," with the trustee money or U.S. Government Obligations for
the payment of principal and interest on the exchange notes to redemption or
maturity, as the case may be, and must comply with other conditions, including
delivery to the trustee of

     (i) an Opinion of Counsel that holders of the exchange notes will not
  recognize income, gain or loss for U.S. Federal income tax purposes as a
  result of the deposit and defeasance and will be governed by U.S. Federal
  income tax on the same amounts, in the same manner and at the same times as
  would have been the case if the deposit and defeasance had not occurred,
  and, in the case of legal defeasance only, the Opinion of Counsel must be
  based on a ruling of the Internal Revenue Service or other change in
  applicable U.S. Federal income tax law, and

     (ii) an Opinion of Counsel in each of the British Virgin Islands and any
  other jurisdiction in which ChipPAC International Company Limited or
  ChipPAC is organized, resident or engaged in business for tax purposes
  that:

       (A) holders of the exchange notes will not recognize income gain or
    loss for purposes of the tax laws of the jurisdiction as a result of
    legal defeasance or covenant defeasance, as applicable, and will be
    subject for purposes of the tax laws of that jurisdiction to income tax
    on the same amounts, in the same manner and at the same times as would
    have been the case if legal defeasance or covenant defeasance had not
    occurred; and

       (B) payments from the defeasance trust will be free or exempt from
    any and all withholding and other taxes of whatever nature of the
    jurisdiction or any political subdivision or taxing authority except in
    the case of a payment made to a holder which can be taxed by reason of
    the holder's carrying on a business in the British Virgin Islands or
    other jurisdiction.

                                      105


Concerning the Trustee

   Firstar Bank of Minnesota, N.A. is the trustee under the indenture and will
be the registrar and paying agent with regard to the exchange notes.

   The holders of a majority in principal amount of the outstanding exchange
notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, with
exceptions provided in the indenture. The indenture provides that if an Event
of Default occurs and is not cured, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his own affairs. The trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any holder of
exchange notes, unless the holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense and
then only to the extent required by the terms of the indenture.

Governing Law

   The indenture provides that it and the exchange notes will be governed by
the laws of the State of New York without giving effect to conflicts of laws
rules.

Enforceability of Judgments

   Since substantially all the operating assets of ChipPAC International
Company Limited, ChipPAC and their Subsidiaries are outside the United States,
any judgment obtained in the United States against ChipPAC International
Company Limited, ChipPAC or a Subsidiary Guarantor, including judgments
relating to the payment of principal, interest, Additional Amounts, redemption
price and any purchase price of the exchange notes, may not be collectible
within the United States.

   ChipPAC International Company Limited has been informed by its British
Virgin Island counsel, Harney Westwood & Riegels, that in its opinion the
applicable laws of the British Virgin Islands permit an action to be brought in
a court of competent jurisdiction in the British Virgin Islands on a final and
conclusive judgment in personam of a United States federal court or a court of
the State of New York sitting in the Borough of Manhattan in The City of New
York, respecting the enforcement of the exchange notes or the indenture,
including the Company Guaranty and the Subsidiary Guaranties, that is not
impeachable as void or voidable under the laws of the State of New York and
that is for a specified sum in money if:

  . the New York court that rendered the judgment has jurisdiction over the
    judgment debtor, as recognized by the courts of the British Virgin
    Islands and in compliance with the British Virgin Islands' conflict of
    laws rules and submission by ChipPAC International Company Limited,
    ChipPAC, Inc. and the Subsidiary Guarantors in the indenture to the
    jurisdiction of the New York court will be sufficient for this purpose;

  .  the judgment was not obtained by fraud or in a manner contrary to
    natural justice and the enforcement thereof would not be inconsistent
    with public policy, as that term is understood under the applicable laws
    of the British Virgin Islands;

  .  the enforcement of the judgment does not constitute, directly or
    indirectly, the enforcement of foreign revenue, expropriator, public or
    penal laws;

  .  no new admissible evidence relevant to the action is discovered prior to
    the rendering of judgment by the British Virgin Islands; and

  .  the action to enforce the judgment is commenced within six years after
    the date of the judgment.

   Furthermore, ChipPAC International Company Limited has been advised by its
counsel that they do not know of any reason under present laws of the British
Virgin Islands for avoiding recognition of the judgment of New York court under
the indenture, including the Company Guaranty and the Subsidiary Guaranties, or
on the exchange notes based upon a reasonable interpretation of public policy.

                                      106


Consent to Jurisdiction and Service

   The indenture provides that ChipPAC International Company Limited, ChipPAC
and each Subsidiary Guarantor will appoint CT Corporation System, 1633
Broadway, New York, New York 10019 as its agent for actions brought under
Federal or state securities laws brought in any Federal or state court located
in the Borough of Manhattan in The City of New York and will submit to that
jurisdiction.

Definitions

   "Additional Assets" means:

     (1) any property or assets, other than Indebtedness and Capital Stock,
  in a Related Business,

     (2) the Capital Stock of a Person that becomes a Restricted Subsidiary
  as a result of the acquisition of the Capital Stock by the Company or
  another Restricted Subsidiary or

     (3) Capital Stock constituting a minority interest in any Person that is
  a Restricted Subsidiary;

provided, however, that the Restricted Subsidiary described in clauses (2) or
(3) above is primarily engaged in a Related Business.

   "Advisory Agreements" mean each of the advisory agreements by and between
ChipPAC, Inc., ChipPAC Limited, ChipPAC International Company Limited and each
Principal entered into on the Recapitalization Closing Date, as the same may be
amended from time to time in a manner that is not more disadvantageous to us in
any material respect than the original agreement as in effect on the
Recapitalization Closing Date.

   "Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with the specified Person. For the purposes of this definition,
"control" when used relating to any Person means the power to direct the
management and policies of Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have correlative meanings. For purposes of the
provisions described under "--Significant Covenants--Limitation on Restricted
Payments," "--Significant Covenants--Limitation on Affiliate Transactions" and
"--Significant Covenants--Limitation on Sales of Assets and Subsidiary Stock"
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of our Voting Stock, on a
fully diluted basis, or of rights or warrants to purchase the Capital Stock,
whether or not currently exercisable and any Person who would be an Affiliate
of the beneficial owner under the first sentence of this definition.

   "Asset Disposition" means any sale, lease, other than operating leases
entered into in the ordinary course of business, transfer or other disposition,
or series of related sales, leases, transfers or dispositions) by us or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction, each referred to for the purposes of this
definition as a "disposition," of (1) any shares of Capital Stock of a
Restricted Subsidiary, other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than us or a Restricted
Subsidiary, (2) all or substantially all the assets of any division or line of
business of ours or any Restricted Subsidiary or (3) any other assets of ours
or any Restricted Subsidiary outside of the ordinary course of our business or
that of the Restricted Subsidiary, other than, in the case of (1), (2) and (3)
above, (w) a disposition by a Restricted Subsidiary to us or by us or a
Restricted Subsidiary to a Restricted Subsidiary, (x) for purposes of the
covenant described under "--Significant Covenants--Limitation on Sales of
Assets and Subsidiary Stock" only, a disposition that constitutes a Restricted
Payment permitted by the covenant described under "--Significant Covenants--
Limitation on Restricted Payments," (y) sales or other dispositions of
obsolete, uneconomical, negligible, worn-out or surplus assets in the ordinary
course of business, including but not limited to equipment and intellectual
property and (z) disposition of assets with a fair market value of less than
$1,000,000; provided, however, that a disposition of all or substantially all
of our assets and our Restricted Subsidiaries taken as a whole will be governed
by the provisions of the indenture described above under the caption "--Change
of Control" and/or the provisions described above under the

                                      107


caption "--Merger and Consolidation" and not by the provisions of the "--
Limitation on Sales of Assets and Subsidiary Stock" covenant.

   "Attributable Debt" relating to a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the exchange notes, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in the Sale/Leaseback Transaction, including any period for which the lease
has been extended.

   "Average Life" means, as of the date of determination, relating to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:

     (1) the sum of the products of the numbers of years from the date of
  determination to the dates of each successive scheduled principal payment
  of the Indebtedness or redemption or similar payment relating to the
  Preferred Stock multiplied by the amount of the payment by (2) the sum of
  all the payments.

   "Bain" means Bain Capital, Inc.

   "Banks" has the meaning specified in the Credit Agreement.

   "Bank Indebtedness" means all Obligations under the Credit Agreement.

   "Board of Directors" means the Board of Directors of ChipPAC or any
committee of the Board duly authorized to act on behalf of the Board.

   "Business Day" means each day other than a Saturday, Sunday or a day on
which commercial banking institutions are authorized or required by law to
close in New York City.

   "Capital Expenditure Facility" means the capital expenditure facility
contained in the Credit Agreement.

   "Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purpose compliance GAAP, and the amount of Indebtedness represented by the
obligation shall be the capitalized amount of the obligation determined in
compliance with GAAP; and the Stated Maturity of the obligation shall be the
date of the last payment of rent or any other amount due under the lease prior
to the first date upon which the lease may be terminated by the lessee without
payment of a penalty.

   "Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in, however designated, equity of the Person, including any
Preferred Stock, but excluding any debt securities convertible into equity.

   "Code" means the Internal Revenue Code of 1986, as amended.

   "Company Guaranty" means the Guarantee by us of ChipPAC International
Company Limited's obligations relating to the exchange notes contained in the
indenture.

   "Consolidated Coverage Ratio" as of any date of determination means the
ratio of (a) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available ending on or prior to the date of determination to (b) Consolidated
Interest Expense for the four fiscal quarters; provided, however, that:

     (1) if ChipPAC or any Restricted Subsidiary has Incurred any
  Indebtedness since the beginning of the period that remains outstanding or
  if the transaction giving rise to the need to calculate the Consolidated
  Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
  Consolidated Interest Expense for the period shall be calculated after
  giving effect on a pro forma basis to the Indebtedness as if the

                                      108


  Indebtedness had been Incurred on the first day of the period and the
  discharge of any other Indebtedness repaid, repurchased, defeased or
  otherwise discharged with the proceeds of the new Indebtedness as if the
  discharge had occurred on the first day of the period;

     (2) if ChipPAC or any Restricted Subsidiary has repaid, repurchased,
  defeased or otherwise discharged any Indebtedness since the beginning of
  the period or if any Indebtedness is to be repaid, repurchased, defeased or
  otherwise discharged (in each case other than Indebtedness Incurred under
  any revolving credit facility unless the Indebtedness has been permanently
  repaid and has not been replaced) on the date of the transaction giving
  rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and
  Consolidated Interest Expense for the period shall be calculated on a pro
  forma basis as if the discharge had occurred on the first day of the period
  and as if ChipPAC or the Restricted Subsidiary has not earned the interest
  income actually earned during the period relating to cash or Temporary Cash
  Investments used to repay, repurchase, defease or otherwise discharge the
  Indebtedness;

     (3) if since the beginning of the period we or any Restricted Subsidiary
  shall have made any Asset Disposition, the EBITDA for the period shall be
  reduced by an amount equal to the EBITDA, if positive, directly
  attributable to the assets which are the subject of the Asset Disposition
  for the period, or increased by an amount equal to the EBITDA, if negative,
  directly attributable for the period and Consolidated Interest Expense for
  the period shall be reduced by an amount equal to the Consolidated Interest
  Expense directly attributable to any Indebtedness of ours or any Restricted
  Subsidiary repaid, repurchased, defeased or otherwise discharged relating
  to us and our continuing Restricted Subsidiaries in connection with the
  Asset Disposition for the period (or, if the Capital Stock of any
  Restricted Subsidiary is sold, the Consolidated Interest Expense for the
  period directly attributable to the Indebtedness of the Restricted
  Subsidiary to the extent we and our continuing Restricted Subsidiaries are
  no longer liable for the Indebtedness after the sale);

     (4) if since the beginning of the period ChipPAC or any Restricted
  Subsidiary, by merger or otherwise, shall have made an Investment in any
  Restricted Subsidiary, or any person which becomes a Restricted Subsidiary,
  or an acquisition of assets, including any acquisition of assets occurring
  in connection with a transaction requiring a calculation to be made
  hereunder, which constitutes all or substantially all of an operating unit
  of a business, EBITDA and Consolidated Interest Expense for the period
  shall be calculated after giving their pro forma effect, including the
  Incurrence of any Indebtedness, as if the Investment or acquisition
  occurred on the first day of the period; and

     (5) if since the beginning of the period any Person, that subsequently
  became a Restricted Subsidiary or was merged with or into us or any
  Restricted Subsidiary since the beginning of the period, shall have made
  any Asset Disposition, any Investment or acquisition of assets that would
  have required an adjustment under clause (3) or (4) above if made by us or
  a Restricted Subsidiary during the period, EBITDA and Consolidated Interest
  Expense for the period shall be calculated after giving their pro forma
  effect as if the Asset Disposition, Investment or acquisition occurred on
  the first day of the period.

   For purposes of this definition, whenever pro forma effect is to be given to
an acquisition or disposition of assets, the amount of income or earnings
relating to the acquisition or disposition and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in connection with,
the acquisition or disposition, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of ChipPAC and
shall include any applicable Pro Forma Cost Savings. If any Indebtedness bears
a floating rate of interest and is being given pro forma effect, the interest
of the Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period, taking into
account any Interest Rate Agreement applicable to the Indebtedness if the
Interest Rate Agreement has a remaining term in excess of 12 months.

                                      109


   "Consolidated Interest Expense" means, for any period, our total interest
expense and that of our consolidated Restricted Subsidiaries determined in
compliance with GAAP, plus, to the extent not included in total interest
expense, and to the extent incurred by us or our Restricted Subsidiaries,
without duplication:

     (1) interest expense attributable to Capital Lease Obligations and the
  interest expense attributable to leases constituting part of a
  Sale/Leaseback Transaction, in each case, determined in compliance with
  GAAP;

     (2) amortization of debt discount and debt issuance cost;

     (3) capitalized interest;

     (4) non-cash interest expenses;

     (5) commissions, discounts and other fees and charges owed relating to
  letters of credit and bankers' acceptance financing;

     (6) net costs associated with Hedging Obligations involving any Interest
  Rate Agreement, including amortization of fees, determined compliance GAAP;

     (7) dividends paid in cash or Disqualified Stock relating to (A) all
  Preferred Stock of Restricted Subsidiaries and (B) all of our Disqualified
  Stock, in each case, held by Persons other than us or a Wholly Owned
  Subsidiary;

     (8) interest actually paid by us or a Restricted Subsidiary under any
  Guarantee of Indebtedness of any other Person; and

     (9) the cash contributions to any employee stock ownership plan or
  similar trust to the extent the contributions are used by the plan or trust
  to pay interest or fees to any Person other than us in connection with
  Indebtedness Incurred by the plan or trust;

and less, to the extent included in total interest expense, (A) the
amortization during the period of capitalized financing costs associated with
the recapitalization and the financing of the recapitalization and (B) the
amortization during the period of other capitalized financing costs.

   "Consolidated Net Income" means, for any period, the net income of us and
our consolidated Subsidiaries determined in compliance with GAAP; provided,
however, that there shall not be included in the Consolidated Net Income:

     (1) any net income of any Person other than us if the Person is not a
  Restricted Subsidiary, except that (A) limited by the exclusion contained
  in clause (4) below, our equity in the net income of the Person for the
  period shall be included in Consolidated Net Income up to the aggregate
  amount of cash actually distributed by the Person during the period to us
  or a Restricted Subsidiary as a dividend or other distribution subject, in
  the case of a dividend or other distribution paid to a Restricted
  Subsidiary, to the limitations contained in clause (3) below and (B) our
  equity in a net loss of the Person for the period shall be included in
  determining the Consolidated Net Income;

     (2) any net income or loss of any Person acquired by us or a Subsidiary
  in a pooling of interests transaction for any period prior to the date of
  the acquisition;

     (3) any net income of any Restricted Subsidiary if the Restricted
  Subsidiary is restricted, directly or indirectly, in its ability to pay
  dividends or or make distributions, directly or indirectly, to us, except
  that (A) limited by the exclusion contained in clause (4) below, our equity
  in the net income of the Restricted Subsidiary for the period shall be
  included in Consolidated Net Income up to the aggregate amount of cash that
  could have been distributed by the Restricted Subsidiary consistent with
  these restrictions during the period to us or another Restricted Subsidiary
  as a dividend or other distribution subject, in the case of a dividend or
  other distribution paid to another Restricted Subsidiary, to the limitation
  contained in this clause, and (B) our equity in a net loss of any the
  Restricted Subsidiary for the period shall be included in determining
  Consolidated Net Income;

                                      110


     (4) any gain or loss realized upon the sale or other disposition of any
  of our assets or those of our consolidated Subsidiaries, including under
  any sale-and-leaseback arrangement, which is not sold or otherwise disposed
  of in the ordinary course of business and any gain or loss realized upon
  the sale or other disposition of any Capital Stock of any Person;

     (5) any extraordinary or unusual gains or losses and the related tax
  effect in compliance with GAAP;

     (6) any translation gains and losses due solely to fluctuations in
  currency values and the related tax effect in compliance with GAAP;

     (7) any cash charges resulting from the recapitalization to the extent
  the cash charges are paid or payable by Hyundai Electronics, Hyundai
  Electronics America or any of their Affiliates;

     (8) the cumulative effect of a change in accounting principles.

   Notwithstanding the provisions, for the purposes of the covenant described
under "--Significant Covenants--Limitation on Restricted Payments" only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to us or a Restricted Subsidiary to the extent the dividends, repayments or
transfers increase the amount of Restricted Payments permitted under the
covenant under clause (a)(3)(D) thereof.

   "Credit Agreement" means the Credit Agreement entered into by and among
ChipPAC International Company Limited, ChipPAC, most of its Subsidiaries, the
lenders referred to therein and Credit Suisse First Boston, as Administrative
Agent, together with the related documents, including without limitation the
term loans and revolving loans thereunder, any guarantees and security
documents, as amended, extended, renewed, restated, supplemented or otherwise
modified, in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions, from time to time, and any
agreement, and related document governing Indebtedness incurred to refund or
refinance, in whole or in part, the borrowings and commitments then
outstanding or permitted to be outstanding under the Credit Agreement or a
successor Credit Agreement, whether by the same or any other lender or group
of lenders.

   "Currency Agreement" of a Person means any foreign exchange contract,
currency swap agreement or other similar agreement to which the Person is a
party or beneficiary.

   "CVC" means Citicorp Venture Capital, Ltd.

   "Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.

   "Designated Senior Indebtedness" of any Person means:

     (1) the Bank Indebtedness of the Person, provided, however, that Bank
  Indebtedness outstanding under any Credit Agreement that is Refinanced in
  part, but not in whole, the previously outstanding Bank Indebtedness shall
  only constitute Designated Senior Indebtedness if it meets the requirements
  of succeeding clause (2); and

     (2) any other Senior Indebtedness of the Person which, at the date of
  determination, has an aggregate principal amount outstanding of, or under
  which, at the date of determination, the holders of the other Senior
  Indebtedness are committed to lend up to, at least $10.0 million and is
  specifically designated by the Person in the instrument evidencing or
  governing the Senior Indebtedness as "Designated Senior Indebtedness" for
  purposes of the indenture.

   "Disqualified Stock" of any Person means any Capital Stock which by its
terms, or by the terms of any security into which it is convertible or for
which it is exchangeable, or upon the happening of any event:

     (1) matures or is mandatorily redeemable under a sinking fund obligation
  or otherwise,

     (2) is convertible or exchangeable for Indebtedness or Disqualified
  Stock, or

     (3) is redeemable at the option of the holder of the Disqualified Stock,
  in whole or in part, in each case on or prior to the first anniversary of
  the Stated Maturity of the exchange notes;

                                      111


provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions giving its holders the right to require
the Person to repurchase or redeem the Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the exchange notes shall not constitute Disqualified
Stock if the "asset sale" or "change of control" provisions applicable to the
Capital Stock are not more favorable to the holders of the Capital Stock than
the provisions described under "--Change of Control" and under "--Significant
Covenants--Limitation on Sales of Assets and Subsidiary Stock." Notwithstanding
these provisions, the Intel Preferred Stock as in effect on the date of
issuance will not be considered to be Disqualified Stock.

   "EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following in the amount deducted in
calculating Consolidated Net Income, without duplication:

     (1) all income tax expense of ours and our consolidated Restricted
  Subsidiaries;

     (2) depreciation expense of ours and our consolidated Restricted
  Subsidiaries;

     (3) amortization expense of ours and our consolidated Restricted
  Subsidiaries, excluding amortization expense other than the amortization of
  capitalized financing costs, attributable to a prepaid cash item that was
  paid in a prior period; and

     (4) all other non-cash charges of ours and our consolidated Restricted
  Subsidiaries, excluding any the non-cash charge in the amount that it
  represents an accrual of or reserve for cash expenditures in any future
  period;

in each case for the period. Notwithstanding these provisions, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only in an amount that and in the
same proportion that the net income of the Restricted Subsidiary was included
in calculating Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to us by the
Restricted Subsidiary without prior approval that has not been obtained, under
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to the
Restricted Subsidiary or its stockholders.

   "Equity Offering" means a primary offering of our Capital Stock other than
Disqualified Stock.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those provided in:

     (1) the opinions and pronouncements of the Accounting Principles Board
  of the American Institute of Certified Public Accountants,

     (2) statements and pronouncements of the Financial Accounting Standards
  Board and

     (3) other statements by other entities as approved by a significant
  segment of the accounting profession.

   All ratios and computations based on GAAP contained in the indenture shall
be computed in conformity with GAAP.

   "Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of the Person:

     (1) to purchase or pay or advance or supply funds for the purchase or
  payment of the Indebtedness or other obligation of the Person, whether
  arising by virtue of partnership arrangements, or by agreements to keep-
  well, to purchase assets, goods, securities or services, to take-or-pay or
  to maintain financial statement conditions or otherwise or

     (2) entered into for the purpose of assuring in any other manner the
  obligee of the Indebtedness of the payment of the Indebtedness or to
  protect the obligee against loss of the Indebtedness in whole or in part;

                                      112


provided, however, that the term "Guarantee" shall not include endorsements
for collection or deposit or standard contractual indemnities, in each case,
in the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

   "Guaranty" means the Company Guaranty and each Subsidiary Guaranty, as
applicable.

   "Guaranty Agreement" means a supplemental indenture, in a form reasonably
satisfactory to the trustee, providing for a Guaranty by a Subsidiary
Guarantor.

   "Hedging Obligations" of any Person means the obligations of the Person
under any Interest Rate Agreement or Currency Agreement.

   "holder" or "noteholder" means the Person in whose name a note is
registered on the Registrar's books.

   "Hyundai Earn-out" means the cash payment to Hyundai Electronics of up to
an additional $55.0 million during the four-year period following January 1,
1999 in the event we exceed levels of EBITDA specified in the Recapitalization
Agreement; provided, however, in the event the final $20.0 million of the
$55.0 million in cash is required to be paid to Hyundai Electronics, it shall
be paid by the mandatory redemption of an equal amount of Hyundai Preferred
Stock.

   "Hyundai Electronics" means Hyundai Electronics Industries Company Ltd., a
Republic of Korea corporation.

   "Hyundai Preferred Stock" means the 12.5% mandatorily redeemable Preferred
Stock issued to Hyundai Electronics and/or Hyundai Electronics America in
connection with the recapitalization.

   "Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time the Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) will be considered to be Incurred by
the Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when
used as a noun shall have a correlative meaning. The accretion of principal of
a non-interest bearing or other discount security, and the issuance as
interest or dividend payments of pay-in-kind securities having identical terms
to the underlying security and which pay-in-kind securities were contemplated
on the issue date of the underlying security, in each case shall not be deemed
the Incurrence of Indebtedness.

   "Indebtedness" of any Person on any date of determination means, without
duplication:

     (1) the principal of and premium, if any, of (A) indebtedness of the
  Person for money borrowed and (B) indebtedness evidenced by exchange notes,
  debentures, bonds or other similar instruments for the payment of which the
  Person is responsible or liable;

     (2) all Capital Lease Obligations of the Person and all Attributable
  Debt of Sale/Leaseback Transactions entered into by the Person;

     (3) all obligations of the Person issued or assumed as the deferred
  purchase price of property, all conditional sale obligations of the Person
  and all obligations of the Person under any title retention agreement, but
  excluding trade accounts and accrued expenses payable arising in the
  ordinary course of business;

      (4) all obligations of the Person for the reimbursement of any obligor
  on any letter of credit, banker's acceptance or similar credit transaction,
  other than obligations under letters of credit securing obligations, other
  than obligations described in clauses (1) through (3) above, entered into
  in the ordinary course of business of the Person to the extent the letters
  of credit are not drawn upon or, if and to the extent drawn upon, the
  drawing is reimbursed no later than the tenth Business Day following
  payment on the letter of credit;

                                      113


     (5) the amount of all obligations of the Person relating to the
  redemption, repayment or other repurchase of any Disqualified Stock or,
  relating to any Subsidiary of the Person, the liquidation preference
  relating to, any Preferred Stock, but excluding, in each case, any accrued
  dividends;

     (6) all obligations of the type referred to in clauses (1) through (5)
  of other Persons and all dividends of other Persons for the payment of
  which, in either case, the Person is responsible or liable, directly or
  indirectly, as obligor, guarantor or otherwise, including by means of any
  Guarantee;

     (7) all obligations of the type referred to in clauses (1) through (6)
  of other Persons secured by any Lien on any property or asset of the
  Person, whether or not the obligation is assumed by the Person, the amount
  of the obligation being deemed to be the lesser of the value of the
  property or assets or the amount of the obligation so secured; and

     (8) to the extent not otherwise included in this definition, Hedging
  Obligations of the Person.

The amount of Indebtedness of any Person at any date shall be the outstanding
balance at the date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at the date; provided, however, that
the amount outstanding at any time of any Indebtedness issued with original
issue discount will be considered to be the face amount of the Indebtedness
less the remaining unamortized portion of the original issue discount of the
indebtedness at the time as determined in compliance with GAAP.

   "Intel" means Intel Corporation.

   "Intel Preferred Stock" means the 10.0% convertible Preferred Stock issuable
to Intel under to the Stock Purchase Agreement dated August 5, 1999 by and
between Intel and ChipPAC, Inc.

   "Interest Rate Agreement" of a Person means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Person against fluctuations in interest
rates.

   "Investment" by any Person means all investments by the Person in other
Persons in the forms of any direct or indirect advance, loan other than (A)
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the lender and (B) commission,
travel and similar advances to officers and employees made in the ordinary
course of business, or other extensions of credit, including by way of
Guarantee or similar arrangement, or capital contribution to, by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others, or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by the other
Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and the covenant described under "--
Significant Covenants--Limitation on Restricted Payments:"

     (1) "Investment" shall include the portion, proportionate to our equity
  interest in the Subsidiary, of the fair market value of the net assets of
  any Subsidiary of our at the time that the Subsidiary is designated an
  Unrestricted Subsidiary; provided, however, that upon a redesignation of
  the Subsidiary as a Restricted Subsidiary, we will be considered to
  continue to have a permanent "Investment" in an Unrestricted Subsidiary
  equal to an amount, if positive, equal to (x) our "Investment" in the
  Subsidiary at the time of the redesignation less (y) the portion,
  proportionate to our equity interest in the Subsidiary, of the fair market
  value of the net assets of the Subsidiary at the time of the redesignation;
  and

     (2) any property transferred to or from an Unrestricted Subsidiary shall
  be valued at its fair market value at the time of the transfer, in each
  case as determined in good faith by the Board of Directors.

   "Issue Date" means the date on which the exchange notes are originally
issued.

   "Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any conditional sale or other title retention
agreement or lease in the nature thereof.


                                      114


   "Net Available Cash" from an Asset Disposition means cash payments received
from the Asset Disposition, including any cash payments received by way of
deferred payment of principal under a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to the properties or assets or
received in any other non-cash form, in each case net of:

     (1) all legal, title and recording tax expenses, commissions and other
  fees and expenses incurred, and all Federal, state, provincial, foreign and
  local taxes required to be accrued as a liability under GAAP, as a
  consequence of the Asset Disposition;

     (2) all payments made on any Indebtedness which is secured by any assets
  that are part of the Asset Disposition, in compliance with the terms of any
  Lien upon or other security agreement of any kind relating to the assets,
  or which must by its terms, or in order to obtain a necessary consent to
  the Asset Disposition, or by applicable law be, repaid out of the proceeds
  from the Asset Disposition;

     (3) all distributions and other payments required to be made to minority
  interest holders in Subsidiaries or joint ventures as a result of the Asset
  Disposition; and

     (4) the deduction of appropriate amounts provided by the seller as a
  reserve, in compliance with GAAP, against any liabilities associated with
  the property or other assets disposed in the Asset Disposition and retained
  by the Company or any Restricted Subsidiary after the Asset Disposition.

   "Net Cash Proceeds" relating to any issuance or sale of Capital Stock, means
the cash proceeds of the issuance or sale net of attorneys' fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees actually incurred in connection with the
issuance or sale and net of taxes paid or payable as a result the issuance or
sale and any reserve for adjustment in the sale price of the asset or assets
established in compliance with GAAP.

   "Obligations" means relating to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable under the documentation governing the
Indebtedness.

   "Permitted Holders" means the Principals and any Related Party of a
Principal and (2) any group of investors if deemed to be a "person," as these
terms is used in Section 13(d)(3) of the Exchange Act by virtue of the
Shareholders Agreement, as it may be amended, modified or supplemented from
time to time, provided that

     (1) a Principal is party to the Shareholders Agreement,

     (2) the persons party to the Shareholders Agreement, as so amended,
  supplemented or modified from time to time that were not parties and are
  not Affiliates of persons who were parties, to the Shareholders Agreement
  as of the Recapitalization Closing Date, together with their respective
  Affiliates whom we refer to as, collectively, the "New Investors," are not
  direct or indirect beneficial owners, determined without reference to the
  Shareholders Agreement, of more than 50% of the Voting Stock owned by all
  parties to the Stockholders' Agreement as so amended, supplemented or
  modified, and

     (3) the New Investors, individually or in the aggregate, do not,
  directly or indirectly, have the right, under the Shareholders Agreement,
  as so amended, supplemented or modified from time to time, or otherwise to
  designate more than 50% of the members of our Board of Directors or any
  direct or indirect parent entity of ours.

   "Permitted Investment" means an Investment by us or any Restricted
Subsidiary in:

     (1) a Restricted Subsidiary or a Person that will, upon the making of
  the Investment, become a Restricted Subsidiary; provided, however, that the
  primary business of the Restricted Subsidiary is a Related Business;

                                      115


     (2) another Person if as a result of the Investment the other Person is
  merged or consolidated with or into, or transfers or conveys all or
  substantially all its assets to, us or a Restricted Subsidiary; provided,
  however, that the Person's primary business is a Related Business;

     (3) Temporary Cash Investments;

     (4) receivables owing to us or any Restricted Subsidiary if created or
  acquired in the ordinary course of business and payable or dischargeable
  compliance customary trade terms; provided, however, that the trade terms
  may include the concessionaire trade terms as ChipPAC or the Restricted
  Subsidiary deems reasonable under the circumstances;

     (5) payroll, travel and similar advances to cover matters that are
  expected at the time of the advances ultimately to be treated as expenses
  for accounting purposes and that are made in the ordinary course of
  business;

     (6) loans or advances to employees, directors, officers or consultants
  made in the ordinary course of our business or that of the Restricted
  Subsidiary;

     (7) stock, obligations or securities received in settlement of debts
  created in the ordinary course of business and owing to us or any
  Restricted Subsidiary or in satisfaction of judgments;

     (8) any Person to the extent the Investment represents the non-cash
  portion of the consideration received for an Asset Disposition as permitted
  under the covenant described under "Significant Covenants--Limitation on
  Sales of Assets and Subsidiary Stock;"

     (9) Currency Agreements and Interest Rate Agreements entered into in the
  ordinary course of our business and otherwise in compliance with the
  indenture; and

     (10) so long as no Default shall have occurred and be continuing or
  results from the Investment, any Person in an aggregate amount which, when
  added together with the amount of all the Investments made under this
  clause (10) which at the time of the Investment have not been repaid
  through repayments of loans or advances or other transfers of assets, does
  not exceed the greater of (A) $30.0 million and (B) 7.5% of Total Assets,
  with the fair market value of each Investment being measured at the time
  made and without giving effect to subsequent changes in value.

   "Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

   "Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes however designated which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of the
Person, over shares of Capital Stock of any other class of the Person.

   "principal" of a note means the principal of the note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.

   "Principal" means Bain and SXI Holders.

   "Pro Forma Cost Savings" during any period means the reduction in costs that
were

     (1) directly attributable to an asset acquisition and calculated on a
  basis that is consistent with Regulation S-X under the Securities Act in
  effect and applied as of the Issue Date, or

     (2) implemented by the business that was the subject of the asset
  acquisition within six months of the date of the asset acquisition and that
  are supportable and quantifiable by the underlying accounting records of
  the business,

as if, in the case of each of clause (1) and (2), all the reductions in costs
had been effected as of the beginning of the period.

                                      116


   "Recapitalization" means the plan of recapitalization and merger under the
Agreement and Plan of Recapitalization and Merger dated as of March 13, 1999 as
amended on or prior to the Issue Date, among Hyundai Electronics Industries
Co., Ltd., Hyundai Electronics America, ChipPAC, Inc. and ChipPAC Merger Corp.

   "Recapitalization Closing Date" means August 5, 1999.

   "Refinance" of any Indebtedness means to refinance, extend, renew, refund,
repay, prepay, redeem, defease or retire, or to issue other Indebtedness in
exchange or replacement for, the indebtedness. "Refinanced" and "Refinancing"
shall have correlative meanings.

   "Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of ours or any Restricted Subsidiary existing on the Issue Date or
Incurred in compliance with the indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that

     (1) the Refinancing Indebtedness has a Stated Maturity no earlier than
  the Stated Maturity of the Indebtedness being Refinanced,

     (2) the Refinancing Indebtedness has an Average Life at the time the
  Refinancing Indebtedness is Incurred that is equal to or greater than the
  Average Life of the Indebtedness being Refinanced; and

     (3) the Refinancing Indebtedness has an aggregate principal amount, or
  if Incurred with original issue discount, an aggregate issue price, that is
  equal to or less than the aggregate principal amount, or if Incurred with
  original issue discount, the aggregate accreted value, then outstanding or
  committed, plus fees and expenses, including any premium and defeasance
  costs, under the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary that Refinances Indebtedness of ours or (y)
Indebtedness of ours or a Restricted Subsidiary that Refinances Indebtedness of
an Unrestricted Subsidiary.

   "Related Business" means any business related, ancillary or complementary to
our businesses and those of our Restricted Subsidiaries on the Issue Date.

   "Related Party" of any Principal means:

     (1) any controlling stockholder, or 80% or more owned Subsidiary of the
  Principal;

     (2) any trust, corporation, partnership or other entity, the
  beneficiaries, stockholders, partners, owners or Persons beneficially
  holding an 80% or more controlling interest of which consist of the
  Principal and/or the other Persons referred to in the immediately preceding
  clause (1); or

     (3) any Affiliate of any Principal.

   "Representative" means any trustee, agent or representative, if any, for an
issue of our Senior Indebtedness; provided, however, that if and for so long as
any Senior Indebtedness lacks the representative, then the Representative for
the Senior Indebtedness shall at all times be the holders of a majority in
outstanding principal amount of the Senior Indebtedness.

   "Restricted Payment" of any Person means:

     (1) the declaration or payment of any dividends or any other
  distributions of any sort relating to its Capital Stock, including any
  payment in connection with any merger or consolidation involving the
  Person, or similar payment to the direct or indirect holders of its Capital
  Stock in their capacity as other than dividends or distributions payable
  solely in its Capital Stock other than Disqualified Stock, and dividends or
  distributions payable solely to us or a Restricted Subsidiary, and other
  than pro rata dividends or other distributions made by a Subsidiary that is
  not a Wholly Owned Subsidiary to minority stockholders or owners of an
  equivalent interest in the case of a Subsidiary that is an entity other
  than a corporation;

                                      117


     (2) the purchase, redemption or other acquisition or retirement for
  value of any of our Capital Stock held by any Person or of any Capital
  Stock of a Restricted Subsidiary held by any Affiliate of ours other than a
  Restricted Subsidiary, including the exercise of any option to exchange any
  Capital Stock, other than into our Capital Stock that is not Disqualified
  Stock;

     (3) the purchase, repurchase, redemption, defeasance or other
  acquisition or retirement for value, prior to scheduled maturity, scheduled
  repayment or scheduled sinking fund payment of any Subordinated
  Obligations, other than the purchase, repurchase or other acquisition of
  Subordinated Obligations purchased in anticipation of satisfying a sinking
  fund obligation, principal installment or final maturity, in each case due
  within one year of the date of acquisition; or

     (4) the making of any Investment in any Person other than a Permitted
  Investment.

   In determining the amount of any Restricted Payment made in property other
than cash, the amount shall be the fair market value of the property at the
time of the Restricted Payment, as determined in good faith by the Board of
Directors.

   "Restricted Subsidiary" means any Subsidiary of ours, including ChipPAC
International Company Limited, that is not an Unrestricted Subsidiary.

   "Revolving Credit Facility" means the revolving credit facility contained in
the Credit Agreement and any other facility or financing arrangement that
Refinances or replaces, in whole or in part, the revolving credit facility.

   "Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby ChipPAC or a Restricted Subsidiary
transfers the property to a Person and ChipPAC or a Restricted Subsidiary
leases it from the Person.

   "SEC" means the Securities and Exchange Commission.

   "Secured Indebtedness" means any Indebtedness of ours secured by a Lien.

   "Senior Indebtedness" of any Person means all:

     (1) Bank Indebtedness of or guaranteed by the Person, whether
  outstanding on the Issue Date or thereafter Incurred, and

     (2) Indebtedness of the Person, whether outstanding on the Issue Date or
  thereafter Incurred, including interest thereon, relating to (A)
  Indebtedness for money borrowed, (B) Indebtedness evidenced by exchange
  notes, debentures, bonds or other similar instruments for the payment of
  which the Person is responsible or liable and (C) Hedging Obligations,
  unless, in the case of (1) and (2), in the instrument creating or
  evidencing the Indebtedness, it is provided that the obligations are
  subordinate in right of payment to the obligations under the exchange
  notes;

   provided, however, that Senior Indebtedness shall not include:

    . any obligation of the Person to any subsidiary of the Person,

    . any liability for Federal, state, local or other taxes owed or owing
      by the Person,

    . any accounts payable or other liability to trade creditors arising in
      the ordinary course of business, including guarantees thereof or
      instruments evidencing the liabilities,

    . any Indebtedness of the Person, and any accrued and unpaid interest
      on the Indebtedness, which is subordinate or junior by its terms to
      any other Indebtedness or other obligation of the Person, or

    . that portion of any Indebtedness which at the time of Incurrence is
      Incurred in violation of the indenture, but as to any the
      Indebtedness under the Credit Agreement, no the violation will be
      considered to exist if the Representative of the Lenders thereunder
      shall have received an officers' certificate of ChipPAC that the
      issuance of the Indebtedness does not violate the covenant and
      setting forth in reasonable detail the reasons supporting that
      statement.

                                      118


   "Senior Subordinated Indebtedness" means:

     (1) regarding ChipPAC International Company Limited, the exchange notes
  and any other Indebtedness of ChipPAC International Company Limited that
  specifically provides that the Indebtedness is to rank pari passu with the
  exchange notes in right of payment and is not subordinated by its terms in
  right of payment to any Indebtedness or other obligation of ChipPAC
  International Company Limited which is not Senior Indebtedness of ChipPAC
  International Company Limited; and

     (2) regarding ChipPAC or a Subsidiary Guarantor, their respective
  Guarantees of the exchange notes and any other Indebtedness of the Person
  that specifically provides that the Indebtedness ranks pari passu with the
  Guaranty in right of payment and is not subordinated by its terms in right
  of payment to any Indebtedness or other obligation of the Person which is
  not Senior Indebtedness of the Person.

   "Shareholders Agreement" means the Shareholders Agreement entered into on
the Recapitalization Closing Date by and among Hyundai Electronics, Hyundai
Electronics America, SXI Group LLC, Bain Related Parties specified in the
agreement and ChipPAC, Inc.

   "Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of ours within the meaning of Rule 1-02 under
Regulation S-X of the SEC.

   "Stated Maturity" of any security means the date specified in the security
as the fixed date on which the final payment of principal of the security is
due and payable, including under any mandatory redemption provision, but
excluding any provision providing for the repurchase of the security at the
option of the holder upon the happening of any contingency unless the
contingency has occurred.

   "Subordinated Obligation" means any Indebtedness of ChipPAC International
Company Limited, of us or any Subsidiary Guarantor, whether outstanding on the
Issue Date or thereafter Incurred, which is subordinate or junior in right of
payment to, in the case of ChipPAC International Company Limited, the exchange
notes or, in the case of ChipPAC or the Subsidiary Guarantor, its Guaranty,
under a written agreement to that effect.

   "Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests, including partnership interests,
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees is at the time owned or controlled,
directly or indirectly, by (1) the Person, (2) the Person and one or more
Subsidiaries of the Person or (3) one or more Subsidiaries of the Person.

   "Subsidiary Guarantor" means each of ChipPAC (Barbados) Ltd., ChipPAC
Limited, ChipPAC Korea Company Ltd., ChipPAC Luxembourg S.a.R.L. and ChipPAC
Liquidity Management Hungary Limited Liability Company and any other subsidiary
of ours that Guarantees ChipPAC International Company Limited's obligations
under the exchange notes.

   "Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the
Issuer's obligations under the exchange notes.

   "Subsidiary Guaranty Agreement" means the Subsidiary Guaranty Agreement
dated the Recapitalization Closing Date between the Subsidiary Guarantors and
ChipPAC International Company Limited.

   "SXI Group LLC" means SXI Group LLC, a Delaware limited liability company.

   "SXI Holders" means:

     (1) CVC,

     (2) SXI Group LLC, and

     (3) any officer, employee or director of CVC or any trust, partnership
  or the entity established solely for the benefit of the officers, employers
  or directors.

                                      119


   "Temporary Cash Investments" means any of the following:

     (1) any evidence of indebtedness, maturing not more than one year after
  the date of investment by us, ChipPAC International Company Limited or any
  other Restricted Subsidiary, issued by the United States of America or any
  of its instrumentality agencies or by the Republic of Korea or any of its
  instrumentalities or agencies, or by the Asian Development Bank, the World
  Bank or any other supranational organization, which we refer to as the
  "Government Entities," and guaranteed or otherwise backed, directly or
  indirectly fully as to principal, premium, if any, and interest, by the
  Government Entity issuing the indebtedness;

     (2) investments in time deposit accounts, certificates of deposit and
  money market deposits maturing within 180 days of the date of the
  investments' acquisition issued by a bank or trust company which is
  organized under the laws of the United States of America, any state of the
  United States or any foreign country recognized by the United States, and
  which bank or trust company has capital, surplus and undivided profits
  aggregating in excess of $250.0 million, or the foreign currency equivalent
  thereof, and has outstanding debt which is rated "A," or a similar
  equivalent rating, or higher by at least one nationally recognized
  statistical rating organization, as defined in Rule 436 under the
  Securities Act, or any money-market fund sponsored by a registered broker
  dealer or mutual fund distributor;

     (3) repurchase obligations with a term of not more than 30 days for
  underlying securities of the types described in clause (1) above entered
  into with a bank meeting the qualifications described in clause (2) above;

     (4) investments in commercial paper, maturing not more than 90 days
  after the date of acquisition, issued by a corporation, other than an
  Affiliate of ours, organized and in existence under the laws of the United
  States of America or any foreign country recognized by the United States of
  America with a rating at the time as of which any investment therein is
  made of "P-1" or higher according to Moody's Investors Service, Inc. or "A-
  1" or higher according to Standard and Poor's Ratings Group; and

     (5) investments in securities with maturities of six months or less from
  the date of acquisition issued or fully guaranteed by any state,
  commonwealth or territory of the United States of America, or by any
  political subdivision or taxing authority of the United States, and rated
  at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors
  Service, Inc.

   "Term Loan Facilities" means the term loan facilities contained in the
Credit Agreement and any other facility or financing arrangement that
Refinances in whole or in part the term loan facility.

   "Total Assets" means our total consolidated assets and those of our
Restricted Subsidiaries, as provided in our most recent consolidated balance
sheet.

   "Unrestricted Subsidiary" means (1) any Subsidiary of ours that at the time
of determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (2) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
ours, including any newly acquired or newly formed Subsidiary, to be an
Unrestricted Subsidiary unless the Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of,
ChipPAC or any other Subsidiary of ChipPAC that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if the
Subsidiary has assets greater than $1,000, the designation would be permitted
under the covenant described under "--Significant Covenants--Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to the designation (x) we could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Significant
Covenants--Limitation on Indebtedness" and (y) no Default shall have occurred
and be continuing. The designation by the Board of Directors shall be evidenced
to the trustee by promptly filing with the trustee a copy of the resolution of
the Board of Directors giving effect to the designation and an Officers'
Certificate certifying that the designation complied with these provisions.


                                      120


   "U.S. Dollar Equivalent" of any monetary amount in a currency other than
U.S. dollars means, at any time for determination thereof, the amount of U.S.
dollars obtained by converting the foreign currency involved in the computation
into U.S. dollars at the spot rate for the purchase of U.S. dollars with the
applicable foreign currency as published in The Wall Street Journal in the
"Exchange Rates" column under the heading "Currency Trading" on the date two
Business Days prior to the determination.

   Except as described under "--Significant Covenants--Limitation on
Indebtedness," whenever it is necessary to determine whether we have complied
with any covenant in the indenture or a Default has occurred and an amount is
expressed in a currency other than U.S. dollars, the amount will be treated as
the U.S. Dollar Equivalent determined as of the date the amount is initially
determined in the currency.

   "U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in the obligations, of the United States of
America, including any agency or instrumentality of the United States, for the
payment of which the full faith and credit of the United States of America is
pledged and which are not callable at the issuer's option.

   "Voting Stock" of a Person means all classes of Capital Stock or other
interests, including partnership interests, of the Person then outstanding and
normally entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers or trustees.

   "Wholly Owned Subsidiary" means a Restricted Subsidiary the Capital Stock of
which (other than directors' qualifying shares) is at least 95% owned by us or
one or more Wholly Owned Subsidiaries.

                        MATERIAL INCOME TAX CONSEQUENCES

United States Federal Income Taxation

   The following discussion, including the opinion of counsel described below,
is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. The Internal Revenue Service may take a contrary view,
and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the following statements and conditions. Any changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Holders, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States, may be covered
by special rules not discussed below. We recommend that each holder consult his
own tax advisor as to the particular tax consequences of exchanging outstanding
notes for exchange notes, including the applicability and effect of any state,
local or foreign tax laws.

   Kirkland & Ellis, U.S. counsel to ChipPAC International Company Limited, has
advised us that in its opinion, the exchange of the outstanding notes for
exchange notes in this exchange offer will not be treated as an "exchange" for
federal income tax purposes because the exchange notes will not be considered
to differ materially in kind or extent from the outstanding notes. Rather, the
exchange notes received by a holder will be treated as a continuation of the
outstanding notes in the hands of that holder. As a result, there will be no
federal income tax consequences to holders exchanging outstanding notes for
exchange notes.

British Virgin Islands Taxation

   The following discussion is based upon the Income Tax Ordinance (Cap. 206),
as amended, the International Business Companies Act (Cap. 291), as amended,
and related administrative and judicial interpretations all as of the date
hereof and all of which may change, possibly on a retroactive basis.

   In general, there is no British Virgin Islands income, corporation or
profits tax, withholding tax, capital gains tax, or capital transfer tax
payable by Holders of the exchange notes other than Holders ordinarily resident
in the British Virgin Islands. No British Virgin Islands stamp or similar duty
applies to the exchange notes and the documents related to their issue,
transfer or redemption.

                                      121


                              PLAN OF DISTRIBUTION

   Each broker-dealer that receives exchange notes for its own account in this
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the resale of exchange notes received in exchange for outstanding notes
where outstanding notes were acquired as a result of market-making activities
or other trading activities. We have agreed that for a period of 180 days from
the consummation of the exchange offer, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any resale. In addition, until 90 days after the commencement of the
exchange offer, all dealer effecting transactions in the exchange notes may be
required to delivery a prospectus.

   We will not receive any proceeds from any sales of the exchange notes by
broker dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes or a combination of methods of resale, at
market prices prevailing at the time of resale, at prices related to prevailing
market prices or negotiated prices. Any resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any broker-dealer and/or the
purchasers of any exchange notes. Any broker-dealer that resells the exchange
notes that were received by it for its own account in the exchange offer and
any broker or dealer that participates in a distribution of exchange notes may
be deemed to be an "underwriter" as defined in the Securities Act and any
profit on any resale of exchange notes and any commissions or concessions
received by any persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" as defined in the Securities Act.

   For a period of 180 days after the Expiration Date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests those documents in the Letter of
Transmittal.

                                      122


                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 relating to the exchange
notes offered in this prospectus. This prospectus, which forms part of the
registration statement, does not contain all of the information that is
included in the registration statement. You will find additional information
about our company, the subsidiary guarantors and the exchange notes in the
registration statement. Any statements made in this prospectus concerning the
provisions of legal documents are not necessarily complete and you should read
the documents that are filed as exhibits to the registration statement for a
more complete understanding of the document or matter.

   After the registration statement becomes effective, we will have to comply
with the informational requirements of the Exchange Act of 1934, and will file
periodic reports, registration statements and other information with the SEC.
You may read and copy the registration statement and any of the other documents
we file with the SEC at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the SEC's regional offices located at 7 World Trade Center, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms. In addition, reports and other
filings are available to the public on the SEC's web site at
http://www.sec.gov.

   If for any reason we are not covered by the reporting requirements of the
Securities Exchange Act of 1934 in the future, we will still be required under
the indenture governing the notes to furnish the holders of those notes with
financial and reporting information. See "Description of the Exchange Notes--
Covenants--Reports" for a description of the information we are required to
provide.

                                 LEGAL MATTERS

   Legal matters with regard to the validity of the exchange notes will be
passed upon for us by Kirkland & Ellis (a partnership including professional
corporations), Chicago, Illinois. Partners of Kirkland & Ellis are partners in
Randolph Street Partners, which acquired less than 1.0% of our common stock in
connection with the closing of the recapitalization. Kirkland & Ellis has, from
time to time, represented, and may continue to represent, Bain Capital and of
its affiliates (including ChipPAC and its direct and indirect subsidiaries) in
connection with legal matters.

                                    EXPERTS

   The financial statements as of December 31, 1999, 1998, and 1997, and for
each of the four years in the period ended December 31, 1999 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.


                                      123


                         Index to Financial Statements



                                                                           Page
                                                                           ----
                                                                        
(1)Financial Statements

  Report of Independent Accountants.......................................  F-2

  Balance Sheets..........................................................  F-3

  Statements of Operations................................................  F-4

  Statement of Shareholders' and Divisional Equity........................  F-5

  Statements of Cash Flows................................................  F-6

  Notes to Financial Statements...........................................  F-7

(2)Financial Statements Schedule

  Valuation and Qualifying Accounts and Reserves-- Allowance for Doubtful
   Accounts............................................................... II-8


                                      F-1


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Boards of Directors and Shareholders of ChipPAC, Inc.

   In our opinion, the financial statements listed in the index under item (1)
and (2) on page F-1 present fairly, in all material respects, the financial
position of ChipPAC, Inc. and its subsidiaries at December 31, 1997, 1998, and
1999, and the results of their operations and their cash flows for each of the
four years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 of these statements in accordance with auditing standards
generally accepted in the United States which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

February 29, 2000
San Jose, California

                                      F-2


                                 ChipPAC, Inc.

                                 BALANCE SHEETS

                                 (In thousands)



                                                         December 31,
                                                  -----------------------------
                                                    1997      1998      1999
                                                  --------  --------  ---------
                     ASSETS
                     ------
                                                             
Current assets:
  Cash and cash equivalents.....................  $  3,067  $ 68,767  $  32,117
  Receivable from shareholder...................       --      4,922     11,662
  Accounts receivable, less allowance for
   doubtful accounts of $375, $1,162 and $1,196.    30,156    37,729     30,003
  Inventories...................................    14,149    10,325     17,497
  Deferred taxes................................     4,193       803       775
  Prepaid expenses and other current assets.....       957     2,923      2,386
                                                  --------  --------  ---------
   Total current assets.........................    52,522   125,469     94,440
Property, plant and equipment, net..............   170,226   229,002    226,931
Other assets....................................    10,493     5,001     22,058
                                                  --------  --------  ---------
   Total assets.................................  $233,241  $359,472  $ 343,429
                                                  ========  ========  =========

             LIABILITIES AND EQUITY
             ----------------------
                                                             
Current liabilities:
  Accounts payable..............................  $ 17,468  $ 61,853  $  52,208
  Accrued expenses and other liabilities........     5,824     7,677     27,208
  Short-term debt...............................    34,479    18,777        --
  Current portion of long-term debt.............    13,256    31,954      4,800
  Current portion of HEI long-term debt.........     4,473     2,610        --
  Payables to affiliates........................     6,659    22,918        --
                                                  --------  --------  ---------
   Total current liabilities....................    82,159   145,789     84,216
                                                  --------  --------  ---------
Long-term debt, less current portion............   116,694    80,943    295,200
HEI long-term debt, less current portion........    17,987    18,208        --
Deferred taxes..................................       --        --         240
Other long-term liabilities.....................     6,929     1,341      3,689
                                                  --------  --------  ---------
   Total liabilities............................   223,769   246,281    383,345
                                                  --------  --------  ---------
Commitments and contingencies (Note 9)
Mandatorily redeemable preferred stock:
  10.0% cumulative convertible preferred stock,
   class A--par value $0.01 per share; 10,000
   shares authorized, issued and outstanding at
   December 31, 1999............................       --        --       9,416
  12.5% cumulative preferred stock, class B--par
   value $0.01 per share; 105,000 shares
   authorized, issued and outstanding 70,000
   shares at December 31, 1999..................       --        --      73,554
Shareholders' and divisional equity (deficit):
  Common stock, class A--par value $0.01 per
   share; 180,000,000 shares authorized, issued
   and outstanding 96,254,000 shares at December
   31, 1999.....................................       --        --         963
  Common stock, class B--par value $0.01 per
   share; authorized 180,000,000 shares, no
   shares issued or outstanding at December 31,
   1999.........................................       --        --         --
  Common stock, class L--par value $0.01 per
   share; 20,000,000 shares authorized, issued
   and outstanding 10,456,000 shares at December
   31, 1999.....................................       --        --         104
  Warrants, Class A Common Stock (the Intel
   Warrant).....................................       --        --       1,250
  Additional paid-in-capital....................       --        --      85,750
  Divisional equity, net of capital redemption..    97,075   180,091   (167,714)
  Receivable for shareholders...................    (7,466)  (37,626)    (1,128)
  Accumulated deficit...........................   (62,354)  (39,752)   (51,280)
  Accumulated other comprehensive income (loss).   (17,783)   10,478      9,169
                                                  --------  --------  ---------
   Total shareholders' and divisional equity
    (deficit)...................................     9,472   113,191   (122,886)
                                                  --------  --------  ---------
   Total liabilities, mandatorily redeemable
    preferred stock, and equity.................  $233,241  $359,472  $ 343,429
                                                  ========  ========  =========


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

                                      F-3


                                 ChipPAC, Inc.


                            STATEMENTS OF OPERATIONS

                                 (In thousands)



                                              Year Ended December 31,
                                        --------------------------------------
                                          1996      1997      1998      1999
                                        --------  --------  --------  --------
                                                          
Revenue................................ $191,655  $289,429  $334,081  $375,530
Cost of revenue........................  166,665   229,238   270,365   317,488
                                        --------  --------  --------  --------
Gross profit...........................   24,990    60,191    63,716    58,042
Operating expenses:
  Selling, general & administrative....   11,431    15,853    15,067    21,219
  Research & development...............    2,617     4,052     7,692    12,362
  Management fees charged by affiliate.    3,322     3,199       528       --
  Change of control expense............      --        --        --     11,842
  Write down of impaired assets........      --     11,569       --        --
                                        --------  --------  --------  --------
    Total operating expenses...........   17,370    34,673    23,287    45,423
                                        --------  --------  --------  --------
Operating income.......................    7,620    25,518    40,429    12,619
Non-operating income (expenses):
  Interest income......................      108        96     1,276     2,751
  Interest expense.....................   (5,780)  (10,972)  (13,340)  (21,241)
  Foreign currency gains (losses)......   (5,041)  (69,669)   24,670     1,224
  Other income (expenses), net.........      351      (762)     (168)      650
                                        --------  --------  --------  --------
    Non-operating income (expenses)....  (10,362)  (81,307)   12,438   (16,616)
                                        --------  --------  --------  --------
Income (loss) before income taxes......   (2,742)  (55,789)   52,867    (3,997)
Provision for (benefit from) income
 taxes.................................    2,883    (9,671)   20,564     1,938
                                        --------  --------  --------  --------
Income (loss) before extraordinary
 item.................................. $ (5,625) $(46,118) $ 32,303  $ (5,935)
                                        --------  --------  --------  --------
Extraordinary Item
  Loss from early extinguishment of
   debt, net of related income tax
   benefit of $272.....................      --        --        --      1,373
                                        --------  --------  --------  --------
Net income (loss)...................... $ (5,625) $(46,118) $ 32,303  $ (7,308)
                                        --------  --------  --------  --------
Accretion of dividends on mandatorily
 redeemable preferred stock............      --        --        --     (3,960)
Accretion of recorded value of the
 Intel warrant.........................      --        --        --       (260)
                                        --------  --------  --------  --------
Net income (loss) available to common
 shareholders.......................... $ (5,625) $(46,118) $ 32,303  $(11,528)
                                        ========  ========  ========  ========
Comprehensive income:
  Net income (loss).................... $ (5,625) $(46,118) $ 32,303  $ (7,308)
  Currency translation gain (loss).....   (1,318)  (16,942)   28,261    (1,309)
                                        --------  --------  --------  --------
Comprehensive income (loss)............ $ (6,943) $(63,060) $ 60,564  $ (8,617)
                                        ========  ========  ========  ========


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

                                      F-4


                                 ChipPAC, Inc.

                STATEMENT OF SHAREHOLDERS' AND DIVISIONAL EQUITY
                                 (In thousands)



                       Common Stock  Warrants,              Divisional                 Accumulated
                      --------------  Class A  Additional    Equity,      Amount Due   Other Com-    Accum-
                      No. of          Common    Paid-in   Net of Capital     From      prehensive    ulated
                      Shares  Amount   Stock    Capital     Redemption   Shareholders Income (Loss) Deficit     Total
                      ------- ------ --------- ---------- -------------- ------------ ------------- --------  ---------
                                                                                   
Balances at January
 1, 1996............      --     --      --         --      $  21,693          --       $    477    $(10,611) $  11,559
  Capital increase..      --     --      --         --         49,076          --            --          --      49,076
  Currency
   translation loss.      --     --      --         --            --           --         (1,318)        --      (1,318)
  Net loss..........      --     --      --         --            --           --            --       (5,625)    (5,625)
                      ------- ------  ------    -------     ---------      -------      --------    --------  ---------
Balances at December
 31, 1996...........      --     --                 --         70,769          --           (841)    (16,236)    53,692
  Capital increase..      --     --      --         --         26,306          --            --          --      26,306
  Advances to HEA...      --     --      --         --            --       $(7,466)          --          --      (7,466)
  Currency
   translation loss.      --     --      --         --            --           --        (16,942)        --     (16,942)
  Net loss..........      --     --      --         --            --           --            --      (46,118)   (46,118)
                      ------- ------  ------    -------     ---------      -------      --------    --------  ---------
Balances at December
 31, 1997...........      --     --                 --         97,075       (7,466)      (17,783)    (62,354)     9,472
  Capital increase..      --     --      --         --         82,953          --            --          --      82,953
  Advances to HEA...      --     --      --         --            --       (30,160)          --          --     (30,160)
  Amortization of
   stock option
   compensation.....      --     --      --         --             63          --            --          --          63
  Currency
   translation gain.      --     --      --         --            --           --         28,261         --      28,261
  Dividends declared
   by CPK...........      --     --      --         --            --           --            --       (9,701)    (9,701)
  Net income........      --     --      --         --            --           --            --       32,303     32,303
                      ------- ------  ------    -------     ---------      -------      --------    --------  ---------
Balances at December
 31, 1998...........      --     --                 --        180,091      (37,626)       10,478     (39,752)   113,191
  Proceeds from
   common stock
   issuance at
   recapitalization
   net of issuance
   cost of $17,982..  102,000 $1,020     --     $82,998       (10,000)         --            --          --      74,018
  Sale of Common
   Stock to
   management.......    4,710     47     --       2,752           --        (1,128)          --          --       1,671
  Capital of
   contributions....      --     --      --         --        (16,401)      37,626           --          --      21,225
  Conversion of
   divisional equity
   to redeemable
   preferred stock..      --     --      --         --        (30,000)         --            --          --     (30,000)
  Capital redemption
   at
   recapitalization.      --     --      --         --       (311,220)         --            --          --    (311,220)
  Capital
   contribution by
   HEI at
   recapitalization.      --     --      --         --         19,816          --            --          --      19,816
  Issuance of Intel
   warrant..........      --     --    1,250        --            --           --            --          --       1,250
  Accretion of
   recorded value of
   Intel warrant....      --     --      --         --            --           --            --         (260)      (260)
  Dividend accretion
   on mandatorily
   redeemable
   preferred stock..      --     --      --         --            --           --            --       (3,960)    (3,960)
  Currency
   translation loss.      --     --      --         --            --           --         (1,309)        --      (1,309)
  Net loss..........      --     --      --         --            --           --            --       (7,308)    (7,308)
                      ------- ------  ------    -------     ---------      -------      --------    --------  ---------
Balances at December
 31, 1999...........  106,710 $1,067  $1,250    $85,750     $(167,714)     $(1,128)     $  9,169    $(51,280) $(122,886)
                      ======= ======  ======    =======     =========      =======      ========    ========  =========


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

                                      F-5


                                 ChipPAC, Inc.

                            STATEMENTS OF CASH FLOWS

                                 (In thousands)



                                              Year Ended December 31,
                                         -------------------------------------
                                           1996      1997     1998      1999
                                         --------  --------  -------  --------
                                                          
Cash flows provided by operating
 activities:
 Net income (loss).....................  $ (5,625) $(46,118) $32,303  $ (7,308)
 Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:
   Depreciation and amortization.......    26,632    40,682   45,855    57,475
   Write down of impaired assets.......       --     11,569      --        --
   Provision for inventory and accounts
    receivable.........................       120     3,502     (425)   (1,060)
   Non-operating early debt
    extinguishment loss................       --        --       --      1,373
   Foreign currency (gains) losses.....     5,041    69,669  (24,670)   (1,224)
   (Gain) loss on sale of equipment....       (16)      515       26      (282)
   Changes in assets and liabilities:..
     Accounts receivable...............    (4,025)  (10,092) (12,740)      750
     Inventories.......................      (354)  (16,122)   9,089    (5,415)
     Prepaid expenses and other assets.    (1,077)  (16,471)  11,859    (2,878)
     Advances (to) from affiliates.....     1,933     2,418    4,671    (7,424)
     Accounts payable..................      (908)    5,006   39,979   (11,615)
     Accrued expenses and other current
      liabilities......................    (3,872)   (2,569)     126    20,021
     Other long-term liabilities.......     1,403     1,226   (7,326)    3,519
                                         --------  --------  -------  --------
      Net cash provided by operating
       activities......................    19,252    43,215   98,747    45,932
                                         --------  --------  -------  --------
Cash flows used in investing
 activities:
 Acquisition of property and equipment.  (104,359) (110,693) (61,332)  (57,856)
 Proceeds from sale of equipment.......       240        17    1,635     1,347
                                         --------  --------  -------  --------
      Net cash used in investing
       activities......................  (104,119) (110,676) (59,697)  (56,509)
                                         --------  --------  -------  --------
Cash flows provided by (used in)
 financing activities:
 Advances to affiliates................       --     (7,466) (30,160)   (4,430)
 Proceeds from short-term loans........    83,513    86,014   63,391     1,169
 Repayment of short-term loans.........   (90,800)  (63,612) (79,093)  (19,469)
 Net proceeds from long-term loans.....    49,396    39,511   10,185   285,631
 Capital redemption at
  recapitalization.....................       --        --       --   (311,220)
 Capital contribution by HEI at
  recapitalization.....................       --        --       --     19,816
 Repayment of long-term debt and
  capital leases.......................    (7,110)  (17,181) (31,795) (133,615)
 Payment made to extinguish debt early.       --        --       --     (1,373)
 Dividend paid.........................       --        --       --     (9,435)
 Net proceeds from common stock
  issuance at recapitalization.........       --        --       --     74,018
 Net proceeds from preferred stock
  issuance.............................       --        --       --     50,000
 Net proceeds from sale of stock to
  management...........................       --        --       --      1,671
 Contributions to paid in capital......    49,076    26,306   82,953    20,750
                                         --------  --------  -------  --------
      Net cash provided by (used in)
       financing activities............    84,075    63,572   15,481   (26,487)
                                         --------  --------  -------  --------
Effect on cash from changes in exchange
 rates.................................       513     4,633   11,169       414
                                         --------  --------  -------  --------
Net increase (decrease) in cash........      (279)      744   65,700   (36,650)
Cash and cash equivalents at beginning
 of year...............................     2,602     2,323    3,067    68,767
                                         --------  --------  -------  --------
Cash and cash equivalents at end of
 year..................................  $  2,323  $  3,067  $68,767  $ 32,117
                                         ========  ========  =======  ========
Supplemental disclosure of noncash
 investing and financing activities
 Acquisition of equipment under capital
  leases...............................  $ 14,612  $ 25,901  $ 2,191       --
                                         ========  ========  =======  ========
 Dividend declared and accreted........       --        --   $(9,701) $ (3,960)
                                         ========  ========  =======  ========
 Accretion of recorded value of the
  Intel warrant........................       --        --       --       (260)
                                         ========  ========  =======  ========
 Conversion of HEA equity to preferred
  stock................................       --        --       --   $ 30,000
                                         ========  ========  =======  ========
 Contribution of non-cash capital......       --        --       --   $    475
                                         ========  ========  =======  ========
 Sale of common stock for shareholder
  notes................................       --        --       --   $  1,128
                                         ========  ========  =======  ========
Supplemental disclosure of cash flow
 information
 Income taxes paid in cash.............       --        --   $   195  $  1,442
                                         ========  ========  =======  ========
 Interest paid in cash.................  $  5,338  $ 10,364  $12,708  $ 12,400
                                         ========  ========  =======  ========


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

                                      F-6


                                 ChipPAC, Inc.

                         NOTES TO FINANCIAL STATEMENTS

Note 1: Business, Recapitalization and Basis of Presentation

Business and Organization

   ChipPAC Inc. and its subsidiaries, (the "Company") provides packaging and
testing services to the worldwide semiconductor industry. The Company packages
and tests integrated circuits from wafers provided by its customers. The
Company markets its services worldwide, with emphasis on the North American
market. The Company's packaging and testing operations are located in the
Republic of Korea ("South Korea" or "Korea") and the People's Republic of China
("China").

Recapitalization


   Prior to August 5, 1999 the Company represented the combination of three
business units of Hyundai Electronics Industries Co., Ltd. ("HEI") which
operated collectively as HEI's worldwide packaging and testing operations.
These three business units historically consisted of the Assembly and Test
Division of HEI, Hyundai Electronics Co. (Shanghai) Ltd. ("HECS"), and the
Assembly and Test Division of Hyundai Electronics America ("HEA"), a majority
owned subsidiary of HEI. Sales and marketing services were primarily performed
by the Assembly and Test Division of HEA, and packaging and testing services
were performed by HECS and the Assembly and Test Division of HEI.

   Beginning in 1995 HEI's packaging business, comprised of the assembly and
test divisions, began to provide greater levels of advanced substrate packaging
services which significantly increased the growth rate of the business and the
managerial complexity of the divisions. The transfer of the assembly and test
divisions into stand-alone subsidiaries facilitated the separate management,
operation and control of the packaging business.

   ChipPAC, Inc. was formed in September 1997 by HEA, the US based majority
owned subsidiary of HEI. In June of 1998 HEI transferred its assembly and test
business to a wholly owned subsidiary that was subsequently renamed ChipPAC
Korea, Ltd. The transfer of HEA's and HEI's assembly and test businesses to
ChipPAC, Inc. and ChipPAC Korea, Ltd. respectively was done in connection with
HEI's desire to more definitively separate the assembly and test division from
HEI's core business operations. The formation of ChipPAC, Inc. and the transfer
of HEA's assembly and test division was undertaken solely by HEA.

   During the first quarter of 1998, management of the assembly and test
division drafted plans for the spin-off of the ChipPAC entities, with ChipPAC,
Inc. as the parent company. This plan was approved by Hyundai's board of
directors in March 1998. During the second quarter of 1998 Hyundai retained
Merrill Lynch to act as investment bankers and assist Hyundai in determining
how best to dispose of ChipPAC. In July 1998, Hyundai, with the assistance of
Merrill Lynch, initiated an auction process for the assembly and test division,
which transpired through March 1999.

   On August 5, 1999, affiliates of Bain Capital, Inc. and SXI Group LLC, a
portfolio concern of Citicorp Venture Capital Ltd., which we refer to
collectively as the "Equity Investors," and management acquired a controlling
interest in the Company from Hyundai Electronics and Hyundai Electronics
America through a series of transactions, including a merger into ChipPAC, Inc.
of a special purpose corporation organized by the Equity Investors. The merger
was structured to be accounted for as a recapitalization. Specifically:

  .  the Equity Investors and other parties, including members of our
     management, invested $92.0 million to acquire common stock of ChipPAC,
     Inc. which represented approximately 90.2% of its common stock
     outstanding immediately following the recapitalization;

  .  the prior stockholders of ChipPAC, Inc. retained a portion of their
     common stock in ChipPAC, Inc. equal to $10.0 million, or approximately
     9.8% of ChipPAC, Inc.'s common stock outstanding immediately following
     the recapitalization; and

                                      F-7


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


  .  the prior stockholders received as consideration for the remainder of
     their common stock (i) an aggregate of $384.0 million in cash and (ii)
     mandatorily redeemable convertible preferred stock payable for up to an
     aggregate of $70.0 million. Net payment to Hyundai of $384 million,
     included capital redemption of $311 million and debt retirement of $133
     million, offset by Hyundai investment of $40 million in mandatorily
     redeemable preferred stock, and a capital contribution of $20 million.

   The formation of ChipPAC, Inc. did not result from any planned or integrated
series of transactions with the Equity Investors in 1999 and was not negotiated
by Hyundai and the Equity Investors in connection with transferring control of
the assembly and test division.

Basis of Presentation

   The financial statements for the period subsequent to the recapitalization
and as at December 31, 1999 have been prepared on a consolidated basis. The
consolidated financial statements include the accounts of ChipPAC, Inc. and its
majority controlled and owned subsidiaries. All significant intercompany
balances have been eliminated on consolidation.

   For the comparative disclosures for the three years ended December 31, 1998
and the balance sheets at December 31, 1998 and 1997, the Company represents
the combination of four corporations then owned by Hyundai Electronics
Industries Co., Ltd (HEI) and Hyundai Electronics America (HEA). These four
corporations are ChipPAC, Inc. (CPI), ChipPAC Korea Co., Ltd (CPK), ChipPAC
Assembly and Test Co. Ltd (CATS), and Hyundai Electronics Co. (Shanghai) Ltd.,
(HECS). Accordingly the financial statements for the comparative periods are
prepared on a combined basis.

   These comparative financial statements prepared on a combined basis include
the accounts of CPI, CPK, HECS and CATS, or the divisional accounts of the
predecessor Assembly and Test Divisions for periods prior to the business
transfers referred to above, and reflect the combined financial position,
results of operations, and cash flows of these entities. All inter-company or
inter-divisional transactions have been eliminated in the combination.

   The combined statements of operations include all revenue and costs
attributable to the Company including an allocation of the costs of shared
facilities, costs of general and administrative services and overhead costs of
HEI and HEA. For the periods prior to the legal formations of CPI and CPK, such
allocated expenses were determined according to allocation bases deemed
appropriate for the nature of each expense item, including relative headcount,
relative occupancy of shared facilities, and relative sales volume. Costs
allocated by HEI and HEA after the legal formations were based on services
rendered, the costs of which were specified by affiliate agreements. In
addition, subsequent to the legal formations, CPI and CPK established internal
administrative and support functions, significantly reducing their reliance on
HEI and HEA for such services. Since inception, HECS generally maintained its
own internal administrative and support functions and was not allocated any
costs by HEI. Management fees charged by HEI to HECS have been included in the
combined results of operations and varied based on the level of services
provided by HEI. Interest is not charged on intercompany trading balances.

   Management believes that the allocation methods used are reasonable.
However, the financial information included herein may not be representative of
the combined financial position, results of operations, and cash flows of the
Company in the future or what they would have been had the Company operated as
a separate entity during the periods presented.

                                      F-8


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


Note 2: Summary of Significant Accounting Policies

Accounting Estimates

   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses in the financial statements and accompanying notes.
Significant estimates made by management include those related to the useful
lives of property, plant and equipment, allowances for doubtful accounts and
customer returns, inventory realizability, contingent assets and liabilities
and allocated expenses, among others. Actual results could differ from those
estimates, and such differences may be material to the combined financial
statements.

Cash and Cash Equivalents

   The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Financial Instruments

   The amounts reported for cash and cash equivalents, accounts receivable,
certain other assets, accounts payable, certain accrued and other liabilities,
and short-term and long-term debt approximate fair value due to their short
maturities or market interest rates. Obligations due to or receivable from
related parties and mandatorily redeemable preferred stockholders have no
ascertainable fair value as no market exists for such instruments.

Inventories

   Inventories are stated at the lower of cost (computed using first-in, first-
out method) or market value.

Property, Plant and Equipment

   Property, plant and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets, which
generally range from three to ten years except for building facilities and
building improvements in Shanghai, China which are depreciated over thirty and
fifteen years, respectively. In addition, land use rights in Shanghai, China
are amortized over fifty years. Assets under capital leases and leasehold
improvements are amortized over the shorter of the asset life or the remaining
lease term. Amortization of assets under capital leases is included with
depreciation expense. Upon disposal or sale, the Company removes the asset and
accumulated depreciation from its records and recognizes the gain or loss in
operations.

   The Company reviews property, plant and equipment and other long lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The Company determines
whether there has been an impairment by comparing the anticipated undiscounted
future net cash flows to the related asset's carrying value. If an asset is
considered impaired, the asset is written down to fair value which is either
determined based on discounted cash flows or appraised values, depending on the
nature of the asset. The Company recognized an impairment write down in 1997,
see Note 4.

Concentration of Credit Risk and Major Customers

   Financial instruments which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts receivable
and cash and cash equivalents.

                                      F-9


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The Company's customers are comprised of companies in the semiconductor
industry located primarily in the United States. Credit risk with respect to
the Company's trade receivables is mitigated by selling to well established
companies, performing ongoing credit evaluations and maintaining frequent
contact with customers. The allowance for doubtful accounts is based upon the
expected collectibility of the Company's accounts receivable. At December 31,
1997, three customers accounted for 27%, 23%, and 17% of the outstanding trade
receivables, respectively. At December 31, 1998, two customers accounted for
68% and 13% of outstanding trade receivables, respectively. At December 31,
1999 three customers accounted for 24%, 14% and 11% of the outstanding trade
receivables, respectively. Loss of or default by these customers could have an
adverse effect upon the Company's financial position, results of operations and
cash flows.

   During the year ended December 31, 1996, two customers accounted for 24% and
13% of the Company's revenue, respectively. During the year ended December 31,
1997, two customers accounted for 45% and 15% of the Company's revenue,
respectively. During the year ended December 31, 1998, two customers accounted
for 67% and 10% of the Company's revenue, respectively. During the year ended
December 31, 1999, one customer accounted for 62% of the Company's revenue.

   Cash and cash equivalents are deposited with banks in the United States,
Korea and China. Deposits in these banks may exceed the amount of insurance
provided on such deposits; however, the Company is exposed to loss only to the
extent of the amount of cash reflected on its balance sheet. The Company has
not experienced any losses to date on its bank cash deposits.

Revenue Recognition

   The Company recognizes revenue, net of rebates and discounts, upon shipment
of packaged semiconductors to its customers. The Company does not take
ownership of customer-supplied semiconductors as these materials are sent to
the Company on a consignment basis. Accordingly, the customer supplied
materials are not reflected in revenue or in cost of revenue.

Research and Development Costs
   Research and development costs are charged to expense as incurred.

Accounting for Income Taxes

   The Company accounts for deferred income taxes using the liability method
whereby deferred tax assets and liabilities are recorded for temporary
differences between amounts reported in the financial statements and amounts
that would have been reported had the combined companies filed separate income
tax returns. A valuation allowance is provided for deferred tax assets when it
is more likely than not that all or a portion of the deferred tax assets will
not be realized through future operations. The provision for income taxes
represents taxes that would have been payable for the current period, plus the
net change in deferred tax amounts.

Foreign Exchange Contracts

   In the ordinary course of business the Company enters into foreign exchange
forward contracts to mitigate the effect of foreign currency movements
associated with its international operations. The contracts entered into
require the purchase of Korean won or Japanese yen, and the delivery of US
dollars, and generally have maturities which do not exceed six months. To date
contracts entered into by the Company do not qualify as hedges and therefore
are included in foreign currency gains and losses in the period in which the
exchange rates change. There were no deferred gains or losses at December 31,
1999. At December 31, 1999 the Company had outstanding forward contracts to
purchase Japanese yen totaling $25.5 million.

                                      F-10


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


Foreign Currency Translation

   Upon completion of the recapitalization, management decided to change the
functional currency of its foreign operations to the US Dollar effective
October 1999. Previously, the Company's functional currencies of its foreign
operations were the respective local currencies and the net of the effect of
the translation of the accounts of the foreign operation was included in equity
as a cumulative translation adjustment.

Stock-Based Compensation

   The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," in accounting for its employee
stock purchase options. Accordingly, compensation for stock purchase options is
measured by the excess of the fair market value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
The Company has adopted the disclosure of pro-forma information required under
SFAS No. 123, "Accounting for Stock-Based Compensation".

Recent Accounting Pronouncements

   In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of FASB Statement No. 133." SFAS 137 amends Statement of Financial
Accounting Standards No. 133 ("SFAS"), "Accounting for Derivative Instruments
and Hedging Activities," to defer its effective date to all fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting
and reporting standards for derivative instruments including standalone
instruments, such as forward currency exchange contracts and interest rate
swaps or embedded derivatives and requires that these instruments be marked-to-
market on an ongoing basis. These market value adjustments are to be included
either in the income statement or stockholders' equity, depending on the nature
of the transaction. The Company is required to adopt SFAS 133 in the first
quarter of its fiscal year 2001. The company is in the process of evaluating
the effect of SFAS 133 on its financial statements.

   In December 1999, the Securities and Exchange Commission issued SAB No. 101.
"Revenue Recognition in Financial Statements," which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements
filed with the SEC. SAB No. 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. We believe that the impact of SAB No. 101 will have no
material effect on our financial position or results of operations.

Note 3: Risks and Uncertainties

Industry

   The Company's business involves certain risks and uncertainties. Factors
that could affect the Company's future operating results and cause actual
results to vary materially from expectations include, but are not limited to,
dependence on a cyclical industry that is characterized by rapid technological
changes, fluctuations in end-user demands, evolving industry standards,
competitive pricing and declines in average selling prices, risks associated
with foreign currencies, and enforcement of intellectual property rights.
Additionally, the market in which the Company operates is very competitive. As
a result of these industry and market characteristics, key elements of
competition in the independent semiconductor packaging market include breadth
of packaging offerings, time-to-market, technical competence, design services,
quality, production yields, reliability customer service and price. The
Company's customer base is highly concentrated with one customer accounting for
62% of revenue for the year ended December 31, 1999. As a result, any de-
commitment from our major customer for products could have an adverse impact on
the Company's financial position, results of operations and cash flows.

                                      F-11


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


Korea

   The Korean economy suffered a period of economic turmoil beginning in 1997
which has resulted in the devaluation of the Korean currency and volatility in
interest rates. A significant portion of the Company's assets and operations
are located in Korea.

   The Korean government has announced restructuring plans directed at
rationalizing certain industries. Based on such a government directive, HEI has
recently acquired LG Semicon Company, a leading competitor of HEI. ChipPAC,
Inc. was not a party to this transaction.

   The majority of CPK's employees are represented by an organized labor union
and are subject to a collective bargaining agreement.

China

   A significant portion of the Company's assets and operations are owned by
HECS and are located in China. HECS is subject to the laws and regulations of
China including regulations governing the maintenance of business permits and
operating licenses. HECS operates under a business license granted by the local
municipal government. It is reasonably possible that additional business
licensure requirements may be applied by the National government that would
pertain to HECS.

Other

   Korean and Chinese foreign currency exchange regulations place restrictions
on the flow of foreign funds into and out of those countries. The Company is
required to comply with these regulations when entering into transactions in
foreign currencies in Korea and China.

   ChipPAC, through CPK, procures materials from local vendors in the ordinary
course of business. Three vendors in South Korea supply approximately 40% of
the Company's component parts used in performing packaging services. Management
believes that they have sufficient suppliers such that the loss of these
concentrated suppliers would not have a material impact on the Company's
combined financial position, results of operations or cash flows.

Note 4: Selected Balance Sheet Accounts

   The components of inventories are as follows (in thousands):



                                                              December 31,
                                                         -----------------------
                                                          1997    1998    1999
                                                         ------- ------- -------
                                                                
      Inventories
        Raw materials................................... $10,420 $ 6,002 $12,274
        Work in process.................................   2,015   2,159   3,003
        Finished goods..................................   1,714   2,164   2,220
                                                         ------- ------- -------
                                                         $14,149 $10,325 $17,497
                                                         ======= ======= =======


                                      F-12


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Property, plant and equipment are comprised of the following (in thousands):



                                                        December 31,
                                                ------------------------------
                                                  1997      1998       1999
                                                --------  ---------  ---------
                                                            
      Property, Plant and Equipment
        Land use rights........................ $  4,041  $   4,041  $   4,041
        Buildings and improvements.............   44,911     51,720     49,688
        Equipment..............................  199,079    319,382    369,212
                                                --------  ---------  ---------
                                                 248,031    375,143    422,941
        Less accumulated depreciation and
         amortization..........................  (77,805)  (146,141)  (196,010)
                                                --------  ---------  ---------
                                                $170,226  $ 229,002  $ 226,931
                                                ========  =========  =========


   Land use rights represents payments made to secure on a fully paid up basis
the use of the property where the Company's facilities are located in Shanghai,
China for a period of 50 years.

   Interest costs of $1.1 million were capitalized as part of the cost of
buildings and improvements in 1997. No interest costs were capitalized in 1998
or 1999.

   As discussed in Note 7, all assets except those held by ChipPAC China are
encumbered under the Credit Agreement entered into as part of the
Recapitalization.

   Property, plant and equipment under capital leases (see Note 7) are as
follows (in thousands):



                                                          December 31,
                                                      -----------------------
                                                       1997      1998    1999
                                                      -------  --------  ----
                                                                
      Property, Plant and Equipment under capital
       leases
        Cost......................................... $32,369  $ 44,501   --
        Less accumulated amortization................  (9,533)  (20,970)  --
                                                      -------  --------  ----
                                                      $22,836  $ 23,531  $--
                                                      =======  ========  ====


   Management reviews fixed assets for impairment in accordance with SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". Effective December 31, 1997, and based on management
changes and deteriorating economic conditions in Asia, the Company undertook a
detailed asset impairment analysis. The analysis covered all assets and
considered discontinuance of products, technological obsolesence, poor quality
of product and changes in demand for products. Based on this analysis the
Company recorded a charge of $11.6 million to recognize the impairment of
certain production equipment in the Company's facilities in China and Korea.
The impairment arose from a combination of management's decision to discontinue
certain product lines which were projected to have limited future growth
potential, and from the write down of production equipment judged to be in
excess of foreseeable requirements. After recognition of the impairment write-
down, the carrying value of the impaired assets was effectively reduced to
$650,000 at December 31, 1997. No assets were held for sale and for those
assets still in use, the carrying amount is being depreciated over the
remaining useful life, which on average is one year.

                                      F-13


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

   Other assets are comprised of the following (in thousands):



                                                               December 31,
                                                          ----------------------
                                                           1997    1998   1999
                                                          ------- ------ -------
                                                                
      Other Assets
        Deposits for severance benefits.................  $ 3,123 $1,618 $ 2,027
        Long-term employee loans........................    1,252  1,478   1,216
        Deferred taxes..................................    6,115  1,889   5,207
        Debt issuance cost, net of amortization of $774.      --     --   13,594
        Other...........................................        3     16      14
                                                          ------- ------ -------
                                                          $10,493 $5,001 $22,058
                                                          ======= ====== =======


   The debt issuance costs of $14,368 were incurred in raising $300 million of
debt in connection with the recapitalization.

   Accrued expenses and other liabilities are comprised of the following (in
thousands):



                                                              December 31,
                                                          ---------------------
                                                           1997   1998   1999
                                                          ------ ------ -------
                                                               
      Accrued Expenses & Other Liabilities
        Accrued personnel expenses....................... $2,606 $3,645 $ 4,673
        Accrued interest payable.........................    318    950   8,781
        Accrued customer rebate..........................    --     --    4,127
        Accrued taxes....................................    852  1,897   4,685
        Accrued warranty and other expenses..............  2,048  1,185   4,942
                                                          ------ ------ -------
                                                          $5,824 $7,677 $27,208
                                                          ====== ====== =======


Note 5: Dividends accreted



                                                          1996 1997 1998  1999
                                                          ---- ---- ---- ------
                                                             
      Preferred Stock, class A ("Intel Preferred Stock")
       .................................................. --   --   --   $  406
      Preferred Stock, class B ("Hyundai Preferred
       Stock")........................................... --   --   --    3,554
                                                          ---  ---  ---  ------
                                                          --   --   --   $3,960
                                                          ===  ===  ===  ======


   Dividends on the Hyundai Preferred Stock accrue on a daily basis at a rate
of 12.5% per annum. Until February 5, 2005, dividends will not be paid in cash,
but will be capitalized as accumulated and unpaid dividends as part of
Mandatorily Redeemable Preferred Stock.

   Dividends on the Intel Preferred Stock accrue on a daily basis at a rate of
10% per annum. Dividends are paid annually on August 1, and accumulated and
unpaid dividends as at the balance sheet date are capitalized as part of
Mandatorily Redeemable Preferred Stock.

                                      F-14


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


Note 6: Segments and Geographic Information

   The Company is engaged in one industry segment, the packaging and testing of
integrated circuits. Financial data, summarized by geographic area, is as
follows (in thousands):



                             United
                             States   Korea     China    Eliminations Combined
                            -------- --------  --------  ------------ --------
                                                       
Year ended December 31,
 1996
  Revenue from unaffiliated
   customers............... $110,943 $ 63,176       --          --    $174,119
  Revenue from affiliates..    2,277  122,704  $  6,889   $(114,334)    17,536
                            -------- --------  --------   ---------   --------
    Total revenue.......... $113,220 $185,880  $  6,889   $(114,334)  $191,655
                            ======== ========  ========   =========   ========
  Interest expense......... $      8 $  5,268  $    504         --    $  5,780
  Depreciation and
   amortization expense....        4   24,039     2,589         --      26,632
  Income tax expense.......    1,401    1,482       --          --       2,883
  Income (loss) from
   operations..............    3,421   12,597    (8,398)        --       7,620
  Acquisition of equipment
   under capital leases....      --    14,612       --          --      14,612
  Identifiable assets...... $ 17,237 $163,908  $ 62,398   $ (27,611)  $215,932
                            ======== ========  ========   =========   ========
Year ended December 31,
 1997
  Revenue from unaffiliated
   customers............... $231,615 $ 43,888       --          --    $275,503
  Revenue from affiliates..    4,206  232,381  $ 21,611   $(244,272)    13,926
                            -------- --------  --------   ---------   --------
    Total revenue.......... $235,821 $276,269  $ 21,611   $(244,272)  $289,429
                            ======== ========  ========   =========   ========
  Interest expense.........      --  $  9,858  $  1,114         --    $ 10,972
  Depreciation,
   amortization, and asset
   impairment expense...... $     75   40,515    11,661         --      52,251
  Income tax expense
   (benefit)...............    2,290  (11,961)      --          --      (9,671)
  Income (loss) from
   operations..............    5,538   33,639   (13,659)        --      25,518
  Acquisition of equipment
   under capital leases....      --    25,901       --          --      25,901
  Identifiable assets...... $ 28,613 $190,818  $ 87,108   $ (73,298)  $233,241
                            ======== ========  ========   =========   ========
Year ended December 31,
 1998
  Revenue from unaffiliated
   customers............... $317,348 $ 11,529       --          --    $328,877
  Revenue from affiliates..    2,330  305,334  $ 13,759   $(316,219)     5,204
                            -------- --------  --------   ---------   --------
    Total revenue.......... $319,678 $316,863  $ 13,759   $(316,219)  $334,081
                            ======== ========  ========   =========   ========
  Interest expense.........      --  $  9,973  $  3,367         --    $ 13,340
  Depreciation and
   amortization expense.... $    489   35,584     9,782         --      45,855
  Income tax expense
   (benefit)...............      954   19,610       --          --      20,564
  Income (loss) from
   operations..............    1,885   51,334   (12,790)        --      40,429
  Acquisition of equipment
   under capital leases....      --     2,191       --          --       2,191
  Identifiable assets...... $ 62,724 $316,288  $ 97,085   $(116,625)  $359,472
                            ======== ========  ========   =========   ========


                                      F-15


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)




                            United
                            States   Korea    China   Eliminations Consolidated
                           -------- -------- -------  ------------ ------------
                                                    
Year ended December 31,
 1999
  Revenue from
   unaffiliated customers. $347,349 $ 17,231 $   151         --      $364,731
  Revenue from affiliates.      --   330,137  16,863   $(336,201)      10,799
                           -------- -------- -------   ---------     --------
    Total revenue......... $347,349 $347,368 $17,014   $(336,201)    $375,530
                           ======== ======== =======   =========     ========
  Interest expense........   14,484    4,913   1,844         --        21,241
  Depreciation and
   amortization expense...    2,528   44,489  10,458         --        57,475
  Income tax expense......    1,166      772     --          --         1,938
  Income (loss) from
   operations.............    4,307   18,295  (9,983)        --        12,619
  Extraordinary item, net
   of related income tax
   benefit................      --     1,373     --          --         1,373
  Acquisition of equipment
   under capital leases...      --       --      --          --           --
  Identifiable assets..... $286,673 $278,505 $92,577   $(314,326)    $343,429
                           ======== ======== =======   =========     ========


   Revenue from unaffiliated and affiliated customers is based on the origin of
the sale. Identifiable assets are those assets that can be directly associated
with a particular geographic area. In determining each geographic location's
income (loss) from operations and identifiable assets, the expenses and assets
relating to general corporate activities are included in the amounts for the
geographical area where they were incurred, acquired or utilized.

Note 7: Term Debt, Credit Facilities, and Capital Lease Obligation

   Under the terms of the recapitalization and merger in 1999 all short and
long term debt, loans and leases and other credit facilities existing prior to
the recapitalization were terminated at the recapitalization date.

   To finance part of the recapitalization, the Company borrowed $300.0 million
of new debt, comprising $150.0 million of term loans and $150.0 million of
senior subordinated notes (the Exchange Notes). The term loans bear interest at
base rate (8.50% at December 31, 1999) plus 2.25% to 3.0% and the senior
subordinated notes bear interest at 12.75% per annum. The senior subordinated
notes mature on July 21, 2009. If a change of control of ChipPAC, Inc. occurs,
we may be required to allow holders of the senior subordinated notes to sell us
their notes at a purchase price of 101.0% of the principal amount of the notes,
plus accrued and unpaid interest.

   We have a borrowing facility of $50.0 million for working capital and
general corporate purposes under the revolving credit facility. In addition,
borrowings of up to $20.0 million are available for acquiring equipment and
making certain other capital expenditures under the capex facility. We may
borrow and repay under the capex facility until August 5, 2001. Amounts that we
repay under the capex facility after August 5, 2001 may not be borrowed by us
later. The final maturity of these facilities will be on August 5, 2005. No
amounts were outstanding under either the revolving credit facility or the
capex facility at December 31, 1999.

                                      F-16


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Future maturities of term debt outstanding, at December 31, 1999 are as
follows (in thousands):



             Year Ending December 31,
             ------------------------
                                           
             2000............................ $  4,800
             2001............................   11,800
             2002............................   12,800
             2003............................   14,300
             2004............................   19,300
             2005............................   11,800
             2006............................   75,200
             2007............................      --
             2008............................      --
             2009............................  150,000
                                              --------
                                              $300,000
                                              ========


   The term loans and the revolving and capital expenditure lines (the Senior
Credit Facilities) require that we meet specified financial tests, including,
without limitation, a maximum leverage ratio, a minimum interest coverage ratio
and minimum fixed charge coverage ratio. These facilities also contain
covenants which restrict the Company's ability to:

  . make capital expenditures;

  . incur liens or engage in sale-leaseback transactions;

  . transact with affiliates;

  . incur indebtedness and contingent obligations;

  . declare dividends or redeem or repurchase capital stock;

  . prepay, redeem or repurchase indebtedness;

  . change the business being conducted;

  . make loans and investments; and

  . engage in mergers, acquisitions, consolidations and asset sales.

   The Senior Credit Facilities also require that we satisfy customary
affirmative covenants and provide customary indemnifications in favor of the
senior lenders. These credit facilities contain customary events of default,
including, without limitation, payment defaults, breaches of representations
and warranties in all material respects, covenant defaults, some events of
bankruptcy and insolvency, ERISA violations, judgment defaults, cross-defaults
to other indebtedness and a change in control.


   There were no violations of these loan covenants through December 31, 1999.

   Substantially all assets of the ChipPAC consolidated group, with the
exception of the two Chinese non-grantor entities (CATS and HECS), have been
pledged as collateral under the term debt and revolving credit facilities
agreement put in place on August 5, 1999.

   On early retirement of certain of the debt upon recapitalization, the
Company incurred termination penalties and recorded an extraordinary loss of
$1.4 million, net of related tax benefit.

                                      F-17


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The following is a summary of the Company's long-term debt and capital lease
obligations which were in existence prior to, and terminated on the
recapitalization (in thousands):



                                                           December 31,
                                                     --------------------------
                                                       1997      1998     1999
                                                     --------  --------  ------

                                                                
   Notes payable to a Korean bank, principal
    maturing at various dates from December 9, 1998
    to June 18, 2005, payable in aggregate monthly
    or quarterly installments together with
    interest at rates ranging from LIBOR (5.72% at
    December 31, 1998) plus 0.12% to 1.5% per
    annum, collateralized by certain machinery and
    equipment, guaranteed by HEI...................  $ 76,009  $ 69,363     --

   Notes payable to a Japanese bank, principal
    payable in aggregate semi-annual installments
    beginning March 28, 1999, maturing September
    28, 2000, together with interest at the 6-month
    LIBOR rate (5.5% at December 31, 1998) plus
    0.4% per annum guaranteed by HEI...............    12,342     8,228     --

   Note payable to a Korean bank, principal payable
    in aggregate semi-annual installments beginning
    May 22, 1999 maturing November 22, 2001
    together with interest at the 3-month LIBOR
    rate (5.08% at December 31, 1998) plus 3% per
    annum, guaranteed by HEI.......................    20,000    20,000     --


   Capital lease obligations to institutions with
    interest at rates ranging from LIBOR (5.72% at
    December 31, 1998) plus .58% to 2.2% per annum,
    collateralized by certain machinery and
    equipment, guaranteed by HEI...................    17,064    10,945     --
   Less current maturities.........................   (13,256)  (31,954)    --
                                                     --------  --------  ------
                                                     $116,694  $ 80,943     --
                                                     ========  ========  ======


   Capital lease obligations in Korean Won to
    institutions with interest at rates ranging
    from 11% per annum to 14.58% per annum,
    collateralized by certain machinery and
    equipment, guaranteed by HEI...................     4,535     4,361     --



HEI Capital Leases

   During the periods through June 30, 1998, HEI transferred certain machinery
and equipment that it leased, amounting to $17.0 million at cost, with related
accumulated depreciation of $6.8 million, to CPK; these leases qualified as
capital lease obligations. HEI assumed all obligations under these leases and
no amounts were to be serviced by CPK; however, title to these assets used by
CPK was held by the leasing companies under these agreements. Total capital
lease obligations at December 31, 1996, 1997 and 1998, were $4.0 million,
$16.7 million and $16.1 million, respectively. The assets and the related
obligations have been reflected in the accompanying combined financial
statements. The Company recorded lease payments made by HEI as a reduction of
the Company's capital lease obligations and a corresponding increase in capital
amounting to $3.4 million, $7.2 million, and $10.0 million for the years ended
December 31, 1996, 1997, and 1998, respectively.

   During the periods through June 30, 1998, HEI also transferred to CPK
certain machinery and equipment which are pledged as collateral under dollar
denominated loan agreements with banks. HEI did not transfer the

                                      F-18


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)
debt obligations to CPK and remained the named borrower. Since the assets used
by CPK were pledged as collateral for the related loan obligations, the Company
recorded these loan obligations as a liability due to HEI in the accompanying
financial statements. At December 31, 1998 the outstanding balance on these
loans amounted to $4.7 million. The Company recorded payments made by HEI on
these loans as a reduction of the liability to HEI and a corresponding increase
in capital amounting to $1.2 million for the year ended December 31, 1998.

Note 8: Mandatorily Redeemable Preferred Stock

Hyundai Preferred Stock

   In connection with the recapitalization, we issued to Hyundai Electronics
and Hyundai Electronics America 70,000 shares of Class B preferred stock, which
we refer to as the Hyundai Preferred Stock, which has an initial aggregate
liquidation preference of $70.0 million. Dividends on the Hyundai Preferred
Stock accrue on a daily basis from August 5, 1999 at a rate of 12.5% per annum.
Until February 5, 2005, dividends will not be paid in cash, but will be
capitalized as accumulated and unpaid dividends. All dividends accruing on the
Hyundai Preferred Stock from and after such period will be paid in cash,
semiannually, beginning after February 5, 2005. In the event we fail to pay any
such dividend when due, the dividend rate on the Hyundai Preferred Stock will
immediately increase by 2.5% per annum and the holders of a majority of the
outstanding Hyundai Preferred Stock will have the exclusive right to nominate
and elect one additional member of our
board of directors, in each case until there is no longer any such default. The
Hyundai Preferred Stock is mandatorily redeemable on August 5, 2010 and is
otherwise redeemable by us at any time at our sole discretion. All of the
shares of Hyundai Preferred Stock will be held by either Hyundai Electronics or
Hyundai Electronics America. The prior written consent of the holders of a
majority of the outstanding Hyundai Preferred Stock are required to amend,
modify or waive the terms of the Hyundai Preferred Stock. The senior credit
facilities and the senior subordinated notes are senior in right of payment to
the Hyundai Preferred Stock. The Class B preferred shares are non-voting
shares.

   In the event of any liquidation, dissolution or winding up of ChipPAC, Inc.,
holders of the class B preferred stock shall be entitled to receive an amount
equal to the face value of the class B preferred stock plus all accrued and
unpaid dividends thereon after payment to the holders of the class A preferred
stock and prior to any distribution to the common stockholders.

   In addition, Hyundai Electronics may receive up to an additional $55.0
million in cash during the four year period beginning January 1, 1999 if we
exceed certain levels of EBITDA as set forth in the recapitalization agreement.
Hyundai Electronics is entitled to receive 33.3% of the amount by which our
EBITDA (defined in the recapitalization agreement as net income before
interest, taxes, depreciation, amortization, extraordinary items and advisory
fees) exceeds $116.5 million, $171.3 million, $198.5 million and $231.8
million, respectively, in each of the first four years following the
recapitalization. In the event the final $20.0 million of such $55.0 million in
cash is required to be paid to Hyundai Electronics, it shall be paid by the
mandatory redemption of an equal amount of Hyundai Preferred Stock. During the
year ended December 31, 1999, the Company's EBITDA did not exceed the level in
the agreement and no amount is due.

   Accretion of dividends is required and the total dividend accreted at
December 31, 1999 is $3,554,000. This amount has been added to the Mandatorily
Redeemable Preferred Stock at December 31, 1999.

Intel Preferred Stock

   Pursuant to the Intel Stock Purchase Agreement, we issued 10,000 shares of
Class A 10.0% preferred stock and the Intel warrant to Intel, which we refer to
as the Intel Preferred Stock, for $10 million in cash.

                                      F-19


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Dividends on the Intel Preferred Stock accrue on a daily basis from the date
of issuance at a rate of 10.0% per annum, payable when and as declared by the
board of directors; provided, however, that dividends will be paid prior to the
payment of any dividends with respect to any of our capital stock or equity
securities which we refer to as junior securities, other than the Hyundai
Preferred Stock. Dividends on each share of Intel Preferred Stock will accrue
from the date of issuance of the Intel Preferred Stock to the first to occur
of:

     (1) the date upon which the face value ($1,000 per share) of such share
  of Intel Preferred Stock plus all accrued but unpaid dividends is paid;

     (2) the date upon which such share of Intel Preferred Stock is converted
  into common stock (as described below); or

     (3) the date upon which such share of Intel Preferred Stock is acquired
  by us.

   Accretion of dividends is required and the total dividend accreted at
December 31, 1999 is $406,000. This amount has been added to the Mandatorily
Redeemable Preferred Stock at December 31, 1999.

   At any time, and from time to time, holders of the Intel Preferred Stock may
convert all or any portion of such Intel Preferred Stock into shares of common
stock at an initial conversion price equal to 150.0% of the weighted average
price per share of common stock paid by the Equity Investors in connection with
the recapitalization, with the purchase price subject to certain adjustments.
The Intel Preferred Stock is convertible into not less than 6.25% of our Class
L common stock and Class A common stock, before taking into account any shares
of our common stock issued or issuable to employees, officers or directors of
ChipPAC, Inc. or our subsidiaries or financing sources.

   In the event of any liquidation, dissolution or winding up of ChipPAC, Inc.,
holders of the Intel Preferred Stock will be entitled to receive, prior to any
distribution to the holders of junior securities, an amount equal to the face
value ($1,000 per share an aggregate liquidation preference of $10 million) of
the Intel Preferred Stock plus all accrued and unpaid dividends thereon. In
addition, each of the following will be deemed a liquidation, dissolution or
winding up of ChipPAC, Inc.:

    . any sale by us of all or substantially all of its assets;

    . any consolidation or merger of ChipPAC, Inc. as a result of which
      holders of our common stock possessing the voting power to elect a
      majority of the board of directors immediately prior to such
      consolidation or merger cease to own capital stock of the surviving
      corporation possessing the voting power to elect a majority of the
      surviving corporation's board of directors; or

    . any issuance, sale or transfer to any third party of our capital
      stock as a result of which holders of our outstanding capital stock
      possessing the voting power to elect a majority of the board of
      directors immediately prior to such sale cease to own capital stock
      of ChipPAC, Inc. possessing the voting power to elect a majority of
      the board of directors (each of the foregoing, a "Liquidation
      Event").

   At any time and from time to time after August 1, 2005, we have the right to
redeem all or any portion of the Intel Preferred Stock then outstanding at a
redemption price per share equal to the greater of (i) its fair market value
and (ii) its face value ($1,000 per share) plus all accrued and unpaid
dividends thereon plus a redemption premium of 10.0%. The premium shall
decrease ratably from year to year and shall be zero on or after August 1,
2010. The stock is mandatorily redeemable in the event that we do not complete
an underwritten initial public offering of shares of our common stock with
gross proceeds in excess of $50.0 million on or prior to August 1, 2001, and
holders of not less than a majority of the Intel Preferred Stock require us to
redeem all or a portion of the Intel Preferred Stock at a price per share equal
to such stock's face

                                      F-20


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

value ($1,000 per share) plus all accrued and unpaid dividends thereon;
provided, however, that any such redemption will be subject to all restrictions
of applicable law and our debt and equity financing arrangements.

   Each share of Intel Preferred Stock has that number of votes equal to the
number of shares of voting common stock then issuable upon the conversion of
that share of Intel Preferred Stock. Except as required by law or as provided
in the following sentence, holders of the Intel Preferred Stock are entitled to
vote on all matters submitted to the stockholders for a vote and will vote
together with holders of our common stock as a single class. The prior written
consent of the holders of at least 66.7% of the outstanding Intel Preferred
Stock is required for:

    . any amendment or change of the rights, preferences, privileges or
      powers of, or the restrictions provided for the benefits of, the
      Intel Preferred Stock;

    . any action that authorized, created or issued any new shares of any
      class of stock having preferences superior to the Intel Preferred
      Stock, other than any issuance of the Hyundai Preferred Stock; or

    . any action that reclassifies any outstanding shares of capital stock
      into shares having preferences or priority as to dividends or assets
      senior to the preference of the Intel Preferred Stock.

   The senior credit facilities and the senior subordinated notes are senior in
right of payment to the Intel Preferred Stock.

Intel Warrant

   Under the Intel Stock Purchase Agreement, we also issued to Intel the Intel
Warrant, which entitles Intel to purchase $5.0 million of our common stock at a
20.0% discount to the initial public offering price, when and if we complete an
initial public offering of our common stock. Accordingly, we have valued the
Intel warrant at $1.25 million and this amount has been recorded as equity. The
Intel Preferred Stock has been recorded net of this amount and is being
accreted to redemption value over the period to August 1, 2001, the first date
at which the Intel Preferred Stock becomes redeemable.

Note 9: Commitments and Contingencies

Intel Materials Agreement

   On August 5, 1999, ChipPAC Limited and Intel entered into the Intel
Materials Agreement pursuant to which Intel will outsource to ChipPAC Limited a
portion of its semiconductor packaging needs. In return, we will provide Intel
with rebates based upon the volume of packaging services outsourced to us.
Rebates are deducted from revenue and accrued as current liabilities when the
sale is made. The rebate percentage applied in computing the accrual is based
on projected total sales and the relevant rebate percentages for the periods
stated in the agreement. The Intel Materials Agreement covers semiconductor
packaging services for which Intel has an ongoing purchasing requirement and
for which we are a qualified source and where costs, yields and quality are
equal to that of the same services provided by other semiconductor packaging
companies.

   The Intel Materials Agreement also provides that Intel will not enter into
other agreements for packaging services that contain provisions relating to
competitive pricing and volume guarantees similar to those contained in the
Intel Materials Agreement. This restriction only applies to agreements with
semiconductor packaging companies that (i) are qualified to provide packaging
services to Intel and (ii) provide the same type

                                      F-21


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

of packaging services provided by us. The Intel Materials Agreement also
obligates us to first offer to Intel rights to use intellectual property
related to certain new packaging services technology developed by us. Following
the expiration of its initial term on December 31, 2001, the Intel Materials
Agreement may be extended upon the mutual consent of ChipPAC Limited and Intel.

   The Company's executive offices in the United States and its facilities in
Korea are leased from HEA and HEI respectively, under noncancelable operating
lease arrangements through 2001. Rent expense for the years ended December 31,
1996, 1997 1998, and 1999 was $5.0 million, $4.3 million, $7.6 million and $4.9
million respectively. Future annual minimum lease payments under operating
leases that have initial or remaining noncancelable lease terms in excess of
one year at December 31, 1999 are as follows (in thousands):

                                
             2000.............................. $5,012
             2001..............................  2,940
                                                ------
                                                $7,952
                                                ======

             

Note 10: Related Party Transactions

   The Company has sold packaging and testing services to HEI and to Symbios,
Inc. (a subsidiary of HEA). The Company recorded sales of $15.2, $9.7, $2.9 and
$10.8 million to HEI for the years ended December 31, 1996, 1997, 1998 and 1999
respectively. The Company recorded sales of $2.3, $4.2 and $2.3 million to
Symbios, Inc. for the years ended December 31, 1996, 1997 and 1998,
respectively. Symbios, Inc. was not a subsidiary of HEA during 1999.

   During the periods prior to June 30, 1998, HEI reimbursed CPK for the use of
a metal plating facility. After June 30, 1998, HEI entered into an agreement
with CPK, whereby CPK charged for plating services on a per piece basis. During
fiscal years 1996, 1997, 1998 and 1999 the Company recognized $5.4 million,
$8.5 million, $6.2 million and $8.1 million from HEI as reimbursement for
plating services, respectively. These amounts exceeded actual costs by
$519,000, $832,000, $57,000 and $2,734,000 for the years ended December 31,
1996, 1997, 1998 and 1999 respectively. The total amount receivable from HEI
for plating services and from the sale of packaging services was $11.7 million
at December 31, 1999.

   HEI has provided certain support functions for CPK, including sales,
administration, finance and treasury management. In connection with these
functions, HEI incurred certain expenses on behalf of CPK, which consisted
primarily of general, selling and administrative expenses. During the years
ended December 31, 1996, 1997 and the six months ended June 30, 1998, HEI
allocated $5.3 million, $4.0 million and $1.2 million, respectively, which are
included as an operating expense by the Company. No allocation of operating
expenses was made after June 30, 1998, as CPK established its own
administration functions.

   In addition, HEI allocated to CPK, $4.8 million, $4.3 million and $1.7
million for facilities and utilities costs during fiscal years ended December
31, 1996, 1997, and the six-month period ended June 30, 1998, respectively. CPK
expenses which were paid by HEI during the periods prior to June 30, 1998, are
recorded as capital contributions. For the six month period from June 30, 1998
to December 31, 1998, CPK paid HEI a total of $5.5 million for facilities,
utilities, and employee welfare. During the periods prior to June 30, 1998, a
portion of these costs was included in the operating expenses allocated to CPK.

   In December 1998, CPK declared a dividend payable of $9.7 million to HEI,
which was paid in February 1999.

                                      F-22


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   HEI entered into an agreement with the Company to provide technical services
and manufacturing support for the Company's facility in China. This agreement
was terminated on June 30, 1998. Under this agreement, the Company owed HEI
approximately, $4.2 million, $6.7 million and $7.2 million at December 31,
1996, 1997 and 1998, respectively. Payment was made under this agreement at the
recapitalization date.

   During 1995 through 1998, HECS contracted with Hyundai Engineering and
Construction Co. Ltd. ("HEC"), a Hyundai affiliated company, to construct the
Company's packaging and testing facilities in Shanghai, China. From inception
through December 31, 1998, charges from HEC amounted to approximately $43.7
million. Amounts payable to HEC, included in the accompanying balance sheets,
were $2.2 million and $1.2 million at December 31, 1996 and December 31, 1998
respectively. No amounts are payable or due to HEC at December 31, 1999.

   At December 31, 1998, HECS had a payable of $4.4 million due HEI for the
cost of certain equipment which had been transferred to HECS. This amount is
included as a current liability in payables to affiliates at December 31, 1998.
No amount is payable or due at December 31, 1999.

   The following table summarized the payables to affiliates at December 31,
1997, 1998 and 1999 (in thousands):



                                                               December 31,
                                                           --------------------
                                                            1997   1998   1999
                                                           ------ ------- -----
                                                                 
      Payables to Affiliates
        Dividend payable to HEI by CPK....................    --  $ 9,701   --
        Management fee due HEI............................ $6,659   7,187   --
        Payable to HEI from HECS for equipment purchases..    --    4,430   --
        Payable to HEA from CPI for current tax
         obligations......................................    --      443   --
        Payable to HEC from HECS for construction work....    --    1,157   --
                                                           ------ ------- -----
                                                           $6,659 $22,918 $ --
                                                           ====== ======= =====


   Intercompany Trading Balances comprised the following (in thousands):



                                                       December 31,
                                               -------------------------------
                                                 1997       1998       1999
                                               ---------  ---------  ---------
                                                            
      Intercompany Trading Balances
        Intercompany Trading Balances,
         beginning balance.................... $  27,611  $  73,244  $ 119,625
        Intercompany purchases................   244,273    316,219    337,481
        Intercompany payments.................  (198,640)  (269,838)  (326,427)
                                               ---------  ---------  ---------
        Intercompany Trading Balances, ending
         balance.............................. $  73,244  $ 119,625  $ 130,679
                                               =========  =========  =========


   Since May 1998, CPI's primary office facility has been located on premises
which it has subleased from HEA. During the year ended December 31, 1998 and
1999, HEA charged $467,000 and $789,000 to CPI for rent and building related
taxes, insurance, and maintenance.

   At December 31, 1997 and 1998, the Company had advances receivable of $7.5
million and $37.6 million, respectively, due from HEA. These advances are non-
interest bearing and have no fixed repayment date. These

                                      F-23


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)

advances have been classified as deductions from shareholders' equity in these
financial statements. Amounts advanced between CPI and HEA prior to 1997 were
not material. No amounts are receivable from HEA at December 31, 1999.

   At June 30, 1998, Hyundai Information Technology ("HIT") entered into a
three year agreement with CPK to provide information technology services.
Substantially all of CPK's major information technology services are provided
by HIT. HIT also entered into a six month agreement at October 1998 to provide
CPK with services for Year 2000 remediation. For the six month period from June
30, 1998 to December 31, 1998, HIT charged CPK $1.0 million. For the year ended
December 31, 1999, HIT charged CPK $2,265,000. Prior to June 30, 1998, while
HIT provided substantially all of CPK's information technology services, such
charges were included with the general allocation of general, selling and
administrative operating expenses made by HEI.

   During 1998, CPI entered into an agreement with HIT for the installation of
a significant portion of a modular software system. The installation of this
portion of the software system was completed in February 1999. For the years
ended December 31, 1998 and 1999, CPI incurred charges of $1,198,000 and
$2,265,000 from HIT, respectively.

Management Advisory Agreements

   At the time of the recapitalization, the Company entered into advisory
agreements with the Equity Investors. Under these agreements, Equity Investors
may provide financial, advisory and consulting services to us. In exchange for
these services, the Equity Investors will be entitled to receive fees billed at
the Equity Investors' customary rates for actual time spent performing these
services plus reimbursement for out-of-pocket expenses; provided that,
commencing with the quarter ending March 31, 2000, when and if we achieve
EBITDA, as calculated through the twelve-month period ended March 31, 2000, in
excess of $81.2 million, the Equity Investors will each be entitled to an
annual advisory fee, the amount of which will be limited by our senior credit
agreements, for the remaining term of the advisory agreement. There are no
minimum levels of service required to be provided under the advisory
agreements. At the time of the recapitalization, the Equity Investors each
received a one-time fee of 1.0% of the aggregate value of the recapitalization,
which fees totaled $10 million. In addition, the Equity Investors will each
receive a fee not to exceed 1.0% of the aggregate value of any acquisition,
divestiture or financing transaction of ChipPAC, Inc. in which the Equity
Investors are involved. Each advisory agreement will remain in effect for an
initial term of ten years, but they may be terminated by the Equity Investors
or us upon written notice 90 days prior to the expiration of the initial term
or any extension. Each advisory agreement includes customary indemnification
provisions in favor of each of the Equity Investors.

Note 11: Common Stock and Shareholders' and Divisional Equity

   The Company's equity for earlier periods includes the divisional equity of
CPI, paid-in-capital of HECS, and the common stock and divisional equity of
CPK. This divisional equity was either redeemed or converted in accordance with
the terms of the recapitalization agreement.

Common Stock

   The Company currently has authorized class A, B, and L common stock. There
are 180,000,000, $0.01 par value, shares authorized of each class A and class B
common stock. At December 31, 1999 there were 96,254,000 shares of class A
common stock issued and outstanding and there were no shares of class B common
issued or outstanding.

                                      F-24


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   There are 20,000,000 shares of $0.01 par value class L common stock,
authorized of which 10,456,000 shares were issued and outstanding at December
31, 1999. Only class A common shares have voting rights.

   In the event of liquidation, the class L common shares have certain
distribution preferences over the class A and B shares, once the senior
liquidation rights of the mandatorily redeemable preferred stock have first
been satisfied. To the extent available a liquidating distribution equal to the
original share cost, plus an amount equal to 12.0% per annum calculated on a
compound basis, shall be made to the holders of the class L common shares
before any distribution is made to the class A and B shareholders.

   Class A and B common shareholders may convert their shares at the ratio of
one to one into the shares of the other class.

Note 12: 1999 Stock Purchase and Option Plan

   As a result of the March 1999 HEI and HEA agreement to re-organize the
Company, the 1997 stock purchase plan was terminated. Cash paid to holders of
vested options upon termination of the plan totalled approximately $170,000 and
was charged as additional employee compensation.

   Our board of directors has adopted the ChipPAC, Inc. 1999 Stock Purchase and
Option Plan, or the "1999 Stock Plan," which authorizes the granting of stock
options and the sale of Class A common stock or Class L common stock to current
or future employees, directors, consultants or advisors of ChipPAC, Inc. or its
subsidiaries. Under the 1999 Stock Plan, a committee of the board of directors
is authorized to sell or otherwise issue Class A common stock or Class L common
stock at any time prior to the termination of the 1999 Stock Plan in such
quantity, at such price, on such terms and subject to such conditions as
established by the committee up to an aggregate of 15,500,000 shares of Class A
common stock and 500,000 shares of Class L common stock, including shares of
common stock with respect to which options may be granted, subject to
adjustment upon the occurrence of specified events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events.

   The following table summarizes stock option activity under the 1997 Option
Plan of ChipPAC through December 31, 1999:


                                                             Weighted
                                     Options                 Average
                                    Available     Options    Exercise Aggregate
                                    for Grant   Outstanding   Price     Value
                                    ----------  -----------  -------- ---------
                                                          
      Balances at October 1, 1997..        --          --                   --
        Options reserved...........  2,508,960         --                   --
        Options granted............   (952,750)    952,750    $0.30   $ 285,825
                                    ----------  ----------    -----   ---------
      Balances at December 31,
       1997........................  1,556,210     952,750    $0.30     285,825
        Options granted............   (793,500)    793,500    $0.30     238,050
        Options cancelled..........    278,500    (278,500)   $0.30     (83,550)
                                    ----------  ----------    -----   ---------
      Balances at December 31,
       1998........................  1,041,210   1,467,750    $0.30   $ 440,325
                                    ==========  ==========    =====   =========
        Options granted............   (102,500)    102,500    $0.30      30,750
        Options cancelled..........  1,076,200  (1,076,200)   $0.30    (322,860)
        Options repurchased........    494,050    (494,050)   $0.30    (148,215)
        Termination of plan........ (2,508,960)        --       --          --
                                    ----------  ----------    -----   ---------
      Balances at December 31,
       1999........................        --          --       --    $     --
                                    ==========  ==========    =====   =========


   As of December 31, 1998, options for 160,239 shares were vested. No options
were vested at December 31, 1997.

                                      F-25


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   The following table summarizes stock option activity under the 1999 Option
Plan of ChipPAC through December 31, 1999:


                                                            Weighted
                                     Options                Average
                                    Available     Options   Exercise Aggregate
                                    for Grant   Outstanding  Price     Value
                                    ----------  ----------- -------- ----------
                                                         
      Balances at January 1, 1999.
        Options reserved..........   7,500,000         --      --           --
        Options granted...........  (5,935,500)  5,935,500   $0.88   $5,223,240
        Options cancelled.........      85,000     (85,000)  $0.88      (74,800)
                                    ----------   ---------   -----   ----------
      Balances at December 31,
       1999.......................   1,649,500   5,850,500   $0.88   $5,148,440
                                    ==========   =========   =====   ==========


   As of December 31, 1999, options for 0 share were vested. No options were
vested at December 31, 1998. The weighted average contractual life is
approximately 9.7 years.

   The Company calculated the value of each option grant on the date of grant
using the Black-Scholes option pricing model with the following assumptions:



                                                          1997    1998    1999
                                                         ------- ------- -------
                                                                
      Risk free interest rate...........................    4-5%    4-5%      6%
      Expected lives.................................... 4 years 4 years 4 years
      Dividend yield....................................     --      --      --
      Expected volatility...............................     --      --      --


   The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". Had compensation cost been
determined based on the fair value at the grant date, the impact on net
operations as reported for the year ended December 31, 1997, 1998 and 1999
would have been $0, $9,000, and $7,000 respectively.

Note 13: Income Taxes

   The provision for (benefit from) income taxes is comprised of the following
(in thousands):



                                                 Years Ended December 31,
                                              ---------------------------------
                                               1996    1997     1998     1999
                                              ------ --------  -------  -------
                                                            
      Current
        Federal.............................. $1,082 $  1,768  $ 1,099  $   209
        State................................    317      519      279       98
        Foreign..............................    574    4,817    3,012    4,680
      Deferred
        Federal..............................    --       --      (358)     566
        State................................    --       --       (62)      95
        Foreign..............................    910  (16,775)  16,594   (3,710)
                                              ------ --------  -------  -------
        Tax expense.......................... $2,883 $ (9,671) $20,564  $ 1,938
                                              ====== ========  =======  =======


   Income (loss) before taxes is comprised of the following (in thousands):



                                                 Years Ended December 31,
                                             ----------------------------------
                                              1996      1997     1998    1999
                                             -------  --------  ------- -------
                                                            
      Domestic.............................. $ 3,413  $  5,579  $ 2,165 $(1,498)
      Foreign...............................  (6,155)  (61,368)  50,702  (2,499)
                                             -------  --------  ------- -------
                                             $(2,742) $(55,789) $52,867 $(3,997)
                                             =======  ========  ======= =======


                                      F-26


                                 ChipPAC, Inc.

                  NOTES TO FINANCIAL STATEMENTS--(Continued)


   A summary of the composition of net deferred income tax assets
(liabilities) is as follows (in thousands):



                                                          At December 31,
                                                       ------------------------
                                                        1997     1998     1999
                                                       -------  -------  ------
                                                                
      Assets:
        Foreign currency transaction losses........... $13,356  $   388     --
        Foreign lease obligations.....................   1,806    1,366  $  887
        Impaired loss.................................   1,355    1,484     787
        Provision for slow moving inventory...........   1,027      657     971
        Capitalized interest..........................   1,242    2,427   1,591
        Accrued expenses and other....................     --       420   2,343
                                                       -------  -------  ------
                                                        18,786    6,742   6,579
                                                       -------  -------  ------
      Less liabilities:
        Foreign currency transaction gains............  (3,614)  (3,182)   (259)
        Foreign lease obligations.....................     --       --      --
        Reserves deducted for tax, not for books......  (4,864)    (868)   (579)
                                                       -------  -------  ------
                                                        (8,478)  (4,050)   (838)
                                                       -------  -------  ------
                                                       $10,308  $ 2,692  $5,741
                                                       =======  =======  ======


   The differences between provision for (benefit from) income taxes at the
statutory Federal income tax rate and income taxes reported in the combined
statements of operations are as follows:



                                                  Years Ended December
                                                          31,
                                                 ----------------------------
                                                 1996    1997    1998   1999
                                                 -----   -----   ----   -----
                                                            
      Federal statutory tax rate................ (35.0)% (35.0)% 35.0 % (35.0)%
      State tax, net of Federal benefit.........   7.5 %   0.6 %  0.3 %   0.5 %
      Losses not benefitted, China.............. 128.8 %  12.5 % 11.4 %  14.5 %
      Foreign operations rate difference........   3.8 %   4.6 % (7.8)%  44.2 %
      Other.....................................   --      --     --      5.4 %
                                                 -----   -----   ----   -----
                                                 105.1 % (17.3)% 38.9 %  29.6 %
                                                 =====   =====   ====   =====


   Since inception on September 30, 1997, until August 5, 1999 CPI has been a
party to a tax sharing agreement with its parent company HEA with which it has
filed a consolidated US Federal income tax return, and various consolidated
and separate state income tax returns. Under the tax sharing agreement CPI
will remit to HEA its tax liability calculated on a separate company basis.
For the year ended December 31, 1998, CPI recorded an income tax provision of
$954,000, of which $443,000 was recorded as a current liability due to HEA.
The balance of prior tax charges was accounted for as a reduction of
shareholder receivable-HEA, and included in shareholders' and divisional
equity.

   HECS operates under a business license in China whereby a tax holiday is
granted to the Company. The tax holiday entitles the Company to a two year tax
exemption followed by three years of reduced statutory tax rates being applied
to taxable income generated in the five year period commencing from the first
year HECS generates taxable income, after utilization of operating losses
carried forward. Operating losses may be carried over for five years. HECS has
been loss making to date. No benefit for income taxes has been reflected in
the accompanying combined financial statements for losses incurred by HECS,
thereby increasing the effective tax rate.

                                     F-27


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Continued)


   Under Korean tax law, CPK is allowed certain income tax deductions for the
appropriation of retained earnings and the Company has established a deferred
tax liability for such appropriations. In addition, CPK incurred certain
unrealized foreign currency translation gains and losses, included in
operations, which must be deferred for tax reporting purposes. The accompanying
combined financial statements reflect the provision or benefit for such gains
and losses and are reflected as deferred income tax assets and liabilities.

   Included in contributions to capital is approximately $4.2 million comprised
primarily of income tax liability assumed by the Company's parent through
December 31, 1998.

Note 14: Employee Benefit Plans

Retirement and Deferred Savings Plan--United States

   CPI has maintained a retirement and deferred savings plan for its employees
(the "401(k) Plan") through its immediate parent company, HEA. The 401(k) Plan
is intended to qualify as a tax qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to 15% of tax
gross compensation (up to a statutory limit). Under the 401(k) Plan, the
Company is required to make contributions based on contributions made by
employees. The Company's contributions to the 401(k) Plan for the years ended
December 31, 1996, 1997, 1998 and 1999 were approximately $11,000, $49,000,
$119,000 and $175,000 respectively. All amounts contributed by participants and
related earnings are fully vested at all times.

Employee Welfare and Social Insurance Plan--China

   In accordance with the National and Shanghai Municipal Regulations on labor
administration, HECS is required to provide a certain percentage of total
employee salaries as a welfare and social insurance reserve. The rates of
provision are as follows:

                                                                  
      Pension fund........................................................ 25.5%
      Welfare fund........................................................  5.5%
      Housing fund........................................................  6.0%
      Unemployment insurance fund.........................................  2.0%

      

   Employee welfare and social insurance expense for the years ended December
31, 1996, 1997, 1998 and 1999 amounted to approximately $13,300, $32,800,
$449,100, $820,900, and $1,230,000 respectively. The Company is under a
statutory requirement in China to establish and maintain a general reserve fund
and an enterprise expansion fund by way of appropriations from net income. The
board of directors determines the amount of the appropriations. There were no
amounts appropriated for these funds during the periods presented.

Severance Benefits--Korea

   Employees and directors with more than one year of service are entitled to
receive a lump-sum payment upon termination of their employment with CPK, based
on their length of service and rate of pay at the time of termination. Accrued
severance benefits are adjusted annually for all eligible employees based on
their employment as of the balance sheet date.

   In accordance with the National Pension Act, a certain portion of severance
benefits is required to be remitted to the National Pension Fund and deducted
from accrued severance benefits. The amounts contributed will be refunded to
employees from the National Pension Fund upon retirement. The expense for
severance benefits for the years ended December 31, 1996, 1997, 1998 and 1999
amounted to approximately $2.4 million, $3.0 million, $2.9 million and $0.6
million, respectively.

                                      F-28


                                 ChipPAC, Inc.

                   NOTES TO FINANCIAL STATEMENTS--(Concluded)


   Severance benefits are funded approximately 44%, 41%, 79% and 26% at
December 31, 1996, 1997, 1998 and 1999, respectively through deposits to a
group severance insurance plan with several life insurance companies. The
amounts funded under this insurance plan are classified as long-term severance
deposits. CPK may fund subsequent accruals at its discretion.

   Included in other long-term liabilities are accrued severance benefits of
$7.0 million, and $1.3 million and $3.7 million at December 31, 1997, 1998, and
1999, respectively. All accrued severance benefits totaling $8.8 million were
paid at June 30, 1998 in conjunction with the initiation of CPK as the legal
employer of the former employees of the HEI Assembly and Test Division.

Note 15: Supplemental Financial Statements of Guarantor/Non-Guarantor Entities

   In connection with the recapitalization, ChipPAC International Company
Limited (CP Int'l) issued senior subordinated debt securities which are fully
and unconditionally guaranteed, jointly and severally, on a senior subordinated
basis, by the parent company, ChipPAC, Inc. (CPI) and by ChipPAC (Barbados)
Ltd., ChipPAC Limited, ChipPAC Korea Company Limited (CPK), ChipPAC Luxembourg
S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability Company
(the "Guarantor Subsidiaries"). All guarantor subsidiaries are wholly-owned
direct or indirect subsidiaries of ChipPAC, Inc. Hyundai Electronics Co.
(Shanghai) Ltd. (HECS) and ChipPAC Assembly & Test Co. Ltd. (CATS)
(collectively the Chinese entities), will not provide guarantees (the "Non-
Guarantor Subsidiaries"). The following is consolidated and combining financial
information for CP Int'l CPI, and CPK, HECS, CATS, ChipPAC (Barbados) Ltd.,
ChipPAC Limited, ChipPAC
Luxembourg S.a.R.L., and ChipPAC Liquidity Management Hungary Limited Liability
Company, segregated between the Guarantor and Non-Guarantor Subsidiaries.
ChipPAC (Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L. and
ChipPAC Liquidity Management Hungary Limited Liability Company were formed by
Hyundai in 1999 and have no historical operating results or balances for the
four years ended December 31, 1998. As a result, it is not possible to include
these entities in the supplemental financial statements for these periods.
Separate financial statements and other disclosures concerning the Guarantor
Subsidiaries are not presented herein because management has determined that
they are not material to investors. Financial information for ChipPAC
(Barbados) Ltd., ChipPAC Limited, ChipPAC Luxembourg S.a.R.L. and ChipPAC
Liquidity Management has not been presented as these entities have no
historical financial results and future transactions will primarily consist of
inter-company transactions. The following HECS financial statements in the
condensed combining financial statements include the accounts of CATS.

                                      F-29


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS

                          Year Ended December 31, 1996
                                 (In thousands)



                                                 Non-
                              Guarantors       Guarantor
                           ------------------  ---------
                             CPI       CPK       HECS     Eliminations Combined
                           --------  --------  ---------  ------------ --------
                                                        
Revenue
  Intercompany revenue....      --   $107,445  $  6,889    $(114,334)       --
  Customer revenue........ $113,220    78,435       --           --    $191,655
                           --------  --------  --------    ---------   --------
  Revenue.................  113,220   185,880     6,889     (114,334)   191,655
Cost of revenue...........  107,471   161,563    11,965     (114,334)   166,665
                           --------  --------  --------    ---------   --------
Gross profit..............    5,749    24,317    (5,076)         --      24,990
Operating expenses:
  Selling, general &
   administrative.........    2,328     9,103       --           --      11,431
  Research & development..      --      2,617       --           --       2,617
  Management fees charged
   by affiliate...........      --        --      3,322          --       3,322
  Writedown of impaired
   assets.................      --        --        --           --         --
                           --------  --------  --------    ---------   --------
    Total operating
     expenses.............    2,328    11,720     3,322          --      17,370
                           --------  --------  --------    ---------   --------
Operating income..........    3,421    12,597    (8,398)         --       7,620
Non-operating Income
 (Expense)
  Interest income.........        1         1       106          --         108
  Interest expense........       (8)   (5,268)     (504)         --      (5,780)
  Foreign currency gains
   (losses)...............      --     (5,005)      (36)         --      (5,041)
  Other income (expenses),
   net....................      --      1,606    (1,255)         --         351
                           --------  --------  --------    ---------   --------
  Non-operating income
   (expenses).............       (7)   (8,666)   (1,689)         --     (10,362)
                           --------  --------  --------    ---------   --------
Income (loss) before
 income taxes.............    3,414     3,931   (10,087)         --      (2,742)
Provision for (benefit
 from) income taxes.......    1,401     1,482       --           --       2,883
                           --------  --------  --------    ---------   --------
    Net Income (loss)..... $  2,013  $  2,449  $(10,087)   $     --    $ (5,625)
                           ========  ========  ========    =========   ========


                                      F-30


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS

                          Year Ended December 31, 1996
                                 (In thousands)



                                                 Non-
                               Guarantors      Guarantor
                            -----------------  ---------
                              CPI      CPK       HECS     Eliminations Combined
                            -------  --------  ---------  ------------ ---------
                                                        
Cash flows from operating
 activities:
  Net Income..............  $ 2,013  $  2,449  $(10,087)         --    $  (5,625)
  Adjustments to reconcile
   net income
    Depreciation and
     amortization.........        4    24,039     2,589          --       26,632
    Write down of impaired
     assets...............      --        --        --           --          --
    Provision for
     inventory and
     receivables..........    1,401    (1,281)      --           --          120
    Foreign currency
     (gains) losses.......      --      5,041       --           --        5,041
    (Gain) loss on
     intercompany sales of
     equipment............      --     (1,283)      --      $  1,283         --
    (Gain) loss on
     external sales of
     equipment............      --        (16)      --           --          (16)
  Changes in assets and
   liabilities:
    Intercompany accounts
     receivable...........      --     (8,113)   (5,809)      13,922         --
    Accounts receivable...   (7,047)    3,022       --           --       (4,025)
    Inventories...........      --        172      (526)         --         (354)
    Prepaid expenses and
     other assets.........      --       (363)     (714)                  (1,077)
    Advances (to) from
     affiliates...........   (1,389)      --      3,322          --        1,933
    Intercompany accounts
     payable..............    4,859     5,821     3,242      (13,922)        --
    Accounts payable......      132    (1,040)      --           --         (908)
    Accrued expenses &
     other liabilities....       47      (233)   (3,686)         --       (3,872)
    Other long-term
     liabilities..........      --      1,403       --           --        1,403
                            -------  --------  --------     --------   ---------
      Net cash provided by
       operating
       activities.........       20    29,618   (11,669)       1,283      19,252
                            -------  --------  --------     --------   ---------
Cash flows used in
 investing activities:
  Acquisition of property
   and equipment..........      (20)  (86,666)  (22,011)       4,338    (104,359)
  Proceeds, intercompany
   equipment sales........      --      5,621       --        (5,621)        --
  Proceeds, external
   equipment sales........      --        240       --           --          240
                            -------  --------  --------     --------   ---------
      Net cash used in
       investing
       activities.........      (20)  (80,805)  (22,011)      (1,283)   (104,119)
                            -------  --------  --------     --------   ---------
Cash flows provided by
 financing activities:
  Advances to HEA.........      --        --        --           --          --
  Proceeds from short-term
   loans..................      --     81,709     1,804          --       83,513
  Repayment of short-term
   loans..................      --    (90,800)      --           --      (90,800)
  Proceeds from term
   loans..................      --     39,696     9,700          --       49,396
  Repayment, term loans
   and capital leases.....      --     (7,111)        1          --       (7,110)
  Contributions
   (withdrawals) of
   capital................      --     27,176    21,900          --       49,076
                            -------  --------  --------     --------   ---------
      Net cash provided by
       financing
       activities.........      --     50,670    33,405          --       84,075
                            -------  --------  --------     --------   ---------
Effect from changes in
 exchange rates...........      --        548       (35)         --          513
                            -------  --------  --------     --------   ---------
Net increase (decrease) in
 cash.....................      --         31      (310)         --         (279)
Cash and equivalents at
 beginning of period......      --        --      2,602          --        2,602
                            -------  --------  --------     --------   ---------
Cash and equivalents at
 end of period............  $   --   $     31  $  2,292     $    --    $   2,323
                            =======  ========  ========     ========   =========


                                      F-31


                                    ChipPAC

                SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS

                               December 31, 1997
                                 (In thousands)



                                                 Non-
                               Guarantors      Guarantor
                            -----------------  ---------
                              CPI      CPK       HECS     Eliminations Combined
                            -------  --------  ---------  ------------ --------
                                                        
Assets
  Current assets:
    Cash and cash
     equivalents........... $   973  $  1,091  $  1,003          --    $  3,067
    Receivable from
     shareholder...........     --        --        --           --         --
    Intercompany accounts
     receivable............     --     67,775     5,523     $(73,298)       --
    Accounts receivable
     from customers........  26,822     3,334       --           --      30,156
    Inventories............     --     11,902     2,247          --      14,149
    Deferred taxes.........     --      4,193       --           --       4,193
    Prepaid expenses &
     other current assets..      24        69       864          --         957
                            -------  --------  --------     --------   --------
      Total current assets.  27,819    88,364     9,637      (73,298)    52,522
  Property, plant and
   equipment, net..........     790    91,965    77,471          --     170,226
  Other assets.............       4    10,489       --           --      10,493
                            -------  --------  --------     --------   --------
      Total assets......... $28,613  $190,818  $ 87,108     $(73,298)  $233,241
                            =======  ========  ========     ========   ========
Liabilities and Equity
  Current liabilities:
    Intercompany accounts
     payable............... $24,360  $  5,521  $ 43,417     $(73,298)       --
    Accounts payable.......     506    16,962       --           --    $ 17,468
    Accrued expenses and
     other liabilities.....     488     3,479     1,857          --       5,824
    Short-term debt........     --     31,478     3,001          --      34,479
    Current portion of
     long-term debt........     --     11,199     2,057          --      13,256
    Current portion of HEI
     long-term debt........     --      4,473       --           --       4,473
    Payables to affiliates.     --        --      6,659          --       6,659
                            -------  --------  --------     --------   --------
      Total current
       liabilities.........  25,354    73,112    56,991      (73,298)    82,159
    Long-term debt, less
     current portion.......     --     86,408    30,286          --     116,694
    HEI long-term debt,
     less current portion..     --     17,987       --           --      17,987
    Other long-term
     liabilities...........     --      6,929       --           --       6,929
                            -------  --------  --------     --------   --------
      Total liabilities....  25,354   184,436    87,277      (73,298)   223,769
                            -------  --------  --------     --------   --------
Shareholders' and
 divisional equity
  Preferred stock and paid
   in capital..............  15,672    48,110    33,293          --      97,075
  Shareholder receivable-
   HEA.....................  (7,466)      --        --           --      (7,466)
  Accumulated earnings
   (deficit)...............  (4,947)  (23,469)  (33,938)         --     (62,354)
  Accumulated other
   comprehensive income
   (loss)..................     --    (18,259)      476          --     (17,783)
                            -------  --------  --------     --------   --------
      Shareholders' and
       divisional equity...   3,259     6,382      (169)         --       9,472
                            -------  --------  --------     --------   --------
      Total liabilities and
       equity.............. $28,613  $190,818  $ 87,108     $(73,298)  $233,241
                            =======  ========  ========     ========   ========


                                      F-32


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS

                          Year Ended December 31, 1997
                                 (In thousands)



                            Guarantors      Non-Guarantor
                         -----------------  -------------
                           CPI      CPK         HECS      Eliminations Combined
                         -------- --------  ------------- ------------ --------
                                                        
Revenue
  Intercompany revenue..      --  $222,661    $ 21,611     $(244,272)       --
  Customer revenue...... $235,821   53,608         --            --    $289,429
                         -------- --------    --------     ---------   --------
  Revenue...............  235,821  276,269      21,611      (244,272)   289,429
Cost of revenue.........  222,628  227,041      23,841      (244,272)   229,238
                         -------- --------    --------     ---------   --------
Gross profit............   13,193   49,228     (2,230)           --      60,191
Operating expenses:
  Selling, general &
   administrative.......    6,814    9,039         --            --      15,853
  Research &
   development..........      841    3,211         --            --       4,052
  Management fees
   charged by affiliate.      --       --        3,199           --       3,199
  Writedown of impaired
   assets...............      --     3,339       8,230           --      11,569
                         -------- --------    --------     ---------   --------
    Total operating
     expenses...........    7,655   15,589      11,429           --      34,673
                         -------- --------    --------     ---------   --------
Operating income            5,538   33,639     (13,659)          --      25,518
Non-operating income
 (Expense)
  Interest income.......       41      --           55           --          96
  Interest expense......      --    (9,858)     (1,114)          --     (10,972)
  Foreign currency gains
   (losses).............      --   (69,691)         22           --     (69,669)
  Other income
   (expenses), net......      --     4,497      (5,259)          --        (762)
                         -------- --------    --------     ---------   --------
  Non-operating income
   (expenses)...........       41  (75,052)     (6,296)          --     (81,307)
                         -------- --------    --------     ---------   --------
Income (loss) before
 income taxes...........    5,579  (41,413)    (19,955)          --     (55,789)
Provision for (benefit
 from) income taxes.....    2,290  (11,961)        --            --      (9,671)
                         -------- --------    --------     ---------   --------
    Net Income (loss)... $  3,289 $(29,452)   $(19,955)    $     --    $(46,118)
                         ======== ========    ========     =========   ========


                                      F-33


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS

                          Year Ended December 31, 1997
                                 (In thousands)



                            Guarantors       Non-Guarantor
                         ------------------  -------------
                           CPI       CPK         HECS      Eliminations Combined
                         -------  ---------  ------------- ------------ ---------
                                                         
Cash flows from
 operating activities:
  Net Income...........  $ 3,289  $ (29,452)   $(19,955)          --    $ (46,118)
  Adjustments to
   reconcile net income
    Depreciation and
     amortization......       75     37,176       3,431           --       40,682
    Write down of
     impaired assets...      --       3,339       8,230           --       11,569
    Provision for
     inventory and
     receivables.......      --       3,502         --            --        3,502
    Foreign currency
     (gains) losses....      --      69,669         --            --       69,669
    (Gain) loss on
     intercompany sales
     of equipment......      --      (4,709)        --       $  4,709         --
    (Gain) loss on
     external sales of
     equipment.........      --         515         --            --          515
  Changes in assets and
   liabilities:
    Intercompany
     accounts
     receivable........      --     (45,898)        308        45,590         --
    Accounts
     receivable........   (9,647)      (445)        --            --      (10,092)
    Inventories........      --     (15,006)     (1,116)          --      (16,122)
    Prepaid expenses
     and other assets..        6    (16,526)         49           --      (16,471)
    Advances (to) from
     affiliates........     (781)       --        3,199           --        2,418
    Intercompany
     accounts payable..   13,465       (300)     32,425       (45,590)        --
    Accounts payable...      205      4,801         --            --        5,006
    Accrued expenses &
     other liabilities.    2,665     (4,053)     (1,181)          --       (2,569)
    Other long-term
     liabilities.......      --       1,226         --            --        1,226
                         -------  ---------    --------      --------   ---------
      Net cash provided
       by operating
       activities......    9,277      3,839      25,390         4,709      43,215
                         -------  ---------    --------      --------   ---------
Cash flows used in
 investing activities:
  Acquisition of
   property and
   equipment...........     (838)  (101,747)    (36,749)       28,641    (110,693)
  Proceeds,
   intercompany
   equipment sales.....      --      33,350         --        (33,350)        --
  Proceeds, external
   equipment sales.....      --          17         --                         17
                         -------  ---------    --------      --------   ---------
      Net cash used in
       investing
       activities......     (838)   (68,380)    (36,749)       (4,709)   (110,676)
                         -------  ---------    --------      --------   ---------
Cash flows provided by
 financing activities:
  Advances to HEA......   (7,466)       --          --            --       (7,466)
  Proceeds from short-
   term loans..........      --      83,014       3,000           --       86,014
  Repayment of short-
   term loans..........      --     (61,804)     (1,808)          --      (63,612)
  Proceeds from term
   loans...............      --      28,511      11,000           --       39,511
  Repayment, term loans
   and capital leases..      --     (15,124)     (2,057)          --      (17,181)
  Contributions
   (withdrawals) of
   capital.............      --      26,306         --            --       26,306
                         -------  ---------    --------      --------   ---------
      Net cash provided
       by financing
       activities......   (7,466)    60,903      10,135           --       63,572
                         -------  ---------    --------      --------   ---------
Effect from changes in
 exchange rates........      --       4,698         (65)          --        4,633
                         -------  ---------    --------      --------   ---------
Net increase (decrease)
 in cash...............      973      1,060      (1,289)          --          744
Cash and equivalents at
 beginning of period...      --          31       2,292           --        2,323
                         -------  ---------    --------      --------   ---------
Cash and equivalents at
 end of period.........  $   973  $   1,091    $  1,003      $    --    $   3,067
                         =======  =========    ========      ========   =========


                                      F-34


                                    ChipPAC

                SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEETS

                               December 31, 1998
                                 (In thousands)



                            Guarantors       Non-Guarantor
                         ------------------  -------------
                           CPI       CPK         HECS      Eliminations Combined
                         --------  --------  ------------- ------------ --------
                                                         
Assets
  Current assets:
    Cash and cash
     equivalents........ $ 10,827  $ 44,292    $ 13,648           --    $ 68,767
    Receivable from
     shareholder........      --      4,922         --            --       4,922
    Intercompany
     accounts
     receivable.........   10,845   103,833       1,947     $(116,625)       --
    Accounts receivable
     from customers.....   34,741     2,988         --            --      37,729
    Inventories.........      --     10,110         215           --      10,325
    Deferred taxes......      420       383         --            --         803
    Prepaid expenses &
     other current
     assets.............       74     2,504         345           --       2,923
                         --------  --------    --------     ---------   --------
      Total current
       assets...........   56,907   169,032      16,155      (116,625)   125,469
  Property, plant and
   equipment, net.......    5,807   142,265      80,930           --     229,002
  Other assets..........       10     4,991         --            --       5,001
                         --------  --------    --------     ---------   --------
      Total assets...... $ 62,724  $316,288    $ 97,085     $(116,625)  $359,472
                         ========  ========    ========     =========   ========
Liabilities and Equity
  Current liabilities:
    Intercompany
     accounts payable... $ 83,556  $ (1,052)   $ 34,121     $(116,625)       --
    Accounts payable....    2,284    57,761       1,808           --    $ 61,853
    Accrued expenses and
     other liabilities..    1,128     3,537       3,012           --       7,677
    Short-term debt.....      --      3,077      15,700           --      18,777
    Current portion of
     long-term debt.....      --     21,173      10,781           --      31,954
    Current portion of
     HEI long-term debt.      --      2,610         --            --       2,610
    Payables to
     affiliates.........      443    10,858      11,617           --      22,918
                         --------  --------    --------     ---------   --------
      Total current
       liabilities......   87,411    97,964      77,039      (116,625)   145,789
    Long-term debt, less
     current portion....      --     63,495      17,448           --      80,943
    HEI long-term debt,
     less current
     portion............      --     18,208         --            --      18,208
    Other long-term
     liabilities........      --      1,341         --            --       1,341
                         --------  --------    --------     ---------   --------
      Total liabilities.   87,411   181,008      94,487      (116,625)   246,281
                         --------  --------    --------     ---------   --------
Shareholders' and
 divisional equity
  Preferred stock and
   paid in capital......   16,674   110,124      53,293           --     180,091
  Shareholder
   receivable-HEA.......  (37,626)      --          --            --     (37,626)
  Accumulated earnings
   (deficit)............   (3,735)   15,149     (51,166)          --     (39,752)
  Accumulated other
   comprehensive income
   (loss)...............      --     10,007         471           --      10,478
                         --------  --------    --------     ---------   --------
      Shareholders' and
       divisional
       equity...........  (24,687)  135,280       2,598           --     113,191
                         --------  --------    --------     ---------   --------
      Total liabilities
       and equity....... $ 62,724  $316,288    $ 97,085     $(116,625)  $359,472
                         ========  ========    ========     =========   ========


                                      F-35


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS

                          Year Ended December 31, 1998
                                 (In thousands)



                            Guarantors      Non-Guarantor
                         -----------------  -------------
                           CPI      CPK         HECS      Eliminations Combined
                         -------- --------  ------------- ------------ --------
                                                        
Revenue
  Intercompany revenue..      --  $302,460    $ 13,759     $(316,219)       --
  Customer revenue...... $319,678   14,403         --            --    $334,081
                         -------- --------    --------     ---------   --------
  Revenue...............  319,678  316,863      13,759      (316,219)   334,081
Cost of revenue.........  303,937  256,626      26,021      (316,219)   270,365
                         -------- --------    --------     ---------   --------
Gross profit............   15,741   60,237     (12,262)          --      63,716
Operating expenses:
  Selling, general &
   administrative.......   10,252    4,815         --            --      15,067
  Research &
   development..........    3,604    4,088         --            --       7,692
  Management fees
   charged by affiliate.      --       --          528           --         528
  Writedown of impaired
   assets...............      --       --          --            --         --
                         -------- --------    --------     ---------   --------
    Total operating
     expenses...........   13,856    8,903         528           --      23,287
                         -------- --------    --------     ---------   --------
Operating income........    1,885   51,334     (12,790)          --      40,429
Non-operating Income
 (Expense)
  Interest income.......      265      967          44           --       1,276
  Interest expense......      --    (9,973)     (3,367)          --     (13,340)
  Foreign currency gains
   (losses).............      --    24,699         (29)          --      24,670
  Other income
   (expenses), net......       15      903      (1,086)          --        (168)
                         -------- --------    --------     ---------   --------
  Non-operating income
   (expenses)...........      280   16,596      (4,438)          --      12,438
                         -------- --------    --------     ---------   --------
Income (loss) before
 income taxes...........    2,165   67,930     (17,228)          --      52,867
Provision for (benefit
 from) income taxes.....      954   19,610         --            --      20,564
                         -------- --------    --------     ---------   --------
    Net Income (loss)... $  1,211 $ 48,320    $(17,228)    $     --    $ 32,303
                         ======== ========    ========     =========   ========


                                      F-36


                                    ChipPAC

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS

                          Year Ended December 31, 1998
                                 (In thousands)



                                                  Non-
                               Guarantors       Guarantor
                            ------------------  ---------
                              CPI       CPK       HECS     Eliminations Combined
                            --------  --------  ---------  ------------ --------
                                                         
Cash flows from operating
 activities:
  Net Income..............  $  1,211  $ 48,320  $(17,228)        --     $ 32,303
  Adjustments to reconcile
   net income
    Depreciation and
     amortization.........       489    35,584     9,782         --       45,855
    Write down of impaired
     assets...............       --        --        --          --          --
    Provision for
     inventory and
     receivables..........       448      (873)      --          --         (425)
    Foreign currency
     (gains) losses.......       --    (24,670)      --          --      (24,670)
    (Gain) loss on
     intercompany sales of
     equipment............       --       (686)      --      $   686         --
    (Gain) loss on
     external sales of
     equipment............       --         26       --          --           26
  Changes in assets and
   liabilities:                            --
    Intercompany accounts
     receivable...........   (10,845)  (39,058)    3,576      46,327         --
    Accounts receivable...    (8,367)   (4,373)      --          --      (12,740)
    Inventories...........       --      7,056     2,033         --        9,089
    Prepaid expenses and
     other assets.........      (475)   11,761       519          54      11,859
    Advances (to) from
     affiliates...........       443      (730)    4,958         --        4,671
    Intercompany accounts
     payable..............    59,196    (3,573)   (9,242)    (46,381)        --
    Accounts payable......     1,777    36,395     1,807         --       39,979
    Accrued expenses &
     other liabilities....       642    (1,615)    1,099         --          126
    Other long-term
     liabilities..........       --     (7,326)      --          --       (7,326)
                            --------  --------  --------     -------    --------
      Net cash provided by
       operating
       activities.........    44,519    56,238    (2,696)        686      98,747
                            --------  --------  --------     -------    --------
Cash flows used in
 investing activities:
  Acquisition of property
   and equipment..........    (5,443)  (52,514)  (13,240)      9,865     (61,332)
  Proceeds, intercompany
   equipment sales........       --     10,551       --      (10,551)        --
  Proceeds, external
   equipment sales........       --      1,635       --          --        1,635
                            --------  --------  --------     -------    --------
      Net cash used in
       investing
       activities.........    (5,443)  (40,328)  (13,240)       (686)    (59,697)
                            --------  --------  --------     -------    --------
Cash flows provided by
 financing activities:
  Advances to HEA.........   (30,160)      --        --          --      (30,160)
  Proceeds from short-term
   loans..................       --     50,735    12,656         --       63,391
  Repayment of short-term
   loans..................       --    (79,136)       43         --      (79,093)
  Proceeds from term
   loans..................       --        185    10,000         --       10,185
  Repayment, term loans
   and capital leases.....       --    (17,681)  (14,114)        --      (31,795)
  Contributions
   (withdrawals) of
   capital................       938    62,014    20,001         --       82,953
                            --------  --------  --------     -------    --------
      Net cash provided by
       financing
       activities.........   (29,222)   16,117    28,586         --       15,481
                            --------  --------  --------     -------    --------
Effect from changes in
 exchange rates...........       --     11,174        (5)        --       11,169
                            --------  --------  --------     -------    --------
Net increase (decrease) in
 cash.....................     9,854    43,201    12,645         --       65,700
Cash and equivalents at
 beginning of period......       973     1,091     1,003         --        3,067
                            --------  --------  --------     -------    --------
Cash and equivalents at
 end of period............  $ 10,827  $ 44,292  $ 13,648     $   --     $ 68,767
                            ========  ========  ========     =======    ========


                                      F-37


                                 ChipPAC, Inc.

              SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

                               December 31, 1999
                                 (In thousands)



                          Parent                         Non-
                         Guarantor  Issuer             Guarantor
                         --------- --------            ---------
                                              Other
                            CPI    CP Int'l Guarantors   HECS    Eliminations Consolidated
                         --------- -------- ---------- --------- ------------ ------------
                                                            
Assets
  Current assets:
    Cash and cash
     equivalents........  $ 1,006  $  3,474  $ 22,275   $ 5,362          --     $ 32,117
    Intercompany
     accounts
     receivable.........    6,778     4,053   128,078     8,799   $ (147,708)        --
    Accounts receivable
     from customers.....      (28)      --     41,673        20          --       41,665
    Inventories.........      --        --     17,331       166          --       17,497
    Deferred taxes......      --        --        775       --           --          775
    Prepaid expenses &
     other current
     assets.............      230       --      1,884       272          --        2,386
                          -------  --------  --------   -------   ----------    --------
      Total current
       assets...........    7,986     7,527   212,016    14,619     (147,708)     94,440
  Property, plant and
   equipment, net.......    6,293         0   142,680    77,958            0     226,931
  Intercompany loans
   receivable...........      --    271,000       --        --      (271,000)        --
  Investment in
   subsidiaries.........   82,866    30,532   283,366       --      (396,764)        --
  Other assets..........       27    13,595     8,436       --           --       22,058
                          -------  --------  --------   -------   ----------    --------
      Total assets......  $97,172  $322,654  $646,498   $92,577   $ (815,472)   $343,429
                          =======  ========  ========   =======   ==========    ========
Liabilities and Equity
  Current liabilities:
    Intercompany
     accounts payable...  $   (29) $    --   $116,150   $31,586   $ (147,707)        --
    Accounts payable....    1,251        40    49,265     1,652          --     $ 52,208
    Accrued expenses and
     other liabilities..    4,467     9,044     9,992     3,705          --       27,208
    Deferred taxes......      --        --        --        --           --          --
    Short-term debt.....      --        --        --        --           --          --
    Current portion of
     long-term debt.....      --      4,800       --        --           --        4,800
                          -------  --------  --------   -------   ----------    --------
      Total current
       liabilities......    5,689    13,884   175,407    36,943     (147,707)     84,216
    Long-term debt, less
     current portion....      --    295,200       --        --           --      295,200
    Intercompany loans
     payable............      --        --    237,000    34,000     (271,000)        --
    Other long-term
     liabilities........      --        --        --        --           --          --
                          -------  --------  --------   -------   ----------    --------
      Total liabilities.    5,929   309,084   416,096    70,943     (418,707)    383,345
                          -------  --------  --------   -------   ----------    --------
Mandatorily redeemable
 preferred stock........   82,970       --        --        --           --       82,970

Shareholders' and
 divisional equity:
  Common stock..........    1,067       --        --        --           --        1,067
  Warrants-common stock
   A....................    1,250       --        --        --           --        1,250
  Additional paid in
   capital..............   85,750       --        --        --           --       85,750
  Receivable from
   shareholder..........   (1,128)      --        --        --           --       (1,128)
  Divisional equity, net
   of capital
   distributions........  (63,403)   14,191   205,655    85,281     (409,438)   (167,714)
  Accumulated earnings
   (deficit)............  (15,263)    (621)    16,043   (64,112)      12,673     (51,280)
  Accumulated other
   comprehensive income
   (loss)...............      --        --      8,704       465          --        9,169
                          -------  --------  --------   -------   ----------    --------
      Shareholders' and
       divisional
       equity...........    8,273    13,570   230,402    21,634     (396,765)   (122,886)
                          -------  --------  --------   -------   ----------    --------
      Total liabilities
       and equity.......  $97,172  $322,654  $646,498   $92,577   $ (815,472)   $343,429
                          =======  ========  ========   =======   ==========    ========



                                      F-38


                                 ChipPAC, Inc.

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF OPERATIONS

                          Year Ended December 31, 1999
                                 (In thousands)



                          Parent                           Non-
                         Guarantor   Issuer              Guarantor
                         ---------  --------    Other    ---------
                            CPI     CP Int'l  Guarantors   HECS     Eliminations Consolidated
                         ---------  --------  ---------- ---------  ------------ ------------
                                                               
Revenue
  Intercompany revenue.. $ 10,772       --     $320,618  $ 16,863    $(348,253)         --
  Customer revenue......  191,897       --      183,482       151          --      $375,530
                         --------   -------    --------  --------    ---------     --------
  Revenue...............  202,669       --      504,100    17,014     (348,253)     375,530
Cost of revenue.........  183,633       --      444,339    26,997     (337,481)     317,488
                         --------   -------    --------  --------    ---------     --------
Gross profit............   19,036       --       59,761    (9,983)     (10,772)      58,042
Operating expenses:
  Selling, general &
   administrative.......   15,113       --       16,878       --       (10,772)      21,219
  Research &
   development..........    5,928       --        6,434       --           --        12,362
  Change of control
   expenses.............      180       --       11,662       --           --        11,842
                         --------   -------    --------  --------    ---------     --------
    Total operating
     expenses...........   21,221       --       34,974       --       (10,772)      45,423
                         --------   -------    --------  --------    ---------     --------
Operating Income........   (2,185)      --       24,787    (9,983)         --        12,619
Non-operating Income
 (Expense)
  Interest income.......      625    12,491      14,101       441      (24,907)       2,751
  Interest expense......      --    (14,481)    (28,416)   (3,251)      24,907      (21,241)
  Foreign currency gains
   (losses).............      --        --        1,253       (29)         --         1,224
  Income (loss) from
   investment in
   subsidiaries.........   (4,848)    1,502      (9,327)      --        12,673          --
  Other income
   (expenses), net......       61       --          713      (124)         --           650
                         --------   -------    --------  --------    ---------     --------
  Non-operating income
   (expenses)...........   (4,162)     (488)    (21,676)   (2,963)      12,673      (16,616)
                         --------   -------    --------  --------    ---------     --------
Income (loss) before
 income taxes...........   (6,347)     (488)      3,111   (12,946)      12,673       (3,997)
Provision for (benefit
 from) income taxes.....      961       132         845       --           --         1,938
                         --------   -------    --------  --------    ---------     --------
Income before
 extraordinary item.....   (7,308)     (620)     (2,266)  (12,946)      12,673       (5,935)
Extraordinary item:
  Loss from early
   extinguishment of
   debt, net of related
   income tax benefit...      --        --        1,373       --           --         1,373
                         --------   -------    --------  --------    ---------     --------
Net Income (loss)....... $ (7,308)  $  (620)   $    893  $(12,946)   $  12,673     $ (7,308)
                         ========   =======    ========  ========    =========     ========


                                      F-39


                                 ChipPAC, Inc.

           SUPPLEMENTAL COMBINING CONDENSED STATEMENTS OF CASH FLOWS

                          Year Ended December 31, 1999
                                 (In thousands)



                          Parent                             Non-
                         Guarantor   Issuer                Guarantor
                         ---------  ---------    Other     ---------
                            CPI     CP Int'l   Guarantors    HECS     Eliminations Consolidated
                         ---------  ---------  ----------  ---------  ------------ ------------
                                                                 
Cash flows from
 operating activities:
 Net Income............  $ (7,308)  $    (620) $     893   $(12,946)   $  12,673    $  (7,308)
 Adjustments to
  reconcile net income
  (loss) to net cash
  provided by
  operating
  activities:
   Depreciation and
    amortization.......     1,753         774     44,490     10,458          --        57,475
   Provision for
    inventory and
    receivables........      (110)        --        (950)       --           --        (1,060)
   Non-operating early
    debt extinguishment
    loss...............       --          --       1,373        --           --         1,373
   Foreign currency
    (gains) losses.....       --          --      (1,224)       --           --        (1,224)
   (Gain) loss on
    external sales of
    equipment..........       --          --        (283)         1          --          (282)
   Equity income from
    investment in
    subsidiaries.......     4,848      (1,502)     9,327        --       (12,673)         --
 Changes in assets and
  liabilities:
   Intercompany
    accounts
    receivable.........     4,067      (4,053)   (21,244)    (6,852)      28,082          --
   Accounts receivable.    34,879         --     (34,109)       (20)         --           750
   Inventories.........       --          --      (5,464)        49          --        (5,415)
   Prepaid expenses and
    other assets.......       247         --      (3,198)        73          --        (2,878)
   Advances (to) from
    affiliates.........      (443)        --      (6,981)       --           --        (7,424)
   Intercompany
    accounts payable...   (83,585)        --     114,203     (2,536)     (28,082)         --
   Accounts payable....    (1,035)         40    (10,645)      (155)         --       (11,615)
   Accrued expenses &
    other liabilities..     4,000       9,045      6,283        693          --        20,021
   Other long-term
    liabilities........       --          --       3,519        --           --         3,519
                         --------   ---------  ---------   --------    ---------    ---------
     Net cash provided
      by operating
      activities.......   (42,687)      3,684     96,170    (11,235)         --        45,932
                         --------   ---------  ---------   --------    ---------    ---------
Cash flows used in
 investing activities:
 Acquisition of
  property and
  equipment............    (2,239)        --     (52,792)    (9,926)       7,101      (57,856)
 Proceeds, external
  equipment sales......       --          --       6,017      2,431       (7,101)       1,347
 Investment in
  subsidiaries            (90,637)    (29,030)  (184,970)       --       304,637          --
                         --------   ---------  ---------   --------    ---------    ---------
     Net cash used in
      investing
      activities.......   (92,876)    (29,030)  (231,745)    (7,495)     304,637      (56,509)
                         --------   ---------  ---------   --------    ---------    ---------
Cash flows provided by
 financing activities:
 Loans & advances with
  affiliates...........       --          --         --      (4,430)         --        (4,430)
 Proceeds from short-
  term loans...........       --          --       1,169        --           --         1,169
 Repayment of short-
  term loans...........       --          --      (3,769)   (15,700)         --       (19,469)
 Net proceeds from
  long-term loans......       --      285,631        --         --           --       285,631
 Repayment, term loans
  and capital leases...       --          --    (105,387)   (28,228)         --      (133,615)
 Intercompany loan
  (advances) payments..       --     (271,000)   237,000     34,000          --           --
 Capital redemption at
  recap................       --          --    (311,220)       --           --      (311,220)
 Capital contributions
  at recap.............       --          --      19,816        --           --        19,816
 Intercompany capital
  contributions........       --       14,215    290,422        --      (304,637)         --
 Payments made to
  extinguish debt
  early................       --          --      (1,373)       --           --        (1,373)
 Dividend paid.........       --          --      (9,435)       --           --        (9,435)
 Net proceeds from
  common stock
  issuance.............    74,071         (26)       (27)       --           --        74,018
 Net proceeds from
  mandatorily
  redeemable preferred
  stock................    50,000         --         --         --           --        50,000
 Net proceeds from
  sale of stock to
  management...........     1,671         --         --         --           --         1,671
 Contributions
  (withdrawals) of
  capital..............       --          --      (4,052)    24,802          --        20,750
                         --------   ---------  ---------   --------    ---------    ---------
     Net cash provided
      by financing
      activities.......   125,742      28,820    113,144     10,444     (304,637)     (26,487)
                         --------   ---------  ---------   --------    ---------    ---------
Effect from changes in
 exchange rates........       --          --         414        --           --           414
                         --------   ---------  ---------   --------    ---------    ---------
Net increase (decrease)
 in cash...............    (9,821)      3,474    (22,017)    (8,286)         --       (36,650)
Cash and equivalents at
 beginning of period...    10,827         --      44,292     13,648          --        68,767
                         --------   ---------  ---------   --------    ---------    ---------
Cash and equivalents at
 end of period.........  $  1,006   $   3,474  $  22,275   $  5,362    $     --     $  32,117
                         ========   =========  =========   ========    =========    =========


                                      F-40


                                    GLOSSARY

Array......................  A group of items such as elements, leads, bonding
                             pads, and circuits arranged in rows and columns.

ASIC ......................  Application Specific Integrated Circuit. A
                             custom-designed integrated circuit that performs
                             specific functions which would otherwise require
                             a number of standardized integrated circuits to
                             perform. The use of an ASIC in place of a
                             conventional integrated circuit reduces product
                             size and cost and also improves reliability.

Back-End Processing........  The packaging and testing portion of the
                             semiconductor manufacturing process.

BGA........................  Ball grid array. A semiconductor package
                             consisting of an encapsulated die mounted on top
                             of a substrate. The bottom of the package has a
                             matrix of solder balls; this matrix is attached
                             to a printed circuit board by solder reflow. Its
                             advantages over leaded packages include smaller
                             size, greater assembly yield and better
                             electrical performance. See "Business--Our
                             Services."

Bonding....................  The process of attaching the chip, or die, to a
                             package substrate is called die bonding, or die
                             attach. The next step is to attach the bonding
                             pads of the die to a lead frame, using wire
                             bonding or tape automated bonding techniques.

Bonding Wire...............  Fine wires, usually aluminum or gold, connecting
                             the metal bonding pads on an integrated circuit
                             to the internal terminations of the leads of the
                             package.

Burn-In....................  Pretest operation of semiconductor devices,
                             frequently at high temperatures, which stabilizes
                             product characteristics and identifies early
                             failures.

Chip.......................  Usually refers to a single integrated circuit
                             die, but also used as a generic term for
                             semiconductor devices.

Chipset....................  Two or more chips designed to perform as a unit
                             for one or more functions.

Chip-Scale Packages (CSP)..  Any semiconductor package in which the package is
                             no more than 1.2 times the size of the bare
                             semiconductor die.

Die........................  Individual integrated circuits, transistors, or
                             diodes, separated from the original whole silicon
                             wafer but not yet packaged. They vary in size
                             from 20 mils on a side to larger than 250 mils on
                             a side. The number of dice on a wafer may vary
                             from tens to thousands. Also called a chip.
                             Refers to a semiconductor that has not yet been
                             packaged.

Die Attachment.............  A step in the packaging process of an integrated
                             circuit in which the individual chip or die is
                             mounted in a package in preparation for wire
                             bonding. This step is usually accomplished using
                             either an epoxy resin or a welding process to
                             attach the chip to the substrate.

DRAM.......................  Dynamic Random Access Memory. A type of volatile
                             memory product that is used in electronic systems
                             to store data and program instructions. It is the
                             most common type of RAM and must be refreshed
                             with electricity thousands of times per send or
                             else it will fade away.

                                      G-1



DSP........................  Digital Signal Processor. A type of integrated
                             circuit that processes and manipulates digital
                             information after it has been converted from an
                             analog source.

EconoCSP(TM)...............  A low cost version of CSP with construction
                             similar to that of PBGA.

Fab........................  Short for wafer fabrication.

Fabless Semiconductor        A new class of semiconductor companies that
Companies..................  design, test and sell ICs, but subcontract wafer
                             manufacturing by forming alliances with silicon
                             wafer manufacturers.

FBGAT......................  Fine Pitch Ball Grid Array--Tape. A version of a
                             BGA package, mounted on tape substrate, that has
                             a solder ball pitch of less than 1.0mm.

Flash......................  A type of non-volatile memory product that is
                             used in electronic systems to store data and
                             program instructions.

FlashPAC(TM)...............  A version of CSP where the silicon die is
                             attached to the package using FlipChip
                             interconnect intended for Flash.

FlipChip...................  Package type where silicon die is attached to the
                             packaging substrate using solder balls instead of
                             wires. See "Business--Our Services."

FlipPAC(TM) ...............  A version of a BGA package where the silicon die
                             is attached to the package using a FlipChip
                             interconnect.

IC.........................  Integrated circuit. A combination of two or more
                             transistors on a base material, usually silicon.
                             All semiconductor chips, including memory chips
                             and logic chips, are very complicated ICs with
                             thousands of transistors.

IDMs.......................  Integrated Device Manufacturers. A semiconductor
                             device manufacturer that has its own
                             manufacturing facilities.

I/O........................  A connector which interconnects the chip to the
                             package or one package level to the next level in
                             the hierarchy. Also referred to as pin out
                             connections or terminals.

iQUAD(TM) .................  Package type with superior thermal performance to
                             that of the conventional Plastic Quad Flat
                             Package.

ISDN.......................  Integrated Services Digital Network. An
                             international telecommunications standard for
                             transmitting voice, video and data over digital
                             lines running at 64 Kbps.

Leadframe..................  A metal frame, connected to the bonding pads of
                             the die by leads, that provides electrical
                             connection to the outside world.

Logic Device...............  A device that contains digital integrated
                             circuits that process, rather than store,
                             information.

LQFP.......................  A thinner version of the Quad Flat Package. See
                             "Business--Our Services."

M/2/BGA(TM) ...............
                             Molded Multi Die Ball Grid Array. A version of a
                             BGA package that contains 2 or more silicon die.

                                      G-2



M/2/CSP(TM) ...............  Molded Multi Die Chip Scale Package. A version of
                             a CSP that contains 2 or more silicon die.

BGA(TM) ...................  Micro Ball Grid Array. A version of a BGA package
                             that is adapted to chip scale size. This is a
                             proprietary package trademarked by the Tessera
                             Corporation. See "Business--Our Services."

                             1/25,000 of an inch. Circuitry on an IC typically
Micron.....................  follows lines that are less than one micron wide.

Microprocessor (MPU).......  A standard circuit design that provides, in one
                             or more chips, functions equivalent to those
                             contained in the central processing unit of a
                             computer. A microprocessor interprets and
                             executes instructions and usually incorporates
                             arithmetic capabilities. The CPU of a personal
                             computer along with main memory and other
                             components, typically contained on a single
                             board.

MOS........................  A device which consists of three layers--metal,
                             oxide and semiconductors--and operates as a
                             transistor.

MQFP.......................  Metric Quad Flat Package. See "Business--Our
                             Services."

Package....................  The protective container for an electronic
                             component that connects it to the printed circuit
                             board. The most common IC package is a DIP, or
                             dual-in-line package--a rectangular plastic or
                             ceramic package in which the leads run along the
                             two longer edges.

Packaging..................  A process whereby a wafer is diced into
                             individual die which are then separated from the
                             wafer and attached to a substrate via an epoxy
                             adhesive. Leads on the substrate are then
                             connected by extremely fine gold wires to the
                             input/output, or "I/O" terminals on the chips
                             through the use of automated machines known as
                             "wire bonders". Each die is then encapsulated in
                             a plastic molding compound, thus forming the
                             package. Semiconductor packaging serves to
                             protect the chip, facilitate integration into
                             electronic systems, and enable the dissipation of
                             heat from the devices.

PBGA.......................  Plastic Ball Grid Array. See "Business--Our
                             Services."

Personal Computer Board....  See "Glossary--Printed Circuit Board."

PDA........................  Personal Digital Assistant.

PDIP.......................  Plastic Dual In-Line Packages. A semiconductor
                             package with leads on two sides, bent vertically,
                             so that the leads can be inserted into holes
                             drilled through the printed circuit board. See
                             "Business--Our Services."

PGA........................  Pin Grid Array. An IC package that has multiple
                             rows of pins on the bottom.

Pitch......................  The center-to-center distance between adjacent
                             leads on a package.

PLCC.......................
                             Plastic Leaded Chip Carrier. See "Business--Our
                             Services."

PLD........................
                             A logic chip that is programmed at the customer's
                             site.

                                      G-3



PQFP.......................  Plastic Quad Flat Packages. See "Business--Our
                             Services."

Printed Circuit Board......  A laminate sheet into which integrated circuits
                             are soldered. Wires in the board connect the
                             circuits with each other, forming a larger
                             functional unit. Printed circuit boards generally
                             contain a subsystem of a larger electronic
                             system, e.g., one board might hold the
                             semiconductor memory of a computer.

QFP........................  Quad Flat Pack. A semiconductor package with
                             leads on all four sides and which is attached to
                             a printed circuit board by surface mounting.

RamPAC(TM) ................  A version of a CSP where the die is attached to
                             the package using FlipChip interconnect intended
                             for DRAM.

SIP........................  Single In-line Package. See "Business--Our
                             Services."

SOIC.......................  Small Outline IC packages. See "Business--Our
                             Services."

SOJ........................  An SOIC package with J-leads for high density
                             memory.

SRAM.......................  Static Random Access Memory. A type of volatile
                             memory product that is used in electronic systems
                             to store data and program instructions. Unlike
                             the more common DRAM, it does not need to be
                             refreshed.

SSOP.......................  Shrink Small Outline Packages. See "Business--Our
                             Services."

Substrate..................  The underlying material upon which a device,
                             circuit, or epitaxial layer is fabricated,
                             normally a silicon wafer.

Surface Mount Technology...  A circuit board packaging technique in which the
                             leads or pins on the chips and components are
                             soldered on top of the board.

TBGA.......................  Thermally Enhanced Ball Grid Array. A version of
                             a BGA package with superior thermal properties
                             compared to that of the conventional PBGA.

TQFP.......................  Thin Quad Flat Packages. See "Business--Our
                             Services."

TSOC.......................  Thin Small Outline IC packages. See "Business--
                             Our Services."

TSOP.......................  Thin Small Outline Packages. See "Business--Our
                             Services."

TSSOP......................  Thin Shrink Small Outline Packages. See
                             "Business--Our Services."

Wafer......................  Thin, round, flat piece of silicon that is the
                             base of most integrated circuits.

Wafer Fabrication..........  The sequence of oxidation, diffusion, deposition
                             and photolithographic process steps by which
                             semiconductor devices are batch fabricated on
                             wafers.

Wire Bonding...............
                             The method used to attach very fine wire to
                             semiconductor components in order to provide
                             electrical continuity between the semiconductor
                             die and a terminal.

                                      G-4


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                                  $150,000,000

[ChipPAC International Company Limited Logo]

                             ChipPAC International
                                Company Limited

                               Offer to Exchange

        $150,000,000 Series B 12 3/4% Senior Subordinated Notes due 2009
                          for any and all outstanding
                   12 3/4% Senior Subordinated Notes due 2009


                            -----------------------

                                   PROSPECTUS

                            -----------------------


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