SEC Filing | ChipMOS TECHNOLOGIES INC.

View:

Download DOC

Download PDF

Download XLS

Form 20-F

As filed with the Securities and Exchange Commission on June 3, 2011

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 0–31106

ChipMOS TECHNOLOGIES (Bermuda) LTD.

(Exact Name of Registrant as Specified in Its Charter)

Bermuda

(Jurisdiction of Incorporation or Organization)

No. 1, R&D Road 1, Hsinchu Science Park

Hsinchu, Taiwan

Republic of China

(Address of Principal Executive Offices)

Shou-Kang Chen

Chief Financial Officer

ChipMOS TECHNOLOGIES (Bermuda) LTD.

No. 1, R&D Road 1, Hsinchu Science Park

Hsinchu, Taiwan

Republic of China

Telephone: (886) 3 563 3988

Facsimile: (886) 3 563 3998

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contract Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange

on Which Registered

Common Shares, par value US$0.04 each

The NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2010, 110,553,157 Common Shares, par value US$0.01 each, were outstanding (27,638,289 Common Shares, par value US$0.04 each, giving effect to the 1:4 reverse stock split that became effective on January 21, 2011).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨ Accelerated Filer x Non-Accelerated Filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

US GAAP ¨

International Financial Reporting Standards as issued by the International Accounting Standards Board ¨ Other x

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17. ¨ Item 18. x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

TABLE OF CONTENTS

ChipMOS TECHNOLOGIES (Bermuda) LTD.


		Page
CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995			1

PART I

Item 1.	Identity of Directors, Senior Management and Advisers		2

Item 2.	Offer Statistics and Expected Timetable		2

Item 3.	Key Information		2

Item 4.	Information on the Company		29

Item 4A.	Unresolved Staff Comments		56

Item 5.	Operating and Financial Review and Prospects		56

Item 6.	Directors, Senior Management and Employees		84

Item 7.	Major Shareholders and Related Party Transactions		95

Item 8.	Financial Information		99

Item 9.	The Offer and Listing		101

Item 10.	Additional Information		101

Item 11.	Quantitative and Qualitative Disclosure about Market Risk		110

Item 12.	Description of Securities Other Than Equity Securities		110

PART II

Item 13.	Defaults, Dividend Arrearages and Delinquencies		111

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		111

Item 15.	Controls and Procedures		111

Item 16A.	Audit Committee Financial Expert		111

Item 16B.	Code of Ethics		111

Item 16C.	Principal Accountant Fees and Services		112

Item 16D.	Exemptions from the Listing Standards for Audit Committees		112

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		112

Item 16F.	Change in Registrant’s Certifying Accountant		112

Item 16G.	Corporate Governance		112

PART III

Item 17.	Financial Statements		115

Item 18.	Financial Statements		115

Item 19.	Exhibits		115

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF

THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for historical matters, the matters discussed in this Annual Report on Form 20-F are forward-looking statements that are subject to significant risks and uncertainties. These statements are generally indicated by the use of forward-looking terminology such as the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “will” or other similar words that express an indication of actions or results of actions that may or are expected to occur in the future. These statements appear in a number of places throughout this Annual Report on Form 20-F and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 20-F. Important factors that could cause those differences include, but are not limited to:

•

our ability to successfully overcome the current economic conditions and the financial market crisis;

•

the volatility of the semiconductor industry and the market for end-user applications for semiconductor products;

•

overcapacity in the semiconductor testing and assembly markets;

•

the increased competition from other companies and our ability to retain and increase our market share;

•

our ability to successfully develop new technologies and remain a technological leader;

•

our ability to maintain control over capacity expansion and facility modifications;

•

our ability to generate growth or profitable growth;

•

our ability to hire and retain qualified personnel;

•

our ability to acquire required equipment and supplies to meet customer demand;

•

our ability to raise debt or equity financing as required to meet certain existing obligations;

•

the pending criminal indictment of our chairman and chief executive officer;

•

our reliance on the business and financial condition of certain major customers;

•

the success of any of our future acquisitions, investments or joint ventures;

•

the outcome of any pending litigation;

•

the outbreak of contagious disease and occurrence of earthquakes, typhoons and other natural disasters, as well as industrial accidents;

•

the political stability of the regions to which we conduct operations; and

•

general local and global economic and financial conditions.

Forward-looking statements include, but are not limited to, statements regarding our strategy and future plans, future business condition and financial results, our capital expenditure plans, our capacity expansion plans, our expansion plans in Mainland China, technological upgrades, investment in research and development, future market demand, future regulatory or other developments in our industry. Please see “Item 3. Key Information—Risk Factors” for a further discussion of certain factors that may cause actual results to differ materially from those indicated by our forward-looking statements.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

Selected Financial Data

The following tables set forth our selected consolidated financial data. The selected consolidated balance sheet data as of December 31, 2009 and 2010 and our consolidated statement of operations and cash flows data for 2008, 2009 and 2010 are derived from our audited consolidated financial statements included herein, and should be read in conjunction with, and are qualified in their entirety by reference to, these audited consolidated financial statements and related notes beginning on page F-1 of this Annual Report on Form 20-F. These audited consolidated financial statements have been audited by Moore Stephens. The selected consolidated balance sheet data as of December 31, 2006, 2007 and 2008 and the consolidated statement of operations and cash flows data for the years ended December 31, 2006 and 2007 are derived from our audited consolidated financial statements not included herein. Our consolidated financial statements have been prepared and presented in accordance with ROC GAAP, which differs in some material respects from US GAAP. Please see Note 25 to our audited consolidated financial statements for a description of the principal differences between ROC GAAP and US GAAP for the periods covered by these financial statements.


	Year ended December 31,
	2006			2007			2008			2009			2010			2010
	NT$			NT$			NT$			NT$			NT$			US$
	(in millions, except per share data)
Consolidated Statement of Operations Data:
ROC GAAP:
Net revenue:
Related parties⁽¹⁾	$	5,654.4		$	6,915.9		$	3,122.9		$	668.9		$	2,033.3		$	69.8
Others		14,720.8			16,681.7			13,887.3			11,481.4			15,176.4			520.8

Total net revenue		20,375.2			23,597.6			17,010.2			12,150.3			17,209.7			590.6
Cost of revenue		14,253.4			17,444.1			16,969.9			15,661.5			16,564.0			568.4

Gross profit (loss)		6,121.8			6,153.5			40.3			(3,511.2	)		645.7			22.2

Operating expenses:
Research and development		274.8			322.3			435.6			375.3			412.7			14.2
General and administrative		813.0			1,070.5			885.6			657.8			677.6			23.3
Sales and marketing		107.4			98.3			2,362.7			561.2			64.4			2.2

Total operating expenses		1,195.2			1,491.1			3,683.9			1,594.3			1,154.7			39.7

Income (loss) from operations		4,926.6			4,662.4			(3,643.6	)		(5,105.5	)		(509.0	)		(17.5	)

Other income (expenses), net		(223.2	)		(669.2	)		(3,286.8	)		116.7			2,320.6			79.6

Income (loss) before income tax, noncontrolling interests and interest in bonuses paid by subsidiaries⁽²⁾		4,703.4			3,993.2			(6,930.4	)		(4,988.8	)		1,811.6			62.1
Income tax benefit (expense)		(636.5	)		(768.2	)		(120.8	)		420.7			99.3			3.4

Income (loss) before noncontrolling interests and interest in bonuses paid by subsidiaries⁽²⁾		4,066.9			3,225.0			(7,051.2	)		(4,568.1	)		1,910.9			65.5
Net (income) loss attributable to noncontrolling interests		(1,799.4	)		(720.0	)		143.3			149.4			(266.2	)		(9.1	)
Interest in bonuses paid by subsidiaries⁽²⁾		(149.5	)		(285.8	)		(362.4	)		—			—			—
Cumulative effect of changes in accounting principles		3.3			—			—			—			—			—

Net income (loss) attributable to ChipMOS	$	2,121.3		$	2,219.2		$	(7,270.3	)	$	(4,418.7	)	$	1,644.7		$	56.4

Earnings (loss) per share⁽⁴⁾:
Basic	$	123.36		$	110.54		$	(346.63	)	$	(223.35	)	$	68.61		$	2.35
Diluted	$	100.00		$	96.94		$	(346.63	)	$	(230.15	)	$	67.38		$	2.31
Weighted-average number of shares outstanding⁽⁴⁾:
Basic		17.2			20.1			21.0			19.8			24.0			24.0
Diluted		22.1			27.1			21.0			22.3			26.8			26.8
US GAAP:⁽³⁾
Net income (loss) attributable to ChipMOS	$	1,253.1		$	2,901.7		$	(7,177.7	)	$	(4,550.3	)	$	1,616.9		$	55.5
Earnings (loss) per share⁽⁴⁾:
Basic	$	72.88		$	144.52		$	(342.24	)	$	(230.00	)	$	67.45		$	2.31
Diluted	$	70.08		$	84.28		$	(342.24	)	$	(236.60	)	$	66.35		$	2.28
Weighted-average number of shares outstanding⁽⁴⁾:
Basic		17.2			20.1			21.0			19.8			24.0			24.0
Diluted		17.9			27.1			21.0			20.8			26.8			26.8

(1)

Related parties include Mosel Vitelic Inc., or Mosel, Siliconware Precision Industries Co. Ltd., or Siliconware Precision, ProMOS Technologies Inc., or ProMOS and DenMOS Technology Inc., or DenMOS. See Note 19 of the notes to the consolidated financial statements contained in this Annual Report on Form 20-F.

(2)	Refers to bonuses to directors, supervisors and employees paid by subsidiaries.

(3)	Reflects the US GAAP adjustments as described in Note 25 of the notes to the consolidated financial statements contained in this Annual Report on Form 20-F.

(4)	The outstanding shares and per share information reflect the reverse stock split of the Company’s common stocks with a ratio of 1-for-every-4 shares effective on January 21, 2011.


	As of December 31,
	2006		2007		2008		2009		2010		2010
	NT$		NT$		NT$		NT$		NT$		US$
	(in millions)
Consolidated Balance Sheet Data:
ROC GAAP:
Current assets:
Cash and cash equivalents	$	5,895.9	$	5,133.6	$	6,651.9	$	3,884.8	$	7,143.3	$	245.1
Restricted cash and cash equivalents		65.1		87.0		59.5		243.8		546.8		18.8
Financial assets at fair value through profit and loss		1,929.1		555.6		102.1		119.0		3.0		0.1
Held-to-maturity financial assets		—		—		250.0		—		—		—
Investment with no active market		—		—		100.0		100.0		—		—
Notes receivable
—related parties		—		—		195.0		—		—		—
—third parties		31.1		28.0		14.2		27.9		14.0		0.5
Accounts receivable
—related parties		1,839.1		1,498.8		0.4		0.2		258.0		8.9
—third parties		3,190.5		3,795.9		1,296.5		2,441.8		2,816.0		96.6
Other receivables
—related parties		14.0		11.9		30.0		—		66.4		2.3
—third parties		31.8		31.2		172.2		130.1		182.0		6.2
Inventories		945.8		1,043.6		1,001.5		862.1		1,279.8		43.9
Deferred income tax, net		134.4		85.1		355.8		356.4		278.7		9.6
Prepaid expenses and other current assets		155.8		334.5		265.2		265.1		202.3		6.9
Total current assets		14,232.6		12,605.2		10,494.3		8,431.2		12,790.3		438.9
Long-term investments		366.7		358.0		437.8		220.0		10.5		0.4
Property, plant and equipment, net		30,494.3		30,020.4		23,654.9		20,769.0		17,273.0		592.7
Intangible assets, net		172.4		180.4		107.8		102.8		94.2		3.2
Other assets		745.9		2,152.1		746.8		833.2		1,147.0		39.4
Total assets		46,011.9		45,316.1		35,441.6		30,356.2		31,315.0		1,074.6


	As of December 31,
	2006		2007		2008		2009		2010		2010
	NT$		NT$		NT$		NT$		NT$		US$
	(in millions)
Current liabilities:
Short-term bank loans		1,055.3		1,249.2		2,745.4		2,363.3		1,494.7		51.3
Current portion of long-term loans		2,335.3		3,686.2		4,603.7		1,553.9		4,925.7		169.0
Convertible notes		—		3,014.9		1,541.6		—		65.8		2.3
Derivative liabilities		—		96.0		—		—		—		—
Accounts payable		803.0		976.1		477.9		738.0		690.1		23.7
Payables to contractors and equipment suppliers		993.2		454.1		251.6		201.2		790.6		27.1
Other payables		549.6		604.1		628.0		696.1		896.7		30.8
Current portion of capital leases payable		—		—		—		821.2		822.0		28.2
Accrued expenses and other current liabilities		713.6		886.7		469.4		525.7		990.9		34.0
Total current liabilities		6,747.5		11,374.2		10,721.6		6,921.5		10,697.5		367.1
Long-term liabilities		15,900.5		11,323.7		9,832.6		13,377.6		6,477.0		222.3
Other liabilities		479.0		370.1		344.6		104.9		97.1		3.3
Total liabilities		23,127.0		23,068.0		20,898.8		20,404.0		17,271.6		592.7
Total equity (including noncontrolling interests)	$	22,884.9	$	22,248.1	$	14,542.8	$	9,952.2	$	14,043.4	$	481.9


	As of December 31,
	2006		2007		2008		2009		2010		2010
	NT$		NT$		NT$		NT$		NT$		US$
	(in millions)
US GAAP⁽¹⁾ :
Current assets:
Cash and cash equivalents	$	5,895.9	$	5,133.6	$	6,651.9	$	3,884.8	$	7,143.3	$	245.1
Restricted cash and cash equivalents		65.1		87.0		59.5		243.8		546.8		18.8
Financial assets at fair value through profit and loss		1,929.1		555.6		102.1		119.0		3.0		0.1
Held-to-maturity financial assets		—		—		250.0		—		—		—
Available-for-sale financial assets		—		—		100.0		100.0		—		—
Notes receivable
—related parties		—		—		195.0		—		—		—
—third parties		31.1		28.0		14.2		27.9		14.0		0.5
Accounts receivable
—related parties		1,839.1		1,498.8		0.4		0.2		258.0		8.9
—third parties		3,190.5		3,795.9		1,296.5		2,441.8		2,816.0		96.6
Other receivables
—related parties		14.0		11.9		30.0		—		66.4		2.3
—third parties		31.8		31.2		172.2		130.1		182.0		6.2
Inventories		946.1		1,044.3		966.1		863.1		1,280.9		44.0
Deferred income tax, net		134.4		82.6		349.5		350.2		272.5		9.3
Prepaid expenses and other current assets		155.8		334.5		265.2		265.1		202.3		6.9
Total current assets		14,232.9		12,603.4		10,452.6		8,426.0		12,785.2		438.7
Long-term investments		366.7		358.0		437.8		220.0		10.5		0.4
Property, plant and equipment, net		30,377.7		29,861.6		23,427.2		20,474.4		16,924.1		580.8
Intangible assets—net		172.4		180.4		107.8		102.8		94.2		3.2
Other assets		826.4		2,262.6		731.6		893.2		1,221.1		41.9
Total assets		45,976.1		45,266.0		35,157.0		30,116.4		31,035.1		1,065.0


	As of December 31,
	2006		2007		2008		2009		2010		2010
	NT$		NT$		NT$		NT$		NT$		US$
	(in millions)
Current liabilities:
Short-term bank loans		1,055.3		1,249.2		2,745.4		2,363.3		1,494.7		51.3
Current portion of long-term loans		2,335.3		3,686.2		4,603.7		1,553.9		4,925.7		169.0
Convertible notes		—		3,056.4		1,453.0		—		65.8		2.3
Derivative liabilities		—		85.4		—		—		—		—
Accounts payable		803.0		976.1		477.9		738.0		690.1		23.7
Payables to contractors and equipment suppliers		993.2		454.1		251.6		201.2		790.6		27.1
Other payables		549.6		604.1		628.0		696.1		896.7		30.8
Current portion of capital leases payable		—		—		—		821.2		822.0		28.2
Accrued expenses and other current liabilities		1,173.1		1,321.0		469.4		525.7		990.9		34.0
Total current liabilities		7,207.0		11,839.3		10,632.9		6,921.5		10,697.5		367.1
Long-term liabilities		16,836.2		11,179.3		9,832.6		13,377.6		6,477.0		222.3
Other liabilities		502.2		596.5		537.3		383.7		488.0		16.7
Total liabilities		24,545.4		23,615.1		21,002.8		20,682.8		17,662.5		606.1
Total equity (including noncontrolling interests)	$	21,430.7	$	21,650.9	$	14,154.2	$	9,433.6	$	13,372.6	$	458.9

(1)	Reflects the US GAAP adjustments as described in Note 25 of the notes to the consolidated financial statements contained in this Annual Report on Form 20-F.


	Year ended December 31,
	2006			2007			2008			2009			2010			2010
	NT$			NT$			NT$			NT$			NT$			US$
	(in millions)
Consolidated Statement of Cash Flows Data:
ROC GAAP:
Capital expenditures	$	15,717.8		$	6,093.8		$	2,188.4		$	3,479.7		$	4,237.3		$	145.4
Depreciation and amortization		5,558.8			6,834.8			7,174.5			6,524.6			6,281.6			215.6
Net cash provided by (used in):
Operating activities		7,316.4			10,882.9			5,164.2			781.0			8,688.9			298.2
Investing activities		(14,988.2	)		(12,212.1	)		(2,296.9	)		(1,042.5	)		(3,587.2	)		(123.1	)
Financing activities		8,947.9			528.1			(1,395.3	)		(2,503.8	)		(1,826.5	)		(62.7	)
Effect of exchange rate changes on cash		12.8			38.8			46.3			(1.8	)		(16.8	)		(0.6	)
Net increase (decrease) in cash	$	1,288.9		$	(762.3	)	$	1,518.3		$	(2,767.1	)	$	3,258.4		$	111.8

Exchange Rates

References to “US$” and “US dollars” are to United States dollars and references to “NT$” and “NT dollars” are to New Taiwan dollars. This Annual Report on Form 20-F contains translations of certain NT dollar amounts into US dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from NT dollars to US dollars and from US dollars to NT dollars were made at the noon buying rate in The City of New York for cable transfers in NT dollars per US dollar as certified for customs purposes by the Federal Reserve Bank of New York as of December 30, 2010, which was NT$29.14 to US$1.00. We make no representation that the NT dollar or US dollar amounts referred to in this Annual Report on Form 20-F could have been or could be converted into US dollars or NT dollars, as the case may be, at any particular rate or at all. On May 27, 2011, the noon buying rate was NT$28.87 to US$1.00.

The following table sets out, for the years and the months indicated, information concerning the number of NT dollars for which one US dollar could be exchanged based on the noon buying rate for cable transfers in NT dollars as certified for customs purposes by the Federal Reserve Bank of New York.


	NT dollars per US dollar noon buying rate
	Average		High		Low		Period-end
2006		32.51		33.31		31.28		32.59
2007		32.85		33.41		32.26		32.43
2008		31.52		33.58		29.99		32.76
2009		33.02		35.21		31.95		31.95
2010		31.50		32.43		29.14		29.14
October		30.81		31.30		30.42		30.60
November		30.32		30.52		30.12		30.47
December		29.90		30.37		29.14		29.14
2011
January		29.11		29.36		28.98		29.03
February		29.28		29.76		28.78		29.74
March		29.49		29.63		29.35		29.40
April		28.98		29.31		28.67		28.67
May (through 27, 2011)		28.73		28.99		28.50		28.87

Sources: Federal Reserve Bank of New York.

Risk Factors

Risks Relating to Economic Conditions and the Financial Markets

The global credit and financial markets crisis could materially and adversely affect our business and results of operations.

In 2009, 2010 and continuing into 2011, global credit and financial markets have experienced severe disruptions. These include diminished liquidity and limited availability of credit, reduced consumer confidence, reduced economic growth, increased unemployment rates and uncertainty about economic stability. Limited availability of credit in financial markets may lead consumers and businesses to postpone spending. This in turn may cause our customers to cancel, decrease or delay their existing and future orders with us. Financial difficulties experienced by our customers or suppliers as a result of these conditions could lead to production delays and delays or defaults in payment of accounts receivable. Continuing credit markets disruption restricts our access to capital and limits our ability to fund operations or to refinance maturing obligations as they become due through additional borrowing or other sources of financing. We are not able to predict the duration or extent of the current global credit and financial markets crisis. These conditions increase the difficulty of accurately forecasting and planning our business activities. If these conditions and uncertainties continue or if credit and financial markets and confidence in economic conditions further deteriorate, our business and results of operations could be materially and adversely affected.

Risks Relating to Our Industry

Because we depend on the highly cyclical semiconductor industry, which is characterized by significant and sometimes prolonged downturns from time to time, our net revenue and earnings may fluctuate significantly, which in turn could cause the market price of our common shares to decline.

Because our business is, and will continue to be, dependent on the requirements of semiconductor companies for independent testing and assembly services, any downturn in the highly cyclical semiconductor industry may reduce demand for our services and adversely affect our results of operations. All of our customers operate in this industry and variations in order levels from our customers and in service fee rates may result in volatility in our net revenue and earnings. For instance, during periods of decreased demand for assembled semiconductors, some of our customers may even simplify, delay or forego final testing of certain types of semiconductors, such as dynamic random access memory or DRAM, further intensifying our difficulties. From time to time, the semiconductor industry has experienced significant, and sometimes prolonged, downturns which have adversely affected our results of operations. In 2009, the semiconductor industry, especially the assembly and testing services for DRAM products sector, continued to experience the significant downturn that began in fourth quarter of 2008, and which has adversely affected our business. As a result of the industry downturn, our net revenue for 2009 decreased 29% from 2008 levels. We incurred a net loss of NT$4,419 million in 2009, a decrease from a net loss of NT$7,270 million in 2008. This industry downturn started to recover from the second quarter of 2009, and our net revenue for 2010 increased 42% from 2009 levels and generated a net income of NT$1,645 million (US$56 million) in 2010. We cannot give any assurances that there will not be any downturn in the future or that any future downturn will not affect our results of operations.

Any deterioration in the market for end-user applications for semiconductor products would reduce demand for our services and may result in a decrease in our earnings.

Market conditions in the semiconductor industry track, to a large degree, those for their end-user applications. Any deterioration in the market conditions for the end-user applications of semiconductors we test and assemble could reduce demand for our services and, in turn, materially adversely affect our financial condition and results of operations. Our net revenue is largely attributable to fees derived from testing and assembling semiconductors for use in personal computers, communications equipment, consumer electronic products and display applications. A significant decrease in demand for products in these markets could put pricing pressure on our testing and assembly services and negatively affect our net revenue and earnings. The weak demand for LCD and other flat-panel display products that began in 2007 and has since adversely affected our operating results in 2008, 2009 and 2010. Any significant decrease in demand for end-user applications of semiconductors will negatively affect our net revenue and earnings.

A decline in average selling prices for our services could result in a decrease in our earnings.

Historically, prices for our testing and assembly services in relation to any given semiconductor tend to decline over the course of its product and technology life cycle. See also “— A decrease in market demand for LCD and other flat-panel display driver semiconductors may adversely affect our capacity utilization rates and thereby negatively affect our profitability”. If we cannot reduce the cost of our testing and assembly services, or introduce higher-margin testing and assembly services for new package types, to offset the decrease in average selling prices for our services, our earnings could decrease.

A reversal or slowdown in the outsourcing trend for semiconductor testing and assembly services could reduce our profitability.

In recent years, integrated device manufacturers, or IDMs, have increasingly outsourced stages of the semiconductor production process, including testing and assembly, to independent companies like us to shorten production cycles. In addition, the availability of advanced independent semiconductor manufacturing services has also enabled the growth of so-called “fabless” semiconductor companies that focus exclusively on design and marketing and outsource their manufacturing, testing and assembly requirements to independent companies. A substantial portion of our net revenue is indirectly generated from providing semiconductor assembly and testing services to these IDMs and fabless companies. We cannot assure you that these companies will continue to outsource their testing and assembly requirements to independent companies like us. A reversal of, or a slowdown in, this outsourcing trend could result in reduced demand for our services, which in turn could reduce our profitability.

Risks Relating to Our Business

If we are unable to compete effectively in the highly competitive semiconductor testing and assembly markets, we may lose customers and our income may decline.

The semiconductor testing and assembly markets are very competitive. We face competition from a number of IDMs with in-house testing and assembly capabilities and other independent semiconductor testing and assembly companies. Our competitors may have access to more advanced technologies and greater financial and other resources than we do. Many of our competitors have shown a willingness to reduce prices quickly and sharply in the past to maintain capacity utilization in their facilities during periods of reduced demand. In addition, an increasing number of our competitors conduct their operations in lower cost centers in Asia such as Mainland China, Thailand, Vietnam and the Philippines. Any renewed or continued erosion in the prices or demand for our testing and assembly services as a result of increased competition could adversely affect our profits.

We are highly dependent on the market for memory products. A downturn in market prices for these products could significantly reduce our net revenue and net income.

A significant portion of our net revenue is derived from testing and assembling memory semiconductors. Our net revenue derived from the testing and assembly of memory semiconductors accounted for 75%, 66% and 62% of our net revenue in 2008, 2009 and 2010, respectively. In the past, our service fees for testing and assembling memory semiconductors were sharply reduced in tandem with the decrease in the average selling price of DRAM in the semiconductor industry. The continuing oversupply of DRAM products in 2008 and the weak demand in the DRAM market in 2009 and 2010 resulted in significant reductions in the price of DRAM products, which in turn drove down the average prices for our testing and assembly services for DRAM products in these periods. We cannot assure you that there will not be further downturns in DRAM prices in the future.

A decrease in market demand for LCD and other flat-panel display driver semiconductors may adversely affect our capacity utilization rates and thereby negatively affect our profitability.

Our testing and assembly services for LCD and other flat-panel display driver semiconductors generated net revenue of NT$2,805 million, NT$2,626 million and NT$4,781 million (US$164 million) in 2008, 2009 and 2010, respectively. We invested NT$157 million, NT$37 million and NT$1,659 million (US$57 million) in 2008, 2009 and 2010, respectively, on equipment for tape carrier package, or TCP, chip-on-film, or COF and chip-on-glass, or COG, technologies, which are used in testing and assembly services for LCD and other flat-panel display driver semiconductors. Most of this equipment may not be used for technologies other than TCP, COF or COG. Although the market demand for LCD and other flat-panel display driver semiconductor testing and assembly services increased in 2010 compared to the market demand in 2009, any future decrease in demand for our LCD and other flat-panel display driver semiconductor testing and assembly services would significantly impair our capacity utilization rates and may result in our inability to generate sufficient revenue to cover the significant depreciation expenses for the equipment used in testing and assembling LCD and other flat-panel display driver semiconductors, thereby negatively affecting our profitability. See also “— Because of our high fixed costs, if we are unable to achieve relatively high capacity utilization rates, our earnings and profitability may be adversely affected”.

Our significant amount of indebtedness and interest expense will limit our cash flow and could adversely affect our operations.

We have a significant level of debt and interest expense. As of December 31, 2010, we had approximately NT$6,477 million (US$222 million) and NT$7,308 million (US$251 million) in long- and short-term indebtedness outstanding, respectively. Both the long- and short-term indebtedness amounts include capital lease obligations. Our long-term indebtedness as of December 31, 2010, included NT$5,640 million (US$194 million) of bank loans, with an interest rate between 1.214% and 4.69%; capital lease obligations of NT$632 million (US$22 million), with an interest rate between 4.0888% to 4.0973%, and US$26 million of convertible notes with an interest rate of 3.75%, 8% or 10%, including US$19 million held by ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary. As of the date of this Annual Report on Form 20-F, all of these convertible notes have been converted to our common shares or redeemed and are no longer outstanding.

Our significant indebtedness poses risks to our business, including the risks that:

•

we may have to use a substantial portion of our consolidated cash flow from operations to pay principal and interest on our debt, thereby reducing the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes;

•

insufficient cash flow from operations may force us to sell assets, or seek additional capital, which we may be unable to do at all or on terms favorable to us;

•

our level of indebtedness may make us more vulnerable to economic or industry downturns; and

•

our debt service obligations increase our vulnerabilities to competitive pressures, because many of our competitors may be less leveraged than we are.

ChipMOS Bermuda and ChipMOS Taiwan were not able to meet their financial covenants under a US$75 million Facility Agreement dated July 18, 2008 (the “USD Facility Agreement”) among ChipMOS Bermuda and the banks named therein, and the related Guarantee Agreement dated July 18, 2008 (the “Guarantee Agreement”) among ChipMOS Taiwan, ChipMOS Bermuda and the banks named therein. ChipMOS Bermuda made a waiver request to the lending banks in April 2009 with respect to the effect of the foregoing arrangements on the USD Facility Agreement and the Guarantee Agreement. In February 2010, ChipMOS Bermuda received the majority lenders’ approval for the requested waiver, subject to certain conditions and a waiver fee of 0.1% on the loan outstanding amount as of July 2, 2009. ChipMOS Bermuda also negotiated with its bondholders to extend its debt repayments and other types of settlement, and has obtained such extension or settlement (the “Settlement Agreement”). In addition, ChipMOS Taiwan filed a bail-out application with the competent government authorities, and negotiated with its bank creditors for an extension of its debt repayment and other types of settlement and with its equipment lessor and the lessor’s creditor to restructure its leasing arrangement. ChipMOS Taiwan has obtained such extension or settlement whereby ChipMOS Taiwan has provided additional collaterals. In addition, in December 2010, ChipMOS Taiwan has reached agreement with and received approval from its bank creditors for an extension of its repayment schedule on its short-term loans.

On February 26, 2010, ChipMOS Bermuda and Siliconware Precision Industries Co., Ltd. (“Siliconware Precision”) entered into a Share Purchase Agreement, whereby ChipMOS Bermuda agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The Share Purchase Agreement was completed in January 2011. ChipMOS Bermuda sought the lending banks’ approval to (1) reduce its share holding percentage in ChipMOS Taiwan, (2) repay the debts prior to maturity by March 2011 and (3) waive the break cost condition. In May 2010, ChipMOS Bermuda received approval from the lending banks for the aforementioned waiver request under the USD Facility Agreement. The USD Facility Agreement was subsequently fully repaid in January 2011.

For additional information on our indebtedness, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources”.

Our results of operations may fluctuate significantly and may cause the market price of our common shares to be volatile.

Our results of operations have varied significantly from period to period and may continue to vary in the future. Among the more important factors affecting our quarterly and annual results of operations are the following:

•

our ability to accurately predict customer demand, as we must commit significant capital expenditures in anticipation of future orders;

•

our ability to quickly adjust to unanticipated declines or shortfalls in demand and market prices for our testing and assembly services, due to our high percentage of fixed costs;

•

changes in prices for our testing and assembly services;

•

volume of orders relative to our testing and assembly capacity;

•

capital expenditures and production uncertainties relating to the roll-out of new testing or assembly services;

•

our ability to obtain adequate testing and assembly equipment on a timely basis;

•

changes in costs and availability of raw materials, equipment and labor;

•

changes in our product mix; and

•

earthquakes, drought and other natural disasters, as well as industrial accidents.

Because of the factors listed above, our future results of operations or growth rates may be below the expectations of research analysts and investors. If so, the market price of our common shares, and the market value of your investment, may fall.

The ongoing criminal proceeding of and adverse publicity associated with Mr. Shih-Jye Cheng, our Chairman and Chief Executive Officer, and Mr. Hung-Chiu Hu, our former director, could have a material adverse effect on our business and cause our stock price to decline.

Mr. Shih-Jye Cheng, our chairman and chief executive officer, was indicted by the Taipei District Prosecutor’s Office, or the prosecutor, in December 2005. Based upon information released by the prosecutor, the indictment alleges that Mr. Shih-Jye Cheng, as instructed by Mr. Hung-Chiu Hu, purchased repurchase notes on January 6, January 13, and January 28, 2004 from Founder Associates Limited, a British Virgin Islands company affiliated with Mega Securities Co., Ltd. (formerly known as Barits International Securities Co., Ltd.), with an aggregate principal amount of approximately US$29 million, by using corporate funds from ChipMOS Taiwan and ThaiLin. The indictment further alleges that these repurchase notes were used as a cover to misuse the corporate funds of Mosel, and its affiliated entities, including ChipMOS Taiwan and ThaiLin, in violation of ROC law. In addition, the indictment alleges that Mr. Hu and others were engaged in the insider trading of the securities of Mosel in violation of ROC law, but none of the current officers at ChipMOS Taiwan or ThaiLin was indicted in this regard.

On January 5, 2006, our board established a special committee to evaluate the circumstances surrounding the indictment of Mr. Cheng. The special committee engaged K&L Gates LLP (formerly Kirkpatrick & Lockhart Preston Gates Ellis LLP) as its independent international legal counsel, Baker & McKenzie as its independent ROC legal counsel, and Ernst & Young (formerly Diwan, Ernst & Young) as its financial advisor to assist in its investigation. As of March 31, 2011, the special committee was soley comprised of Mr. Yeong-Her Wang, our independent director.

The special committee’s investigation focused on (1) the probability that Mr. Shih-Jye Cheng would be convicted on the charges described in the indictment, (2) whether the indictment resulted in any pecuniary or other damage to us, (3) whether there were any internal control weaknesses related to the investments in repurchase notes within ChipMOS Bermuda and its subsidiaries and (4) whether ChipMOS Bermuda is required by applicable laws or the NASDAQ Global Select Market listing requirements to take any action in connection with the indictment. The special committee did not attempt to independently determine whether Mr. Cheng had engaged in any wrongdoing in connection with the investments in repurchase notes, irrespective of whether such wrongdoing would lead to a conviction on the charges under the indictment.

On June 28, 2006, the special committee issued its report, including its findings and recommendations. Based upon the results of its investigation, it found that (1) Mr. Shih-Jye Cheng has declared himself not guilty of the charges described in the indictment, (2) Baker & McKenzie, after reviewing the indictment and the prosecutor’s exhibits, has found that the evidence produced by the prosecutor seems to be inadequate and that there is a low probability of the charge of irregular transactions in the indictment being founded, (3) the financial advisor to the special committee has found that we suffered no loss (not taking into account exchange rate factors) and that all monies (capital and interest) were remitted back to our subsidiaries involved, (4) we have suffered no identifiable harm to our reputation or business and (5) Mr. Cheng has not been impaired by the indictment to perform as our chairman and chief executive officer. The special committee recommended that our board maintain Mr. Cheng as our chairman and chief executive officer with full responsibilities and our board unanimously (with Mr. Cheng having recused himself) resolved to accept and adopt the special committee’s recommendation with regard to Mr. Cheng. Our board of directors also resolved to continue the role of the special committee for the duration of the ongoing criminal proceeding involving Mr. Cheng to actively monitor any developments of the criminal investigation and take or recommend any appropriate action in light of such developments.

On October 1, 2007, the Taipei District Court found Mr. Shih-Jye Cheng not guilty, and on October 22, 2007, the prosecutor appealed the Taipei District Court decision at the Taiwan High Court. The Taiwan High Court held four trial hearings in 2008, six trial hearings in 2009 and six trial hearings in 2010. Due to the rotation of the judges in the meantime, a new bench was formed at the beginning of 2010 to try this case. In November 2010, a trial schedule has been established indicating that further hearings are expected to be held in the first half of 2011.

Theoretically, as a result of prosecutor’s appeal, Mr. Cheng may still be convicted of one or more charges in the indictment. In addition, new evidence that leads to additional criminal charges and/or an adverse judgment against Mr. Cheng may be produced during the ongoing criminal investigation, and the special committee may make recommendations to our board in respect of Mr. Cheng’s positions with us or our subsidiaries. However, up to the present, no new evidence or charge has been presented or collected by the prosecutor or the Court. Therefore, we are reasonably confident that the non-guilty judgment for Mr. Cheng will be maintained by the Taiwan High Court. If Mr. Cheng is convicted, or in light of any new developments, the special committee may recommend or our board of directors may otherwise decide that it is in the Company’s best interests that Mr. Cheng no longer serves in all or some of his current capacities with us or our subsidiaries, or if Mr. Cheng resigns as a result of a final adverse judgment rendered against him by the court, or otherwise, the public perception of us may be seriously harmed and we would lose some or all of the services of Mr. Cheng. In addition, if Mr. Cheng is convicted and sentenced to imprisonment, the ROC Financial Supervisory Commission may subject ChipMOS Taiwan or ThaiLin to certain restrictions on financing activities if Mr. Cheng continues to serve as the chairman or president of ChipMOS Taiwan or ThaiLin. Mr. Cheng is very important to our current on-going business operations and our relationships with our customers and financing sources, and our loss of his services due to and any adverse publicity from the trial or conviction of Mr. Cheng or other key personnel could materially and adversely affect our business, reputation and prospects and therefore cause our stock price to decline.

We depend on key customers for a substantial portion of our net revenue and a loss of, or deterioration of the business from, or delayed payment by, any one of these customers could result in decreased net revenue and materially adversely affect our results of operations and financial condition.

We depend on a small group of customers for a substantial portion of our business. In 2010, our top five customers, collectively accounted for 52% of our net revenue. As part of our strategy, we have been focusing on sales to key customers through long-term service agreements. Beginning in 2008, we also resumed a focus on our business with smaller customers and customers who do not place orders on a regular basis. We expect that we will continue to depend on a relatively limited number of customers for a significant portion of our net revenue, even as we increase the volume of our business with smaller customers and customers who do not place orders on a regular basis. Any adverse development in our key customers’ operations, competitive position or customer base could materially reduce our net revenue and adversely affect our business and profitability.

ProMOS is an affiliate of Mosel. As of March 31, 2011, Mosel indirectly owned 8.6% of our outstanding common shares. In March 2008, ProMOS defaulted on its payment obligations under our long-term service agreement. In November 2008, we entered into a revised subcontracting contract with ProMOS by requiring ProMOS to provide wafers with a value of 80% of the subcontracting fee as collateral. Effective March 2009, we started to request prepayments from ProMOS. In May 2009, a further revised subcontracting contract was entered into by and between us and ProMOS under which ProMOS provided us with wafer as a pledge for its payment obligations and Work-In-Process, or WIP and existing finished goods would serve as lien material. Part of ProMOS’ receivables had been recovered through sales of the pledged wafer and lien material back to ProMOS with a discount to market price, and the remaining outstanding accounts receivables have been secured by equipment mortgage under the same contract arrangement. NT$7 million (US$240 thousand) was received by April 2010. The remaining outstanding accounts receivables have been paid under the amended subcontracting contract and settlement with ProMOS. ProMOS paid us NT$200 million (US$7 million) and NT$24 million (US$1 million) in May 2010 and December 2010, respectively and the remaining NT$202 million (US$7 million) was paid in nine monthly installments ending on March 15, 2011. As of the date of this Annual Report on Form 20-F, all sums have been received. See “Item 4. Information on the Company—Customers”.

In January 2009, Spansion defaulted on its payment obligations under our long-term service agreement and we subsequently terminated the long-term service agreement with Spansion on February 19, 2009. On March 1, 2009, Spansion filed for a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On January 25, 2010, ChipMOS Taiwan entered into a definitive Transfer of Claim Agreement to sell to Citigroup Financial Products Inc. (“Citigroup”) the general unsecured claim reflected in the proof of claim against Spansion. In February 2010, we received from Citigroup the purchase price for the Undisputed Claim of NT$1,118 million (US$38 million) against accounts receivable of NT$2,186 million (US$75 million). We recognized a related loss on sale of receivables of NT$1,068 million (US$37 million) and we reversed the related allowance for doubtful receivables of NT$2,186 million (US$75 million). On October 4, 2010, ChipMOS Taiwan entered into a settlement agreement with Spansion LLC for the general unsecured claim on breach of contract and liquidated damages rights reflected in the proof of claim, Claim No. 5, against Spansion Inc., Spansion Technology LLC, Spansion LLC, Spansion International Inc. and Cerium Laboratories LLC filed by ChipMOS Taiwan in the U.S. Bankruptcy Court. In October 2010, the Company received payment of NT$2,118 million (US$73 million) under the Transfer of Claim Agreement to Citigroup. See “Item 4. Information on the Company— Customers”.

Since semiconductor companies generally rely on service providers with whom they have established relationships to meet their testing and assembly needs for their applications and new customers usually require us to pass a lengthy and rigorous qualification process, if we lose any of our key customers, we may not be able to replace them in a timely manner. We cannot assure you that receivable collection difficulties experienced by us will not occur in the future. If any of our key customers reduces or cancels its orders or terminates existing contractual arrangements, and if we are unable to attract new customers and establish new contractual arrangements with existing or new customers, our net revenue could be reduced and our business and results of operations may be materially adversely affected.

Because of our high fixed costs, if we are unable to achieve relatively high capacity utilization rates, our earnings and profitability may be adversely affected.

Our operations are characterized by a high proportion of fixed costs. For memory and logic/mixed-signal semiconductor testing services, our fixed costs represented 79%, 88% and 77% of our total cost of revenue in 2008, 2009 and 2010, respectively. For memory and logic/mixed-signal semiconductor assembly services, our fixed costs represented 30%, 31% and 24% of our total cost of revenue in 2008, 2009 and 2010, respectively. For LCD and other flat-panel display driver semiconductor testing and assembly services, our fixed costs represented 57%, 56% and 43% of our total cost of revenue in 2008, 2009 and 2010, respectively. Our profitability depends in part not only on absolute pricing levels for our services, but also on the utilization rates for our testing and assembly equipment, commonly referred to as “capacity utilization rates”. Increases or decreases in our capacity utilization rates can significantly affect our gross margins as unit costs generally decrease as the fixed costs are allocated over a larger number of units. In the past, our capacity utilization rates have fluctuated significantly as a result of the fluctuations in the market demand for semiconductors. If we fail to increase or maintain our capacity utilization rates, our earnings and profitability may be adversely affected. In addition, we have entered into various long-term assembly and testing services agreements with certain of our customers that may require us to incur significant capital expenditures. If we are unable to achieve high capacity utilization rates for the equipment purchased pursuant to these agreements, our gross margins may be materially and adversely affected.

The testing and assembly process is complex and our production yields and customer relationships may suffer as a result of defects or malfunctions in our testing and assembly equipment and the introduction of new packages.

Semiconductor testing and assembly are complex processes that require significant technological and process expertise. Semiconductor testing involves sophisticated testing equipment and computer software. We develop computer software to test our customers’ semiconductors. We also develop conversion software programs that enable us to test semiconductors on different types of testers. Similar to most software programs, these software programs are complex and may contain programming errors or “bugs”. In addition, the testing process is subject to human error by our employees who operate our testing equipment and related software. Any significant defect in our testing or conversion software, malfunction in our testing equipment or human error could reduce our production yields and damage our customer relationships.

The assembly process involves a number of steps, each of which must be completed with precision. Defective packages primarily result from:

•

contaminants in the manufacturing environment;

•

human error;

•

equipment malfunction;

•

defective raw materials; or

•

defective plating services.

These and other factors have, from time to time, contributed to lower production yields. They may do so in the future, particularly as we expand our capacity or change our processing steps. In addition, to be competitive, we must continue to expand our offering of packages. Our production yields on new packages typically are significantly lower than our production yields on our more established packages. Our failure to maintain high standards or acceptable production yields, if significant and prolonged, could result in a loss of customers, increased costs of production, delays, substantial amounts of returned goods and related claims by customers. Further, to the extent our customers have set target production yields, we may be required to compensate our customers in a pre-agreed manner. Any of these problems could materially adversely affect our business reputation and result in reduced net revenue and profitability.

Because of the highly cyclical nature of our industry, our capital requirements are difficult to plan. If we cannot obtain additional capital when we need it, we may not be able to maintain or increase our current growth rate and our profits will suffer.

As our industry is highly cyclical and rapidly changing, our capital requirements are difficult to plan. To remain competitive, we may need capital to fund the expansion of our facilities as well as to fund our equipment purchases and research and development activities. To meet our liquidity, capital spending and other capital needs, we have taken and plan to take certain measures to generate additional working capital and to save cash. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources”. We cannot assure you that these plans and measures will be implemented or will provide sufficient sources of capital.

In addition, future capacity expansions or market or other developments may require additional funding. Our ability to obtain external financing in the future depends on a number of factors, many of which are beyond our control. They include:

•

our future financial condition, results of operations and cash flows;

•

general market conditions for financing activities by semiconductor testing and assembly companies; and

•

economic, political and other conditions in Taiwan and elsewhere.

If we are unable to obtain funding in a timely manner or on acceptable terms, our growth prospects and potential future profitability will suffer.

Disputes over intellectual property rights could be costly, deprive us of technologies necessary for us to stay competitive, render us unable to provide some of our services and reduce our opportunities to generate revenue.

Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technologies and to secure, on commercially acceptable terms, critical technologies that we do not own. We cannot assure you that we will be able to independently develop, or secure from any third party, the technologies required for our testing and assembly services. Our failure to successfully obtain these technologies may seriously harm our competitive position and render us unable to provide some of our services.

Our ability to compete successfully also depends on our ability to operate without infringing upon the proprietary rights of others. The semiconductor testing and assembly industry is characterized by frequent litigation regarding patent and other intellectual property rights. We may incur legal liabilities if we infringe upon the intellectual property or other proprietary rights of others. The situation is exacerbated by our inability to ascertain what patent applications have been filed in the United States or elsewhere until they are granted. If any third party succeeds in its intellectual property infringement claims against us or our customers, we could be required to:

•

discontinue using the disputed process technologies, which would prevent us from offering some of our testing and assembly services;

•

pay substantial monetary damages;

•

develop non-infringing technologies, which may not be feasible; or

•

acquire licenses to the infringed technologies, which may not be available on commercially reasonable terms, if at all.

Any one of these developments could impose substantial financial and administrative burdens on us and hinder our business. We are, from time to time, involved in litigation in respect of intellectual property rights. Any litigation, whether as plaintiff or defendant, is costly and diverts our resources. If we fail to obtain necessary licenses on commercially reasonable terms or if litigation, regardless of the outcome, relating to patent infringement or other intellectual property matters occurs, our costs could be substantially increased to impact our margins. Any such litigation could also prevent us from testing and assembling particular products or using particular technologies, which could reduce our opportunities to generate revenue. For more information on litigation in respect of intellectual property rights, see “Item 8. Financial Information—Legal Proceedings”.

If we are unable to obtain raw materials and other necessary inputs from our suppliers in a timely and cost-effective manner, our production schedules would be delayed and we may lose customers and growth opportunities and become less profitable.

Our operations require us to obtain sufficient quantities of raw materials at acceptable prices in a timely and cost-effective manner. We source most of our raw materials, including critical materials like leadframes, organic substrates, epoxy, gold wire and molding compound for assembly, and tapes for TCP/COF, 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 of our suppliers. From time to time, suppliers have extended lead times, increased the price or limited the supply of required materials to us because of market shortages. Consequently, we may, from time to time, experience difficulty in obtaining sufficient quantities of raw materials on a timely basis. In addition, from time to time, we may reject materials that do not meet our specifications, resulting in declines in output or yield. Although we typically maintain at least two suppliers for each key raw material, we cannot assure you that we will be able to obtain sufficient quantities of raw materials and other supplies of an acceptable quality in the future. It usually takes from three to six months to switch from one supplier to another, depending on the complexity of the raw material. If we are unable to obtain raw materials and other necessary inputs in a timely and cost-effective manner, we may need to delay our production and delivery schedules, which may result in the loss of business and growth opportunities and could reduce our profitability.

If we are unable to obtain additional testing and assembly equipment or facilities in a timely manner and at a reasonable cost, we may be unable to fulfill our customers’ orders and may become less competitive and less profitable.

The semiconductor testing and assembly business is capital intensive and requires significant investment in expensive equipment manufactured by a limited number of suppliers. The market for semiconductor testing and assembly equipment is characterized, from time to time, by intense demand, limited supply and long delivery cycles. Our operations and expansion plans depend on our ability to obtain equipment from a limited number of suppliers in a timely and cost-effective manner. We have no binding supply agreements with any of our suppliers and we acquire our testing and assembly equipment on a purchase order basis, which exposes us to changing market conditions and other significant risks. Semiconductor testing and assembly also requires us to operate sizeable facilities. If we are unable to obtain equipment or facilities in a timely manner, we may be unable to fulfill our customers’ orders, which could negatively impact our financial condition and results of operations as well as our growth prospects. Previously we have committed to acquire certain wafer sorting testers and probers under our long-term service agreement with Spansion. We terminated that agreement and commitment on February 19, 2009, after Spansion defaulted on its payment obligations. Currently, we do not have any other long-term service agreements that require our commitment to acquire additional testing and assembly equipment or facilities, however we can not assure you that such commitment will not be made in the future. See “Item 4. Information on the Company— Customers”.

If we are unable to manage the expansion of our operations and resources effectively, our growth prospects may be limited and our future profitability may be reduced.

We expect to continue to expand our operations and increase the number of our employees. Rapid expansion puts a strain on our managerial, technical, financial, operational and other resources. As a result of our expansion, we will need to implement additional operational and financial controls and hire and train additional personnel. We cannot assure you that we will be able to do so effectively in the future, and our failure to do so could jeopardize our expansion plans and seriously harm our operations.

Bermuda law may be less protective of shareholder rights than laws of the United States or other jurisdictions.

Our corporate affairs are governed by our memorandum of association, our bye-laws and laws governing corporations incorporated in Bermuda. Shareholder suits such as class actions (as these terms are understood with respect to corporations incorporated in the United States) are generally not available in Bermuda. Therefore, our shareholders may be less able under Bermuda law than they would be under the laws of the United States or other jurisdictions to protect their interests in connection with actions by our management, members of our board of directors or our controlling shareholder.

It may be difficult to bring and enforce suits against us in the United States.

We are incorporated in Bermuda and a majority of our directors and most of our officers are not residents of the United States. A substantial portion of our assets is located outside the United States. As a result, it may be difficult for our shareholders to serve notice of a lawsuit on us or our directors and officers within the United States. Because most of our assets are located outside the United States, it may be difficult for our shareholders to enforce in the United States judgments of United States courts. Appleby, our Bermuda counsel, has advised us that there is some uncertainty as to the enforcement in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated upon United States federal securities laws.

Investor confidence and the market price of our common shares may be adversely impacted if we or our independent public registered accounting firm is unable to conclude that our internal control over our financial reporting is effective as required by Section 404 of the Sarbanes-Oxley Act of 2002.

We are subject to the SEC’s reporting obligations, and beginning in our Annual Report on Form 20-F for the year ended December 31, 2006, we have been required by the SEC, as directed by Section 404 of the Sarbanes-Oxley Act of 2002, to include a report of management on our internal control over financial reporting in our Annual Report on Form 20-F that contains an assessment by management of the effectiveness of our internal control over financial reporting. Beginning in fiscal year 2007, our independent public registered accounting firm has audited the effectiveness of our internal control over financial reporting. Although our management concluded that our internal controls are effective in this Annual Report on Form 20-F, and our independent public registered accounting firm has rendered its opinion that we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria set forth in Internal Control – Integrated Framework issued by Committee of Sponsoring Organization of the Treadway Commission (COSO), our management may not conclude that our internal controls are effective in the future. Moreover, even if our management concludes that our internal controls over our financial reporting are effective, our independent public registered accounting firm may disagree. If our independent public registered accounting firm is not satisfied with our internal controls over our financial reporting or the level at which our controls are documented, designed, operated or reviewed, or if the independent public registered accounting firm interprets the requirements, rules or regulations differently from us, it may decline to attest to our management’s assessment or may issue an adverse opinion in the future. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our consolidated financial statements, which ultimately could negatively impact the market prices of our common shares.

Any environmental claims or failure to comply with any present or future environmental regulations, or any new environmental regulations, may require us to spend additional funds, may impose significant liability on us for present, past or future actions, and may dramatically increase the cost of providing our services to our customers.

We are subject to various laws and regulations relating to the use, storage, discharge and disposal of chemical by-products of, and water used in, our assembly and gold bumping processes. Although we have not suffered material environmental claims in the past, a failure or a claim that we have failed to comply with any present or future regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of our operations or negative publicity. New regulations could require us to acquire costly equipment or to incur other significant expenses. Any failure on our part to control the use of, or adequately restrict the discharge of, hazardous substances could subject us to future liabilities that may materially reduce our earnings.

Fluctuations in exchange rates could result in foreign exchange losses.

Currently, most of our net revenue is denominated in NT dollars. Our cost of revenue and operating expenses, on the other hand, are incurred in several currencies, including NT dollars, Japanese yen, US dollars and Renminbi, or RMB. In addition, a substantial portion of our capital expenditures, primarily for the purchase of testing and assembly equipment, has been, and is expected to continue to be, denominated in Japanese yen with much of the remainder in US dollars. We also have debt denominated in NT dollars, Japanese yen, US dollars and RMB. Fluctuations in exchange rates, primarily among the US dollar, the NT dollar and the Japanese yen, will affect our costs and operating margins in NT dollar terms. In addition, these fluctuations could result in exchange losses and increased costs in NT dollar terms. Despite selective hedging and other techniques implemented by us, fluctuations in exchange rates have affected, and may continue to affect, our financial condition and results of operations.

We may not be successful in our acquisitions, investments, joint ventures and dispositions, and may therefore be unable to implement fully our business strategy.

As part of our growth strategy, we may make acquisitions and investments in companies and businesses, establish joint ventures or make dispositions of our interests. For example, in September 2007, we acquired all outstanding common shares of ChipMOS Taiwan through a share exchange transaction with ChipMOS Taiwan. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision and the transaction was completed in January 2011. The success of our acquisitions, investments, joint ventures and dispositions depends on a number of factors, including:

•

our ability to identify suitable investment, acquisition, joint venture or disposition opportunities;

•

our ability to reach an agreement for an acquisition, investment, joint venture or disposition opportunity on terms that are satisfactory to us or at all;

•

the extent to which we are able to exercise control over the acquired or joint venture company;

•

our ability to align the economic, business or other strategic objectives and goals of the acquired company with those of our company; and

•

our ability to successfully integrate the acquired or joint venture company or business with our company.

If we are unsuccessful in our acquisitions, investments, joint ventures and dispositions, we may not be able to implement fully our business strategy to maintain or grow our business.

We depend on key personnel, and our revenue could decrease and our costs could increase if we lose their services.

We depend on the continued service of our executive officers and skilled engineering, technical and other personnel. We will also be required to hire a substantially greater number of skilled employees in connection with our expansion plans. In particular, we depend on a number of skilled employees in connection with our LCD and other flat-panel display driver semiconductor testing and assembly services, and the competition for such employees in Taiwan and Mainland China is intense. We may not be able to either retain our present personnel or attract additional qualified personnel as and when needed. Moreover, we do not carry key person insurance for any of our executive officers nor do we have employment contracts with any of our executive officers or employees, and, as a result, none of our executive officers or employees is bound by any non-competition agreement. If we lose any of our key personnel, it could be very difficult to find and integrate replacement personnel, which could affect our ability to provide our services, resulting in reduced net revenue and earnings. In addition, we may need to increase employee compensation levels in order to retain our existing officers and employees and to attract additional personnel. As of March 31, 2011, 10.6% of the workforce at our facilities are foreign workers employed by us under work permits that are subject to government regulations on renewal and other terms. Consequently, if the regulations in Taiwan relating to the employment of foreign workers were to become significantly more restrictive or if we are otherwise unable to attract or retain these workers at reasonable cost, we may be unable to maintain or increase our level of services and may suffer reduced net revenue and earnings.

Risk Relating to Our Relationship with Mosel

ChipMOS Taiwan entered into certain transactions that, if determined to have constituted impermissible financings or purchases of assets or equity of Mosel under ROC law, could result in the resignations of members of our management. As a result, our business operations could be disrupted and the market price of our common shares could decline.

ROC law limits the ability of a company incorporated in Taiwan to purchase any equity interest in companies, directly or indirectly, holding more than 50% of its issued and outstanding voting securities or registered capital or to provide loans or other financing to any company. ChipMOS Taiwan purchased NT$242 million worth of Mosel shares in 2002. Lee and Li, our ROC special counsel, has advised us that these purchases do not violate relevant ROC law that prohibits a subsidiary from buying or taking collateral in shares of companies holding, directly or indirectly, more than 50% of its issued and outstanding voting securities or registered capital, because Mosel’s indirect interest (calculated as the product of (i) Mosel’s percentage interest in ChipMOS Bermuda and (ii) ChipMOS Bermuda’s percentage interest in ChipMOS Taiwan) in ChipMOS Taiwan was less than 50% and ChipMOS Bermuda is incorporated outside of Taiwan. In 2005, ChipMOS Taiwan disposed of NT$84 million of Mosel shares, and in August 2006, ChipMOS Taiwan further disposed of the remaining Mosel shares for approximately NT$30 million. ChipMOS Taiwan no longer owns any Mosel shares. Lee and Li has advised that under relevant ROC law, there is no similar restriction or limitation on a subsidiary’s disposal of its parent’s equity shares, if the previous acquisitions of such shares complied with relevant ROC law. However, we understand that there is no applicable judicial precedent and there is some doubt as to how a court would rule if presented with the situation.

If it were to be determined that any of the transactions described above constituted an impermissible financing or purchase of assets of Mosel by ChipMOS Taiwan or an impermissible purchase of Mosel’s equity by ChipMOS Taiwan, then ChipMOS Taiwan’s then chairman and any responsible officers would be jointly and severally liable to ChipMOS Taiwan for any losses suffered by ChipMOS Taiwan and may also be severally liable criminally for any breach of fiduciary duties that resulted in losses and damages suffered by ChipMOS Taiwan. Moreover, certain of these transactions may not have been in full compliance with ChipMOS Taiwan’s then applicable internal procedures due to the failure to have received an appropriate valuation opinion prior to entering into such purchases. The failure to comply fully with ChipMOS Taiwan’s then applicable internal procedures could constitute evidence of a failure by the then chairman of ChipMOS Taiwan and responsible officers to comply fully with their fiduciary duties, which could result in them being held criminally liable for any breach of fiduciary duties that resulted in losses and damages to ChipMOS Taiwan. If members of our current management were held to have breached their fiduciary duties or become criminally liable for the transactions described above, they may become obliged, whether under law or otherwise, to resign from their respective positions at ChipMOS Bermuda and our affiliates. Any loss of the services of these persons could disrupt our business, damage our reputation, and cause the market price of our common shares to decline.

Risks Relating to Countries in Which We Conduct Operations

The investment in Mainland China by our controlled consolidated subsidiary, Modern Mind, through ChipMOS Shanghai, and the related contractual arrangements may result in Mosel or Siliconware Precision violating ROC laws governing investments in Mainland China by ROC companies or persons. Any sanctions on Mosel or Siliconware Precision as a result of any violation of ROC laws may cause Mosel or Siliconware Precision to decrease its ownership in us significantly or cause Mosel or Siliconware Precision to take other actions that may not be in the best interest of our other shareholders.

Previously, ROC laws and regulations generally prohibited investment by ROC entities in Mainland China in most aspects of the semiconductor testing and assembly industry. In February 2010, these restrictions have been relaxed. ROC entities now may make investment in Mainland China in the semiconductor testing and assembly industry if they have obtained approval from the Investment Commission of the ROC Ministry of Economic Affairs, or the Investment Commission. The Investment Commission will undertake a special approval process if the investment amount exceeds US$50 million. “Investment” is defined for this purpose to mean:

•

establishing a new company or enterprise in Mainland China;

•

increasing one’s equity interest in an existing company or enterprise in Mainland China;

•

acquiring shares in an existing company or enterprise in Mainland China (other than shares of publicly traded companies, acquisition of which is prohibited under current policy of the Investment Commission); or

•

establishing or expanding a branch office in Mainland China.

We provide our services in Mainland China through ChipMOS Shanghai, a company incorporated under the laws of the PRC and a wholly-owned subsidiary of Modern Mind since 2002. Modern Mind is a company incorporated under the laws of the British Virgin Islands and is wholly-owned by Jesper Limited (“Jesper”), a company incorporated under the laws of the British Virgin Islands. While we do not own any equity interest in Modern Mind, we control Modern Mind through our ownership of a demand note issued by Modern Mind (“MMT Notes”), convertible into common shares with a controlling equity interest in Modern Mind at a conversion rate of one common share of Modern Mind for every US$1.00 if repayment is not made when due. Under accounting principles that are applicable to us, Modern Mind is our controlled consolidated subsidiary. In addition, we have obtained from Jesper an irrevocable option to acquire the common shares of Modern Mind then owned by Jesper. Payment under the demand notes is fully and unconditionally guaranteed by Jesper and secured by a pledge agreement in respect of the entire equity interest in Modern Mind and ChipMOS Shanghai. Under an assignment and assumption agreement signed on April 22, 2011 (the “MMT Assignment Agreement”), ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011.

As the regulations described above are applicable only to entities organized within the ROC with respect to specified investments in Mainland China made by these entities, in the opinion of Lee and Li, our ROC special counsel, ChipMOS Bermuda’s indirect control over ChipMOS Shanghai through the ownership of MMT Notes and the above contemplated contractual arrangements are in compliance with all existing ROC laws and regulations. There are, however, substantial uncertainties regarding the interpretation and application of ROC laws and regulations, including the laws and regulations governing the enforcement and performance of our contractual arrangements. Accordingly, we cannot assure you that ROC regulatory authorities will not take a view contrary to the opinion of our ROC special counsel and that the ThaiLin will obtain the necessary approval from the Investment Commission and allow the MMT Assignment Agreement to be completed.

In addition, under current applicable ROC regulations, if a company incorporated in the ROC has directly or indirectly invested in a company incorporated outside of the ROC and has controlling power over the management and operations of such non-ROC company, any investment by such non-ROC company in the PRC will constitute an investment by the controlling ROC company that is subject to ROC laws and regulations. As a result, for the purposes of these regulations, any investment (within the meaning of the ROC laws governing investments in Mainland China) by ChipMOS Bermuda in ChipMOS Shanghai may be deemed to be an investment in Mainland China by Mosel and/or Siliconware Precision, if Mosel and/or Siliconware Precision is determined to have controlling power over our management and operations. While the regulations do not define what constitutes “controlling power over management and operations”, we understand from our ROC special counsel, Lee and Li, that, due to Mosel’s and/or Siliconware Precision’s equity interest in us and representatives on our board of directors, any conversion of the convertible notes or MMT Notes into shares of Modern Mind or other acquisition of shares of Modern Mind or ChipMOS Shanghai by ChipMOS Bermuda may be deemed an investment in Mainland China by Mosel and/or Siliconware Precision and require approval of the Investment Commission, and be subject to the prohibitions described in the first paragraph of this risk factor analysis. As a result, so long as Mosel and/or Siliconware Precision is deemed to have controlling power over ChipMOS Bermuda’s management and operations, ChipMOS Bermuda may have to choose not to convert its convertible notes or demand notes into common shares of Modern Mind in order to avoid any violations by Mosel and/or Siliconware Precision under these regulations. As a result, should the ownership of our common shares by Mosel and/or Siliconware Precision be deemed significant, in light of the above analysis, the equity interest by the respective parties may individually or collectively materially and adversely restrict our ability and flexibility in structuring our investment in Mainland China and thereby affect our business prospects.

If Mosel or Siliconware Precision was found to be in violation of the applicable ROC laws and regulations governing investments in Mainland China, Mosel or Siliconware Precision may be ordered by the Investment Commission to cease such investment activities in Mainland China within a specified period of time and may be subject to a fine of between NT$50 thousand and NT$25 million. In such case, Mosel or Siliconware Precision may comply with the order of the Investment Commission either by causing us to terminate our investment activities in Mainland China or by taking actions that will cause Mosel or Siliconware Precision to reduce their respective investment and equity interest holding in our Company. If Mosel or Siliconware Precision fails to comply with the order of the Investment Commission, the ROC government can impose on the chairman of Mosel or Siliconware Precision up to two years’ imprisonment, a fine of up to NT$25 million, or both. We cannot provide any assurance that any actions taken by Mosel or Siliconware Precision in response to any orders by the Investment Commission will be in the best interest of our other shareholders. We can not assure you that ThaiLin will obtain the necessary approval from the Investment Commission for the completion of the MMT Assignment Agreement and that if ThaiLin obtains the necessary approval from the Investment Commission for the MMT Assignment Agreement, Mosel or Siliconware Precision’s investment and equity interest will be automatically be deemed to be in compliance with ROC rules and regulations. As of the date of this Annual Report on Form 20-F, we have not obtained any Investment Commission regarding the aforementioned matters. Any termination or disposal of ChipMOS Shanghai’s operations in Mainland China could have a material adverse effect on our financial condition, results of operations or prospects, as well as the market price of our common shares.

ROC laws and regulations limit or prohibit certain technology cooperation between ROC persons or entities with PRC persons or entities, and our current technology transfer arrangements between ChipMOS Bermuda and ChipMOS Shanghai may be found to be in violation of any such limitation or prohibition, which may result in the termination of such technology transfer arrangements and therefore have a material adverse effect on the operations of ChipMOS Shanghai and our financial condition and results of operations.

ROC laws and regulations previously prohibited any transfer of semiconductor testing and assembly technologies to any person or entity located in Mainland China, except for transfers involving certain low-end semiconductor testing and assembly technologies, such as conventional wire bond assembly technology, if certain requirements are met. The ROC Ministry of Economic Affairs has the ultimate administrative authority in interpreting such laws and regulations. In February 2010, these restrictions have been relaxed, so that ROC entities may transfer semiconductor testing and assembly technologies to any person or entity located in Mainland China after they have obtained approval from the Investment Commission. Under a technology transfer agreement, dated August 1, 2002, ChipMOS Bermuda licensed to ChipMOS Shanghai certain testing and assembly-related technologies that were then controlled by ChipMOS Bermuda, which included technologies that were licensed to ChipMOS Bermuda by ChipMOS Taiwan. ChipMOS Bermuda also provided ChipMOS Taiwan with technical support and consulting services under this agreement. On April 7, 2004, ChipMOS Bermuda entered into an assignment agreement with ChipMOS Taiwan, pursuant to which ChipMOS Taiwan transferred all of the technologies it owned as of that date to ChipMOS Bermuda, including those previously licensed to ChipMOS Bermuda. On April 12, 2007, ChipMOS Bermuda entered into an assignment agreement with ChipMOS Taiwan, pursuant to which ChipMOS Taiwan assigned and transferred fifty percent of the title to ownership of and interest in all of the technologies and intellectual property it owned as of that date to ChipMOS Bermuda. ChipMOS Bermuda will continue to license such technologies to ChipMOS Shanghai pursuant to the above mentioned technology transfer agreement dated August 1, 2002.

In the opinion of Lee and Li, our ROC special counsel, our technology transfer arrangements as described above are in compliance with all applicable ROC laws and regulations. However, substantial uncertainties remain regarding the interpretation and application of those laws and regulations. Accordingly, we cannot assure you that ROC regulatory authorities will not take a view contrary to the opinion of our ROC special counsel. If ChipMOS Taiwan were determined to be in violation of applicable ROC laws and regulations governing technology cooperation with PRC persons and entities, ChipMOS Taiwan may be ordered by the Investment Commission to terminate such activity within a specified period of time and may be subject to a fine of between NT$50 thousand and NT$25 million. In addition, if ChipMOS Taiwan does not comply with the order of the Investment Commission, the ROC government can impose on the chairman of ChipMOS Taiwan up to two years’ imprisonment, a fine of up to NT$25 million, or both. Any termination of our current technology transfer to ChipMOS Shanghai could materially adversely affect our Mainland China operations and our financial condition, results of operations or prospects, as well as the market price of our common shares.

Our current ownership structure and contractual arrangements with Jesper Limited, Modern Mind and ChipMOS Shanghai may not be effective in providing operational control of our Mainland China operations.

Since 2002, we provide our services in Mainland China through ChipMOS Shanghai, a wholly-owned subsidiary of Modern Mind. While we do not own any equity interest in Modern Mind, we have a controlling interest in Modern Mind through our ownership of a demand note issued by Modern Mind. In 2004, we restructured our control of ChipMOS Shanghai and the way we provide our services in Mainland China through contractual arrangements with Jesper, Modern Mind, and ChipMOS Shanghai. Under the MMT Assignment Agreement, ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011. Prior to the completion of the MMT Assignment Agreement, the existing contractual arrangements, however, may not be as effective in providing control over our Mainland China operations as would direct ownership in ChipMOS Shanghai. See “— The investment in Mainland China by our controlled consolidated subsidiary, Modern Mind, through ChipMOS Shanghai, and the related contractual arrangements may result in Mosel or Siliconware Precision violating ROC laws governing investments in Mainland China by ROC companies or persons. Any sanctions on Mosel or Siliconware Precision as a result of any violation of ROC laws may cause Mosel or Siliconware Precision to decrease its ownership in us significantly or cause Mosel or Siliconware Precision to take other actions that may not be in the best interest of our other shareholders”.

Our ability to direct the operations we conduct through our subsidiaries and affiliated companies that we do not fully own may be limited by legal duties owed to other shareholders of such companies.

Certain of our operations are conducted through companies that we do not fully own. For example, certain current consolidated operations are conducted through ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary as of March 31, 2011, and ChipMOS Shanghai, in which we exercise control without holding any direct or indirect equity interest. We also conduct other activities through our affiliated entities.

In accordance with the various laws of the relevant jurisdictions in which our subsidiaries and affiliates are organized, each of our subsidiaries and affiliates and their respective directors owe various duties to their respective shareholders. As a result, the actions we wish our subsidiaries or affiliates to take could be in conflict with their or their directors’ legal duties owed to their other shareholders. When those conflicts arise, our ability to cause our subsidiaries or affiliates to take the action that we desire may be limited.

Any future outbreak of health epidemics and outbreaks of contagious diseases, including avian influenza, Severe Acute Respiratory Syndrome or H1N1 influenza may materially affect our operations and business.

An outbreak of a contagious disease such as avian influenza, Severe Acute Respiratory Syndrome (SARS), or more recently, the New Influenza A (H1N1) or more commonly known as the “swine flu,” for which there is inadequate treatment or no known cure or vaccine, may potentially result in a quarantine of infected employees and related persons, and adversely affect our operations at one or more of our facilities or the operations of our customers or suppliers. We cannot predict the impact that any future outbreak of these or other diseases could have on our business and results of operations.

We face substantial political risk associated with doing business in Taiwan, particularly due to recent domestic political events and the strained relations between the Republic of China and the People’s Republic of China, that could negatively affect our business and the market price of our common shares.

Our principal executive offices and most of our testing and assembly facilities are located in Taiwan. As a result, our business, financial condition and results of operations and the market price of our common shares may be affected by changes in ROC governmental policies, as well as social instability and diplomatic and social developments in or affecting Taiwan which are beyond our control. For example, the ROC has a unique international political status. The PRC government regards Taiwan as a renegade province and does not recognize the legitimacy of the ROC. Although significant economic and cultural relations have been strengthened in recent years between the ROC and the PRC, relations have often been strained. In March 2005, the PRC government enacted the “Anti-Secession Law” codifying its policy of retaining the right to use military force to gain control over Taiwan, particularly under what it considers as highly provocative circumstances, such as a declaration of independence by Taiwan or the refusal by the ROC to accept the PRC’s stated “One China” policy. Past developments related to the interaction between the ROC and the PRC have on occasion depressed the market prices of the securities of Taiwanese or Taiwan-related companies, including our own. Relations between the ROC and the PRC and other factors affecting military, political or economic conditions in Taiwan could have a material adverse effect on our financial condition and results of operations, as well as the market price and the liquidity of our common shares.

We are vulnerable to natural disasters and other events disruptive to our business and operations.

We currently provide most of our testing services through our facilities in the Hsinchu Industrial Park and the Hsinchu Science Park in Taiwan and the Shanghai Qingpu Industrial Zone, and all of our assembly services through our facilities in the Southern Taiwan Science Park in Taiwan and the Shanghai Qingpu Industrial Zone. Significant damage or other impediments to these facilities as a result of natural disasters, industrial strikes or industrial accidents could significantly increase our operating costs.

Taiwan is particularly susceptible to earthquakes and typhoons. For example, in late 1999, Taiwan suffered severe earthquakes that caused significant property damage and loss of life, particularly in the central part of Taiwan. These earthquakes damaged production facilities and adversely affected the operations of many companies involved in the semiconductor and other industries. We experienced NT$1 million in damages to our machinery and equipment, NT$6 million in damages to our facilities, NT$1 million in damages to our inventory and five days of delay in our production schedule as a result of these earthquakes.

In January and February 2008, certain parts of Mainland China, particularly in the southern, central and eastern regions, experienced reportedly the most severe winter weather in the country in recent decades, which resulted in significant and extensive damages to factories, power lines, homes, automobiles, crops and other properties, blackouts, transportation and communications disruptions and other losses in the affected areas. In addition, in May 2008, certain semiconductor companies with facilities in eastern Mainland China experienced production disruption reportedly due to power stoppages caused by the failure of certain electricity supply system in the area where the plants are located. We cannot assure you that our facilities in the Shanghai Qingpu Industrial Zone will not be adversely affected by future snowstorms, power shortages, earthquakes or other similar events.

The 2011 Sendai earthquake and tsunami was a 9.0-magnitude (Mw) undersea megathrust earthquake off the coast of Japan that occurred on March 11, 2011 (the “2011 Sendai Earthquake”). The 2011 Sendai Earthquake was recorded as most powerful earthquake to hit Japan and the fourth most powerful earthquake in the world overall. The earthquake triggered tsunami warnings and evacuations along Japan’s Pacific coast and in at least 20 countries, including Taiwan and Mainland China. The earthquake and tsunami resulted in deaths, injuries and people missing across the affected Japanese prefectures and caused extensive and severe property damage in Japan, including heavy damage to roads and railways as well as fires in many areas, and dam collapse. Many electrical generators were disabled, and at least three nuclear power plant reactors partially melted down and experienced a chemical explosion extensively damaging surrounding buildings. We cannot assure you that our production facilities, operations and market located in Taiwan and Mainland China will not be adversely affected as result of the 2011 Sendai Earthquake, including as a result of radiation emission from the damaged nuclear power plants or subsequent future earthquakes that may take place.

The production facilities of many of our suppliers and customers and providers of complementary semiconductor manufacturing services, including foundries, are located in Taiwan and Mainland China. If our customers are adversely affected by natural disasters or other events occurring in or affecting these geographic areas, it could result in a decline in the demand for our testing and assembly services. If our suppliers and providers of complementary semiconductor manufacturing services are affected by such events, our production schedule could be interrupted or delayed. As a result, a major earthquake, snowstorm, other natural disaster, industrial strike, industrial accident or other disruptive event occurring in or affecting Taiwan or Mainland China could severely disrupt the normal operation of business and have a material adverse effect on our financial condition and results of operations.

Any future outbreak of radiation-related disease as a result of nuclear power plant reactors damage caused by the 2011 Sendai Earthquake may materially adversely affect our operations and business.

The 2011 Sendai Earthquake raises tremendous concerns about the possible effects of radiation emission from the damaged nuclear power plants. Japanese official authorities are working with experts in assessing the risk and determining the best courses of actions to implement to escape harmful radiation. The potential health effects due to exposure to harmful radiation may be temporary or permanent harmful effects in nature.

Multiple radioactive gases could possibly be emitted in a situation where uranium attains a “meltdown” state, which is a severe overheating of the core of a nuclear reactor, in which the core melts and radiation and heat are caused to escape. This would occur if the containment system partially or fully fails. The particles that are released with the gases due to the meltdown would be the spewed particles of iodine-131, strontium-90 and cesium-137. These might enter into a human by being swallowed, absorbed through the skin, or inhaled. Depending on the chemical characteristics of each of these and their predilection for certain body tissues, they could cause cancers of such organs as bones, soft tissues near bones, thyroid gland, and the bone marrow (typically known as leukemia).

Acute or very high level radiation exposure can cause a person to become very ill or to die quickly. Ionizing radiation, which is defined as high-energy particles or electromagnetic waves that can break chemical bonds, damage humans by disrupting cellular function, particularly in tissues with rapid growth and turnover of cells. Intense, high level and/or excessive radiation exposure may result in acute radiation syndrome whereby harmful effects to the human body may be evidenced by skin burns, internal organ deterioration, bleeding, vomiting, bone marrow distortion and deaths. If the radiation exposure is less intense and/or more prolonged at a lower level, then the central nervous system, kidneys, thyroid gland, and liver may be affected. Cancer is the most well known effect, and may affect virtually any significantly exposed tissue.

Certain health effects due to exposure to harmful radiation does not have adequate treatment or known cure or vaccine, consequently, may potentially result in a quarantine of infected employees and related persons, and adversely affect our operations at one or more of our facilities or the operations of our customers or suppliers. We cannot predict the probability of any future outbreak of radiation related diseases as a possible result of nuclear power plants damage caused by the 2011 Sendai Earthquake or the extent of the material adverse impact that this could have on our business and results of operations.

Risks Relating to Our Corporate Structure

Our ability to receive dividends and other payments from our subsidiaries may be restricted by commercial, statutory and legal restrictions, and thereby materially adversely affect our ability to grow, fund investments, make acquisitions, pay dividends, repay or repurchase outstanding indebtedness and otherwise fund and conduct our business.

We are a holding company, and our most significant asset is our majority ownership interest in ChipMOS Taiwan. Although we control ChipMOS Shanghai through Modern Mind, we will not hold any equity interest in these entities until we obtain approval from the Investment Commission allowing ThaiLin, a 42.9% owned subsidiary of ChipMOS Taiwan to make investment in Mainland China. Under the MMT Assignment Agreement, ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011. As long as we do not hold any equity interest in these entities, we are not entitled to any dividends distributed by these entities and our contractual arrangements may not effectively prevent these entities from declaring any dividends to their shareholders. Dividends we receive from our subsidiaries, if any, will be subject to taxation.

The ability of our subsidiaries to pay dividends, repay intercompany loans from us or make other distributions to us is restricted by, among other things, the availability of funds and the terms of various credit arrangements entered into by our subsidiaries, as well as statutory and other legal restrictions. In addition, although there are currently no foreign exchange control regulations which restrict the ability of our subsidiaries located in Taiwan to distribute dividends to us, we cannot assure you that the relevant regulations will not be changed and that the ability of our subsidiaries to distribute dividends to us will not be restricted in the future. A Taiwan company is generally not permitted to distribute dividends or to make any other distributions to shareholders for any year in which it did not have either earnings or retained earnings (excluding reserves). In addition, before distributing a dividend to shareholders following the end of a fiscal year, the company must recover any past losses, pay all outstanding taxes and set aside 10% of its annual net income (less prior years’ losses and outstanding taxes) as a legal reserve until the accumulated legal reserve equals its paid-in capital, and may set aside a special reserve.

In addition, PRC law requires that our PRC-incorporated subsidiary only distributes dividends out of its net income, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, it is also required to set aside at least 10% of its after-tax net income each year into its reserve fund until the accumulated legal reserve amounts to 50% of its registered capital. PRC-incorporated companies are further required to maintain a bonus and welfare fund at percentages determined at their sole discretion. The reserve fund and the bonus and welfare fund are not distributable as dividends. Moreover, a ROC-incorporated company is only able to declare dividends at its annual general meeting of shareholders, which cannot occur until after completion of its annual financial statements. Any limitation on dividend payments by our subsidiaries could materially adversely affect our ability to grow, fund investments, make acquisitions, pay dividends, repay or repurchase outstanding indebtedness, and otherwise fund and conduct our business.

ThaiLin, Siliconware Precision and Mosel, our large shareholders, may have significant influence over our company and may cause us to take actions that may not be, or refrain from taking actions that may be, in our best interest or the best interest of our other shareholders.

As of March 31, 2011, ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary, directly owned 19.9% of our common shares, Siliconware Precision and Mosel directly and indirectly owned 9.3% and 8.6% of our common shares, respectively. Also as of March 31, 2011, Siliconware Precision owned 15.8% of ChipMOS Taiwan’s outstanding shares. As at December 31, 2010 and 2009, Siliconware Precision and Mosel have historically ranked as our number one and number two shareholder directly and indirectly owned 11.0% and 10.1% of our common shares for 2010 and 14.5% and 13.3% of our common shares for 2009, respectively. These three large shareholders, individually or collectively, through their equity interests may have significant influence over matters submitted to our shareholders for approval and other corporate actions, such as:

•

election of directors;

•

timing and manner of dividend distributions;

•

approval of contracts between us and these major shareholders or their respective affiliates, which could involve conflicts of interest; and

•

open market purchase programs or other purchases of our common shares.

•

Siliconware Precision’s, Mosel’s and ThaiLin’s substantial interests in our company could also:

•

delay, defer or prevent a change in who controls us;

•

discourage bids for our shares at a premium over the market price; and

•

adversely affect the market price of our common shares.

In addition, one of our directors, Mr. Hsing-Ti Tuan, also acts as a director of ProMOS, a subsidiary of Mosel. As a result, conflicts of interest between Mr. Tuan’s duty to us and ProMOS and/or Mosel may arise. For an example of such a conflict of interest, see “— Risks Relating to Countries in Which We Conduct Operations—The investment in Mainland China by our controlled consolidated subsidiary, Modern Mind, through ChipMOS Shanghai, and the related contractual arrangements may result in Mosel or Siliconware Precision violating ROC laws governing investments in Mainland China by ROC companies or persons. Any sanctions on Mosel or Siliconware Precision as a result of any violation of ROC laws may cause Mosel or Siliconware Precision to decrease its ownership in us significantly or cause Mosel or Siliconware Precision to take other actions that may not be in the best interest of our other shareholders”. We cannot give any assurances that when conflicts of interest arise, Mr. Tuan will act in our interests, or that conflicts of interest will be resolved in our favor.

Moreover, because Siliconware Precision and Mosel have potential power to direct or influence our corporate actions, we may be required to engage in transactions that may not be agreeable to our other shareholders or that may not be in the best interest of our other shareholders.

Our ability to make further investments in ChipMOS Taiwan may be dependent on regulatory approvals. If ChipMOS Taiwan is unable to receive the equity financing it requires, its ability to grow and fund its operations may be materially adversely affected.

As ChipMOS Taiwan is not a listed company, it generally depends on its shareholders, ChipMOS Bermuda and Siliconware Precision, to meet its equity financing requirements. Any capital contribution by us to ChipMOS Taiwan may require the approval of the relevant ROC authorities. For example, any capital contribution by us to ChipMOS Taiwan will require the approval of the authorities of the Science Park Administration. We may not be able to obtain any such approval in the future in a timely manner, or at all. If ChipMOS Taiwan is unable to receive the equity financing it requires, its ability to grow and fund its operations may be materially adversely affected.

Risks Relating to Our Common Shares

Volatility in the price of our common shares may result in shareholder litigation that could in turn result in substantial costs and a diversion of our management’s attention and resources.

The financial markets in the United States and other countries have experienced significant price and volume fluctuations, and market prices of technology companies have been and continue to be extremely volatile. Volatility in the price of our common shares may be caused by factors outside of our control and may be unrelated or disproportionate to our results of operations. In the past, following periods of volatility in the market price of a public company’s securities, shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.

Certain provisions in our constitutive documents and in our severance agreements with our executive officers make the acquisition of us by another company more difficult and costly and therefore may delay, defer or prevent a change of control.

Our bye-laws provide that our board of directors is divided into three classes of directors, each class to be re-elected only once every three years. As a result, shareholders would not generally be able to replace a majority of the directors until after two annual general meetings. In addition, any extraordinary corporate transaction such as a merger, amalgamation or consolidation, or a sale or transfer of all or substantially all of our assets, cannot be done without the approval of shareholders representing 70% of the total voting rights of all shareholders having the right to vote at such general meeting called to consider such extraordinary transaction. These provisions in our constitutive documents may increase the difficulty faced by a party which seeks to acquire control of our board or to approve an extraordinary transaction.

In 2007, we entered into change in control severance agreements with certain executive officers pursuant to which we agreed to pay certain severance payments if a change in control event (as defined in the change in control severance agreements) occurs and the employment of such executive officer is terminated by our company other than for cause or by such executive officer for good reasons within two years following the occurrence of the change in control event. These changes in control agreements may increase the cost of a party seeking to effect a change in control of our company.

Future sales, pledge or issuance of common shares by us or our current shareholders could depress our share price and you may suffer dilution.

Sales of substantial amounts of shares in the public market, the perception that future sales may occur, or the pledge of a substantial portion of our common shares could depress the prevailing market price of our shares. As of March 31, 2011, we had approximately 33 million shares outstanding. ThaiLin, Siliconware Precision, Mosel, and DLS Capital Management, LLC, our four largest shareholders, owned 6,474,211, 3,043,749, 2,798,659 and 1,925,975 common shares as of March 31, 2011, respectively, representing in the aggregate of approximately 43.7% of our outstanding common shares. See “Item 7. Major Shareholders and Related Party Transactions — Major Shareholders”. As of March 31, 2011, we had US$2 million in aggregate principal amount of the 2006 Notes outstanding and US$2 million in aggregate principal amount of the 2009 Notes outstanding, and US$2 million in aggregate principal amount of the 2010 Notes outstanding. The 2006 Notes, 2009 Notes and 2010 Notes are convertible into our common shares at the conversion price of US$27.40 per share, US$5.00 per share and US$5.00 per share, respectively. As of the date of this Annual Report on Form 20-F, the 2006 Notes have been redeemed and the 2009 Notes and 2010 Notes have been converted into our common shares.

Mosel in the past decided to sell a significant portion of our common shares in order to raise funds. In June 2006, Mosel sold 6,956,522 (1,739,130) common shares through its wholly-owned subsidiary, Giant Haven, under a shelf registration statement which has since expired. In addition, in March 2007, we issued 12,174,998 (3,043,749) common shares pursuant to a share purchase and subscription agreement with ChipMOS Taiwan and Siliconware Precision, and we entered into a registration rights agreement in March 2007 with Siliconware Precision, pursuant to which we granted to Siliconware Precision certain rights to require us to register these common shares for sale under the Securities Act. In July 2007, Mosel sold 8,121,266 (2,030,316) common shares through Giant Haven to ProMOS and Powertech Technology, and we then granted Giant Haven, ProMOS and Powertech Technology certain rights to require us to register these common shares for sale under the Securities Act. For a shareholder that is not our affiliate these shares may be resold pursuant to Rule 144 after lapse of the applicable holding period. In 2008, ProMOS failed to meet its payment obligations to ThaiLin. Subsequently in March 2009, ThaiLin acquired 4,060,633 (1,015,158) common shares from ProMOS pursuant to its enforcement of the collateral under a Stock Pledge Agreement between ThaiLin and ProMOS dated December 3, 2008. Furthermore, each of Siliconware Precision, Mosel and ThaiLin may be able to sell, in any three-month period, that number of those ChipMOS common shares that each of Siliconware Precision, Mosel and ThaiLin owns, as the case may be, up to the greater of (i) one percent of our outstanding common shares or (ii) the average weekly trading volume of our common shares as reported on the NASDAQ Capital Market during the four calendar weeks prior to filing a notice under Rule 144(h) for any such sales pursuant to Rule 144(e) under the Securities Act.

On September 14, 2007, ChipMOS Bermuda issued 604,124 (151,031) common shares pursuant to a share exchange transaction with ChipMOS Taiwan, under which ChipMOS Bermuda exchanged one common share for every 8.4 ChipMOS Taiwan shares then outstanding. Following the completion of the share exchange transaction, ChipMOS Taiwan became our wholly-owned subsidiary. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. In January 2011, the share purchase transaction was completed and we subsequently owned 84.2% of ChipMOS Taiwan’s outstanding shares. We plan to issue, from time to time, additional shares in connection with employee compensation and to finance possible future capital expenditures, investments or acquisitions. See “Item 6. Directors, Senior Management and Employees—Share Option Plan and Share Appreciation Rights Plan” for a discussion of the Share Option Plan that we have adopted for the benefit of all of our directors, officers, employees and consultants. The issuance of additional shares may have a dilutive effect on other shareholders and may cause the price of our common shares to decrease.

In addition, the indictment relating to Mr. Hung-Chiu Hu alleges that embezzled funds were used in investments by PacMOS, which, as of March 31, 2011, owned 2% of our outstanding common shares. As a result, PacMOS may be ordered by relevant authorities to dispose of its investments made with any embezzled funds, which may result in a sale of our shares by PacMOS. A sale of a significant number of our shares by PacMOS or our other current shareholders could depress our share price.

The share numbers disclosed in the foregoing notes, contain corresponding adjusted figures in brackets denoting the effect of Company’s 1-for-every-4 reverse stock split effective on January 21, 2011.

If the trading price of our common shares declines, we may face a limited public market for our common shares and reduced availability of future debt or equity financing.

Companies listed on the NASDAQ Stock Market (“NASDAQ”) are subject to delisting for, among other things, failure to maintain a minimum closing bid price of US$1.00 per share for 30 consecutive business days. Though we are in compliance with the NASDAQ Listing Rules as of the date of this Annual Report on Form 20-F, we were not in compliance with the minimum bid price requirement from September 15, 2009 until May 5, 2010, when we regained compliance. During this time, we applied for, and NASDAQ approved, the transfer of our listing from NASDAQ Global Select Market to NASDAQ Capital Market. If the bid price of our common stock falls below US$1.00 per share for 30 consecutive business days again in the future, we may be subject to delisting. If our common shares are delisted from the NASDAQ Capital Market, our common shares would likely trade in the over-the-counter market, which could make selling our common shares more difficult. Smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts’ coverage of us may be reduced. In addition, in the event our common shares are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our common shares. These factors could limit our common shares’ liquidity and result in lower prices and larger spreads in the bid and ask prices for our common shares.

Future declines in our share price could also significantly impair our ability to raise additional necessary capital through equity or debt financing, and could significantly increase ownership dilution to shareholders caused by our issuing equity in financing or other transactions. A general permission under the Exchange Control Act 1972 and the Exchange Control Regulation 1973 (and other relevant legislations and regulations) has been given by the Bermuda Monetary Authority (the “BMA”) for the issue and transfer of our common shares, notes and other securities to and between non-residents of Bermuda for exchange control purposes, provided that our common shares remain listed on an appointed stock exchange (which includes listing on the NASDAQ Capital Market). There can be no assurance that the BMA will give the same or a similar consent in the event our common shares are no longer listed on the NASDAQ Capital Market or another appointed stock exchange. In the absence of such a general consent, specific consents of the BMA would be required for all issues and transfers of our shares, notes and other securities, unless such issues and/or transfers fall under certain exemptions as provided by the BMA.

Item 4.

Information on the Company

Overview of the Company

We believe that we are one of the leading independent providers of semiconductor testing and assembly services. Specifically, we believe that we are one of the leading independent providers of testing and assembly services for LCD and other flat-panel display driver semiconductors in Taiwan and for advanced memory and logic/mixed-signal products in Taiwan and Mainland China. The depth of our engineering expertise and the breadth of our testing and assembly technologies enable us to provide our customers with advanced and comprehensive testing and assembly services. In addition, our geographic presence in Taiwan and Mainland China is attractive to customers wishing to take advantage of the logistical and cost efficiencies stemming from our close proximity to foundries and producers of consumer electronic products in Taiwan and Mainland China. Our production facilities are located in Hsinchu and Tainan, Taiwan and Shanghai, Mainland China.

Our Structure and History

We are a holding company, incorporated in August 2000 under the Companies Act 1981 of Bermuda (as amended) (the “Bermuda Companies Act”), under the name “ChipMOS TECHNOLOGIES (Bermuda) LTD.” Our principal place of business is located at No. 1, R&D Road 1, Hsinchu Science Park, Hsinchu, Taiwan, Republic of China and our phone number is (886) 3 563 3988. We provide most of our services in Taiwan through our subsidiary, ChipMOS TECHNOLOGIES INC., or ChipMOS Taiwan, in which we hold a majority ownership interest, and its subsidiaries and investees. We also provide services in Mainland China through ChipMOS TECHNOLOGIES (Shanghai) LTD., or ChipMOS Shanghai, a wholly-owned subsidiary of MODERN MIND TECHNOLOGY LIMITED, or Modern Mind, which is one of our controlled consolidated subsidiaries. As of March 31, 2011, ThaiLin Semiconductor Corp., or ThaiLin, a 42.9% owned subsidiary of ChipMOS Taiwan, owned 19.9% of our common shares, Siliconware Precision Industries Co., Ltd., or Siliconware Precision, owned 9.3% of our common shares, and Mosel Vitelic Inc., or Mosel, indirectly owned 8.6% of our common shares.

The following chart illustrates our corporate structure and our equity interest in each of our principal subsidiaries and affiliates as of March 31, 2011.

LOGO

Notes:

(1)

Under ROC Financial Accounting Standards and the regulations of the Taiwan Securities and Futures Bureau, we are required to consolidate the financial results of any subsidiaries in which we hold a controlling interest or voting interest in excess of 50%. We consolidated the financial results of ChipMOS Taiwan, ChipMOS Japan (which was liquidated in October 2009), ChipMOS USA, ChipMOS TECHNOLOGIES (H.K.) Limited, or ChipMOS Hong Kong (which is in the process of liquidation as of March 31, 2011), Modern Mind, its wholly-owned subsidiary, ChipMOS Shanghai and ThaiLin.

(2)

As of March 31, 2011, 3,899,999 shares of ChipMOS Hong Kong were issued to us and one share was issued to Shih-Jye Cheng, our chairman and chief executive officer, representing 100% of the then issued share capital of ChipMOS Hong Kong. Shih-Jye Cheng holds the one share issued to him as trustee for and on behalf of our company.

(3)

On March 27, 2007, we completed a share purchase and subscription transaction with ChipMOS Taiwan and Siliconware Precision, under which we and ChipMOS Taiwan purchased all of Siliconware Precision’s equity interest in ChipMOS Taiwan, and Siliconware Precision subscribed to 12,174,998 (3,043,749 shares as taking into effect of 1-for-every-4 reverse stock split effective on January 21, 2011) of our newly issued common shares through a private placement. Following such transaction, on September 14, 2007, we completed a share exchange transaction with ChipMOS Taiwan pursuant to which we exchanged one common share for every 8.4 ChipMOS Taiwan shares. Following the completion of the share exchange transaction, ChipMOS Taiwan became our wholly-owned subsidiary. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares.

(4)

We control Modern Mind through our ownership of a convertible note issued by Modern Mind that may be converted into a controlling equity interest in Modern Mind. We do not currently own any equity interest in Modern Mind. ChipMOS Shanghai is a wholly-owned subsidiary of Modern Mind. Under the MMT Assignment Agreement, ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011.

Below is a description of our principal consolidated subsidiaries:

ChipMOS TECHNOLOGIES INC. ChipMOS Taiwan was incorporated in Taiwan in July 1997 as a joint venture company of Mosel and Siliconware Precision and with the participation of other investors. Its operations consist of the testing and assembly of semiconductors as well as gold bumping and memory module manufacturing. We acquired our interest in ChipMOS Taiwan by issuing our common shares to ChipMOS Taiwan’s shareholders in exchange for their 70.3% shareholding in ChipMOS Taiwan in January 2001. In October 2001, ChipMOS Taiwan issued 6,911,732 common shares as employee bonuses. In December 2002, we issued 531,175 (132,793) common shares in exchange for 5,633,442 ChipMOS Taiwan common shares held by these employees.

On September 14, 2007, we completed a share exchange transaction with ChipMOS Taiwan pursuant to which we exchanged one common share for every 8.4 ChipMOS Taiwan shares. In connection with the share exchange transaction, ChipMOS Bermuda and ChipMOS Taiwan paid in the aggregate NT$53 million in cash to purchase fractional shares and shares held by dissenting shareholders, and ChipMOS Bermuda issued 604,124 (151,031) new common shares. Following the completion of the share exchange transaction, ChipMOS Taiwan became our wholly-owned subsidiary. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares.

ChipMOS TECHNOLOGIES (H.K.) Limited ChipMOS Hong Kong (formerly ChipMOS Far East Limited) was incorporated in Hong Kong in November 2002. It is engaged in semiconductor testing and assembly services and trading of spare parts and tools. Effective May 31, 2005, the name of ChipMOS Far East Limited was changed to ChipMOS TECHNOLOGIES (H.K.) Limited. As of March 31, 2011, we held 100% of the outstanding common shares of ChipMOS Hong Kong. As of the date of this Annual Report on Form 20-F, ChipMOS Hong Kong is in the process of liquidation.

MODERN MIND TECHNOLOGY LIMITED and ChipMOS TECHNOLOGIES (Shanghai) LTD. Modern Mind was incorporated in the British Virgin Islands in January 2002. Modern Mind conducts its operations through ChipMOS Shanghai, a wholly-owned subsidiary incorporated in Mainland China in June 2002. ChipMOS Shanghai is engaged in wafer testing and semiconductor assembly and testing. We acquired a 100% equity interest in Modern Mind on December 12, 2002, and then transferred it to Jesper on December 31, 2002. In 2003, we acquired from Jesper a convertible note in the amount of US$37.5 million issued by Modern Mind that may be converted into a controlling equity interest in Modern Mind at a conversion rate of one ordinary share of Modern Mind for every US$1.00 if the repayment is not made when due. In 2004, we restructured our control of ChipMOS Shanghai and our Mainland China operations. On July 29, 2004, we replaced the US$37.5 million convertible note previously issued by Modern Mind in its entirety with a US$62.8 million demand note issued by Modern Mind, with the difference representing a US$25 million loan that we extended to Modern Mind from the net proceeds of our July 2004 offering of common shares. In addition, we extended a loan in the aggregate amount of US$50 million to Modern Mind from the net proceeds of our November 2004 convertible debt offering in exchange for demand notes issued by Modern Mind in the same aggregate amount (the “MMT Notes”). The MMT Notes are convertible at any time into common shares representing, immediately after the conversion, almost 100% of the then outstanding common shares of Modern Mind at a conversion rate of US$1.00 for each common share of Modern Mind. Payment under the MMT Notes are fully and unconditionally guaranteed by Jesper and secured by a pledge agreement in respect of the entire equity interest in Modern Mind and ChipMOS Shanghai. We have obtained from Jesper an irrevocable option to acquire at any time the common shares of Modern Mind then owned by Jesper. Under an assignment and assumption agreement signed on April 22, 2011 (the “MMT Assignment Agreement”), ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011. As of March 31, 2011, the aggregate amount of total loans we extended to Modern Mind was US$130.3 million.

On April 22, 2004, ChipMOS Hong Kong and ChipMOS Shanghai entered into an exclusive services agreement, pursuant to which ChipMOS Shanghai will provide its services exclusively to ChipMOS Hong Kong or customers designated by ChipMOS Hong Kong. Under the exclusive services agreement, ChipMOS Hong Kong will purchase and consign to ChipMOS Shanghai all of the equipment required to render those services. The exclusive services agreement has a term of ten years, which is automatically renewable for an additional ten-year period unless either party provides written notice of intention to terminate at least 30 days prior to the expiration of such ten-year term. In addition, ChipMOS Hong Kong may terminate the exclusive services agreement at any time by giving 30 days’ prior written notice. The exclusive services agreement was terminated on July 1, 2010.

On July 1, 2010, ChipMOS Bermuda and ChipMOS Shanghai entered into an exclusive services agreement, pursuant to which ChipMOS Shanghai provides services exclusively to ChipMOS Bermuda or customers designated by ChipMOS Bermuda. Under the exclusive services agreement, ChipMOS Bermuda agrees to procure certain equipment required to render those services and consign such equipment for the exclusive use of ChipMOS Shanghai. The exclusive services agreement has a term of ten years and unless otherwise terminated by either party giving at least 30 days prior written notice to the expiration of such ten-year term, will automatically renew for another ten-year term upon its expiry. In addition, under the exclusive services agreement, ChipMOS Bermuda has the discretion to terminate the exclusive services agreement for any reason at any time by giving 30 days’ prior written notice to ChipMOS Shanghai.

For risks associated with our investment in Mainland China and these contractual arrangements, see “Item 3. Key Information—Risk Factors—Risks Relating to Countries in Which We Conduct Operations—The investments in Mainland China by our controlled consolidated subsidiary, Modern Mind, through ChipMOS Shanghai, and the related contractual arrangements may result in Mosel or Siliconware Precision violating ROC laws governing investments in Mainland China by ROC companies or persons. Any sanctions on Mosel or Siliconware Precision as a result of any violation of ROC laws may cause Mosel or Siliconware Precision to decrease its ownership in us significantly or cause Mosel or Siliconware Precision to take other actions that may not be in the best interest of our other shareholders” and “Item 3. Key Information – Risk Factors—Risks Relating to Countries in Which We Conduct Operations—Our current ownership structure and contractual arrangements with Jesper Limited, Modern Mind and ChipMOS Shanghai may not be effective in providing operational control of our Mainland China operations”.

ThaiLin Semiconductor Corp. ThaiLin was incorporated in Taiwan in May 1996, and is listed on the GreTai Securities Market in Taiwan. It is engaged in the provision of semiconductor testing services. ChipMOS Taiwan acquired a 41.8% interest in ThaiLin in December 2002. Under applicable accounting principles, ThaiLin was consolidated into our consolidated financial statements in 2003 because ChipMOS Taiwan was deemed to exert significant control over ThaiLin through common directors and management.

On March 4, 2008, ChipMOS Taiwan made a loan in an amount of NT$145 million that bears interest at a rate of 4.69% per annum to Taiwan Kolin Co. Ltd., or Kolin, a major shareholder of ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary. NT$15 million of this loan was repaid in 2008. The loan is secured by a pledge by Kolin of 11 million common shares of ThaiLin. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—ThaiLin Semiconductor Corp.”

As of March 31, 2011, ChipMOS Taiwan held (excluding the ThaiLin common shares pledged to us in connection with the loan to Kolin) a 42.9% interest in ThaiLin. Mr. Shih-Jye Cheng, our chairman and chief executive officer and the director and chairman of ChipMOS Taiwan, is also a director and the chairman of ThaiLin. In addition, five of the nine directors of ThaiLin are appointed by ChipMOS Taiwan.

As of March 31, 2011, ThaiLin held 6,474,211 of our outstanding shares, corresponding to 19.9% of all of our outstanding shares. See “Item 7. Major Shareholders and Related Party Transactions — Related Party Transactions—ThaiLin Semiconductor Corp”.

Industry Background

We provide a broad range of back-end testing services, including engineering testing, wafer probing and final testing of memory and logic/mixed-signal semiconductors. We also offer a broad selection of leadframe-based and organic substrate-based package assembly services for memory and logic/mixed-signal semiconductors. Our advanced leadframe-based packages include thin small outline packages, or TSOPs, and our advanced organic substrate-based packages include fine-pitch ball grid array, or fine-pitch BGA, packages. In addition, we provide gold bumping, testing and assembly services for LCD and other flat-panel display driver semiconductors by employing TCP, COF and COG technologies.

Semiconductors tested and assembled by us are used in personal computers, graphics applications, such as game consoles and personal digital assistants, or PDAs, communications equipment, such as cellular handsets, and consumer electronic products and display applications, such as flat-panel displays. In 2010, 35.9% of our net revenue was derived from testing services for memory and logic/mixed-signal semiconductors, 36.4% from assembly services for memory and logic/mixed-signal semiconductors, and 27.7% from LCD and other flat-panel display driver semiconductor testing and assembly services.

Semiconductor Industry Trends

Growth in the semiconductor industry is largely driven by end-user demand for consumer electronics, communications equipment and computers, for which semiconductors are critical components. Highly cyclical, the worldwide semiconductor industry has experienced peaks and troughs over the last decade, with a severe downturn at the end of 2000 that was followed by a modest recovery in late 2002. Beginning in the fourth quarter of 2008, the semiconductor industry commenced another downturn that increased in unprecedented severity into the first quarter of 2009. The overall semiconductor industry commenced to recover from the downturn in the second quarter of 2009 and the positive recovery trend continues in 2010.

Selected Key Semiconductor Markets

After such time as a recovery occurs in end-user demand for new and improved electronic products and applications that is sufficient to reverse reduced demand trends that began in 2007 and are still continuing, various sectors of the semiconductor industry are in turn expected to benefit from a resumption in growth. These sectors include the memory semiconductor market, and the LCD and other flat-panel display driver semiconductor market.

Memory Semiconductor Market

The potential for memory market growth is linked to anticipated memory content increases in consumer electronics and PC applications (after such time as a recovery occurs in end-user demand for these) due to increasing operating system requirements, increasing use of graphics in gaming and other applications, continued growth of broadband content and a transition to 64-bit PC architecture. The memory market is dominated by two segments—DRAM and flash memory. Potential growth in the DRAM market is expected to be driven by continued growth in both the commodity and niche DRAM market, as well as growth opportunities in mobile DRAM as memory requirements significantly increase for mobile applications. Flash memory market potential growth is expected to be driven by increasing memory requirements for cellular handsets, digital cameras, digital audio /video, and other mobile applications.

LCD and Other Flat-Panel Display Driver Semiconductor Market

Flat-panel displays are used in applications such as PC monitors, notebook computers, television sets, cellular handsets and digital cameras. The end-user demand for LCD and other flat-panel display driver semiconductor experienced a downturn in 2007 and 2008. The LCD driver market started to recover in the second quarter of 2009 and the positive recovery trend continues in 2010.

Logic/Mixed-Signal Semiconductor Market

The communications market is one of the main drivers of potential growth in the semiconductor industry. Logic/mixed-signal semiconductors, which are chips with analog functionality covering more than half of the chip area, are largely used in the communications market. The increasing use of digital technology in communications equipment requires chips with both digital and analog functionality for applications such as modems, network routers, switches, cable set-top boxes and cellular handsets. As the size and cost of cellular handsets and other communications-related devices have decreased, components have increased in complexity. Logic/mixed-signal semiconductors, such as LCD controllers and DVD controllers, are also used in consumer electronic products.

Overview of the Semiconductor Manufacturing Process

The manufacturing of semiconductors is a complex process that requires increasingly sophisticated engineering and manufacturing expertise. The manufacturing process may be broadly divided into the following stages:

LOGO


Process		Description
Circuit Design		The design of a semiconductor is developed by laying out circuit patterns and interconnections.

Wafer Fabrication		Wafer fabrication begins with the generation of a photomask, a photographic negative onto which a circuit design pattern is etched or transferred by an electron beam or laser beam writer. Each completed wafer contains many fabricated chips, each known as a die.

Wafer Probe		Each individual die is then electrically tested, or probed, for defects. Dies that fail this test are discarded, or, in some cases, salvaged using laser repair.

Assembly		The assembly of semiconductors serves to protect the die, facilitates its integration into electronic systems and enables the dissipation of heat. The process begins with the dicing of the wafers into chips. Each die is affixed to a leadframe-based or organic substrate-based package. Then, electrical connections are formed, in many cases by connecting the terminals on the die to the inner leads of the package using fine metal wires. Finally, each chip is encapsulated for protection, usually in a molded epoxy enclosure.

Final Test		Assembled semiconductors are tested to ensure that the device meets performance specifications. Testing takes place on specialized equipment using software customized for each application. For memory semiconductors, this process also includes “burn-in” testing to screen out defective devices by applying very high temperatures and voltages on to the memory device.

Outsourcing Trends in Semiconductor Manufacturing

Historically, integrated device manufacturers, or IDMs, designed, manufactured, tested and assembled semiconductors primarily at their own facilities. In recent years, there has been a trend in the industry to outsource stages in the manufacturing process to reduce the high fixed costs resulting from the increasingly complex manufacturing process. Virtually every significant stage of the manufacturing process can be outsourced. The independent semiconductor manufacturing services market currently consists of wafer fabrication and probing services and semiconductor testing and assembly services. Most of the world’s major IDMs now use some independent semiconductor manufacturing services to maintain a strategic mix of internal and external manufacturing capacity. We believe that many of these IDMs are significantly reducing their investments in new semiconductor testing and assembly facilities.

The availability of technologically advanced independent semiconductor manufacturing services has also enabled the growth of “fabless” semiconductor companies that focus exclusively on semiconductor design and marketing and outsource their fabrication, testing and assembly requirements to independent companies.

We believe the outsourcing of semiconductor manufacturing services, and in particular of testing and assembly services, will increase for many reasons, including the following:

Significant Capital Expenditure Requirements. Driven by increasingly sophisticated technological requirements, wafer fabrication, testing and assembly processes have become highly complex, requiring substantial investment in specialized equipment and facilities and sophisticated engineering and manufacturing expertise. In addition, product life cycles have been shortening, magnifying the need to continually upgrade or replace manufacturing, testing and assembly equipment to accommodate new products. As a result, new investments in in-house fabrication, testing and assembly facilities are becoming less desirable for IDMs because of the high investment costs, as well as difficulties in achieving sufficient economies of scale and utilization rates to be competitive with the independent service providers. Independent foundry, testing and assembly companies, on the other hand, are able to realize the benefits of specialization and achieve economies of scale by providing services to a large base of customers across a wide range of products. This enables them to reduce costs and shorten production cycles through high capacity utilization and process expertise.

Increasing Focus on Core Competencies. As the costs of semiconductor manufacturing facilities increase, semiconductor companies are expected to further outsource their wafer fabrication, testing and assembly requirements to focus their resources on core competencies, such as semiconductor design and marketing.

Time-to-Market Pressure. Increasingly short product life cycles have amplified time-to-market pressure for semiconductor companies, leading them to rely increasingly on independent companies as a key source for effective wafer fabrication, testing and assembly services.

Semiconductor Testing and Assembly Services Industry

Growth in the semiconductor testing and assembly services industry is driven by increased outsourcing of the various stages of the semiconductor manufacturing process by IDMs and fabless semiconductor companies.

The Semiconductor Industry and Conditions of Outsourcing in Taiwan and Mainland China

Taiwan is one of the world’s leading locations for outsourced semiconductor manufacturing. The semiconductor industry in Taiwan has developed such that the various stages of the semiconductor manufacturing process have been disaggregated, thus allowing for specialization. The disaggregation of the semiconductor manufacturing process in Taiwan permits these semiconductor manufacturing service providers to focus on particular parts of the production process, develop economies of scale, maintain higher capacity utilization rates and remain flexible in responding to customer needs by lowering time-to-market pressure faced by semiconductor companies. There are several leading service providers in Taiwan, each of which offers substantial capacity, high-quality manufacturing, leading semiconductor wafer fabrication, test, assembly and process technologies, and a full range of services. These service providers have access to an educated labor pool and a large number of engineers suitable for sophisticated manufacturing industries. As a result, many of the world’s leading semiconductor companies outsource some or all of their semiconductor manufacturing needs to Taiwan’s semiconductor manufacturing service providers and take advantage of the close proximity among facilities. In addition, companies located in Taiwan are very active in the design and manufacture of electronic systems, which has created significant local demand for semiconductor devices.

Mainland China has emerged as a similarly attractive location for outsourced semiconductor manufacturing. Mainland China is an attractive manufacturing location for electronic products because companies can take advantage of a well-educated yet low-cost labor force, cost savings due to tax benefits and a large domestic market. These factors have driven increased relocation of much of the electronics industry manufacturing and supply chain to Mainland China. An increasing number of global electronic systems manufacturers and contract manufacturers are relocating or have relocated production facilities to Mainland China. We believe that these electronic product manufacturers and contract manufacturers will source an increasing portion of their demand for semiconductors from semiconductor suppliers located in Mainland China in order to reduce production cycle times, decrease costs, simplify supply chain logistics and meet local content requirements. In line with this trend, we have in recent years expanded our operations in Mainland.

Our Strategy

Our goal is to reinforce our position as a leading independent provider of semiconductor testing and assembly services, concentrating principally on memory, logic/mixed-signal and LCD and other flat-panel display driver semiconductors. The principal components of our business strategy are set forth below.

Focus on Providing Our Services to Potential Growth Segments of the Semiconductor Industry.

We intend to continue our focus on developing and providing advanced testing and assembly services for potential growth segments of the semiconductor industry, such as memory, logic/mixed-signal and LCD and other flat-panel display driver semiconductors. In 2010, our revenue from testing and assembly of semiconductors for these segments accounted for all of our net revenue. We believe that our investments in equipment and research and development in some of these areas allow us to offer a differentiated service from our competition. In order to benefit from the expected resumption of growth in these segments, we intend to continue to invest in capacity to meet the testing and assembly requirements of these key semiconductor market segments.

Continue to Invest in the Research and Development of Advanced Testing and Assembly Technologies.

We believe that our ability to progressively provide more advanced testing and assembly services to customers is critical to our business. In addition, advanced semiconductor testing and assembly services typically have the potential to generate higher margins due to the greater expertise required and the more sophisticated technologies used. We will continue to invest in the research and development of advanced testing and assembly technologies. For example, we are expanding our capabilities in fine-pitch BGA, multi-chip package (MCP) and the testing and assembly of COFs. We have also introduced fine-pitch COF based on our proprietary technology and COG testing and assembly services for LCD and other flat-panel display driver semiconductors.

In addition, we will continue to pursue the development of new testing and assembly technologies jointly with domestic and foreign research institutions and universities. We expect to focus our research and development efforts in the following areas:

•

developing new software conversion programs to increase the capabilities of our testers;

•

developing technologies for wafer-level burn-in and testing before assembly;

•

developing advanced assembly technologies for high-speed memory devices;

•

developing fine-pitch bumping, chip probing and bonding technologies for LCD drivers;

•

improving manufacturing yields for new assembly technologies;

•

developing environmentally friendly assembly services that focus on eliminating the lead and halogen elements from the materials employed in the package and reducing the toxicity of gaseous chemical wastes; and

•

implementing of radio frequency identification (RFID) logistics management system for the wafer probing process.

In 2010, we spent approximately 2.4% of our net revenue on research and development. We will continue to invest our resources to recruit and retain experienced research and development personnel. As of March 31, 2011, our research and development team comprised 264 persons.

Build on Our Strong Presence in Taiwan and Expand Our Operations Outside Taiwan.

We intend to build on our strong presence in key centers of semiconductor and electronics manufacturing to grow our business. Currently, most of our operations are in Taiwan, one of the world’s leading locations for outsourced semiconductor manufacturing. This presence provides us with several advantages. First, our proximity to other semiconductor companies is attractive to customers who wish to outsource various stages of the semiconductor manufacturing process. Second, our proximity to many of our suppliers, customers and the end-users of our customers’ products enables us to be involved in the early stages of the semiconductor design process, enhances our ability to quickly respond to our customers’ changing requirements and shortens our customers’ time-to-market. Third, we have access to an educated labor pool and a large number of engineers who are able to work closely with our customers and other providers of semiconductor manufacturing services.

As with our operations in Taiwan, we intend to similarly benefit from our operations in Mainland China. We intend to invest in and expand our operations in Mainland China, increasing our testing and assembly services for memory and logic/mixed-signal semiconductors.

Depending on customers demands, market conditions and other relevant considerations, we may from time to time look into other opportunities to expand our operations outside Taiwan.

Expand Our Offering of Vertically Integrated Services.

We believe that one of our competitive strengths is our ability to provide vertically integrated services to our customers. Vertically integrated services consist of the integrated testing, assembly and direct shipment of semiconductors to end-users designated by our customers. Providing vertically integrated services enables us to shorten lead times for our customers. As time-to-market and cost increasingly become sources of competitive advantage for our customers, they increasingly value our ability to provide them with comprehensive back-end services.

Through ChipMOS Taiwan, ThaiLin and ChipMOS Shanghai, we are able to offer vertically integrated services for a broad range of products, including memory, logic/mixed-signal and LCD and other flat-panel display driver semiconductors. We believe that these affiliations, which offer complementary technologies, products and services as well as additional capacity, will continue to enhance our own development and expansion efforts into new and potential growth markets. We intend to establish new alliances with leading companies and, if suitable opportunities arise, engage in merger and acquisition activities that will further expand the services we can provide.

Focus on Increasing Sales through Long-Term Agreements with Key Customers as well as Business with Smaller Customers.

From time to time, we strategically agree to commit a portion of our testing and assembly capacity to certain of our customers. We intend to continue focus on increasing sales to key customers through long-term capacity agreements. The customers with which we currently have long-term agreements include a reputable mixed-signal customer based in the US. See “— Customers” below for a more detailed discussion of these long-term agreements.

Recent global market and economic conditions have been unprecedented and challenging with tight credit conditions and recession in most major economies continuing into 2010. Beginning in 2008, we also resumed our focus on our business with smaller customers or customers who do not place orders on a regular basis. We believe that the dual focused strategy would assist us to be better prepared for the current economic volatility and ensure maximum utilization rate of our capacity and help us to develop closer relationships with all types of our customers.

Principal Products and Services

The following table presents, for the periods shown, revenue by service segment as a percentage of our net revenue.


	Year ended December 31,
	2008		2009		2010
Testing
Memory testing revenue		48.4%		38.2%		32.4%
Logic/mixed-signal testing revenue		3.3		4.3		3.5
Total testing revenue		51.7		42.5		35.9
Assembly
Memory assembly revenue		27.0		27.5		29.7
Logic/mixed-signal assembly revenue		4.8		8.4		6.7
Total assembly revenue		31.8		35.9		36.4
LCD and other flat-panel display driver semiconductor testing and assembly revenue		16.5		21.6		27.7

Total net revenue		100.0%		100.0%		100.0%

Memory and Logic/Mixed-Signal Semiconductors

Testing

We provide testing services for memory and logic/mixed-signal semiconductors:

Memory. We provide testing services for a variety of memory semiconductors, such as SRAM, DRAM and flash memory. To speed up the time-consuming process of memory product testing, we provide multi-site testing, which can test up to 256 devices simultaneously. The memory semiconductors we test are used primarily in desktop computers, notebook computers and handheld consumer electronic devices and wireless communication devices.

Logic/Mixed-Signal. We conduct tests on a wide variety of logic/mixed-signal semiconductors, with lead counts ranging from the single digits to over 1024 and operating frequencies of up to 800 MHz. The semiconductors we test include those used for networking and wireless communications, data communications, graphics and disk controllers for home entertainment and personal computer applications. We also test a variety of application specific integrated circuits, or ASICs, for applications such as cellular handsets, digital still cameras and personal digital assistants.

The following is a description of our pre-assembly testing services:

Engineering Testing. We provide engineering testing services, including software program development, electrical design validation, reliability and failure analyses.

•

Software Program Development. Design and test engineers develop a customized software program and related hardware to test semiconductors on advanced testing equipment. A customized software program is required to test the conformity of each particular semiconductor to its particular function and specification.

•

Electrical Design Validation. A prototype of the designed semiconductor is submitted to electrical tests using advanced test equipment, customized software programs and related hardware. These tests assess whether the prototype semiconductor complies with a variety of different operating specifications, including functionality, frequency, voltage, current, timing and temperature range.

•

Reliability Analysis. Reliability analysis is designed to assess the long-term reliability of the semiconductor and its suitability of use for its intended applications. Reliability testing may include operating-life evaluation, during which the semiconductor is subjected to high temperature and voltage tests.

•

Failure Analysis. If the prototype semiconductor does not perform to specifications during either the electrical validation or reliability analysis process, failure analysis is performed to determine the reasons for the failure. As part of this analysis, the prototype semiconductor may be subjected to a variety of tests, including electron beam probing and electrical testing.

Wafer Probing. Wafer probing is the step immediately before the assembly of semiconductors and involves visual inspection and electrical testing of the processed wafer for defects to ensure that it meets our customers’ specifications. Wafer probing employs sophisticated design and manufacturing technologies to connect the terminals of each chip for testing. Defective chips are marked on the surface or memorized in an electronic file, known as a mapping file, to facilitate subsequent processing.

Laser Repairing. In laser repairing of memory products, specific poly or metal fuses are blown after wafer probing to enable a spare row or column of a memory cell to replace a defective memory cell.

After assembly, we perform the following testing services:

Burn-In Testing. This process screens out unreliable products using high temperature, high voltage and prolonged stress to ensure that finished products will survive a long period of end-user service. This process is used only for memory products.

Top Marking. By using either a laser marker or an ink marker, we mark products according to our customers’ specifications, including the logo, product type, date code and lot number.

Final Testing. Assembled semiconductors are tested to ensure that the devices meet performance specifications. Tests are conducted using specialized equipment with software customized for each application in different temperature conditions ranging from minus 45 degrees celsius to 85 degrees celsius. One of the tests includes speed testing to classify the parts into different speed grades.

Final Inspection and Packing. Final inspection involves visual or auto-inspection of the devices to check for any bent leads, inaccurate markings or other construction defects. Packing involves dry packing, packing-in-tube and tape and reel. Dry pack involves heating semiconductors in a tray at 125 to 150 degrees celsius for about two hours to remove the moisture before the semiconductors are vacuum-sealed in an aluminum bag. Packing-in-tube involves packing the semiconductors in anti-static tubes for shipment. Tape and reel pack involves transferring semiconductors from a tray or tube onto an anti-static embossed tape and rolling the tape onto a reel for shipment to customers.

Assembly

Our assembly services generally involve the following steps:


Wafer Lapping		The wafers are ground to their required thickness.

Die Saw		Wafers are cut into individual dies, or chips, in preparation for the die-attach process.

Die Attach		Each individual die is attached to the leadframe or substrate.

Wire Bonding		Using gold wires, the I/O pads on the die are connected to the package inner leads.

Molding		The die and wires are encapsulated to provide physical support and protection.

Marking		Each individual package is marked to provide product identification.

Dejunking and Trimming		Mold flash is removed from between the lead shoulders through dejunking, and the dambar is cut during the trimming process.

Electrical Plating		A solderable coating is added to the package leads to prevent oxidization and to keep solder wettability of the package leads.

Ball Mount and Reflow		Each electrode pad of the substrate is first printed with flux, after which solder balls are mounted, heated and attached to the electrode pad of the substrate through a reflow oven.

Forming/Singulation		Forming involves the proper configuration of the device packages leads, and singulation separates the packages from each other.

We offer a broad range of package formats designed to provide our customers with a broad array of assembly services. The assembly services we offer customers are leadframe-based packages, which include thin small outline packages, and organic substrate-based packages, including fine-pitch BGA.

The differentiating characteristics of these packages include:

•

the size of the package;

•

the number of electrical connections which the package can support;

•

the electrical performance and requirements of the package; and

•

the heat dissipation requirements of the package.

As new applications for semiconductor devices require smaller components, the size of packages has also decreased. In leading-edge packages, the size of the package is reduced to just slightly larger than the size of the individual chip itself in a process known as chip scale packaging.

As semiconductor devices increase in complexity, the number of electrical connections required also increases. Leadframe-based products have electrical connections from the semiconductor device to the electronic product through leads on the perimeter of the package. Organic substrate-based products have solder balls on the bottom of the package, which create the electrical connections with the product and can support large numbers of electrical connections.

Leadframe-Based Packages. These are generally considered the most widely used package category. Each package consists of a semiconductor chip encapsulated in a plastic molding compound with metal leads on the perimeter. This design has evolved from a design plugging the leads into holes on the circuit board to a design soldering the leads to the surface of the circuit board.

The following diagram presents the basic components of a standard leadframe-based package for memory semiconductors:

LOGO

To address the market for miniaturization of portable electronic products, we are currently developing and will continue to develop increasingly smaller versions of leadframe-based packages to keep pace with continually shrinking semiconductor device sizes. Our advanced leadframe-based packages generally are thinner and smaller, have more leads and have advanced thermal and electrical characteristics when compared to traditional packages. As a result of our continual product development, we offer leadframe-based packages with a wide range of lead counts and sizes to satisfy our customers’ requirements.

The following table presents our principal leadframe-based packages, including the number of leads in each package, commonly known as lead-count, a description of each package and the end-user applications of each package.


Package	Lead-count	Description	End-User Applications
Plastic Leaded Chip Carrier (PLCC)	32-44	Package with leads on four sides used in consumer electronics products in which the size of the package is not vital	Copiers, printers, scanners, personal computers, electronic games, monitors

Plastic Dual-in-line Package (PDIP)	16-56	Package with insertion leads on longer sides used in consumer electronics products	Electronic games, monitors, copiers, printers, audio and video products, personal computers

Thin Small Outline Package I (TSOP I)	28-56	Designed for high volume production of low lead-count memory devices, including flash memory, SRAM and MROM	Notebook computers, personal computers, still and video cameras and standard connections for peripherals for computers

Thin Small Outline Package II (TSOP II)	24-86	Designed for memory devices, including flash memory, SRAM, SDRAM and DDR DRAM	Disk drives, recordable optical disk drives, audio and video products, consumer electronics, communication products



Quad Flat Package (QFP)	44-208	Flat structure with 4-sided peripheral leads designed for SRAM, graphic processors, personal computer chipsets and mixed-signal devices	Wireless communication products, notebook computers, personal computers, consumer electronics

Quad Flat No Lead (QFN)	8-132	Thermal enhanced quad flat no lead package providing small footprint (chip scale), light weight with good thermal and electrical performance	Wireless communication products, notebook computers, PDAs, consumer electronics

Low-Profile Quad Flat Package (LQFP)	48-128	Low-profile and light weight package designed for ASICs, digital signal processors, microprocessors/controllers, graphics processors, gate arrays, SSRAM, SDRAM, personal computer chipsets and mixed-signal devices	Wireless communication products, notebook computers, digital cameras, cordless/radio frequency devices

Thin Quad Flat Package (TQFP)	44-128	Designed for lightweight portable electronics requiring broad performance characteristics and mixed-signal devices	Notebook computers, personal computers, disk drives, office equipment, audio and video products and wireless communication products

Small Outline Package (SOP)	8	Designed for low lead-count memory and logic semiconductors, including SRAM and micro-controller units	Personal computers, consumer electronics, audio and video products, communication products

Multi-Chip Package (TSOP with organic substrate)	24-86	Our patented design for memory devices, including SRAM, DRAM and SDRAM	Notebook computers, personal computers, disk drives, audio and video products, consumer products, communication products

Organic Substrate-based Packages. As the number of leads surrounding a traditional leadframe-based package increases, the leads must be placed closer together to reduce the size of the package. The close proximity of one lead to another can create electrical shorting problems and requires the development of increasingly sophisticated and expensive techniques to accommodate the high number of leads on the circuit boards.

The BGA format solves this problem by effectively creating external terminals on the bottom of the package in the form of small bumps or balls. These balls are evenly distributed across the entire bottom surface of the package, allowing greater pitch between the individual terminals. The ball grid array configuration enables high-pin count devices to be manufactured less expensively with less delicate handling at installation.

Our organic substrate-based packages employ a fine-pitch BGA design, which uses a plastic or tape laminate rather than a leadframe and places the electrical connections, or leads, on the bottom of the package rather than around the perimeter. The fine-pitch BGA format was developed to address the need for the smaller footprints required by advanced memory devices. Benefits of ball grid array assembly over leadframe-based assembly include:

•

smaller size;

•

smaller footprint on a printed circuit board;

•

better electrical signal integrity; and

•

easier attachment to a printed circuit board.

The following diagram presents the basic component parts of a fine-pitch BGA package:

LOGO

The following table presents the ball-count, description and end-user applications of organic substrate-based packages we currently assemble:


Package	Connections	Description	End-User Applications
Mini BGA	36-400	Low-cost and space-saving assembly designed for low input/output count, suitable for semiconductors that require a smaller package size than standard BGA	Memory, analog, flash memory, ASICs, radio frequency devices, personal digital assistants, cellular handsets, communication products, notebook computers, wireless systems

Fine-Pitch BGA	54-90	Our patented design for DRAM products that require high performance and chip scale package (CSP)	Notebook computers, cellular handsets, global positioning systems, personal digital assistants, wireless systems

Very Thin Fine-Pitch BGA	48-176	Similar structure of Mini BGA package with thinner and finer ball pitch that is designed for use in a wide variety of applications requiring small size, high reliability and low unit cost	Handheld devices, notebook computers, disk drives, wireless and mobile communication products

Land Grid Array (LGA)	44-52	Thinner and lighter assembly designed essential to standard BGA without solder balls, suitable for applications that require high electrical performance	Disk drives, memory controllers, wireless, mobile communication products

Multi-Chip BGA	48-137	Designed for assembly of two or more memory chips (to increase memory density) or combinations of memory and logic chips in one BGA package	Notebook computers, digital cameras, personal digital assistants, global positioning systems, sub-notebooks, board processors, wireless systems

Stacked-Chip BGA	48-137	Designed for assembly of two or more memory chips or logic and memory chips in one CSP, reducing the space required for memory chips	Cellular handsets, digital cameras, personal digital assistants, wireless systems, notebook computers, global positioning systems

LCD and Other Flat-Panel Display Driver Semiconductors

We also offer testing and assembly services for LCD and other flat-panel display driver semiconductors. We employ TCP, COF and COG technologies for testing and assembling LCD and other flat-panel display driver semiconductors. In addition, we offer gold bumping services to our customers.

Gold bumping technology, which can be used in TCP, COF and COG technologies, is a necessary interconnection technology for LCD and other flat-panel display driver semiconductors. Most gold bumping services are performed on six- or eight-inch wafers. Gold bumping technology provides the best solution for fine-pitch chips and is able to meet the high production requirement for LCD and other flat-panel display driver semiconductors or other chips that require thin packaging profiles.

The gold bumping fabrication process uses thin film metal deposition, photolithography and electrical plating technologies. A series of barrier and seed metal layers are deposited over the surface of the wafer. A layer of thick photoresist material is spin-coated over these barrier and seed layers. A photomask is used to pattern the locations over each of the bond pads that will be bumped. UV exposure and developing processes open the photoresist material, which defines the bump shape. The gold bump is then electroplated over the pad and the deposited barrier metal layers. Once the plating is complete, a series of etching steps are used to remove the photoresist material and the metal layers that are covering the rest of the wafer. The gold bump protects the underlying materials from being etched. The gold bumped wafers will go through an annealing furnace to soften the gold bumps to fit the hardness requirement of TCP, COF and COG assembly processes.

Tape Carrier Package Technology

TCPs offer a high number of inputs and outputs, a thin package profile and a smaller footprint on the circuit board, without compromising performance. Key package features include surface mount technology design, fine-pitch tape format and slide carrier handling. Because of their flexibility and high number of inputs and outputs, TCPs are primarily employed either for STN-LCD or TFT-LCD driver semiconductors.

Testing of TCPs. We conduct full function testing of LCD and other flat-panel display driver semiconductors with a specially designed probe handler to ensure reliable contact to the test pads on the TCP tape. We can test STN-LCD or TFT-LCD driver semiconductors with frequencies of up to 750 MHz and at voltages up to 40V. The test is performed in a temperature-controlled environment with the device in tape form. The assembled and tested LCD and other flat-panel display driver semiconductors in tape form are packed between spacer tapes together with a desiccant in an aluminum bag to avoid contact during shipment.

Assembly of TCPs. TCPs use a tape-automated bonding process to connect die and tape. The printed circuit tape is shipped with a reel. The reel is then placed onto an inner lead bonder, where the LCD or other flat-panel display driver semiconductor is configured onto the printed circuit tape. The resulting TCP component consists of the device interconnected to a three-layer tape, which includes a polyimide carrier film, an epoxy-based adhesive layer and a metal layer. The tape metallization area of the interconnections is tin plated over a metal layer. The silicon chip and inner lead area is encapsulated with a high temperature thermoset polymer after inner lead bonding. The back face of the chip is left un-sealed for thermal connection to the printed circuit board.

The following diagram presents the basic components of a TCP:

LOGO

Chip-on-Film Technology

In 2001, we commenced testing and assembly services using COF technology. We have developed this proprietary technology from our existing TCP technology, and it has been widely accepted by our customers. The primary use of the COF module is to replace the liquid crystal module, or LCM, in certain applications. LCM is mainly employed in handheld electronics, such as PDAs and cellular handsets.

COF technology provides several additional advantages. For example, COF is able to meet the size, weight and higher resolution requirements in electronic products, such as flat-panel displays. This is because of its structural design, including an adhesive-free two-layer tape that is highly flexible, bending strength and its capacity to receive finer patterning pitch.

The TCP and COF assembly process involves the following steps:


Wafer Lapping		Wafers are ground to their required thickness.

Die Saw		Wafers are cut into individual dies, or chips, in preparation for inner lead bonding.

Inner Lead Bonding		An inner lead bonder machine connects the chip to the printed circuit tape.

Potting		The package is sealed with an epoxy.

Potting Cure		The potting cure process matures the epoxy used during the potting stage with high temperatures.

Marking		A laser marker is used to provide product identification.

Marking Cure		The marking cure process matures the marking ink by subjecting the semiconductor to high temperatures.

Chip-on-Glass Technology

COG technology is an electronic assembly technology that is used increasingly in assembling LCD and other flat-panel display driver semiconductors for communications equipment. Compared to the traditional bonding process for TCP or COF, the new COG technology requires lower bonding temperature. In addition, the COG technology reduces assembly cost as it does not use tapes for interconnection between the LCD panel and the printed circuit board.

The COG assembly technology involves the following steps:


Wafer Lapping		Wafers are ground to their required thickness.

Die Saw		Wafers are cut into individual dies, or chips, in preparation for the pick and place process.

Pick and Place		Each individual die is picked and placed into a chip tray.

Inspection and Packing		Each individual die in a tray is visually or auto-inspected for defects. The dies are packed within a tray in an aluminum bag after completion of the inspection process.

Other Services

Drop Shipment

We offer drop shipment of semiconductors directly to end-users designated by our customers. We provide drop shipment services, including assembly in customer-approved and branded boxes, to a majority of our testing and assembly customers. Since drop shipment eliminates the additional step of inspection by the customer prior to shipment to end-users, quality of service is a key to successful drop shipment service. We believe that our ability to successfully execute our full range of services, including drop shipment services, is an important factor in maintaining existing customers as well as attracting new customers.

Software Development, Conversion and Optimization Program

We work closely with our customers to provide sophisticated software engineering services, including test program development, conversion and optimization, and related hardware design. Generally, testing requires customized testing software and related hardware to be developed for each particular product. Software is often initially provided by the customer and then converted by us at our facilities for use on one or more of our testing machines and contains varying functionality depending on the specified testing procedures. Once a conversion test program has been developed, we perform correlation and trial tests on the semiconductors.

Customer feedback on the test results enables us to adjust the conversion test programs prior to actual testing. We also typically assist our customers in collecting and analyzing the test results and recommend engineering solutions to improve their design and production process.

Customers

We believe that the following factors have been, and will continue to be, important factors in attracting and retaining customers:

•

our advanced testing and assembly technologies;

•

our strong capabilities in testing and assembling LCD and other flat-panel display driver semiconductors;

•

our focus on high-density memory products and logic/mixed-signal communications products; and

•

our reputation for high quality and reliable customer-focused services.

The number of our customers as of March 31, in each of 2009, 2010 and 2011, respectively, was 90, 100 and 87. Our top 15 customers in terms of revenue in 2010 were (in alphabetical order):

Elite Semiconductor Memory Technology Inc.

Eon Silicon Solution Inc.

Etron Technology, Inc.

Himax Technologies, Inc.

ILI TECHNOLOGY CORP.

Integrated Circuit Solution Inc.

Integrated Device Technology Inc.

Macronix International Co., Ltd.

Micron Technology, Inc.

Novatek Microelectronics Corp.

ProMOS Technologies Inc.

Spansion LLC

Standard Microsystems Corp.

Winbond Electronics Corp.

Zentel Electronics Corp.

In 2008, our largest customer was Spansion, our second-largest customer was ProMOS, and our third-largest customer was Novatek, accounting for approximately 23%, 18% and 9% of our net revenue, respectively. In 2009, our largest customer was Spansion, our second-largest customer was Novatek; and our third-largest customer was Micron Technology, Inc. accounting for approximately 15%, 12% and 10% of our net revenue, respectively. In 2010, our largest customer was Novatek, our second-largest customer was ProMOS and our third-largest customer was Micron Technology, Inc., accounting for approximately 18%, 12% and 9% of our net revenue, respectively.

The majority of our customers purchase our services through purchase orders and provide us three-month non-binding rolling forecasts on a monthly basis. The price for our services is typically agreed upon at the time when a purchase order is placed.

In 2006 and 2007, we strategically entered into or extended certain long-term agreements with some of our key customers, including a reputable logic/mixed-signal customer based in the US, under which we reserved capacity for the customers primarily and the customer committed to place orders in the amount of the reserved capacity (which is subject in certain cases to reduction by the customer).

Pursuant to the long-term service agreement we have entered into with ProMOS in July 2007, ProMOS agreed to provide us with six month rolling forecast on testing and assembly service orders to be placed to us, and ProMOS guarantees that such orders will represent no less than certain percentage of ProMOS’ total production volume of these products (excluding OEM products). In January 2008, at the request of ProMOS, we agreed to permit ProMOS to defer payment of aggregate service fees of NT$450 million to February 15, 2009. The deferred service fees, bore an interest at a rate of 4.69% per annum, were recorded as long-term accounts receivables as of December 31, 2007, and were paid in full by ProMOS in March and April 2008. In March 2008, ProMOS failed to place orders in the amount of the reserved capacity and failed to meet its payment obligations under the long-term service agreement. In November 2008, we entered into a revised subcontracting contract with ProMOS by requiring ProMOS to provide wafers with a value of 80% of the subcontracting fee as collateral. In May 2009, a further revised subcontracting contract was entered into by and between us and ProMOS under which ProMOS provided us with wafer as pledge and Work-In-Process, or WIP and existing finished goods as lien material. Part of ProMOS’ receivables will be recovered through sales of the pledged wafer and lien material back to ProMOS with a discount to market price, and the remaining outstanding accounts receivables will be secured by equipment mortgage under the same contract arrangement. Effective March 2009, we started to request prepayment from ProMOS. As of December 31, 2009, other receivables from ProMOS amounted to NT$409 million and 100% allowance was made by ChipMOS Taiwan. NT$7 million (US$240 thousand) was received by April 2010. Under the amended subcontracting contract, ProMOS paid ChipMOS Taiwan NT$200 million (US$7 million) in May 2010. The remaining NT$202 million (US$7 million) was paid in nine monthly installments with final installment payment ending on March 15, 2011. As of December 31, 2010, ChipMOS Taiwan received NT$336 million (US$12 million) and the related allowance of NT$409 million (US$14 million) was reversed to other non-operating income. As of the date of this Annual Report on Form 20-F, all payments have been received. In May 2010, the collection term was revised to 30 days upon delivery and it was futher revised to 45 days upon delivery in October 2010.

As of December 31, 2009, other receivables from ProMOS amounted to NT$55 million and 100% allowance was made by ThaiLin. In June 2010, ThaiLin agreed a settlement with ProMOS in the amount of NT$24 million (US$1 million) and it was collected during the same year. The allowance of NT$24 million (US$1 million) was reversed to other non-operating income. Commencing in June 2010, the collection term was revised to become 30 days upon delivery. See Note 19 to our consolidated financial statements contained in this Annual Report on Form 20-F.

Pursuant to the long-term service agreement we have entered into with Spansion in September 2005, Spansion agreed to provide us with six month rolling forecast on testing and assembly service orders to be placed to us. In January 2009, Spansion defaulted on its payment obligations under the long-term service agreement and we subsequently terminated the long-term service agreement with Spansion on February 19, 2009. Our service fee receivable from Spansion in connection with its default amounted to NT$1,539 million. On March 1, 2009, Spansion filed for a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Subsequent to such filing, on March 16, 2009, ChipMOS Taiwan was elected as the co-chairman of the Unsecured Creditor Committee to represent unsecured creditors in Spansion’s efforts to reorganize its debts under Chapter 11 petition. In early January, 2010, ChipMOS Taiwan resigned as a member of the Unsecured Creditor Committee.

On January 25, 2010, ChipMOS Taiwan entered into a definitive Transfer of Claim Agreement to sell to Citigroup the general unsecured claim reflected in the proof of claim against Spansion Inc., Spansion Technology LLC, Spansion LLC, Spansion International Inc. and Cerium Laboratories LLC (collectively, “Spansion”) filed by ChipMOS Taiwan in U.S. Bankruptcy Court. The claim that is the subject of the Transfer of Claim Agreement includes accounts receivable for testing and assembly services provided to Spansion in the amount of approximately US$66 million to US$70 million (the “Undisputed Claim”). ChipMOS Taiwan received the purchase price for the Undisputed Claim of NT$1,118 million (US$38 million) in February 2010 from Citigroup. The Transfer of Claim Agreement also includes the sale of breach of contract and liquidated damages rights against Spansion in the amount of approximately US$234 million (the “Damages Claim”). The purchase price for the Damages Claim is expected to be an amount that will be determined based on a purchase rate of 50.2% multiplied by the portion of the Damages Claim that is allowed by a final adjudication of the U.S. Bankruptcy Court. The purchase price for the Damages Claim is payable to ChipMOS Taiwan to the extent that the Court allows this claim. In furtherance of the Transfer of Claim Agreement, the Company also has entered into an agreement to subscribe for, purchase and transfer to Citigroup rights offering shares to be issued by Spansion according to the Second Amended Joint Plan of Reorganization filed in U.S. Bankruptcy Court. This agreement provides that Citigroup will pay to the Company the amount of the rights offering shares purchase price. On October 4, 2010, ChipMOS Taiwan entered into a settlement agreement with Spansion LLC for the general unsecured claim on breach of contract and liquidated damages rights reflected in the proof of claim, Claim No. 5, against Spansion Inc., Spansion Technology LLC, Spansion LLC, Spansion International Inc. and Cerium Laboratories LLC filed by ChipMOS Taiwan in the U.S. Bankruptcy Court. In October 2010, the Company has received payment of NT$2,118 million (US$73 million) for the Transfer of Claim Agreement to Citigroup.

On April 22, 2010, the Company announced that Spansion LLC and ChipMOS Taiwan entered into a two-year wafer sort services agreement, utilizing the V5400 test platform, making ChipMOS Taiwan Spansion’s exclusive wafer sort subcontractor, except for any sort equipment operated by Spansion LLC or currently located at Spansion Japan Limited. The wafer sort services agreement became effective upon the effective date of Spansion’s confirmed plan of reorganization. The U.S. Bankruptcy Court confirmed Spansion’s Second Amended Plan of Reorganization on April 16, 2010. The effective date of Spansion’s plan of reorganization is May 10, 2010. The wafer sort services agreement became effective on May 10, 2010.

Beginning in 2008, we also resumed a focus on our business with smaller customers and customers who do not place orders on a regular basis.

The following table sets forth, for the periods indicated, the percentage breakdown of our net revenue, categorized by geographic region based on the jurisdiction in which each customer is headquartered.


	Year ended December 31,
	2008		2009		2010
Taiwan		60%		60%		74%
United States		34		33		22
Korea		3		3		3
Japan		1		1		1
Hong Kong SAR		—⁽¹⁾		—⁽¹⁾		— ⁽¹⁾
Others		2		3		— ⁽¹⁾

Total		100%		100%		100%

(1)	Less than 1%.

Qualification and Correlation by Customers

Our customers generally require that our facilities undergo a stringent “qualification” process during which the customer evaluates our operations, production processes and product reliability, including engineering, delivery control and testing capabilities. The qualification process typically takes up to eight weeks, or longer, depending on the requirements of the customer. For test qualification, after we have been qualified by a customer and before the customer delivers semiconductors to us for testing in volume, a process known as “correlation” is undertaken. During the correlation process, the customer provides us with test criteria, information regarding process flow and sample semiconductors to be tested and either provides us with the test program or requests that we develop a new or conversion program. In some cases, the customer also provides us with a data log of results of any testing of the semiconductor that the customer may have conducted previously. The correlation process typically takes up to two weeks, but can take longer depending on the requirements of the customer.

Sales and Marketing

We maintain sales and marketing offices in Taiwan, Mainland China and the United States. Our sales and marketing strategy is to focus on memory semiconductors in Taiwan, Japan, Korea and the United States, logic/mixed-signal semiconductors in Taiwan, Japan and the United States, LCD and other flat-panel display driver semiconductors in Japan, Taiwan, Hong Kong and Mainland China. As of March 31, 2011, our sales and marketing efforts were primarily carried out by teams of sales professionals, application engineers and technicians, totaling 58 staff members. Each of these teams focuses on specific customers and/or geographic regions. As part of our emphasis on customer service, these teams:

•

actively participate in the design process at the customers’ facilities;

•

resolve customer testing and assembly issues; and

•

promote timely and individualized resolutions to customers’ issues.

We conduct marketing research through our in-house customer service personnel and through our relationships with our customers and suppliers to keep abreast of market trends and developments. Furthermore, we do product and system bench marking analyses to understand the application and assembly technology evolution, such as analysis on mobile handsets and CD-/DVD-ROM players. In addition, we regularly collect data from different segments of the semiconductor industry and, when possible, we work closely with our customers to design and develop testing and assembly services 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.

We have appointed a non-exclusive sales agent for promoting our services for memory semiconductors in the United States, Japan and Korea. Our sales agent helps us promote and market our services, maintain relations with our existing and potential customers and communicate with our customers on quality, specific requirements and delivery issues. We generally pay our sales agent a commission of 1.5% to 2.5% of our revenue from services for memory semiconductors in the United States, Japan and Korea. In 2008, 2009 and 2010, we paid approximately NT$12 million, NT$9 million and NT$9 million (US$309 thousand), respectively, in commissions to our sales agent.

Research and Development

We believe that research and development is critical to our future success. In 2008, 2009 and 2010, we spent approximately NT$436 million, or 3%, NT$375 million, or 3% and NT$413 million (US$14 million), or 2%, respectively, of our net revenue on research and development. We intend to sustain these efforts.

Our research and development efforts have focused primarily on improving the efficiency, production yields and technologies of our testing and assembly services. From time to time, we jointly develop new technologies with universities and research institutions. For testing, our research and development efforts focus particularly on thin wafer probing, non-clean sockets, non-clean probing, fine-pitch MEMS probes, and testing of MEMS wafers/ devices. Our projects include:

•

Developing thin wafer probing technology to study the yield effect after processing;

•

Developing non-clean probing and sockets to increase productivity and yield;

•

Developing fine-pitch MEMS probes for advanced testing of MENS and COF products; and

•

Developing high-speed probing.

We are also continuing development of interface designed to provide for high frequency testing by minimizing electrical noise.

In the assembly areas, our research and development efforts focus on:

•

Copper wire bonding and low-cost wire bonding alternatives;

•

Wafer-level chip scale packaging and low-cost flip-chip integrated solution;

•

Low cost, fine–pitch bumping solutions;

•

High performance, fine pitch and miniaturization of packages;

•

Multi-chip assembly and modules;

•

Stacked-die chip scale package;

•

3D IC packaging related technologies: thin wafer handling /testing/dicing;

•

Compression molding; and

•

Developing environmentally friendly assembly services.

Our projects include developing multi-chip packages, flip-chip technologies, environmentally friendly products, 12-inch wafer technologies, fine-pitch wire bonding technologies, 25-micron wafer thinning technology, and advanced packages. These are aimed to meet advanced needs for DDR III, COF modules, fine-pitch LCD driver bumping, mixed-signal assembly and advanced probe card technologies. We work closely with our customers to optimize software and with equipment vendors to increase the efficiency and reliability of testing and assembly equipment. Our research and development operations also include a mechanical engineering group, which currently designs handler kits for semiconductor testing and wafer probing, as well as software to optimize capacity utilization.

As of March 31, 2011, we employed 264 employees in our research and development activities. In addition, other management and operational personnel are also involved in research and development activities but are not separately identified as research and development professionals.

We maintain laboratory facilities to analyze the characteristics of semiconductor packages by computer simulation, and verify their performance by measurement tools. Shadow Moiré and Micro Moiré characterization capabilities were established in the Advanced Packaging Lab. Electrical measurement instruments and simulation software Agilent ADS, EMPro, and Ansoft Q3D were set up in Electrical Measurement and Simulation Lab. These added capabilities allow us to support various advanced development work. The implementation of computer simulation, as compared with physical testing methods, is expected to substantially shorten the development cycle and provides predictable performance of our packages.

Quality Control

We believe that our reputation for high quality and reliable services has been an important factor in attracting and retaining leading international semiconductor companies as customers for our testing and assembly services. We are committed to delivering semiconductors that meet or exceed our customers’ specifications on time and at a competitive cost. We maintain quality control staff at each of our facilities.

As of March 31, 2011, we employed 397 personnel for our quality control activities. Our quality control staff typically includes engineers, technicians and other employees who monitor testing and assembly processes in order to ensure high quality. We employ quality control procedures in the following critical areas:

•

sales quality assurance: following market trends to anticipate customers’ future needs;

•

design quality assurance: when developing new testing and assembly processes;

•

supplier quality assurance: consulting with our long-term suppliers;

•

manufacturing quality assurance: through a comprehensive monitoring program during mass production; and

•

service quality assurance: quickly and effectively responding to customers’ claims after completion of sale.

All of our facilities have been QS 9000 certified by the International Automotive Sector Group. In addition, our facilities in Hsinchu and Tainan have been ISO 9002 certified in September 1997 and December 1998, respectively and recertified with ISO 9001 for substantial revision since 2000. With respect to our quality management system, on November 26, 2003, ChipMOS Taiwan obtained ISO/TS 16949 quality system certification. In 2005, ChipMOS acquired Chantek as Chupei site. In the subsequent year, the Chupei site obtained ISO/TS16949 quality system certification. ThaiLin and ChipMOS Shanghai also obtained ISO/TS 16949 quality system certification in September 2005 and January 2006, respectively.

QS 9000 quality standards provide for continual improvement with an emphasis on the prevention of defects and reduction of variation and waste in the supply chain, and a QS 9000 certification is required by certain semiconductor manufacturers as a threshold indicator of a company’s quality control standards. An ISO 9002 certification is required by many countries for sales of industrial products. ISO/TS 16949:2002 certification system seeks to integrate quality management standards into the operation of a company, and emphasizes the supervision and measurement of process and performance.

In addition to the quality management system, we also earned the 1998 QC Group Award from The Chinese Society of Quality, which is equivalent to the similar award from the American Society of Quality. In 2003, ChipMOS passed SONY Green Partner (Tier 2) certification through its ProMOS channel, and in 2009, ChipMOS obtained SONY Green Partner (Tier 1) certification due to its direct business relationship with SONY. ChipMOS Shanghai also obtained SONY Green Partner (Tier 2) certification through its ISSI channel in 2008. Our laboratories have also been awarded Chinese National Laboratory accreditation under the categories of reliability test, electricity and temperature calibration.

Our testing and assembly operations are carried out in clean rooms where air purity, temperature and humidity are controlled. To ensure the stability and integrity of our operations, we maintain clean rooms at our facilities that meet U.S. federal 209E class 100, 1,000, 10,000 and 100,000 standards. A class 1,000 clean room means a room containing less than 1,000 particles of contaminants per cubic foot.

We have established manufacturing quality control systems that are designed to ensure high-quality services to our customers and maintain reliability and high production yields at our facilities. We employ specialized equipment for manufacturing quality and reliability control, including:

•

Joint Electron Device Engineering Council (JEDEC) standardized temperature cycling, thermal shock and pressure cook reliability tests;

•

high and low temperature storage life tests, temperature humidity bias test and highly accelerated temperature/humidity stress test (HAST); and

•

high resolution scanning acoustic tomography, scanning electronic microscope and X-Ray microscopy for physical failure analysis, curve tracer and semi-probe station for electrical failure analysis.

In addition, to enhance our performance and our research and development capabilities, we also installed a series of high-cost equipment, such as temperature humidity bias testers, low temperature storage-life testers and highly accelerated stress testers. We believe that many of our competitors do not own this equipment.

As a result of our ongoing focus on quality, in 2010, we achieved monthly assembly yields of an average of 99.98% for our memory and logic/mixed-signal assembly packages, 99.93% for our COF packages and 99.96% for our COG packages. The assembly yield, which is the industry standard for measuring production yield, is equal to the number of integrated circuit packages that are shipped back to customers divided by the number of individual integrated circuits that are attached to leadframes or organic substrate.

Raw Materials

Semiconductor testing requires minimal raw materials. Substantially all of the raw materials used in our memory and logic/mixed-signal semiconductor assembly processes are interconnect materials such as leadframes, organic substrates, gold wire and molding compound. Raw materials used in the LCD and other flat-panel display driver semiconductor testing and assembly process include carrier tape, resin, spacer tape, plastic reel, aluminum bags, and inner and outer boxes. Cost of raw materials represented 17%, 21% and 22% of our net revenue in 2008, 2009 and 2010, respectively.

We do not maintain large inventories of leadframes, organic substrates, gold wire or molding compound, but generally maintain sufficient stock of each principal raw material for approximately one month’s production based on blanket orders and rolling forecasts of near-term requirements received from customers. In addition, since the commencement of economic downturn in second quarter of 2008, due to the volatility of the semiconductor market, several of our principal suppliers have also ceased to stock inventories to be reserved to meet its customers’ production requirements. Instead, our suppliers now require longer lead time for delivery of our supply orders. Despite shortages in the supply of materials, the prices of raw materials have decreased compared to prior to the economic downturn. Our principal raw material supplies have not been impacted by Japan earthquake and tsunami catastrophe. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—If we are unable to obtain raw materials and other necessary inputs from our suppliers in a timely and cost-effective manner, our production schedules would be delayed and we may lose customers and growth opportunities and become less profitable” for a discussion of the risks associated with our raw materials purchasing methods. For example, with the exception of aluminum bags and inner and outer boxes, which we acquire from local sources, the raw materials used in our TCP/COF process and for modules are obtained from a limited number of Japanese suppliers.

Competition

The independent testing and assembly markets are very competitive. Our competitors include large IDMs with in-house testing and assembly capabilities and other independent semiconductor testing and assembly companies, especially those offering vertically integrated testing and assembly services, such as Advanced Semiconductor Engineering Inc., Amkor Technology, Inc., Chipbond Technology Corporation, King Yuan Electronics Co., Ltd., Powertech Technology Inc., Siliconware Precision, STATS ChipPAC Ltd. and United Test and Assembly Center Ltd. We believe that the principal measures of competitiveness in the independent semiconductor testing industry are:

•

engineering capability of software development;

•

quality of service;

•

flexibility;

•

capacity;

•

production cycle time; and

•

price.

In assembly services, we compete primarily on the basis of:

•

production yield;

•

production cycle time;

•

process technology, including our COF technology for LCD and other flat-panel display driver semiconductor assembly services;

•

quality of service;

•

capacity;

•

location; and

•

price.

IDMs that use our services continually evaluate our performance against their own in-house testing and assembly capabilities. These IDMs may have access to more advanced technologies and greater financial and other resources than we do. We believe, however, that we can offer greater efficiency and lower costs while maintaining an equivalent or higher level of quality for three reasons:

•

first, we offer a broader and more complex range of services as compared to the IDMs, which tend to focus their resources on improving their front-end operations;

•

second, we generally have lower unit costs because of our higher utilization rates and thus enabling us to operate at a more cost-effective structure compared to the IDMs; and

•

finally, we offer a wider range of services in terms of complexity and technology.

Intellectual Property

As of March 31, 2011, we held 460 patents in Taiwan, 101 patents in the United States, 172 patents in the People’s Republic of China and 1 patent in the United Kingdom, France and Germany, respectively, relating to various semiconductor testing and assembly technologies. These patents will expire at various dates through to 2029. As of March 31, 2011, we also had a total of 47 pending patent applications in the United States, 165 in Taiwan, and 88 in the People’s Republic of China. In addition, we have registered “ChipMOS” and its logo and “InPack” as trademarks in Taiwan, and “ChipMOS” and its logo as trademarks in the United States, the People’s Republic of China, Singapore, Hong Kong, Korea, Japan and the European Community.

We expect to continue to file patent applications where appropriate to protect our proprietary technologies. We may need to enforce our patents or other intellectual property rights or to defend ourselves against claimed infringement of the rights of others through litigation, which could result in substantial costs and a diversion of our resources. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Disputes over intellectual property rights could be costly, deprive us of technologies necessary for us to stay competitive, render us unable to provide some of our services and reduce our opportunities to generate revenue” and “Item 8. Financial Information—Legal Proceedings”.

On June 3, 2006, ChipMOS Taiwan entered into a license agreement with Sharp Corporation, or Sharp, pursuant to which we acquired a perpetual license to use TCP testing and assembly technology for a lump sum royalty payment of 10 million Japanese yen (approximately US$87 thousand), which we paid in July 2006. This license agreement superseded the previous license agreement with Sharp entered into in February 2000 pursuant to which Sharp licensed to us TCP-related technology and intellectual property rights for five years starting from February 10, 2000 for a royalty fee based on the service fees paid to us by our customers. Our royalty obligations under the February 2000 license agreement were fully paid.

On April 12, 2007, ChipMOS Bermuda entered into an assignment agreement with ChipMOS Taiwan, pursuant to which ChipMOS Taiwan assigned and transferred fifty percent of the title to, ownership of and interest in all of the technologies and intellectual property it owned as of that date to ChipMOS Bermuda for a purchase price of US$6.4 million, which was paid in full in June 2007.

Government Regulations

As discussed above under “— Intellectual Property”, governmental regulation of our intellectual property may materially affect our business. The failure to protect our property rights would deprive us of our ability to stay competitive in the semi-conductor industry. Our intellectual property rights are protected by the relevant patent and intellectual property agencies of the European Community, United States, the People’s Republic of China, Singapore, Hong Kong, Korea, Japan and Taiwan.

Environmental Matters

Semiconductor testing does not generate significant pollutants. The semiconductor assembly process generates stationary acid and alkali pollution, principally at the plating stages. Liquid waste is produced when silicon wafers are ground thinner and diced into chips with the aid of diamond saws and cooled with running water and during the gold bumping process. In addition, excess material on leads and moldings are removed from assembled semiconductors in the trimming and dejunking processes, respectively. We have installed various types of liquid and gaseous chemical waste-treatment equipment at our semiconductor assembly and gold bumping facilities. Since 2001, we have adopted certain environmentally-friendly production management systems, and have implemented certain measures intended to bring our assembly process in compliance with the Restriction of Hazardous Substances Directive 2002/95/EC issued by the European Union. We believe that we have adopted adequate and effective environmental protection measures that are consistent with semiconductor industry practices in Taiwan and Mainland China. In addition, we believe we are in compliance in all material respects with current environmental laws and regulations applicable to our operations and facilities.

All of our facilities in Taiwan and Mainland China have been certified as meeting the ISO 14001 environmental standards of the International Organization for Standardization, and all of our facilities in Taiwan have been further certified as meeting the OHSAS18001 standards, of the International Organization for Standardization. Our facilities at Hsinchu Science Park, Chupei and Southern Taiwan Science Park have won numerous awards including health promotion awards granted by Department of Health of ROC in 2009, “Safety & Health Performance Certification Unit” from Council of the Labor Affairs of ROC in 2009 and 2010. Our bumping facility has won “Civil Defence Excellent Award” from Hsinchu City in 2009 and 2010. We continue to encourage our employees to attend and participate in community environmental campaigns and events to promote and build better environmental friendly practices.

We will continue to implement programs, measures and related training to reduce industrial waste, save energy and control pollution. In 2001, ChipMOS Taiwan completed a lead-free process control program, which offers a lead-free method in a semiconductor package, a lead-free plating, a lead-free solder ball and a lead-free reliability method and specification. In 2005, ChipMOS Shanghai completed a similar lead-free process control program. In 2003 and 2008, ChipMOS Taiwan and ChipMOS Shanghai obtained Green Partner certification from Sony Corporation of Japan, respectively. The Green Partner program requires external suppliers to meet SONY’s Green Partner requirements. In 2009, we further obtained SGS recognition whereby we received the “Greenhouse Gas Verification Statement” which also further enhance our eligibility under the Green Partner program. Standardizing on green, “environmentally friendly” products, production facilities and management systems, which has become an industry trend, and to many companies, a key criteria in selection of their service providers.

Insurance

We maintain insurance policies on our buildings, equipment and inventories. These insurance policies cover property damages due to all risks, including but not limited to, fire, lightning and earthquakes. The maximum coverage of property insurance for ChipMOS Taiwan and ThaiLin is approximately NT$52,354 million and NT$7,610 million, respectively. ChipMOS Shanghai also maintains property insurance policies for a maximum coverage of approximately RMB824 million.

Insurance coverage on facilities under construction is maintained by us and our contractors, who are obligated to procure necessary insurance policies and bear the relevant expenses of which we are the beneficiary. We also maintain insurance on the wafers delivered to us while these wafers are in our possession and during transportation from suppliers to us and from us to our customers.

Employees

See “Item 6. Directors, Senior Management and Employees—Employees” for certain information relating to our employees.

Taxation

See “Item 5. Operating and Financial Review and Prospects—Taxation” for certain information regarding the effect of PRC and ROC tax regulations on our operations.

Facilities

We provide testing services through our four facilities in Taiwan and one facility in Shanghai, with one facility at each of the following locations: Chupei, the Hsinchu Industrial Park, the Hsinchu Science Park, the Southern Taiwan Science Park and the Shanghai Qingpu Industrial Zone. We provide assembly services through our facility at the Southern Taiwan Science Park and our facility at the Shanghai Qingpu Industrial Zone. We own the land for our Hsinchu Industrial Park testing facility and Chupei facility and possess the land use right to the land on which our Shanghai Qingpu Industrial Zone facility is located until 2052, and, we lease two parcels of land for our Hsinchu Science Park testing facility with lease expiration in year 2017 and 2026, respectively, and Southern Taiwan Science Park facility with lease expiration in year 2017.

The following table shows the location, primary use and size of each of our facilities, and the principal equipment installed at each facility, as of March 31, 2011.


Location of Facility	Primary Use	Floor Area (m²)		Principal Equipment
Chupei, Hsinchu	Wafer Testing/Gold Bumping		25,294	4 steppers 11 sputters 252 testers

Hsinchu Industrial Park, Taiwan	Testing		39,997	135 testers 31 burn-in ovens

Hsinchu Science Park, Taiwan	Testing		28,633	143 testers 99 burn-in ovens

Southern Taiwan Science Park, Taiwan	Assembly/Testing		109,676	503 wire bonders 141 inner-lead bonders 280 testers

Shanghai Qingpu Industrial Zone, Mainland China	Assembly/Testing		66,817	39 testers 158 wire bonders 21 burn-in ovens

Equipment

Testing of Memory and Logic/Mixed-Signal Semiconductors

Testing equipment is the most capital-intensive component of the memory and logic/mixed-signal semiconductors testing business. Upon the acquisition of new testing equipment, we install, configure, calibrate and perform burn-in diagnostic tests on the equipment. We also establish parameters for the testing equipment based on anticipated requirements of existing and potential customers and considerations relating to market trends. As of March 31, 2011, we operated 849 testers for testing memory and logic/mixed-signal semiconductors. We generally seek to purchase testers with similar functionality that are able to test a variety of different semiconductors. We purchase testers from major international manufacturers, including Advantest Corporation, Verigy Ltd. and Credence Systems Corporation.

In general, particular semiconductors can be tested using a limited number of specially designed testers. As part of the qualification process, customers will specify the machines on which their semiconductors may be tested. We often develop test program conversion tools that enable us to test semiconductors on multiple equipment platforms. This portability among testers enables us to allocate semiconductor testing across our available testing capacity and thereby improve capacity utilization rates. If a customer requires the testing of a semiconductor that is not yet fully developed, the customer consigns its testing software programs to us to test specific functions. If a customer specifies testing equipment that is not widely applicable to other semiconductors we test, we require the customer to furnish the equipment on a consignment basis.

We will continue to acquire additional testing equipment in the future to the extent market conditions, cash generated from operations, the availability of financing and other factors make it desirable to do so. Some of the equipment and related spare parts that we require have been in short supply in recent years. Moreover, the equipment is only available from a limited number of vendors or is manufactured in relatively limited quantities and may have lead time from order to delivery in excess of six months.

Assembly of Memory and Logic/Mixed-Signal Semiconductors

The number of wire bonders at a given facility is commonly used as a measure of the assembly capacity of the facility. Typically, wire bonders may be used, with minor modifications, for the assembly of different products. We purchase wire bonders principally from Shinkawa Co., Ltd. and Kulicke & Soffa Industries Inc. As of March 31, 2011, we operated 661 wire bonders. In addition to wire bonders, we maintain a variety of other types of assembly equipment, such as wafer grinders, wafer mounters, wafer saws, die bonders, automated molding machines, laser markers, solder platers, pad printers, dejunkers, trimmers, formers, substrate saws and lead scanners.

Gold Bumping, Testing and Assembly of LCD and Other Flat-Panel Display Driver Semiconductors

We acquired TCP-related equipment from Sharp to begin our TCP-related services. We subsequently purchased additional TCP-related testers from Yokogawa Electric Corp. and Advantest Corporation and assembly equipment from Shibaura Mechatronics Corp., Shinkawa Co., Ltd., Athlete FA Corp. and Daitron Electron Crop. As of March 31, 2011, we operated 4 steppers and 11 sputters for gold bumping, 141 inner-lead bonders for assembly and 280 testers for LCD and other flat-panel display driver semiconductors. We are currently in the process of purchasing additional testing equipment. The testing equipment can be used for the TCP, COF and COG processes, while the inner-lead bonders are only used in the TCP and COF processes. The same types of wafer grinding, auto wafer mount and die saw equipment is used for the TCP, COF and COG processes. In addition, auto inspection machines and manual work are used in the COG process, which is more labor-intensive than the TCP and COF processes.

Item 4A.

Unresolved Staff Comments

Not applicable.

Item 5.

Operating and Financial Review and Prospects

This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained in this Annual Report on Form 20-F.

Overview

We provide a broad range of back-end testing services, including wafer probing and final testing of memory and logic/mixed-signal semiconductors. We also offer a broad selection of leadframe-based and organic substrate-based package assembly services for memory and logic/mixed-signal semiconductors. Our advanced leadframe-based packages include thin small outline packages, or TSOPs, and our advanced organic substrate-based packages include fine-pitch ball grid array, or fine-pitch BGA, packages. In addition, we provide gold bumping, testing and assembly services for LCD and other flat-panel display driver semiconductors by employing TCP, COF and COG technologies. In 2010, our consolidated net revenue was NT$17,210 million (US$591 million) and our net income was NT$1,645 million (US$56 million).

We are a holding company, incorporated in Bermuda on August 1, 2000. We provide most of our services through our majority-owned subsidiary, ChipMOS Taiwan, and its subsidiaries and investees. ChipMOS Taiwan was incorporated in Taiwan in July 1997 as a joint venture company of Mosel and Siliconware Precision and with the participation of other investors. Following the completion of the share exchange transaction between our company and ChipMOS Taiwan on September 14, 2007, ChipMOS Taiwan became a wholly-owned subsidiary of ChipMOS Bermuda. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares. In Taiwan, we conduct testing operations in our facilities at the Hsinchu Science Park and the Hsinchu Industrial Park, gold bumping and wafer testing in our facility at Chupei, and testing and assembly operations in our facility at the Southern Taiwan Science Park. We also conduct operations in Mainland China through ChipMOS Shanghai, a wholly-owned subsidiary of Modern Mind, which is one of our controlled consolidated subsidiaries. ChipMOS Shanghai operates a testing and assembly facility at the Qingpu Industrial Zone in Shanghai. Through our subsidiaries, we also have equity interests in other companies that are engaged in the semiconductor industry. In April 2011, ChipMOS Bermuda has entered into agreement with ThaiLin to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million. The MMT Assignment Agreement is subject to certain closing conditions, including approval of shareholders of ThaiLin and obtaining certain approval from Investment Commission for ThaiLin’s investment in China. The MMT Assignment Agreement transaction is expected to be completed in the fourth quarer of 2011. See “Item 4. Information on the Company—Overview of the Company” for more details.

The following key trends are important to understanding our business:

Capital Intensive Nature of Our Business. Our operations, in particular our testing operations, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous acquisitions of testing and assembly equipment and facilities. Our profitability depends in part not only on absolute pricing levels for our services, but also on capacity utilization rates for our testing and assembly equipment. In particular, increases or decreases in our capacity utilization rates could significantly affect our gross margins since the unit cost of testing and assembly services generally decreases as fixed costs are allocated over a larger number of units.

The current generation of advanced testers typically cost between US$2 million and US$5 million each, while wire bonders used in assembly typically cost approximately US$65 thousand each and inner-lead bonders for TCP and COF assembly cost approximately US$300 thousand each and COG chip sorters cost approximately US$140 thousand each. We begin depreciating our equipment when it is placed into commercial operation. There may be a time lag between the time when our equipment is placed into commercial operation and when it achieves high levels of utilization. In periods of depressed semiconductor industry conditions, we may experience lower than expected demand from our customers and a sharp decline in the average selling prices of our testing and assembly services, resulting in an increase in depreciation expenses relative to net revenue. In particular, the capacity utilization rates for our testing equipment may be severely adversely affected during a semiconductor industry downturn as a result of the decrease in outsourcing demand from integrated device manufacturers, or IDMs, which typically maintain larger in-house testing capacity than in-house assembly capacity.

Highly Cyclical Nature of the Semiconductor Industry. Highly cyclical, the worldwide semiconductor industry has experienced peaks and troughs over the last decade, with a severe downturn beginning in the fourth quarter of 2000 that was followed by a recovery in early 2003. The significant decrease in market demand for semiconductors that began in 2000 adversely affected our results of operations for 2001 and 2002. Beginning in the fourth quarter of 2008, the semiconductor industry commenced another significant downturn which continued in 2009 and in 2010. Market demand for semiconductors significantly decreased across our industry during these periods, which adversely affected average selling prices for our services and our results of operations for 2008, 2009 and 2010. The impact on our results of operations of the decrease in market demand during these periods was partly offset by increases in our 2009 and 2010 net revenue from assembly services for logic/mixed-signal semiconductors due to higher customer demand for these services in 2009 and 2010. During periods of decreased demand for assembled semiconductors, some of our customers may forego, delay or simplify final testing of certain types of semiconductors, such as DRAM, which may further decrease demand and average selling prices for our services and intensify our difficulties related to realizing pricing levels, capacity realization rates and gross margin during these periods.

Declining Average Selling Prices of Our Testing and Assembly Services. The semiconductor industry is characterized by a general decrease in prices for products and services over the course of their product and technology life cycles. The rate of decline is particularly steep during periods of intense competition and adverse market conditions. The average selling prices of our testing and assembly services experienced sharp declines during such periods as a result of intense price competition from other independent testing and assembly companies that attempt to maintain high capacity utilization levels in the face of reduced demand.

To offset the effects of decreasing average selling prices, we will continue to seek to:

•

improve production efficiency and attain high capacity utilization rates;

•

concentrate on testing of potentially high-demand, high-growth semiconductors;

•

develop new assembly technologies; and

•

implement new technologies and platforms to shift into potentially higher margin services.

Market Conditions for the End-User Applications for Semiconductors. Market conditions in the semiconductor industry, to a large degree, track those for their end-user applications. Any deterioration in the market conditions for the end-user applications of semiconductors that we test and assemble may reduce demand for our services and, in turn, materially adversely affect our financial condition and results of operations. Despite an increase in the demand for mobile/niche DRAM in 2010, for DRAMs with more advanced features such as that of enhanced graphic capability, increased power efficiency and increased mobility, the average market demand for DRAM remained low. Our net revenue is largely attributable to fees from testing and assembling semiconductors for use in personal computers, consumer and portable electronic products, display applications and communications equipment. The markets for these products are intensely competitive, and a significant decrease in demand puts pricing pressure on our testing and assembly services and negatively affects our earnings. The oversupply of DRAM products in the second half of 2007 and the weak demand in the DRAM market in 2008 and in the first quarter of 2009 resulted in significant reductions in the price of DRAM products, which in turn drove down the average selling prices for our testing and assembly services for DRAM products in the second half of 2009, 2010 and the first quarter of 2011.

Change in Product Mix. Declines in average selling prices have been partially offset over the last three years by a change in our revenue mix. In particular, revenue from testing and assembly of LCD and other flat-panel display driver semiconductors and 12-inch wafer processing have increased as a percentage of our total net revenue over the 2008 to 2010 period. We intend to continue focusing on testing and assembling more semiconductors that have the potential to provide higher margins and developing and offering new technologies in testing and assembly services, in order to mitigate the effects of declining average selling prices on our ability to attain profitability.

Recent Acquisitions

In March 2007, we completed a share purchase and subscription transaction with ChipMOS Taiwan and Siliconware Precision, under which we became a holder of 99.1% of the outstanding common shares of ChipMOS Taiwan. In April 2007, we and ChipMOS Taiwan further entered into a share exchange transaction and pursuant to which we agreed to exchange one common share for every 8.4 ChipMOS Taiwan shares outstanding. Following the completion of the share exchange transaction in September 2007, ChipMOS Taiwan became our wholly-owned subsidiary. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares. See “Item 4. Information on the Company—Our Structure and History” for description of our earlier merger events.

Net Revenue

We conduct our business according to the following main business segments: (1) testing services for memory and logic/mixed-signal semiconductors; (2) assembly services for memory and logic/mixed-signal semiconductors; and (3) LCD and other flat-panel display driver semiconductor testing and assembly services. The following table sets forth, for the periods indicated, our consolidated net revenue for each segment.


	Year ended December 31,
	2008		2009		2010		2010
	NT$		NT$		NT$		US$
	(in millions)
Testing
Memory	$	8,226.9	$	4,646.5	$	5,577.4	$	191.4
Logic/mixed-signal		560.1		524.7		592.3		20.3
Total testing		8,787.0		5,171.2		6,169.7		211.7
Assembly
Memory		4,591.1		3,335.7		5,112.6		175.4
Logic/mixed-signal		826.6		1,017.2		1,146.2		39.4
Total assembly		5,417.7		4,352.9		6,258.8		214.8
LCD and other flat-panel display driver semiconductor testing and assembly		2,805.5		2,626.2		4,781.2		164.1

Total	$	17,010.2	$	12,150.3	$	17,209.7	$	590.6

Our net revenue consists primarily of service fees for testing and assembling semiconductors, and to a lesser extent, fees from equipment rentals to semiconductor manufacturers for engineering testing, less allowances for product returns. We offer testing and assembly services for memory semiconductors, logic/mixed-signal semiconductors and testing and assembly services for LCD and other flat-panel display driver semiconductors.

Most of our customers do not place purchase orders far in advance and our contracts with customers generally do not require minimum purchases of our products or services. Our customers’ purchase orders have varied significantly from period to period because demand for their products is often volatile. We have strategically entered into long-term capacity agreements with some of our customers. Under certain of those long-term agreements, we have agreed to reserve capacity for our customers and our customers have agreed to place orders in the amount of the reserved capacity (which is subject in certain cases to reduction by the customers). As part of our strategy, we intend to enter into additional long-term capacity agreements in the future if this approach continues to represent a potential growth opportunity for our business. Depending on customer demands, market conditions and other considerations, we may explore opportunities to expand our operations outside Taiwan and Mainland China in connection with possible future long-term capacity agreements.

Our financial condition and results of operations have also been, and are likely to continue to be, affected by price pressures on our service fees, which tend to decline in tandem with the declining average selling prices of the products we test and assemble over the course of their product and technology life cycles. In order to maintain our margins, it is necessary to offset the fee erosion by continually improving our production efficiency and maintaining high capacity utilization rates. We also plan to continue to develop and implement new technologies and expand our services into potentially higher-margin segments. These efforts require significant up front investment in advance of incremental revenue, which could impact our margins.

Pricing

We price our testing fees primarily based on the cost of testing the products to our customers’ specifications, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and with reference to prevailing market prices. Accordingly, the testing fee for a particular product would principally depend on the time taken to perform the tests, the complexity of the product and the testing process, and the cost of the equipment used to perform the test. For example, testing fees for memory semiconductors are significantly higher than those for other products because of the longer time required and the need for burn-in testing.

We price our assembly services on a per unit basis, taking into account the complexity of the package, our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, prevailing market conditions, the order size, the strength and history of our relationship with the customer and our capacity utilization.

We price our testing and assembly services for LCD and other flat-panel display driver semiconductors on the basis of our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and the price for comparable services.

We offer volume discounts to all customers who purchase large quantities of our services and special discounts to customers who use our vertically integrated services. On a case by case basis, we also may offer special payment terms, including longer payment cycles, to key customers during downturns in the market so as to retain business from such key customers.

Revenue Recognition

We generally recognize our revenue upon shipment of tested and assembled semiconductors to locations designated by our customers, including our internal warehouse for customers using our warehousing services. Revenue from product sales is recognized when risks of ownership are transferred to customers, generally upon shipment of the products. We submit invoices at the time of shipment or delivery and generally require all customers to pay within 60 days after the last day of the month during which the invoice was sent. However, for ProMOS, our second largest customer, during 2010 the invoice settlement cycle has been changed to 30 or 45 days upon delivery.

In January 2008, at the request of ProMOS, we agreed to permit ProMOS to defer payment of aggregate service fees of NT$450 million to February 15, 2009. The deferred service fees, bore interest at a rate of 4.69% per annum, were recorded as long-term accounts receivable as of December 31, 2007, and were paid in full by ProMOS in March and April 2008. We also experienced collection problems for our receivables from ProMOS in 2008 and 2009, respectively. The full amount of allowance for these doubtful receivables of NT$578 million and NT$464 million were reserved as of December 31, 2008 and 2009, respectively. As of December 31, 2009, other receivables from ProMOS amounted to NT$409 million and 100% allowance was made by ChipMOS Taiwan. NT$7 million (US$240 thousand) was received by April 2010. Under the amended subcontracting contract ProMOS paid ChipMOS Taiwan NT$200 million (US$7 million) in May 2010. The remaining NT$202 million (US$7 million) was paid in nine monthly installments with the final payment made on March 15, 2011. As of December 31, 2010, ChipMOS Taiwan received NT$336 million (US$12 million) and the related allowance of NT$409 million (US$14 million) was reversed to other non-operating income. As of the date of this Annual Report on Form 20-F, all payments have been received.

We also experienced collection problems for our services of receivables from Spansion in 2008 and 2009, respectively. The full amount of allowance of these doubtful receivables of NT$1,539 million and NT$2,232 million were reserved as of December 31, 2008 and 2009, respectively. On January 25, 2010, we entered into a definitive Transfer of Claim Agreement to sell to Citigroup Financial Products Inc. (Citigroup) the general unsecured claim reflected in the proof of claim against Spansion. The claim that is the subject of the Transfer of Claim Agreement includes accounts receivable for testing and assembly services provided to Spansion (the “Undisputed Claim”). In February 2010, we received from Citigroup the purchase price for the Undisputed Claim of NT$1,118 million (US$38 million) against accounts receivable of NT$2,186 million (US$75 million). A loss on sale of receivables of NT$1,068 million (US$37 million) was recognized and the related allowance for doubtful receivables of NT$2,186 million ($75 million) was reversed. See “Item 4. Information on the Company — Customers”.

We have not experienced other significant collection problems for our services.

Related Party Revenues

In 2008, 2009 and 2010, 18%, 5% and 12%, respectively, of our net revenue were derived from related parties. While we believe that our transactions with related parties were entered into on an arm’s length basis, we extended them favorable payment terms, as discussed in the preceding paragraph. See “Item 7. Major Shareholders and Related Party Transactions” for more information concerning our related party transactions.

Geography and Currency

The majority of our net revenue is generated from customers headquartered in Taiwan, which represented 60%, 60% and 74% of our net revenue in 2008, 2009 and 2010, respectively. We also generate net revenue from customers in the United States, Korea, Japan and other countries. Our service fees and revenue are generally denominated in the currency of the jurisdiction in which our facilities are located, for example NT dollars for our Taiwan operations and RMB for our Mainland China operations. As we generate most of our net revenue from Taiwanese customers using our Taiwanese operations, and since most of our labor and overhead costs are denominated in NT dollars, we consider the NT dollar to be our functional currency.

See Note 23 to our consolidated financial statements contained in this Annual Report on Form 20-F and “Item 11. Quantitative and Qualitative Disclosure about Market Risk — Market Risks — Foreign Currency Exchange Rate Risks” for certain information on our exchange rate risks.

Cost of Revenue and Gross Profit (Loss)

Our cost of revenue consists primarily of the following: depreciation and amortization expenses, raw material costs, and labor and overhead expenses, which primarily include expensable equipments, sub-contracting fees and rental expenses. Our operations, in particular our testing operations, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous and future acquisitions of testing and assembly equipment and facilities, including our investment in our Mainland China operations. As of March 31, 2011, we had 849 testers, 151 burn-in ovens, 661 wire bonders, 141 inner-lead bonders, 4 steppers and 11 sputters. We use inner-lead bonders for the assembly of LCD and other flat-panel display driver semiconductors using TCP or COF technology, and wire bonders for TSOP, BGA, and some other package assembly technologies.

Our profitability depends in part not only on absolute pricing levels for our services, but also on our capacity utilization rates. Our average capacity utilization rate for testing of memory and logic/mixed-signal semiconductors was 65% in 2008, 45% in 2009 and 60% in 2010. Our average capacity utilization rate for assembly of memory and logic/mixed-signal semiconductors was 63% in 2008, 64% in 2009 and 85% in 2010. In addition, our average capacity utilization rate for LCD and other flat-panel display driver semiconductor testing and assembly was 52% in 2008, 50% in 2009 and 77% in 2010.

For each period of time selected, we derived the capacity utilization rate for our testing operations by dividing the total number of hours of actual use of our facilities’ testing equipment units by the maximum number of hours that these equipment units were capable of being used. The testing capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders.

For each period of time selected, we derived the capacity utilization rate for our assembly operations by dividing the total number of units actually produced by our assembly facilities by the maximum number of units that these facilities are capable of producing. The assembly capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders.

Our gross revenue is generally the product of the total volume of our customer orders multiplied by the average selling price per deliverable unit from our assembly or testing services, as the case may be. As a result, in a period where the average selling prices do not fluctuate significantly, increases or decreases in our capacity utilization rates generally correlate to increases or decreases in our gross revenue. Periods with significant increases in the average selling prices reduce the negative impact on our gross revenue from any decreases in our capacity utilization rates. Similarly, periods with significant decreases in the average selling prices reduce the positive impact on our gross revenue from any increases in our capacity utilization rates.

The Company has significant fixed costs in operating our assembly and testing facilities. For this reason, decreases in our cost of goods sold during a period generally occur at a slower rate than decreases, during the same period, in our gross revenue due to lower capacity utilization rates, lower average selling prices, or both. Also, as a result, our gross margin and profitability generally decreases in correlation to decreases in our capacity utilization rates, decreases in our average selling prices, or both. Similarly, our gross margin and profitability generally increases in correlation to increases in our capacity utilization rates, increases in our average selling prices, or both. Due to the cyclical nature of the semiconductor industry, customer orders may change significantly, causing fluctuation in our capacity utilization rate and average selling price.

Most of our labor and overhead costs are denominated in NT dollars. However, we also incur costs of revenues and operating expenses associated with testing and assembly services in several other currencies, including Japanese yen, US dollars and RMB. In addition, a substantial portion of our capital expenditures, primarily for the purchase of testing and assembly equipment, has been, and is expected to continue to be, denominated in Japanese yen with much of the remainder denominated in US dollars.

The following table sets forth, for the periods indicated, our gross profit (loss) and our gross profit (loss) margin as a percentage of net revenue.


	Year ended December 31,
	2008			2009			2010			2010
	NT$			NT$			NT$			US$
	(in millions)
Gross profit (loss):
Testing
Memory	$	746.6		$	(2,275.9	)	$	(362.4	)	$	(12.4	)
Logic/mixed-signal		114.0			84.7			114.5			3.9
Total testing		860.6			(2,191.2	)		(247.9	)		(8.5	)
Assembly
Memory		(245.5	)		(745.2	)		(36.0	)		(1.2	)
Logic/mixed-signal		(78.4	)		(13.2	)		240.9			8.3
Total assembly		(323.9	)		(758.4	)		204.9			7.1
LCD and other flat-panel display driver semiconductor testing and assembly		(496.4	)		(561.6	)		688.7			23.6

Total	$	40.3		$	(3,511.2	)	$	645.7		$	22.2

Gross profit (loss) margin:
Testing
Memory		9.1	%		(49.0	)%		(6.5	)%		(6.5	)%
Logic/mixed-signal		20.4			16.1			19.3			19.3
Total testing		9.8			(42.4	)		(4.0	)		(4.0	)
Assembly
Memory		(5.3	)		(22.3	)		(0.7	)		(0.7	)
Logic/mixed-signal		(9.5	)		(1.3	)		21.0			21.0
Total assembly		(6.0	)		(17.4	)		3.3			3.3
LCD and other flat-panel display driver semiconductor testing and assembly		(17.7	)		(21.4	)		14.4			14.4
Overall		0.2	%		(28.9	)%		3.8	%		3.8	%

Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel expenses, amortization expenses relating to technology, expenditures to qualify our services for specific customers and other consulting fees and certification fees paid to third parties. Research and development expenses are recognized as they are incurred. We currently expect that research and development expenses will increase in the future as we continue to explore new technologies and service offerings. We also expect to hire additional employees in our research and development department.

Sales and Marketing

Sales and marketing expenses consist primarily of shipping and handling expenses incurred in delivering products to our customers’ designated locations, advertising, corporate communications and other marketing expenses, salary expenses for sales and marketing personnel, sales commission, professional service fees, bad debt provision and service support expenses.

General and Administrative

General and administrative expenses consist of salaries and related expenses for executive, finance and accounting, and management information systems personnel, professional service fees, and other corporate expenses. They also include stock-based compensation that is expensed using the intrinsic value-based method and fair value method. See “Item 6. Directors, Senior Management and Employees—Share Option Plan and Share Appreciation Rights Plan” for more information concerning our share option plan. We expect general and administrative expenses to increase in absolute terms as we add personnel and incur additional expenses related to the growth of our business and operations, particularly our Mainland China operations.

Other Income (Expenses), Net

Our other income principally consists of interest income, sales of claims receivables, foreign exchange gains, warehouse space rental revenue, gains on sale of investments, gains on disposal of property, plant and equipment, fair value gains on financial assets, gain on disposal of land use right and gains on embedded derivative. In 2008, our other income included certain interest income paid by Kolin under a loan repayable to ChipMOS Taiwan that bears interest at a rate of 4.69% per annum. NT$15 million of this loan was repaid in 2008. The loan is secured by a pledge by Kolin of 11 million common shares of ThaiLin. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—ThaiLin Semiconductor Corp”. In January 2010, ChipMOS Taiwan entered into a definitive Transfer of Claim Agreement to sell to Citigroup Financial Products Inc. (Citigroup) the general unsecured claim reflected in the proof of claim against Spansion. As a result of the agreement, ChipMOS Taiwan received from Citigroup the purchase price for the Undisputed Claim of approximately NT$1,118 million (US$38 million) against accounts receivable of NT$2,186 million (US$75 million). A loss on sale of receivables of NT$1,068 million (US$37 million) was recognized and the related allowance for doubtful receivables of NT$2,186 million (US$75 million) was reversed. The Transfer of Claim Agreement also includes the sale of breach of contract and liquidated damages rights against Spansion in the amount of NT$2,118 million (US$73 million), which was received in October 2010.

As of December 31, 2009, other receivables from ProMOS amounted to NT$409 million and 100% allowance was made by ChipMOS Taiwan. NT$7 million (US$240 thousand) was received by April 2010. Under an amended subcontracting contract, ProMOS paid ChipMOS Taiwan NT$200 million (US$7 million) in May 2010. The remaining NT$202 million (US$7 million) was subsequently received by March 2011. As of December 31, 2010, ChipMOS Taiwan received NT$336 million (US$12 million) and the related allowance of NT$409 million (US$14 million) was reversed to other non-operating income. As of the date of this Annual Report on Form 20-F, all payments have been received.

As of December 31, 2009, other receivables from ProMOS amounted to NT$55 million and 100% allowance was made by ThaiLin. In June 2010, ThaiLin agreed a settlement with ProMOS in the amount of NT$24 million (US$1 million), this payment was fully received in the same year. The allowance of NT$24 million (US$1 million) was reversed to other non-operating income. Our other expenses principally consist of interest expense, investment losses recognized by equity method, fair value loss on financial assets, financing costs, impairment losses, losses on disposal of property, plant and equipment, loss on embedded derivative, loss on redemption of convertible notes and foreign exchange losses.

Noncontrolling Interests and Interest in Bonuses Paid by Subsidiaries

Noncontrolling interests represent the portion of our income that is attributable to the shareholding in our consolidated subsidiaries that we do not own. See “Item 4. Information on the Company—Our Structure and History” for information concerning our consolidated subsidiaries. In 2008 and 2009, our noncontrolling interests were attributable to the public shareholders’ interest in ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary. In 2010, our noncontrolling interests were attributable to the noncontrolling interests owned by Siliconware Precision in ChipMOS Taiwan as a result of the February 2010 share purchase agreement under which we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision, and the public shareholders’ interest in ThaiLin. The sale of 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares.

Interest in bonuses paid by subsidiaries represents our portion of ChipMOS Taiwan’s and ThaiLin’s distributable earnings that are appropriated as bonuses to employees and remuneration to directors and supervisors of ChipMOS Taiwan and ThaiLin, as required by ROC regulations and ChipMOS Taiwan’s and ThaiLin’s articles of incorporation. ChipMOS Taiwan and ThaiLin paid bonuses to directors, supervisors and employees of NT$387 million and NT$58 million, respectively, in 2008. ChipMOS Taiwan and ThaiLin did not pay any bonuses to directors, supervisors and employees in 2009. During 2010, ChipMOS Taiwan and ThaiLin accrued nil and NT$29 million (US$1 million) to employees, directors and supervisors as bonuses.

Net Income

Our net loss was NT$7,270 million in 2008, NT$4,419 million in 2009, and net income was NT$1,645 million (US$56 million) in 2010, respectively. We believe our future results will be dependent upon the overall economic conditions in the markets we serve, the competitive environment in which we operate, and our ability to successfully implement our strategy, among other things. For additional information on factors that will affect our future performance, see “Item 3. Key Information—Risk Factors”.

Results of Operations

The following table presents selected operating data as a percentage of net revenue for the periods indicated:


	Year ended December 31,
	2008			2009			2010
ROC GAAP:
Net revenue		100.0	%		100.0	%		100.0	%
Cost of revenue		99.8			128.9			96.2

Gross profit (loss) margin		0.2			(28.9	)		3.8

Operating expenses:
Research and development		2.5			3.1			2.4
General and administrative		5.2			4.6			3.9
Sales and marketing		13.9			5.4			0.4

Total operating expenses		21.6			13.1			6.7

Loss from operations		(21.4	)		(42.0	)		(2.9	)

Other income (expenses), net		(19.3	)		1.0			13.5

Income (loss) before income tax, noncontrolling interests and interest in bonuses paid by subsidiaries⁽¹⁾		(40.7	)		(41.0	)		10.6
Income tax benefit (expense)		(0.7	)		3.4			0.5

Income benefit (loss) before noncontrolling interests and interest in bonuses paid by subsidiaries		(41.4	)		(37.6	)		11.1
Net (income) loss attributable to noncontrolling interests		0.8			1.2			(1.5	)
Interest in bonuses paid by subsidiaries⁽¹⁾		(2.1	)		—			—

Net income (loss) attributable to ChipMOS		(42.7	)%		(36.4	)%		9.6	%

Note:

(1)	Refers to bonuses to directors, supervisors and employees paid by subsidiaries.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Net Revenue. Our net revenue increased by NT$5,060 million, or 42%, to NT$17,210 million (US$591 million) in 2010 from NT$12,150 million in 2009.

Net revenue from testing services for memory and logic/mixed-signal semiconductors increased by NT$999 million, or 19%, to NT$6,170 million (US$212 million) in 2010 from NT$5,171 million in 2009, mainly due to an increase in net revenue from testing services for memory semiconductors. Net revenue from testing services for memory semiconductors increased by NT$931 million, or 20%, to NT$5,577 million (US$192 million) in 2010 from NT$4,646 million in 2009, principally due to increased capacity utilization rates and higher average selling price for DRAM products. Net revenue for testing services for logic/mixed-signal semiconductors increased by NT$68 million, or 13%, to NT$593 million (US$20 million) in 2010 from NT$525 million in 2009, principally due to increased capacity utilization rates.

Net revenue from assembly services for memory and logic/mixed-signal semiconductors, which includes revenue from assembly services for memory and logic/mixed-signal semiconductors and revenue from our memory module manufacturing business, increased by NT$1,906 million, or 44%, to NT$6,259 million (US$215 million) in 2010 from NT$4,353 million in 2009. This increase was primarily the result of an increase in net revenue from assembly services for memory semiconductors. Net revenue from assembly services for memory semiconductors increased by NT$1,777 million, or 53%, to NT$5,113 million (US$175 million) in 2010 from NT$3,336 million in 2009, primarily as a result of an increased capacity utilization rate for DDR II SDRAM products. Net revenue from assembly services for logic/mixed-signal semiconductors increased by NT$129 million, or 13%, to NT$1,146 million (US$40 million) in 2010 from NT$1,017 million in 2009, principally as a result of higher customer demand.

Net revenue from LCD and other flat-panel display driver semiconductor testing and assembly services increased by NT$2,155 million, or 82%, to NT$4,781 million (US$164 million) in 2010 from NT$2,626 million in 2009. This increase was principally as a result of an increased capacity utilization rate for LCD and other flat-panel display products in 2010.

See “— Cost of Revenue and Gross Profit (Loss)” for more information concerning our testing and assembly capacity utilization rates and the impact on our gross revenue, gross margin and profitability from any increases or decreases in our capacity utilization rates.

Cost of Revenue and Gross Margin. Cost of revenue increased by NT$903 million, or 6%, to NT$16,564 million (US$568 million) in 2010 from NT$15,661 million in 2009, primarily due to increases of the direct material expenses, direct labor expenses, salary and fringes expenses and expensable equipment expenses of NT$1,168 million (US$40 million), NT$531 million (US$18 million), NT$239 million (US$8 million) and NT$215 million (US$7 million), respectively. These expenses increases are partially offset by the decrease of rental expenses of NT$1,288 million (US$44 million). Direct material expenses increased principally as a result of a raise in the capacity utilization rate.

Our gross profit increased to NT$646 million (US$22 million) in 2010 from negative NT$3,511 million in 2009. Our gross margin was 4% in 2010, compared to negative 29% in 2009.

Our gross margin for testing services for memory and logic/mixed-signal semiconductors increased to negative 4% in 2010 from negative 42% in 2009, primarily due to a higher capacity utilization rate, which increased to 60% in 2010 from 45% in 2009.

Our gross margin for assembly services for memory and logic/mixed-signal semiconductors increased to 3% in 2010 from negative 17% in 2009, primarily due to a higher capacity utilization rate, which increased to 85% in 2010 from 64% in 2009.

Our gross margin for LCD and other flat-panel display driver semiconductor testing and assembly services increased to 14% in 2010 from negative 21% in 2009, primarily as a result of an increase in the capacity utilization rate from 50% in 2009 to 77% in 2010.

Research and Development Expenses. Research and development expenses increased by NT$38 million, or 10%, to NT$413 million (US$14 million) in 2010 from NT$375 million in 2009. This increase was primarily due to the higher personnel expenses and the increase of professional services fees.

General and Administrative Expenses. General and administrative expenses increased by NT$20 million, or 3%, to NT$678 million (US$24 million) in 2010 from NT$658 million in 2009, primarily due to the higher personnel expenses.

Sales and Marketing Expenses. Sales and marketing expenses decreased by NT$497 million, or 89%, to NT$64 million (US$2 million) in 2010 from NT$561 million in 2009, primarily due to a decrease of NT$497 million (US$17 million) in bad debt provision.

Other Income (Expenses), Net. Other income, net increased by NT$2,204 million, or 1,884%, to NT$2,321 million (US$80 million) in 2010 from NT$117 million in 2009. This increase was primarily due to the damage claim received of NT$2,118 million (US$73 million), recovery of allowance for doubtful receivables of NT$2,717 million (US$93 million) in 2010 and partially offset by the increase of loss on sale of receivables of NT$1,068 million (US$37 million), impairment loss on other assets of NT$392 million (US$13 million), and the increase of foreign exchange loss by NT$307 million (US$11 million), increase of loss on derivative liability by NT$311 million (US$11 million) and increase of interest expense by NT$244 million (US$8 million).

Income (Loss) Before Income Tax, Noncontrolling Interests and Interest in Bonuses to Directors, Supervisors and Employees Paid by Subsidiaries. As a result of the foregoing, income before income tax, noncontrolling interests and interests in bonuses to directors, supervisors and employees paid by subsidiaries increased by 136% to an income of NT$1,812 million (US$62 million) in 2010 from a loss of NT$4,989 million in 2009.

Income Tax Benefit (Expense). We had an income tax benefit of NT$99 million (US$3 million) in 2010 compared to income tax benefit of NT$421 million for 2009, primarily due to a significant increase in income before income tax in 2010.

Net (Income) Loss Attributable to Noncontrolling Interests. The net income of ThaiLin and of ChipMOS Taiwan attributable to noncontrolling interests amounted to NT$266 million (US$9 million) in 2010, compared to the net loss of ThaiLin attributable to noncontrolling interests of NT$149 million in 2009.

Interest in Bonuses paid by Subsidiaries. Interest in bonuses paid by subsidiaries remained at nil in 2010 and 2009, respectively.

Net Income (Loss) Attributable to ChipMOS. As a result of the foregoing, the net income attributable to ChipMOS was NT$1,645 million (US$56 million) in 2010, compared to a net loss attributable to ChipMOS of NT$4,419 million in 2009.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net Revenue. Our net revenue decreased by NT$4,860 million, or 29%, to NT$12,150 million in 2009 from NT$17,010 million in 2008.

Net revenue from testing services for memory and logic/mixed-signal semiconductors decreased by NT$3,616 million, or 41%, to NT$5,171 million in 2009 from NT$8,787 million in 2008, mainly due to a decrease in net revenue from testing services for memory semiconductors. Net revenue from testing services for memory semiconductors decreased by NT$3,581 million, or 44%, to NT$4,646 million in 2009 from NT$8,227 million in 2008, principally due to decreased capacity utilization rates and lower average selling price for DRAM products. Net revenue for testing services for logic/mixed-signal semiconductors decreased by NT$35 million, or 6%, to NT$525 million in 2009 from NT$560 million in 2008, principally due to decreased capacity utilization rates.

Net revenue from assembly services for memory and logic/mixed-signal semiconductors, which includes revenue from assembly services for memory and logic/mixed-signal semiconductors and revenue from our memory module manufacturing business, decreased by NT$1,065 million, or 20%, to NT$4,353 million in 2009 from NT$5,418 million in 2008. This decrease was primarily the result of a decrease in net revenue from assembly services for memory semiconductors. Net revenue from assembly services for memory semiconductors decreased by NT$1,255 million, or 27%, to NT$3,336 million in 2009 from NT$4,591 million in 2008, primarily as a result of a decreased capacity utilization rate and lower average price for DDR II SDRAM products. Net revenue from assembly services for logic/mixed-signal semiconductors increased by NT$190 million, or 23%, to NT$1,017 million in 2009 from NT$827 million in 2008, principally as a result of higher customer demand.

Net revenue from LCD and other flat-panel display driver semiconductor testing and assembly services decreased by NT$179 million, or 6%, to NT$2,626 million in 2009 from NT$2,805 million in 2008. This decrease was principally as a result of the weak demand for LCD and other flat-panel display products in 2009, which in turn led to decreased capacity utilization rates as well as decreased average selling prices for services.

Cost of Revenue and Gross Margin. Cost of revenue decreased by NT$1,309 million, or 8%, to NT$15,661 million in 2009 from NT$16,970 million in 2008, primarily due to the decrease of depreciation expenses of NT$531 million, salary and fringes expenses of NT$238 million and direct material and direct labor expenses of NT$329 million and NT$522 million, respectively. Direct material expenses decreased principally as a result of a decline in the capacity utilization rate.

Our gross profit decreased to negative NT$3,511 million in 2009 from NT$40 million in 2008. Our gross margin was negative 29% in 2009, compared to 0.2% in 2008.

Our gross margin for testing services for memory and logic/mixed-signal semiconductors decreased to negative 42% in 2009 from 10% in 2008, primarily due to a lower capacity utilization rate, which decreased to 45% in 2009 from 65% in 2008.

Our gross margin for assembly services for memory and logic/mixed-signal semiconductors decreased to negative 17% in 2009 from negative 6% in 2008, primarily due to pricing pressures that resulted from decreases in the pricing of end products.

Our gross margin for LCD and other flat-panel display driver semiconductor testing and assembly services decreased to negative 21% in 2009 from negative 18% in 2008, primarily as a result of a decrease in the capacity utilization rate from 52% in 2008 to 50% in 2009 as well as a decreased average selling price for our services.

Research and Development Expenses. Research and development expenses decreased by NT$61 million, or 14%, to NT$375 million in 2009 from NT$436 million in 2008. This decrease was primarily due to lower salary expenses associated with a decrease in research and development personnel, and the decrease of professional services fees and expensable equipment expenses.

General and Administrative Expenses. General and administrative expenses decreased by NT$228 million, or 26%, to NT$658 million in 2009 from NT$886 million in 2008, primarily due to the decrease of depreciation expenses.

Sales and Marketing Expenses. Sales and marketing expenses decreased by NT$1,802 million, or 76%, to NT$561 million in 2009 from NT$2,363 million in 2008, primarily due to a decrease of NT$1,790 million in allowance for doubtful receivables. The decrease was primarily due to full allowance already made on outstanding receivables from Spansion and ProMOS in 2008.

Other Income (Expenses), Net. Other expenses, net decreased by NT$3,404 million, or 104%, to other income of NT$117 million in 2009 from other expenses of NT$3,287 million in 2008. This decrease was primarily due to the impairment loss on property, plant and equipment of NT$26 million recognized in 2009, compared to an impairment loss on goodwill of NT$917 million and impairment loss on property, plant and equipment of NT$1,599 million recognized in 2008.

Income (Loss) Before Income Tax, Noncontrolling Interests and Interest in Bonuses to Directors, Supervisors and Employees Paid by Subsidiaries. As a result of the foregoing, loss before income tax, noncontrolling interests and interests in bonuses to directors, supervisors and employees paid by subsidiaries decreased by 28% to a loss of NT$4,989 million in 2009 from NT$6,930 million in 2008.

Income Tax Benefit (Expense). We had an income tax benefit of NT$421 million in 2009 compared to income tax expenses of NT$121 million for 2008, primarily due to an increase of loss carried forward in 2009.

Net (Income) Loss Attributable to Noncontrolling Interests. The net loss of ThaiLin attributable to noncontrolling interests amounted to NT$149 million in 2009, compared a net loss of NT$143 million in 2008.

Interest in Bonuses paid by Subsidiaries. Interest in bonuses paid by subsidiaries decreased by 100% to nil in 2009 from NT$362 million in 2008.

Net Income (Loss) Attributable to ChipMOS. As a result of the foregoing, the net loss attributable to ChipMOS was NT$4,419 million in 2009, compared to a net loss of NT$7,270 million in 2008.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with ROC GAAP. Under ROC GAAP, we are required to make certain estimates, judgments and assumptions about matters that are highly uncertain at the time those estimates, judgments and assumptions are made, and our financial condition or results of operations may be materially impacted if we use different but nonetheless reasonable estimates, judgments or assumptions about those matters for that particular period or if we change our estimates, judgments or assumptions from period to period.

Under ROC GAAP, the significant accounting policies are set forth in Note 2 of the notes to the consolidated financial statements contained in this Annual Report on Form 20-F. The significant accounting policies that require us to make estimates and assumptions about the effect of matters that are inherently uncertain are discussed below. In connection with the reconciliation of our consolidated financial statements to US GAAP, there are no additional accounting policies that we believe are critical to us except as described below under “— Convertible Notes” and “— Share-Based Compensation”.

Allowance for Doubtful Receivables and Sales Returns

Our accounts receivable balance on our balance sheet is affected by our allowances for doubtful accounts and sales returns, which reflect our estimate of the expected amount of the receivables that we will not be able to collect and our estimate of the expected amount of sales returns.

Our determination of the allowance for doubtful receivables is based on our determination of two different types of reserves. The first type of reserve involves an individual examination of available information regarding any customer that we have reason to believe may have an inability to meet its financial obligations. For these customers, we use our judgment, based on the available facts and circumstances, and record a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific reserves are reevaluated and adjusted as additional information is received. The second type of reserve is a general reserve established for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, our estimates of the recoverability of amounts due to us could be reduced by a material amount. As of December 31, 2010, we provided NT$73 million (US$3 million) for the first type of reserve and NT$1 million (US$34 thousand) for the second type of reserve. See “Item 4. Information on the Company—Customers”.

Our determination of the allowances for sales returns as of the end of any quarter is based upon calculating an average historical return rate, usually based on the previous three quarters, and multiplying this by the revenue of that quarter. As of December 31, 2010, we provided NT$188 million (US$6 million) for the allowance of sales returns.

The allowance we set aside for doubtful receivables and sales returns was NT$2,433 million as of December 31, 2008, NT$2,937 million as of December 31, 2009 and NT$262 million (US$9 million) as of December 31, 2010. The allowances as of December 31, 2008, 2009 and 2010 represented 62%, 53% and 7%, respectively, of our accounts receivable and other receivables as of those dates. The allowance in 2008, 2009 and 2010 reflected a reduction of NT$2,292 million, NT$1,065 million and NT$74 million (US$3 million), respectively, in accounts receivable and other receivables that were charged to sales and marketing expenses. If we were to change our estimate of the allowance for doubtful receivables either upward or downward 10%, our operating income would be affected by NT$201 thousand (US$7 thousand) for 2010.

An increase in our allowance for doubtful receivables and sales returns would increase our sales and marketing expenses, decrease our recorded revenue and our current assets.

Inventory Valuation

Inventories are stated at the lower of standard cost (adjusted to the approximate weighted average cost on the balance sheet date) or net realizable value. Inventory write-down is made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs. Prior to January 1, 2009, inventories were stated at the lower of cost or market value. Any write-down was made on a total-inventory basis. Market value represented replacement cost for raw materials and net realizable value for finished goods and work in progress.

In 2008, 2009 and 2010, we reserved NT$99 million, NT$199 million and NT$37 million (US$1 million) of inventory valuation allowance, primarily due to the market price of tested and assembled DRAM and SDRAM inventory was below cost. In addition, we reserved NT$3 million in 2008, NT$ 1 million in 2009 and NT$28 million (US$1 million) in 2010 for identified slow-moving inventories.

As of December 31, 2010, we recorded NT$65 million (US$2 million) of inventory valuation allowances. If the prevailing market price of our testing and assembly services had been 10% lower, we would have been required to recognize a valuation allowance of approximately NT$76 million (US$3 million) in 2010 and would have decreased our inventory value by 6.0% and decreased our net income by 4.6%, respectively.

Valuation Allowance for Deferred Tax Assets

When we have net operating loss carry forwards, investment tax credits or temporary differences in the amount of tax recorded for tax purposes and accounting purposes, we may be able to reduce the amount of tax that we would otherwise be required to pay in future periods. We recognize all existing future tax benefits arising from these tax attributes as deferred tax assets and then, based on our internal estimates of our future profits, establish a valuation allowance equal to the extent, if any, that it is more likely than not that deferred tax assets will not be realized. We record an income tax expense or benefit in our statement of operations when there is a net change in our total deferred tax assets and liabilities in a period. The ultimate realization of the deferred tax assets depends upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible or the investment tax credits may be utilized. Specifically, our valuation allowances are impacted by our expected future revenue growth and profitability, tax holidays, alternative minimum tax, and the amount of tax credits that can be utilized within the statutory period. In determining the amount of valuation allowance for deferred tax assets as of December 31, 2010, we considered past performance, the general outlook of the semiconductor industry, future taxable income and prudent and feasible tax planning strategies.

Because the determination of the amount of valuation allowance is based, in part, on our forecast of future profitability, it is inherently uncertain and subjective. Changes in market conditions and our assumptions may cause the actual future profitability to differ materially from our current expectation, which may require us to increase or decrease the amount of valuation allowance that we have recorded. Because our expectation for future profitability is generally less during periods of reduced revenue, we will be more likely to provide significant valuation allowances with respect to deferred tax assets during those periods of already reduced income.

As of December 31, 2008, 2009 and 2010, the ending balance for valuation allowances were NT$1,823 million, NT$2,400 million and NT$1,171 million (US$40 million), respectively.

Impairment Loss of Long-Lived Assets

Under ROC GAAP, we record impairment losses on long-lived assets used in operations if events and circumstances indicate that the assets might be impaired and the recoverable amounts of the assets of the cash-generating unit are less than the carrying amounts of those items. Assumptions about the recoverable amounts of the long-lived assets require significant judgment on our expected cash flow. Our cash flow estimates are based on historical results adjusted to reflect our best estimate of future market and operating conditions. The net carrying value of assets not recoverable is reduced to fair value. Our management periodically reviews the carrying value of our long-lived assets and this review is based upon our projections of anticipated future cash flows.

In determining whether any impairment charges were necessary for the property, plant and equipment and other assets as of December 31, 2010, we assumed that the semiconductor industry will continue its growth in the next few years. Based upon our assumption of growth in the semiconductor industry and our other assumptions in our internal budget, for the purpose of determining whether any impairment charges are necessary as of December 31, 2010, we estimated that our discounted future cash flows are not smaller than our property, plant and equipment. Therefore, no impairment loss has been recognized in respect of property, plant and equipment. We have previously purchased equipment to meet our commitments under a long-term service agreement with Spansion. Since our termination of the long-term service agreement with Spansion in February 2009, part of the equipment have remained idle. As of December 31, 2010, we engaged an independent third party valuer to value these idle equipment. An impairment loss of NT$392 million (US$13 million) was recognized with respect to the idle equipment. If our current estimates of future cash flows decreases, those cash flows would be less than the reported amount of long-lived assets, and we would be required to recognize additional impairment loss, which would significantly decrease our net income before taxes.

Under US GAAP, an impairment loss is recognized when the carrying amount of an asset or a group of assets is not recoverable from the expected future cash flows and the impairment loss is measured as the difference between the fair value and the carrying amount of the asset or group of assets. The impairment loss is recorded in earnings and cannot be reversed subsequently. Long-lived assets (excluding goodwill) held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Based on the assessment of our management, in 2010, we recognized NT$9 million (US$309 thousand) and NT$392 million (US$13 million) of impairment loss for long-term investments and other long-lived assets under ROC GAAP and US GAAP, respectively.

While we believe that our estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect our evaluations.

Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the acquired net identified tangible and intangible assets. Under US GAAP, and effective on January 1, 2005, under ROC GAAP, we assess the impairment of goodwill on an annual basis, or more frequently whenever triggering events or changes in circumstances indicate that goodwill may be impaired and its carrying value may not be recoverable. Moreover, effective on January 1, 2006, goodwill is no longer amortizable under ROC GAAP. Factors we consider important which could trigger an impairment review include, without limitation, the following:

•

a significant decline in our stock price for a sustained period; and

•

a significant decline in our market capitalization relative to net book value.

Application of the goodwill impairment test is highly subjective and requires significant judgment, including the identification of cash generating units, assigning assets and liabilities to the relevant cash generating units, assigning goodwill to the relevant cash generating units, and determining the fair value of the relevant cash generating units. Under ROC GAAP, the fair value of the cash generating units is compared to the associated carrying value including goodwill, while under US GAAP, the fair value of the reporting units is compared to the associated carrying value including goodwill.

Under ROC GAAP, goodwill recorded from the acquisition of ChipMOS Taiwan and ThaiLin is evaluated for impairment on an annual basis. Based on our most recent evaluation, the fair value calculated by using the discounted future cash flows was lower than the associated carrying value. According to management’s analysis incorporating the declining market capitalization in 2008, as well as the significant market deterioration and economic uncertainties impacting expected future demand management concluded that the entire goodwill balance of NT$917 million was impaired, we recognized a non-cash impairment charge of approximately NT$917 million for the year ended December 31, 2008 to write-off the entire carrying value of goodwill.

Under US GAAP, the measurement of impairment of goodwill consists of two steps. In the first step, the fair value of the reporting unit is compared to its carrying value, including goodwill. In connection with the preparation of the financial statements for the year ended December 31, 2008, management made a determination of the fair value of the two reporting units. Fair value is determined using a combination of an income approach, which estimates fair value based upon future revenue, expenses and cash flows discounted to their present value, and a market approach, which estimates fair value using market multiples to various financial measures compared to a set of comparable public companies listed on Taiwan Stock Exchange. Management concluded the estimated fair values of the reporting units were less than their net book value. Accordingly, the guidance in FASB ASC 350 “Intangibles – Goodwill and Others” requires a second step to determine the implied fair value of the Company’s goodwill, and to compare it to the carrying value of the Company’s goodwill is adopted. Second step includes valuing all of the tangible and intangible assets and liabilities of the reporting unit as if it had been acquired in a business combination, including valuing all of its intangible assets even if they were not currently recorded to determine the implied fair value of goodwill. Based on management’s analysis incorporating the declining market capitalization in 2008, as well as the significant market deterioration and economic uncertainties impacting expected future demand, management concluded that the entire goodwill balance of NT$969 million was impaired.

Convertible Notes

Under US GAAP, we are required to account for the conversion features in the 2006 Notes, the 2009 Notes and the 2010 Notes as derivative liabilities in accordance with FASB ASC 815 “Derivative and Hedging”. The discount attributable to the issuance date aggregate fair value of the conversion features, totaling NT$459 million (US$16 million), is amortized using the effective interest method over the terms of the 2006 Notes, the 2009 Notes and the 2010 Notes.

The change in fair value on revaluation of the embedded derivative liabilities represents the difference between the fair value of the embedded derivative liabilities at the beginning of the reporting period and their fair value at the end of the reporting period. We are required to record the change in fair value as a loss or gain on embedded derivative liabilities in determining net income under US GAAP. As of December 31, 2010, the fair value of the embedded derivative liabilities amounted to NT$97 million (US$3 million) which resulted in a loss on embedded derivative liabilities of NT$261 million (US$9 million). These gains and losses were taken into account when determining our net income under US GAAP for the year ended December 31, 2010. The fair values of embedded derivatives are determined using option pricing models, which require us to make various assumptions, including among others, the expected volatility of our stock over the life of the option, market interest rates, credit spread and the expected life of the option. In determining these input assumptions, we consider historical trends and other relevant factors which may change from period to period. Because the option pricing models are sensitive to change in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the options.

Under ROC GAAP, we are required to bifurcate and separately account for embedded derivatives contained in our convertible notes issued after 2005 in accordance with SFAS No. 34 “Financial Instruments: Recognition and Measurement”. For more information, see Notes 13, 25j and 26i to our consolidated financial statements contained in this Annual Report on Form 20-F.

Share-Based Compensation

Under US GAAP, we are required to account for our employee share option plans under the fair-value-based method and to recognize share-based compensation arrangements as expenses in the consolidated statements of operations, in accordance with FASB ASC 715 “Compensation – Retirement Benefits”. The determination of the fair value of our share options on the date of grant under the Black Scholes Option Pricing Model is affected by the price of our common shares and assumptions of a number of variables, including the risk-free interest rate, the expected life of the options, the estimated fair value of our common shares and the expected price volatility of our common shares over the term of the options. In 2010, the share-based compensation expense amounted to NT$31 million (US$1 million), which was taken into account when determining our net income and shareholders’ equity under US GAAP for the year ended December 31, 2010.

Prior to adopting FASB ASC 715 in 2006, share-based compensation arrangements were accounted for under Accounting Principles Board Opinion No. 25, which utilized an intrinsic value approach in recognizing compensation expense. Under ROC GAAP and prior to January 1, 2008, we accounted for our share-based compensation arrangements under the intrinsic value method. Commencing January 1, 2008, we adopted ROC SFAS No. 39 “Share-based Payment”. After the adoption of SFAS No. 39, our share-based compensation has been measured at the fair value of the options at grant date using an option valuation model. For more information, see Notes 2, 25k and 26h to our consolidated financial statements contained in this Annual Report on Form 20-F.

Senior Management’s Discussion with the Audit Committee

Our management has discussed the critical accounting policies described above with the audit committee of our board of directors and the audit committee has reviewed our disclosure relating to the critical accounting policies in this section.

Impact of Foreign Currency Fluctuations and Governmental or Political Factors

For a discussion of the impact of foreign currency fluctuations and governmental economics, fiscal, monetary or political policies or factors that may directly or indirect impact us, see “Item 3. Key Information—Risks Factors—Risks Relating to Our Business—Fluctuations in exchange rate could result in foreign exchange losses” and “Item 3. Key Information—Risks Factors—Risks Relating to Countries in Which We Conduct Operations”.

Liquidity and Capital Resources

Since our inception, we have funded our operations and growth primarily through the issuance of equity, a mixture of short- and long-term loans and cash flow from operations. As of December 31, 2010, our primary sources of liquidity were cash and cash equivalents (excluding restricted cash and cash equivalents) of NT$7,143 million (US$245 million), short-term loans of NT$908 million (US$31 million) available to us in undrawn facilities, which have expired or will expire before December 2011, and long-term loans of NT$500 million (US$17 million) available to us in undrawn facilities, which have expired or will expire before December 2015. To meet our liquidity, capital spending and other capital needs, we have taken certain steps discussed below.

In December 2010, ChipMOS Taiwan reached agreement with and received approval from its bank creditors for an extension of its repayment schedule on its short-term loans. This loan repayment schedule is further discussed under Note 14 to our consolidated financial statements contained in this Annual Report on Form 20-F. The following related key extended repayment terms and conditions apply to ChipMOS Taiwan’s bank loans due between 2009 to 2013. For repayment of non-revolving short-term loans, ChipMOS Taiwan agreed to repay 20% of the outstanding principal on December 31, 2010, to repay the balance outstanding in eight quarterly installments by the end of 2012, and to set aside NT$50 million per month with Bank of Taiwan from January 2011 until December 2012 to fund the scheduled estimated principal repayments. ChipMOS Taiwan may maintain its current revolving short-term facilities but is required to increase its collateral to secure up to 60% of the outstanding principal amount by the end of 2011. For repayment of long-term loans, ChipMOS Taiwan agreed to set aside with Bank of Taiwan NT$300 million per month for 2011, NT$270 million per month for 2012 and NT$150 million per month for 2013 to meet the principal repayment schedule. The bank creditors agreed that ChipMOS Taiwan may arrange additional bank loans for purchasing operating materials by using its available assets as collateral. These banks also agreed not to unilaterally foreclose and seize any machinery, property or deposits of ChipMOS Taiwan and agreed to waive any penalties that might have to be imposed on the Company in case of breach under the existing loan agreements.

Our bank creditors provided us with a waiver in February 2010 relating to any potential covenant breaches under a syndicated loan facility agreement with Standard Chartered Bank (Hong Kong) Limited as agent. The application by the Company for early repayment of the outstanding loan in four installments was approved in April 2010 without penalty. The syndicated loan facility was fully repaid in January 2011. See “Item 3. Key Information—Risk Factors—Risks Relating to Economic Conditions and the Financial Markets—The global credit and financial markets crisis could materially and adversely affect our business and results of operations” for additional information.

Liquidity

The following table sets forth our cash flows with respect to operating activities, investing activities, financing activities and the effect of exchange rate changes on cash for the periods indicated.


	Year ended December 31,
	2008			2009			2010			2010
	NT$			NT$			NT$			US$
	(in millions)
Net cash provided by (used in):
Operating activities	$	5,164.2		$	781.0		$	8,688.9		$	298.2
Investing activities		(2,296.9	)		(1,042.5	)		(3,587.2	)		(123.1	)
Financing activities		(1,395.3	)		(2,503.8	)		(1,826.5	)		(62.7	)
Effect of exchange rate changes on cash		46.3			(1.8	)		(16.8	)		(0.6	)

Net increase (decrease) in cash	$	1,518.3		$	(2,767.1	)	$	3,258.4		$	111.8

Net Cash Provided by Operating Activities

Net cash provided by operating activities totaled NT$8,689 million (US$298 million) in 2010, compared to NT$781 million in 2009. The increase in net cash provided by operating activities was primarily due to a net income of NT$1,645 million (US$56 million) in 2010, compared to net loss of NT$4,419 million in 2009 and a decrease of accounts receivable of NT$1,564 million (US$54 million) in 2010 compared to an increase of accounts receivable of NT$1,241 million in 2009. The increase in net cash provided by operating activities was also partially offset by the increase of recovery of allowance for doubtful receivables, which was NT$2,718 million (US$93 million) in 2010 compared to NT$561 million in 2009.

Net cash provided by operating activities totaled NT$781 million in 2009, compared to NT$5,164 million in 2008. The decrease in net cash provided by operating activities was primarily due to allowance for doubtful receivables, which decreased to NT$1,065 million in 2009 from NT$2,292 million in 2008 and an increase in accounts receivable of NT$1,241 million in 2009, compared to a decrease of accounts receivable of NT$1,175 million in 2008. The decrease in net cash provided by operating activities was also attributable to a decrease in impairment loss on property, plant and equipment to NT$26 million in 2009 from NT$1,599 million in 2008. The decrease in impairment loss on property, plant and equipment was primarily the result of the recovery of the semiconductor industry compared with 2008.

Net Cash Used in Investing Activities

Net cash used in investing activities totaled NT$3,587 million (US$123 million) in 2010, compared to NT$1,043 million in 2009. The increase in net cash used in investing activities was primarily the result of an increase in capital expenditures and partially offset by the proceeds from sales of property, plant and equipment which increased to NT$899 million (US$31 million) in 2010 from NT$19 million in 2009. Capital expenditures were NT$4,468 million (US$153 million) in 2010, compared to NT$1,245 million in 2009.

Net cash used in investing activities totaled NT$1,043 million in 2009, compared to NT$2,297 million in 2008. The decrease in net cash used in investing activities was primarily the result of a decrease in capital expenditures budget for 2009 prepared in 2008 in view of the global economic downturn. Capital expenditures were NT$1,245 million in 2009, compared to NT$2,391 million in 2008.

Net Cash Used in Financing Activities

Net cash used in financing activities totaled NT$1,827 million (US$63 million) in 2010, compared to NT$2,504 million in 2009. The decrease in net cash used in financing activities was primarily the result of the proceeds from the sales of 11.0% of ChipMOS Taiwan’s outstanding share to Siliconware Precision of NT$1,133 million (US$39 million) in 2010. The net proceeds of convertible notes were NT$131 million (US$4 million) in 2010 compared to the net payments of NT$517 million in 2009. This was partially offset by net payments of short-term bank loans of NT$869 million (US$30 million) in 2010, compared to NT$382 million in 2009 and net payments of long-term loans of NT$2,227 million (US$76 million) in 2010, compared to NT$1,573 million in 2009.

Net cash used in financing activities totaled NT$2,504 million in 2009, compared to NT$1,395 million in 2008. The increase in net cash used in financing activities was primarily the result of the net payments of bank loans of NT$382 million in 2009, compared to the net proceeds of NT$1,496 million in 2008 and net payments of long-term loans of NT$1,573 million in 2009, compared to net proceeds of NT$1,386 million in 2008. This was partially offset by net payments of convertible notes of NT$517 million in 2009, compared to net payments of NT$3,498 million in 2008.

Capital Resources

Capital expenditures in 2008 were funded by NT$5,164 million in cash flows from operating activities. Capital expenditures in 2009 were funded by NT$781 million in cash flows from operating activities. Capital expenditures in 2010 were funded by NT$8,689 million (US$298 million) in cash flows from operating activities.

Steps taken with respect to generating additional working capital and to saving cash are further discussed under “—Liquidity and Capital Resources.”

Loans

As of December 31, 2010, we had long-term loans of NT$10,566 million (US$363 million) (including current portions of such long-term loans of NT$4,926 million (US$169 million)). As of December 31, 2010, the unused credit value of our outstanding long-term loans under various bank loans and syndicated loan facilities were approximately NT$500 million (US$17 million). As of December 31, 2010, NT$7,254 million (US$249 million) of our long-term loans were collateralized by equipment, and NT$1,455 million (US$50 million) were collateralized by land and buildings. Of our long-term loans, in the aggregate:

•

NT$9,779 million (US$336 million) were floating rate loans with a rate between 1.214% and 3.75% as of December 31, 2010, repayable quarterly, semi-annually or totally until December 2015;

•

NT$145 million (US$5 million) were fixed rate loans with a rate between 4% and 4.69% as of December 31, 2010, repayable quarterly until December 2012; and

•

US$22 million (NT$642 million) were floating rate loans with a rate of 1.28438% as of December 31, 2010, repayable annually until August 2011. This loan was fully repaid in January 2011.

As of December 31, 2010, we had entered into the following syndicated loan facilities:

•

On March 21, 2003, we obtained a syndicated loan facility in the amount of NT$1,000 million. This loan facility is separated into two parts with its respective term of seven years and five years. This loan facility is secured by ThaiLin’s facilities and the testing equipment at Chupei. As of December 31, 2010, this loan facility was fully drawn.

•

On July 27, 2004, we obtained a syndicated loan facility in the amount of NT$1,000 million for a term of five years. This loan facility is secured by our facilities at the Southern Taiwan Science Park and our testing and assembly equipment located within our facilities at Chupei, the Hsinchu Science Park and the Southern Taiwan Science Park. As of December 31, 2010, this loan facility was fully drawn.

•

On June 7, 2005, we obtained a syndicated loan facility in the amount of NT$1,000 million for a term of four years. This loan facility is secured by our facilities at the Hsinchu Science Park. As of December 31, 2010, this loan facility was fully drawn.

•

In January 2006, we obtained a syndicated loan facility from banks in Taiwan in the amount of NT$6,000 million for a term of five years. This loan facility is secured by our facilities at the Hsinchu Science Park and our testing and assembly equipment located within our facilities at Chupei, the Hsinchu Science Park and the Southern Taiwan Science Park. As of December 31, 2010, this loan facility was fully drawn.

•

In February 2006, we obtained a syndicated loan facility from banks in Taiwan in the amount of NT$3,000 million for a term of six years. This loan facility is secured by ThaiLin’s facilities at Chupei. The last withdraw date was August 2009, and the facility was adjusted to NT$1,500 million. As of December 31, 2010, this loan facility was fully drawn.

•

In June 2007, we obtained a syndicated loan facility from banks in Taiwan in the amount of NT$6,000 million for a term of five years. This loan facility is secured by our facilities at the Southern Taiwan Science Park and equipment located within our facilities at Chupei, the Hsinchu Science Park and the Southern Taiwan Science Park. In November 2009, the facility downward adjusted to NT$2,100 million. As of December 31, 2010, NT$2,100 million (US$72 million) was fully drawn under this loan facility.

•

In July 2008, we obtained a syndicated loan facility from banks in Taiwan in the amount of US$74.5 million (NT$2,171 million) for a term of three years. This loan facility is guaranteed by ChipMOS Taiwan. This loan facility was fully repaid on January 31, 2011.

Certain of our loan agreements and indentures contain covenants that, if violated, could result in the obligations under these agreements becoming due prior to the originally scheduled maturity dates. These covenants include financial covenants that require us to:

•

maintain a current assets to current liabilities ratio above 1:2 and 1:1;

•

maintain total indebtedness to shareholders’ equity (excluding goodwill and other intangible assets) ratio below 1.5:1;

•

maintain total indebtedness to shareholders’ equity ratio below 1.2:1; and

•

maintain the earnings before interest, taxes, depreciation and amortization to gross interest expense ratio above 2:1 and 2.5:1.

In December 2009, ThaiLin was waived from compliance with the earnings to principal and interest ratio requirement for 2009. ThaiLin was in compliance with the financial ratio requirement for 2008 and 2010. In February and November 2009 and November 2010, ChipMOS Taiwan received three separate waiver request approvals from its creditors and was waived from compliance with the financial ratio requirements for 2008, 2009 and 2010, respectively. Pursuant to a bank creditors meetings and the approval notice from Standard Chartered Bank on February 9, 2010, ChipMOS Bermuda, as borrower, and ChipMOS Taiwan, as guarantor, were waived from compliance with the financial ratio requirements as of December 31, 2008 and December 31, 2009.

In December 2010, ChipMOS Taiwan further received approval for its request for repayment extension from over 50% of the creditor banks for its short-term loans and the amount of NT$1,468 million (US$50 million) has been extended on December 31, 2010. The key extension repayment terms include agreement by ChipMOS Taiwan to repay 20% of the outstanding short-term loans on December 31, 2010 and to repay the balance in eight installments by setting aside monthly installments of NT$50 million (US$2 million) with Bank of Taiwan, the largest bank creditor, commencing January 2011 to December 2012.

In addition, a substantial portion of our short-term and long-term borrowings may be subject to repayment upon a material deterioration of our financial condition, results of operations or our ability to perform under the loan agreements.

Set forth below are the maturities of our long-term bank loans outstanding as of December 31, 2010:


	As of December 31, 2010
	NT$		US$
	(in millions)
During 2011	$	4,926	$	169
During 2012		3,358		115
During 2013		1,874		65
During 2014		235		8
During 2015 and onwards		173		6

	$	10,566	$	363

As of December 31, 2010, certain of our land and buildings and machinery with an aggregate net book value of NT$5,754 million (US$197 million) and NT$5,859 million (US$201 million), respectively, were pledged as collateral in connection with our long-term borrowings. Approximately 67% of our net property, plant and equipment in terms of book value was pledged as collateral for our long-term loans.

Our unused credit lines for short-term loans, as of December 31, 2010, totaled NT$908 million (US$31 million), which have expired or will expire from January 2011 to December 2011. As of December 31, 2010, we had available undrawn long-term credit facilities totaling NT$500 million (US$17 million).

As of December 31, 2010, we had credit loans for imports of machinery in the total amount of NT$216 million (US$7 million), which are due between February 2011 and June 2011. We also had a short-term credit loan for importing raw materials and equipment in the total amount of NT$107 million (US$4 million), which was due between January 2011 and February 2011, and secured loans for import in the total amount of NT$95 million (US$3 million), which was due by February 2011, and short-term working capital loan in the total amount of NT$800 million (US$27 million) and secured short-term working capital loan in the total amount of NT$277 million (US$ 10 million), which is due between January 2011 and December 2011.

We believe our current cash and cash equivalents, cash flow from operations and available credit facilities will be sufficient to meet our capital spending and other capital needs through the end of 2011. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our significant amount of indebtedness and interest expense will limit our cash flow and could adversely affect our operations”. There can be no assurance regarding these matters, however, considering prevailing global economic conditions which continue to have a negative impact on our ability to accurately forecast our revenues, results of operations and cash position.

Capital Lease Obligations

ChipMOS Taiwan negotiated with its lessors and converted the leases of certain equipment into capital leases in November 2009. As of December 31, 2010, ChipMOS Taiwan had capital lease obligations of NT$1,454 million (US$50 million) to be repaid between 2011 and 2013, with an interest rate between 4.0888% to 4.0973%. The leased equipment and the corresponding capital leases payable are recorded at the lower of the fair value of the leased equipment and the present value of the minimum lease payments of such assets. Under the capital leases, ChipMOS Taiwan is required to maintain certain financial ratios, beginning in 2010. As of December 31, 2010, ChipMOS Taiwan was in compliance with these financial ratio requirements.

Convertible Notes

As of March 31, 2011, we had approximately US$5 million of convertible notes outstanding. As at the date of this Annual Report on Form 20-F, all convertible notes have been fully converted or redeemed and no convertible notes remain outstanding.

On November 3, 2004, ChipMOS Bermuda issued US$85 million of 1.75 % Convertible Senior Notes due 2009 (the “2004 Notes”), with a conversion price of US$7.85 per share (which was later adjusted to a conversion price of US$6.28 per share). In December 2004, we repurchased and cancelled approximately US$1 million of the 2004 Notes. In October 2006, we made an induced conversion offer to the noteholders of the 2004 Notes in which noteholders converted approximately US$7 million in aggregate principal amount of the 2004 Notes into a combination of common shares and cash. In November 2006, we repurchased approximately US$6 million in aggregate principal amount of the 2004 Notes pursuant to the noteholders’ put option under the indenture. In 2007, ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary, purchased approximately US$9 million of the 2004 Notes. During 2008, we repurchased approximately US$15 million of the 2004 Notes. In October 2009, we completed the closing of two privately negotiated transactions with two investors holding, in aggregate, US$54 million of the 2004 Notes. In the first transaction, the Company and an institutional investor completed the exchange of US$45 million in outstanding 2004 Notes for US$15 million in cash and US$16 million of the 10% Notes (as defined below) issued pursuant to an indenture with The Bank of New York Mellon as indenture trustee. In the second transaction, the Company and ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary, completed an exchange of US$9 million in outstanding 2004 Notes for US$3 million of the 10% Notes issued by us and US$6 million of the 8% Notes (as defined below). The remaining 2004 Notes, approximately US$2 million, were repaid in full at maturity in 2009.

In September 2006, we issued US$100 million 3.375% Convertible Senior Notes due 2011 with a conversion price of US$6.85 (US$27.4) per share, issued pursuant to an indenture with The Bank of New York Mellon as the indenture trustee (the “2006 Notes”). In 2007, we repurchased approximately US$1 million in aggregate principal amount of the 2006 Notes. In 2008, we repurchased approximately US$97 million in aggregate principal amount of the 2006 Notes, primarily pursuant to the put option offered under the indenture. On March 31, 2011, the Company has elected to redeem approximately US$2 million in aggregate principal amount of the 2006 Notes, then outstanding. The effective date of the redemption is May 3, 2011.

In 2009, we issued the following convertible notes (collectively, the “2009 Notes”):

•

US$16 million of 10% Convertible Senior Notes due 2014 with conversion price of US$1.5 (US$6.0) per share, issued in October 2009 pursuant to an indenture with The Bank of New York Mellon as indenture trustee (the “10% Notes”);

•

US$3 million of 10% Senior Convertible Bonds due 2014 with a conversion price of US$1.5 (US$6.0) per share, pursuant to notes issued in October 2009 by us directly to ThaiLin, ChipMOS Taiwan’s 42.9% owned subsidiary, in exchange of outstanding 2004 Notes (also, the “10% Notes”); and

•

US$21 million of 8% Senior Convertible Bonds due 2014 with conversion price of US$1.25 (US$5.0) per share, pursuant to notes issued by us directly to the noteholders thereof (the “8% Notes”), of which, US$16 million were issued to ThaiLin in October 2009. Approximately US$6 million of which principal amount was issued in exchange for outstanding 2004 Notes and US$10 million of which principal amount was purchased by ThaiLin at face value.

In December 2009, we entered into purchase agreements with seven other investors (the “Purchasers”) for the purchase of 8% Notes at face value in the principal aggregate amount of US$10 million. The Purchasers included the Chairman and Chief Executive Officer of the Company, Mr. Shih-Jye Cheng, who purchased the 8% Notes in the principal amount of US$1 million on the same terms and conditions as the other Purchasers. The closing occurred on December 29, 2009 for all Purchasers other than PacMOS and the Chairman of PacMOS, Mr. Chi Hung Yip. The closing for PacMOS and Mr. Chi Hung Yip (in the aggregate amount of US$5 million) occurred in March 2010.

As of the date of this Annual Report on Form 20-F, all 2009 Notes have been fully converted into our common shares, in various conversion transactions that occurred during the first quarter of 2010 through to second quarter of 2011. The conversion prices of our convertible notes disclosed in the foregoing paragraph contain corresponding adjusted figures in brackets denoting the effect of the Company’s 1-for-every-4 reverse stock split effective on January 21, 2011.

In March 2010, we issued US$5 million of 8% Senior Convertible Bonds due 2015, upon the same commercial terms as the 8% Notes (the “2010 Notes”), all of which have been fully converted into our common shares, in conversion transactions that occurred in May 2010 and April 2011.

The amount converted to our common shares upon conversion of the 2009 Notes and the 2010 Notes included an amount equal to the sum of any make-whole amount and any accrued and unpaid interest, calculated in accordance with the terms and conditions of the 2009 Notes and the 2010 Notes. The make-whole amount was the amount of interest that would have accrued from the applicable conversion date until the stated maturity, discounted to the present value using the published yield on U.S. treasury notes having a comparable remaining tenor on the determination date plus 50 basis points; provided that the additional 50 basis points was not added if the applicable treasury note rate is greater than two percent (2%) of any unpaid interest accrued as of the conversion date. Under the 2009 Notes’ and 2010 Notes’ “PIK” or payment in kind provisions, unpaid interest was payable on a quarterly basis and the Company had the option, subject to the satisfaction of certain conditions, of paying interest in cash or common shares or a combination thereof. When interest was paid in our common shares, the number of common shares was equal to the amount of interest payable in common shares divided by the volume weighted average price of our common shares over a period of 10 consecutive trading days ending on the sixth day prior to the applicable payment date.

See “Item 3. Key Information—Risk Factors—Risks Relating to Economic Conditions and the Financial Markets” for additional information. For a discussion of the accounting for the conversion feature of the convertible notes under US GAAP, see “— Critical Accounting Policies—Convertible Notes” and “— US GAAP Reconciliation”.

Research and development, patents and licenses

See the discussion under “Item 4. Information on the Company—Research and Development”.

Trend Information

See the discussion under “Item 4. Information on the Company—Industry Background” and “Item 4. Information on the Company—Competition”.

Off-Balance Sheet Arrangements

As of December 31, 2010, we had no off-balance sheet arrangements.

US GAAP Reconciliation

Our consolidated financial statements are prepared in accordance with ROC GAAP, which differs in certain material respects from US GAAP. The following table sets forth a comparison of our net income, total assets and shareholders’ equity in accordance with ROC GAAP and US GAAP for the periods indicated:


	Year ended as of December 31,
	2008			2009			2010		2010
	NT$			NT$			NT$		US$
	(in millions)
Net income (loss) attributable to ChipMOS in accordance with:
ROC GAAP	$	(7,270.3	)	$	(4,418.7	)	$	1,644.7	$	56.4
US GAAP		(7,177.7	)		(4,550.3	)		1,616.9		55.5
Total assets in accordance with:
ROC GAAP		35,441.6			30,356.2			31,315.0		1,074.6
US GAAP		35,157.0			30,116.4			31,035.1		1,065.0
Total equity (including noncontrolling interests) in accordance with:
ROC GAAP		14,542.8			9,952.2			14,043.4		481.9
US GAAP	$	14,154.2		$	9,433.6		$	13,372.6	$	458.9

Note 25 to our consolidated financial statements contained in this Annual Report on Form 20-F describes the principal differences between ROC GAAP and US GAAP as they relate to us, and a reconciliation to US GAAP of certain items, including net income and shareholders’ equity. Differences between ROC GAAP and US GAAP which have an effect on our net income as reported under ROC GAAP relate to, among other things, accrual for bonuses to employees, directors and supervisors, share-based compensation and accounting for our convertible notes.

Under FASB ASC 718, share-based compensation transactions are generally required to be accounted for using a fair-value-based method and recognized as expenses in the consolidated statements of operations. The standards became effective for the first interim period beginning after December 15, 2005. For more information, see “— Critical Accounting Policies—Share-Based Compensation” and Notes 25k and 26h to our consolidated financial statements contained in this Annual Report on Form 20-F.

Under FASB ASC 815, we are required to bifurcate and separately account for the conversion feature of our convertible notes as embedded derivatives contained in the convertible notes. Under US GAAP, we are required to carry these embedded derivatives on our balance sheet at fair value and changes in fair values of these embedded derivatives are reflected in the consolidated statement of operations. The change in fair value for embedded derivative liabilities for the conversion feature for the year ended December 31, 2010, under US GAAP was NT$261 million (US$9 million) and the resulting net income for the year ended December 31, 2010, under US GAAP was approximately NT$1,617 million (US$56 million). For more information, see Notes 25j and 26i to our consolidated financial statements contained in this Annual Report on Form 20-F.

Recent Accounting Pronouncements

See Note 26a to our consolidated financial statements contained in this Annual Report on Form 20-F for a description of the authoritative accounting principals recognized by the Financial Accounting Standards Board (“FASB”), FASB’s issuance of FASB Accounting Standard codification guidance and the extent to which these will impact our consolidated financial statements.

Non-GAAP Financial Information Derived from US GAAP Measures

To supplement our consolidated income statement for the year ended December 31, 2010, on a ROC GAAP basis, our management uses a non-GAAP measure of net income, which is net income pursuant to US GAAP adjusted to exclude two non-cash items referred to as special items. The two non-cash items excluded are changes in the fair value of the embedded derivative liabilities and amortization of discount on convertible notes. These items are considered by the management to be outside of our core operating results. For example, changes in the fair value of the embedded derivative liabilities relate heavily to the price of our company’s common shares, interest rate and volatility, all of which are difficult to predict and outside of the control of our management.

For these reasons, our management uses non-GAAP adjusted measures of net income and non-GAAP net income per share, both derived from US GAAP measures to evaluate the performance of our core businesses and to estimate future core performance. In addition, this information facilitates our management’s internal comparisons to our historical operating results as well as to the operating results of our competitors.

Our management finds these supplemental non-GAAP measures to be useful, and believes these non-GAAP measures are useful to investors in enabling them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate our core operating results. However, readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, ROC GAAP or US GAAP financial measures. They should be read in conjunction with ROC GAAP and US GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

The following table sets forth, for the year ended December 31, 2010, reconciliation of US GAAP net income to non-GAAP net income:


	Year ended December 31, 2010
	NT$		US$
	(in millions, except for per share data)
US GAAP Net Income Attributable to ChipMOS (Basic)⁽¹⁾	$	1,616.9	$	55.5
US GAAP Net Income Attributable to ChipMOS (Diluted)		1,778.7		61.0
Special Items (in Non-Operating Income (Expenses), Net)
Changes in the fair value of the embedded derivative liabilities⁽²⁾		260.7		8.9
Amortization of discount on convertible notes⁽³⁾		11.4		0.4

Total Special Items		272.1		9.3

Non-GAAP Adjusted Net Income Attributable to ChipMOS (Basic)	$	1,889.0	$	64.8

Non-GAAP Adjusted Net Income Attributable to ChipMOS (Diluted)	$	1,859.4	$	63.8

US GAAP Net Income Per Share (Basic)	$	67.45	$	2.31

Adjustment for special items		11.35		0.39

Non-GAAP Net Income Per Share (Basic)	$	78.80	$	2.70

US GAAP Net Income Per Share (Diluted)	$	66.35	$	2.28

Adjustment for special items		3.01		0.10

Non-GAAP Net Income Per Share (Diluted)	$	69.36	$	2.38

Notes:

(1)	Reflects the US GAAP adjustments as described in Note 25 of the notes to the consolidated financial statements contained in this Annual Report on Form 20-F.

(2)

The management of our company believes excluding non-cash special item for the changes in the fair value of the embedded derivative liabilities from its non-GAAP financial measure of net income is useful for itself and investors as such gain does not have any impact on cash available to our company.

(3)	The management of our company believes excluding non-cash amortization expense of discount on convertible notes from its non-GAAP financial measure of net income is useful for itself and investors as such expense does not have any impact on cash available to our company.

Taxation

ChipMOS Taiwan was granted a ROC income tax exemption for a period of four years on income attributable to the expansion of its production capacity as a result of purchases of new equipment funded by capital increases in 1998, 1999 and 2000. The tax exemption relating to the expansion of production capacity in 1998 and 1999 expired on December 31, 2002. The tax exemption relating to the expansion of production capacity in 2000 expired on December 31, 2005. The tax exemption relating to the expansion of production capacity in 2001 expired on December 31, 2008, and has resulted in tax savings for ChipMOS Taiwan of approximately NT$135 million in 2007.

ChipMOS Taiwan is also entitled to other tax incentives generally available to Taiwan companies under the ROC Statute of Upgrading Industries, including tax credits of 30% for certain research and development and employee training expenses (and, if the amount of expenditure exceeds the average amount of expenditure for the preceding two years, 50% of the excess amount may be credited against tax payable) and from 5% to 7% for certain investments in automated equipment and technology. These tax credits must be utilized within five years from the date on which they were earned. In addition, except for the last year of the five-year period, the aggregate tax reduction from these tax credits for any year cannot exceed 50% of that year’s income tax liability. In 2008, 2009 and 2010, tax credits resulted in tax savings for ChipMOS Taiwan of approximately NT$161 million, nil and nil, respectively.

ThaiLin was granted a ROC income tax exemption for a period of five years on income attributable to the expansion of its production capacity as a result of purchases of new equipment funded by capital increase in 2002, which expired on December 31, 2009. This has resulted in tax savings for ThaiLin of approximately NT$153 million in 2008, nil in 2009 and 2010.

ThaiLin is also entitled to other tax incentives generally available to Taiwan companies under the ROC Statute of Upgrading Industries, including tax credits of 5% to 7% for certain investment in automated equipment and technology. These tax credits must be utilized within five years from the date on which they were earned. In addition, except for the last year of the five-year period, the aggregate tax reduction from these tax credits for any year cannot exceed 50% of such year’s income tax liability. In 2008, 2009 and 2010, tax credits resulted in tax savings for ThaiLin of approximately NT$5 million, nil and NT$9 million (US$309 thousand), respectively.

Net income generated by ChipMOS Taiwan and ThaiLin after January 1, 1998, which is not distributed in the year following the year the income was generated, is subject to income tax at the rate of 10%. If that net income is subsequently distributed, the income tax previously paid on that income is credited against the amount of withholding tax payable by shareholders, who are not individuals or entities of the Republic of China (for taxation purposes), in connection with the distribution.

The ROC government enacted the ROC Alternative Minimum Tax Act (“AMT Act”) that became effective on January 1, 2006. The alternative minimum tax (“AMT”) imposed under the AMT Act is a supplemental tax which is payable if the income tax payable pursuant to the ROC Income Tax Act is below the minimum amount prescribed under the AMT Act. The taxable income for calculating the AMT includes most income that is exempted from income tax under various legislations, such as tax holidays and investment tax credits. The AMT rate for business entities is 10%. However, the AMT Act grandfathered certain tax exemptions and tax credits granted prior to the enactment of the AMT. The effects of the AMT on the tax expenses of ChipMOS Taiwan and ThaiLin in 2010 were not significant.

In accordance with the relevant tax rules and regulations of the PRC, ChipMOS Shanghai is entitled to an income tax exemption starting from the first profit making year, with a full exemption available for the first two years and a 50% exemption available for three additional years thereafter. As the first profit-making year for ChipMOS Shanghai was 2004, the profits made in the years 2004 and 2005 were fully exempt, and the profits made in the years 2006 through 2008 were subject to a 50% tax exemption. Commencing January 1, 2009, ChipMOS Shanghai is subject to a 25% tax on profits. Any tax losses can only be carried forward for five years.

Tabular Disclosure of Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2010, or the periods indicated:


	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
	NT$		NT$		NT$		NT$		NT$
	(in millions)
Long-term debt^{(1) (2)}	$	13,350.2	$	6,067.0	$	6,105.9	$	1,177.3	$	—
Short-term loans⁽¹⁾		1,504.5		1,504.5		—		—		—
Operating leases		231.0		27.1		52.2		52.1		99.6
Capital commitments		877.7		877.7		—		—		—

Total contractual cash obligations	$	15,963.4	$	8,476.3	$	6,158.1	$	1,229.4	$	99.6

Notes:

(1)	Includes interest payments. Assumes level of relevant interest rates remains at December 31, 2010, level throughout all relevant periods.

(2)	Includes capital lease obligations.

In addition to the commitments set forth in the contractual obligations table above, we have certain outstanding purchase orders relating to the procurement of raw materials for which there are no definite delivery dates or deadlines.

Item 6.

Directors, Senior Management and Employees

Directors and Senior Management

Our board of directors currently comprises nine directors, eight of whom were elected by our shareholders and one of whom was appointed by directors to fill a vacancy on our board. The number of directors, which must not be less than three nor greater than nine according to our bye-laws, is set by our directors but so long as a quorum of directors remains in office, casual vacancies on the board may be filled by the board. The quorum for a meeting of the directors is set by the board and otherwise is two in number. The chairman of the board is appointed from among the members of the board.

There is no requirement under Bermuda law that a director be a shareholder.

The following table sets out the names of our directors and executive officers, their positions with our company and their ages as of March 31, 2011. The business address for our directors and executive officers is No. 1, R&D Road 1, Hsinchu Science Park, Hsinchu, Taiwan, Republic of China.


Name	Age		Position	Term Expires
Shih-Jye Cheng		53	Chairman and Director/Chief Executive Officer	2011
Antonio R. Alvarez		55	Independent Director	2011
Chin-Shyh Ou		54	Deputy Chairman and Independent Director	2011
Hsing-Ti Tuan		67	Director	2012
Yeong-Her Wang		55	Independent Director	2012
Shou-Kang Chen		50	Chief Financial Officer and Director	2012
John Yee Woon Seto		67	Independent Director	2013
Chao-Jung Tsai		57	Director	2013
Rong Hsu		61	Independent Director	2013
Carl Lei		47	Acting President of ChipMOS Shanghai	—
Lafair Cho		49	President of ThaiLin	—
Li-Chun Li		54	Chief Operating Officer	—
Steve Cheng		49	President of ChipMOS USA	—
Joyce Chang		50	Vice President, LCDD Production Group	—
Michael Lee		46	Vice President, Wafer Sort Business Group	—
Ivan Hsu		45	Vice President, Memory Production Group	—
Jesse Huang		45	Vice President, Assembly Production Group	—
David W. Wang		63	Vice President, Research & Strategy Development Center	—
I-Fan Chiang		53	Vice President, I.T.M. Center	—

Shih-Jye Cheng has served as one of our directors and chief executive officer since our inception. He was our deputy chairman from our inception to May 2004 and became our chairman in May 2004. He has also served as a director and president of ChipMOS Taiwan since 1997, the chairman of ChipMOS Taiwan since June 2003, the chairman of ThaiLin since 2002. He was a director of Syntax-Brillian Corporation from November 2005 to June 2008, the chairman of ChipMOS Shanghai from 2002 to June 2005, the chairman of Chantek from 2002 to November 2005, the chairman of ChipMOS Logic from January 2004 to November 2005, the chairman of Advanced Micro Chip Technology Co., Ltd. from 2003 to April 2004 and a director of Ultima Electronics Corp. from 2000 to June 2003. He was a division head of the back-end operation of Mosel from 1992 to 1997. Mr. Cheng has a master’s degree in business administration from Saginaw Valley State University. Mr. Cheng is currently under indictment of the Taipei District Prosecutor’s Office for matters relating to the purchase by ChipMOS Taiwan and ThaiLin of certain repurchase notes in 2004. Although Mr. Cheng was found not guilty by the Taipei District Court on October 1, 2007, the prosecutor appealed the Taipei District Court’s decision on October 27, 2007. For more information, please see “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—The ongoing criminal proceeding of and adverse publicity associated with Mr. Shih-Jye Cheng, our Chairman and Chief Executive Officer, and Mr. Hung-Chiu Hu, our former director, could have a material adverse effect on our business and cause our stock price to decline”.

Antonio R. Alvarez has served as one of our directors from July 2005. Mr. Alvarez is currently the chief operating officer of Advance Analogic Technology. He was president and chief executive officer of Leadis Technology Inc. from November 2005 to January 2009 and is currently a director. He was senior vice president and general manager of the memory products division of Cypress Semiconductor Corporation from 1998 to July 2005, and senior vice president of research and development from 1991 to 2001. He holds master’s and bachelor’s degrees in electrical engineering from Georgia Institute of Technology, where he is a member of the advisory board of the Electrical Engineering Department. He is a member of the Institute for Electrical and Electronic Engineers.

Chin-Shyh Ou has served as one of our directors since August 2008. He has been the deputy chairman since August 2010. He has served as a director of ChipMOS Taiwan since June 2007. Mr. Ou joined the National Chengchi University as an associate professor in 1993 and then became professor in 1997. In 1998, he joined National Chung Cheng University as a professor and the chairman of the Department of Accounting. He led a project to establish the executive MBA program and Graduate Institute of Accounting and Information Technology of National Chung Cheng University in 1999. Mr. Ou holds a master’s degree in Public Policy and Management from Carnegie Mellon University, and a Ph.D. degree in Business Administration (Accounting) from the University of Minnesota. Mr. Ou holds several professional licenses and qualifications, including U.S. Certified Public Accountant and Certified Internal Auditor.

Hsing-Ti Tuan has served as one of our directors since August 2000. Mr. Tuan was the executive vice president of ProMOS Technologies Inc. in charge of R&D from 2005 to 2010. Mr. Tuan has served as a director of ProMOS since 1997. Mr. Tuan was the president of Mosel Vitelic Corp., USA from 1994 to 2009. Mr. Tuan was the acting president of Mosel from November 2004 to December 2005 and previously served as the executive vice president of their research and development division. He was also the vice president of Mosel from 1992 to 1996. Mr. Tuan also serves as a director of Mosel and SyncMOS Technology International. Mr. Tuan holds a master’s degree in electrical engineering from Utah State University and a bachelor’s degree in electrical engineering from National Cheng Kung University in Taiwan.

Yeong-Her Wang has served as one of our directors since July 2004 and a member of the board of directors of ChipMOS Taiwan. He has been a professor in the Department of Electrical Engineering of National Cheng Kung University since 1992. He serves as the vice president of National Applied Research Laboratories since 2007. He was also an associate dean of the College of Engineering between 1999 and 2003, chairman of the Department of Electrical Engineering between 1996 and 1999, associate director of the Department of Electrical Engineering between 1993 and 1996 and director of the Electrical Factory, College of Engineering of National Cheng Kung University between 1995 and 1996. Mr. Wang holds Ph.D., master’s and bachelor’s degrees from National Cheng Kung University in Taiwan.

Shou-Kang Chen has served as one of our directors since June 2005. He has served as our chief financial officer, investor relations officer and head of the finance division of ChipMOS Taiwan since 2002. He was the head of our strategy development department from 2000 to 2001. He was the department head of the quality lab of ChipMOS Taiwan from 1998 to 2000. Mr. Chen holds a bachelor’s degree in mining and petroleum engineering and a master of science degree and a Ph.D. degree from the graduate school of mining, metallurgy and material science of National Cheng Kung University in Taiwan.

John Yee Woon Seto has served as one of our directors since August 2010. He was a member of ChipMOS’s Board of Directors from August 2000 to May 2004. Dr. Seto was a founder and senior vice president of operation and strategic planning of Vitelic Corporation U.S.A. He served as the executive vice president of the business group of Mosel Vitelic Inc. from 1995 to 2005. He was a director of Mosel Vitelic Inc. from 1999 to 2008. He served on the board of directors in a number of companies, such as ProMOS Technologies Inc. and Advanced Analogic Technologies Inc. He has been the president and CEO of International Capture Tech Co LTD since 2006. He holds a Ph.D. in electrical engineering from University of California at Berkeley.

Chao-Jung Tsai has served as one of our directors since November 2004. Mr. Tsai was a director of ChipMOS Taiwan from January 2001 to December 2005, as a representative of Siliconware Precision, where he was a director from June 2005 to December 2009 and served as a supervisor from June 2002 to June 2005. He was also a supervisor of Phoenix Precision Technology Co. Ltd. from June 2005 to December 2009. He was previously president of Grand Cathay Securities Co., Ltd. and assistant vice president of China Trust Commercial Bank Co., Ltd. Mr. Tsai received his bachelor’s degree in statistics from National Cheng Kung University and master’s degree in management of technology from National Chiao Tung University in Taiwan. He holds Taiwan CPA and CFA licenses.

Rong Hsu was appointed by our board of directors on October 1, 2008 to fill the vacancy from Mr. Takaki Yamada’s resignation. He has served as one of our directors from July 2005 to August 2008. He has been the director of Corp. R&D, Delta Electronics since February 2009. He has been the vice president of Spatial Photonics Inc. since May 2006. He was a founder of eLCOS Microdisplay Technology Group where he was the president from April 2001 to December 2005, senior director of operations at Aurora Systems Co. from 1999 to March 2001, director of manufacturing for micro-display systems and testing at S-Vision Co. from 1996 to 1999, manager of manufacturing at nCHIP Co. from 1991 to 1996, research engineer at Lawrence Livermore National Laboratory from 1988 to 1991 and senior engineer at Intel Corporation from 1982 to 1988. He has a doctorate degree in material engineering from the University of Maryland, a master’s degree in material science from Brown University and a bachelor’s degree in mechanical engineering from National Taiwan University. He is a founding member and senior advisor of the Chinese American Semiconductor Professional Association.

Carl Lei has served as the acting president and vice president of assembly and testing operations of ChipMOS Shanghai since July 2010. Mr. Lei was the deputy director of Backend Operation of ProMOS from 2004 to 2010 and product manager of Mosel from 1998 to 2003. Mr. Lei received his bachelor’s degree from Feng Chia University in Taiwan.

Lafair Cho has served as ThaiLin’s president since December 1, 2003 and a director since December 30, 2002. He was vice president of ThaiLin from February 1, 2003 to November 30, 2003. He has also served as vice president of the memory production group of ChipMOS Taiwan from July 2003 to August 2004 and as a director of ChipMOS Taiwan from October 2003 to June 2007. He served as a deputy assistant vice president of the IC testing division of ChipMOS Taiwan from April 2000 to December 2001 and as an assistant vice president of the IC testing division of ChipMOS Taiwan from January 2002 to January 2003. He served as manager of production material control of Mosel from 1993 to 1997. He holds a master’s degree in industrial management from National Cheng Kung University in Taiwan.

Li-Chun Li has served as the Chief Operating Officer of ChipMOS Taiwan since January 2010. Prior to joining ChipMOS, he served as vice president of the Product Engineering group in Mosel-Vitelic (U.S.A.) and ProMOS Technologies Inc. from 2003 to 2009, and vice president of product development in Mosel-Vitelic (U.S.A.) and Mosel-Vitelic (Taiwan) from 1992 to 2003. Mr. Li received a bachelor’s degree in electrical engineering from the University of California, Berkeley.

Steve Cheng has served as the president of ChipMOS U.S.A. since August 2008. Mr. Cheng has served as the director of Finance and Administration in ChipMOS U.S.A. since July 2004. He has been serving in ChipMOS U.S.A. since November 1999. He received a bachelor’s degree in business banking and insurance from Feng Chia University in Taiwan.

Joyce Chang has served as ChipMOS Taiwan’s vice president of LCD Driver production group since June 2004. She was assistant vice president of ChipMOS Taiwan from 2002 to 2004 and manager of ChipMOS Taiwan from 2000 to 2002. Ms. Chang received a bachelor’s degree from Chung Yuan Christian University in Taiwan.

Michael Lee has served as ChipMOS Taiwan’s vice president of wafer sort business group since June 2004. He was assistant vice president of ChipMOS Taiwan from 2003 to 2004 and assistant vice president of King Yuan ELECTRONIC CO., LTD. from 2000 to 2003. Mr. Lee received a master’s degree from National Chiao Tung University in Taiwan.

Ivan Hsu has served as ChipMOS Taiwan’s vice president of memory production group since December 2004. He was ChipMOS Taiwan’s assistant vice president from 2003 to 2004 and deputy assistant vice president from 2002 to 2003. Mr. Hsu received a bachelor’s degree from Feng Chia University in Taiwan.

Jesse Huang has served as ChipMOS Taiwan’s vice president of assembly production group since April 2007. He was the assistant vice president of assembly engineering division formerly. He received a bachelor’s degree in Physics from Soochow University in Taiwan.

David W. Wang joined ChipMOS Taiwan as vice president of Research and Strategy Development Center in 2007. Prior to joining ChipMOS, he was the vice president of Fibera, Inc. from 2001 to 2007. Mr. Wang served as Senior Director at Lam Research where his responsibilities included new product introduction, system integration, field escalation and management of regional teams from 1996 to 2001. Mr. Wang also worked for IBM’s Microelectronics Division where he as Senior Engineer/ Manager led advanced packaging materials, process development and marketing organizations. Mr. Wang is a member of SEMI Taiwan Packaging and Test Committee and holds 45 US patents. Mr. Wang holds a Ph.D in M.S. from the University of Michigan and Bachelor of Science degree from Fu Jen University.

I-Fan Chiang has served as ChipMOS Taiwan’s vice president of ITM Center since July 2010. Mr. Chiang was a vice president of Websurf Technologies Taiwan from 2003 to June 2010. Mr. Chiang also served as a vice president of Hitrust Inc. from 2000 to 2003. Mr. Chiang holds a bachelor’s degree in Electronic Engineering from Tamkang University in Taiwan.

Board Practice and Terms of Directorship

Our board of directors consists of three classes of directors. The first class of directors, consisting of Shih-Jye Cheng, Antonio R. Alvarez and Chin-Shyh Ou, is up for re-election at the annual general meeting in 2011 and then every third annual general meeting thereafter. The second class, consisting of Hsing-Ti Tuan, Yeong-Her Wang and Shou-Kang Chen, is up for re-election at the annual general meeting in 2012 and then every third annual general meeting thereafter. The third class, consisting of John Yee Woon Seto, Chao-Jung Tsai and Rong Hsu, is up for re-election at the annual general meeting in 2013 and then every third annual general meeting thereafter.

Any director vacates his or her office if he or she:

•

is prohibited by law from being a director or ceases to be a director by virtue of the Bermuda Companies Act;

•

resigns from his or her office;

•

becomes bankrupt under the laws of any country or compounds with his or her creditors;

•

becomes of unsound mind or a patient for the purpose of any statute or applicable law relating to mental health and the board resolves that his or her office is vacated; or

•

is removed by a resolution passed by our shareholders at a special general meeting called for that purpose.

Share Ownership

The following table sets forth certain information as of March 31, 2011 with respect to our common shares owned by our directors and executive officers.

Name

Number of
Common
Shares Held

Percentage
of Shares
Issued and
Outstanding

Number of
Options
Held⁽¹⁾

Exercise Price
of Options
(US$)

Expiration Date of
Options

Shih-Jye Cheng

310,178

1.0%

87,187

2.55-21.488

2012/8/31-2015/11/16

Antonio R. Alvarez

—

Chin-Shyh Ou

—

Hsing-Ti Tuan

Yeong-Her Wang

—

Shou-Kang Chen

John Yee Woon Seto

Chao-Jung Tsai

—

Rong Hsu

—

Carl Lei

Lafair Cho

Steve Cheng

Li-Chun Li

—

Joyce Chang

Michael Lee

Ivan Hsu

Jesse Huang

David W. Wang

—

I-Fan Chiang

—

Notes:

*	Upon exercise of options currently exercisable or vested within 60 days after March 31, 2011, would beneficially own less than 1% of our ordinary shares.

(1)	Each option covers one of our common shares.

(2)

As of March 31, 2011, Chairman Cheng beneficially owned US$1 million in aggregate principal amount of our 8% Notes with a conversion price of US$5 per share. If Chairman Cheng is to convert, on an as converted basis, he would own 1.6% of our outstanding common shares as of March 31, 2011. Chairman Cheng’s 8% Notes had been converted into 232,698 of our common shares due to the Company’s election of automatic conversion, as announced on our Form 6-K filed with the Commission on April 19, 2011.

Compensation Committee

The aggregate compensation paid in 2010 to our directors and our executive officers, including cash and accrued pension payable upon retirement, was approximately NT$76 million (US$3 million). In 2010, we granted options to purchase 149,000 of our common shares to our directors and executive officers as set forth in the table below. These options will vest over a period of four to five years, with an equal proportion vesting on each of January 19, May 26 and August 31, 2010, 2011, 2012, 2013 and 2014, except for certain options granted on August 31, 2010 that vested on the date of grant.


Number of common shares issuable upon exercise of options	Expiration date	Exercise price (US$)	Considerations paid for options granted
12,500	January 19, 2016	2.7880	None
37,500	May 26, 2016	5.4740	None
68,750	August 31, 2016	3.0600	None
18,750	August 31, 2020	3.0600	None
11,500	August 31, 2020	3.0600	None

We do not provide our directors with any benefits upon termination of employment.

Our compensation committee currently consists of Mr. Antonio R. Alvarez, Dr. John Yee Woon Seto and Dr. Rong Hsu. This committee reviews and recommends to our board of directors the compensation of all our directors and officers on at least an annual basis.

Audit Committee

Under our audit committee charter adopted on February 28, 2001 and amended on May 14, 2004, December 21, 2004 and August 27, 2009, our audit committee:

•

is directly responsible for the appointment, compensation, retention and oversight of the work of our external auditors or any other public accounting firm engaged for the purpose of preparing or issuing an audit report or to perform audit, review or attestation services;

•

oversees our accounting principles and policies, financial reporting and internal control over financial reporting, internal audit controls and procedures, financial statements and independent audits;

•

meets with management, our external auditors and, if appropriate, the head of the auditing department to discuss audited financial statements, audit reports or other communications, including, without limitation, any audit problems or difficulties relating to our financial statements, any major issues regarding accounting principles and the adequacy of our internal control over financial reporting;

•

pre-approves, or adopts appropriate procedures to pre-approve all audit and non-audit services, if any, provided to us by our external auditors;

•

establishes our internal complaints procedure for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission thereof by our employees;

•

evaluates the independence of and discuss with management the timing and process for implementing the rotation of the audit partners of the outside auditors; and

•

reviews and approves all our related party transactions.

The audit committee currently consists of Dr. John Yee Woon Seto, Dr. Chin-Shyh Ou and Dr. Yeong-Her Wang, all of whom are independent directors according to NASDAQ Marketplace Rules requirements. Dr. Chin-Shyh Ou serves as a financial expert to the Audit Committee.

Nominations Committee

Under our nominations committee charter adopted on August 26, 2005, our nominations committee:

•

identifies individuals qualified to become members of the board of directors, selects or recommends nominees to the board of directors and, in the case of a vacancy of a director, recommends to the board of directors an individual to fill such vacancy;

•

develops and recommends to the board of directors standards to be applied in making determinations as to the absence of material relationships between us and a director;

•

identifies members of the board of directors qualified to fill vacancies on any committee thereof and recommends the appointment of the identified member(s) to the respective committee;

•

assists our management in the preparation of the disclosure in our annual proxy statement regarding the operations of the nominations committee; and

•

performs any other duties or responsibilities expressly delegated to the nominations committee by the board of directors from time to time relating to the nomination of members of the board of directors and any committee thereof.

Dr. Yeong-Her Wang, Dr. Rong Hsu and Dr. Chin-Shyh Ou are currently the members of our nominations committee.

Special Investigation Committee

On December 21, 2004, in connection with alleged embezzlement at Pacific Electric by our former directors, Mr. Hung-Chiu Hu and Mr. Jwo-Yi Miao, and money laundering by our former director, Mr. Robert Ma Kam Fook, our board established a special investigation committee to identify and investigate any past and present dealings between ChipMOS Bermuda, including any of its subsidiaries and affiliates, and Messrs. Hu, Miao and Ma, and any companies or entities affiliated with them. For additional information on the allegations, see “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—The ongoing criminal proceeding of and adverse publicity associated with Mr. Shih-Jye Cheng, our Chairman and Chief Executive Officer, and Mr. Hung-Chiu Hu, our former director, could have a material adverse effect on our business and cause our stock price to decline”.

The special investigation committee was solely comprised of Messrs. Pierre Laflamme and Yeong-Her Wang, two of our Company’s independent directors. Concurrent with the establishment of the special investigation committee, our board requested the resignations of Mr. Hu and Mr. Miao, who subsequently resigned from our board on June 2 and June 8, 2005, respectively. On December 21, 2004, our board also accepted the resignation of Mr. Ma. The special investigation committee engaged Ernst & Young as its forensic accounting advisor and Baker & McKenzie as its legal advisor to review transactions that were similar in nature to the transactions that allegedly implicated Messrs. Hu, Miao and Ma at Pacific Electric as well as significant related party transactions between ChipMOS Bermuda, including its subsidiaries and affiliates, and Messrs. Hu, Miao and Ma and any companies or entities affiliated with any of them. The special investigation committee also engaged Hong Kong counsel.

On June 23, 2005, the special investigation committee presented its final report to our board of directors. The special investigation committee concluded that the review conducted by Ernst & Young and Baker & McKenzie did not reveal previously unknown information regarding losses suffered by ChipMOS Bermuda, other than a potential liability relating to a credit facility entered into with Trident (Asia) Investments Limited, or Trident, and HSH Nordbank AG, Hong Kong Branch, or Nordbank. The special investigation committee noted that total losses from transactions reviewed by it in the amount of NT$454 million, relating to impairment losses and realized losses of certain investments, were reflected in our 2002, 2003 and 2004 financial statements, and a potential decline in the value of our investment in respect of Ultima Technology Corp. (BVI). In 2005, we recognized an impairment loss of NT$188 million (US$6 million) as a result of the decline in the value of our investment to Ultima Technology Corp. (BVI). See Note 8 to our audited consolidated financial statements contained in this Annual Report on Form 20-F and “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions”. The special investigation committee did not make any factual findings as to the business purpose of the transactions reviewed or as to persons at our company responsible for such transactions. On August 26, 2005, our board dissolved the special investigation committee.

The Special Investigation Committee provided the following recommendations to our board of directors:

•

reinforce the internal controls related to our company’s investment decisions, including the design and adoption of comprehensive internal control procedures for investments in connection with our company’s implementation of the internal control procedures required to comply with Section 404 of the Sarbanes Oxley Act of 2002 (“Section 404”);

•

strengthen the role of the board of directors in overseeing our company’s investment activities;

•

develop an internal control mechanism applicable to our company’s selection of banks that our company will use for deposits so as to address both commercial risks and reputational risks; and

•

develop more prudent and conservative procedures regarding the entry by our company into banking or other credit relationships.

As of December 31, 2006, we had taken the following measures to implement the recommendations of the Special Investigation Committee:

•

engaged Ernst & Young to advise on the internal control over financial reporting requirements under Section 404, including testing and monitoring the effectiveness of our internal controls over financial reporting;

•

enhanced the board of directors’ ability to oversee our financial activities by adopting new internal control procedures, pursuant to which decisions relating to derivatives, loans to others, endorsement and guarantee for third parties, and equity investments, exceeding certain limits, are subject to the board of directors’ approval; and

•

reduced the risks inherent in banking or other credit activities by adopting new internal control procedures, under which the application for any credit line or the opening of any account at any overseas banks is required to be approved by the board of directors.

Special Committee

In connection with the indictment of Mr. Shih-Jye Cheng by the Taipei District Prosecutor’s Office, our board of directors formed a special committee to evaluate the circumstances surrounding the indictment. As of March 31, 2011, the special committee was solely comprised of Mr. Yeong-Her Wang, our Company’s independent director. The special committee has engaged K&L Gates LLP (formerly Kirkpatrick & Lockhart Preston Gates Ellis LLP) as its independent international legal counsel and Baker & McKenzie as its independent ROC legal counsel, and Ernst & Young (formerly know as Diwan, Ernst & Young) as its accounting advisor to assist in its evaluation and provide recommendations.

On June 28, 2006, the special committee issued its report, including its findings and recommendations. Based upon the results of its investigation, it found that: (1) Mr. Cheng has declared himself not guilty of the charges described in the indictment; (2) Baker & McKenzie, after reviewing the indictment and the prosecutor’s exhibits, have found that the evidence produced by the prosecutor seems to be inadequate and that there is a low probability of the charges in the indictment being founded; (3) the financial advisor to the special committee have found that we suffered no loss (not taking into account exchange rate factors) and that all monies (capital and interest) were remitted back to our subsidiaries involved; (4) we have suffered no identifiable harm to our reputation or our business; and (5) Mr. Cheng has not been impaired by the indictment to perform as our chairman and chief executive officer. The special committee recommended that our board maintains Mr. Cheng as our chairman and chief executive officer with full responsibilities and our board unanimously (with Mr. Cheng having recused himself) resolved to accept and adopt the special committee’s recommendation with regard to Mr. Cheng.

Our board of directors also resolved to continue the role of the special committee, for the duration of the ongoing criminal proceeding involving Mr. Cheng to actively monitor any developments of the criminal investigation and take or recommend any appropriate action in light of such developments.

During its engagement by the special committee, Ernst & Young identified certain internal control weaknesses that existed during the relevant period of the special committee’s investigation within ChipMOS Taiwan, ThaiLin and ChipMOS Logic (which was merged into ThaiLin on December 1, 2005). These weaknesses were in areas related to segregation of duties and of corporate governance on investment authorizations, insufficiency of training for financial personnel in respect of derivative transactions, and non-compliance with the applicable ROC regulations. These identified internal control weaknesses have either been addressed previously or have been remedied by our company and our subsidiaries.

In light of the identification of these internal control weaknesses, the special committee recommended that the audit committee of the board of directors lead a special task force and report to the board of the directors as to the effectiveness of the implementation of internal control over financial reporting, with an aim to enhance our company’s financial personnel’s knowledge of derivative transactions. The board of directors unanimously resolved to accept and adopt the special committee’s recommendation in this regard.

In August 2006, we engaged Ernst & Young to design certain employee training sessions regarding derivative transactions and the applicable accounting treatment for these transactions.

See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—The ongoing criminal proceeding of and adverse publicity associated with Mr. Shih-Jye Cheng, our Chairman and Chief Executive Officer, and Mr. Hung-Chiu Hu, our former director, could have a material adverse effect on our business and cause our stock price to decline”.

Employees

The following table sets forth, as of the dates indicated, the number of our full-time employees serving in the functions indicated:


	As of December 31,						As of March 31,
Function	2008		2009		2010		2011
General operations		2,716		3,001		3,224		3,341
Quality control		379		380		381		397
Engineering		1,350		1,299		1,360		1,358
Research and development		276		263		269		264
Sales, administration and finance		201		186		213		212
Others		364		370		361		360

Total		5,286		5,499		5,808		5,932

The following table sets forth, as of the dates indicated, a breakdown of the number of our full-time employees by geographic location:


Location	As of December 31,						As of March 31,
Location	2008		2009		2010		2011
ChipMOS H.K. Taiwan Branch (Hsinchu)		11		—		—		—
ThaiLin (Hsinchu Industrial Park)		632		695		668		653
ChipMOS Taiwan Hsinchu Production Group		1,715		1,703		1,658		1,659
ChipMOS Taiwan Southern Taiwan Production Group		2,330		2,479		2,886		3,028
Shanghai		591		617		591		587
Japan and the United States		7		5		5		5

Total		5,286		5,499		5,808		5,932

Our employees are not covered by any collective bargaining agreements. We have not experienced any strikes or work stoppages by our employees and believe that our relationship with our employees is good.

Share Option Plan and Share Appreciation Rights Plan

We adopted a broad-based share option plan in 2001, which was amended at a special general meeting on March 19, 2004 to increase the number of shares available for issuance under the share option plan from 5,800,000 (1,450,000) to 9,000,000 (2,250,000). In August 2006, we adopted a second broad-based share option plan, which has 7,000,000 (1,750,000) shares available for issuance. Each share option plan provides that our directors, officers, employees and those of our affiliates may, at the discretion of our board of directors or a committee, be granted options to purchase our shares at an exercise price of no less than the par value of our common shares. The board or the committee has complete discretion to determine which eligible individuals are to receive option grants, the number of shares subject to each grant, the exercise price of all options granted, the vesting schedule to be in effect for each option grant and the maximum term for which each granted option is to remain outstanding, up to a maximum term of ten years.

In 2008, we granted 3,981,487 (995,371) share options, with an exercise price, at the time of grant, ranging from US$0.1870 to US$2.9750 (US$0.748 to US$11.9) per share. In 2008, 763,229 (190,807) share options were forfeited, 1,180,738 (295,184) share options were expired and 127,850 (31,962) share options were exercised. In 2009, we granted 1,977,577 (494,394) share options, with an exercise price, at the time of grant, ranging from US$0.2132 to US$0.6375 (US$0.8528 to US$2.55) per share. In 2009, 697,181 (174,295) share options were forfeited, 385,001 (96,250) share options were expired and nil share options were exercised. In 2010, we granted 642,640 (160,660) share options, with an exercise price, at the time of grant, ranging from US$0.6120 to US$1.3685 (US$2.448 to US$5.474) per share. In 2010, 848,198 (212,049) share options were forfeited, 1,415,200 (353,800) share options were expired and 76,985 (19,246) share options were exercised. As of December 31, 2010, we had 8,456,215 (2,114,054) share options outstanding, with an exercise price ranging from US$0.1870 to US$6.4770 (US$0.748 to US$25.908).

In September 2006 and August 2008, we adopted a share appreciation rights (“SARs”) plan pursuant to which we may issue up to 2,000,000 (500,000) and 3,000,000 (750,000) cash-settled SARs to our directors, officers, employees and those of our affiliates. Under the share appreciation rights plan, each holder of SARs, issued thereunder will be entitled to receive, on the applicable exercise date, cash in an amount equal to the excess of the market value of our common shares on such date over the exercise price of such rights. Our board of directors or a relevant committee thereof has complete discretion over the administration of the share appreciation rights plan, including determining the recipients of the share appreciation right awards, the number of rights awarded, the exercise date, the exercise price and other relevant terms. Unless earlier terminated by our board of directors or the relevant board committee, the plan will remain effective until September 2016 and August 2018. In 2008, 623,285 (155,821) SARs were granted, with an exercise price, at the time of grant, ranging from US$0.1870 to US$2.9750 (US$0.748 to US$11.9). In 2008, 367,890 (91,972) SARs were forfeited. In 2009, 1,173,060 (293,265) SARs were granted, with an exercise price, at the time of grant, ranging from US$0.2210 to US$0.6375 (US$0.884 to US$2.55). In 2009, 204,662 (51,165) SARs were forfeited and no SARs were exercised. In 2010, 74,500 (18,625) SARs were granted, with an exercise price, at the time of grant, ranging from US$0.612 to US$0.765 (US$2.448 to US$3.06). In 2010, 357,200 (89,300) SARs were forfeited and 61,200 (15,300) SARS were exercised. As of December 31, 2010, we had 2,510,028 (627,507) SARs outstanding, with an exercise price, at the time of grant, ranging from US$0.1870 to US$6.4770 (US$0.748 to US$25.908).

The share numbers and exercise price of our share option plan and share appreciation rights plan disclosed in the foregoing paragraph, contain corresponding adjusted figures in brackets denoting the effect of Company’s 1-for-every-4 reverse stock split effective on January 21, 2011.

Item 7.

Major Shareholders and Related Party Transactions

Major Shareholders

The following table and information set out certain information as of March 31, 2011 regarding the ownership of our common shares by (1) each person known to us to be the owner of more than five percent of our common shares and (2) the total amount owned by our directors and executive officers as a group.


Identity of person or group	Number of shares owned		Percentage Owned
ThaiLin Semiconductor Corp.⁽¹⁾		6,474,211		19.9
Siliconware Precision Industries Co., Ltd⁽²⁾		3,043,749		9.3
Mosel Vitelic Inc.^{(3) (}⁴⁾		2,798,659		8.6
DLS Capital Management, LLC⁽⁵⁾		1,925,975		5.9
Directors and executive officers, as a group⁽⁶⁾		377,840		1.2

Notes:

(1)

From December 2008 to August 2009, ThaiLin acquired 2,025,455 (506,364) shares pursuant to the Rule 10b5-1/10b-18 securities purchase program, under which purchases commenced on December 28, 2008; 4,060,633 (1,015,158) shares in March 2009 pursuant to its enforcement of the collateral provided by ProMOS under the Stock Pledge Agreement entered into between ThaiLin and ProMOS dated December 3, 2008; 1,605,410 (401,352) shares and 262,829 (65,707) shares in 2010 and January 2011, respectively, pursuant to the interest shares payment under 2009 Notes held by ThaiLin and 4,485,630 shares in March 2011 pursuant to the conversion of 2009 Notes held by ThaiLin.

(2)

Siliconware Precision completed a share purchase and subscription transaction with ChipMOS Taiwan and us on March 27, 2007, pursuant to which we and ChipMOS Taiwan purchased all of Siliconware Precision’s equity interest in ChipMOS Taiwan, and Siliconware Precision subscribed for 12,174,998 (3,043,749) of our common shares through a private placement. See “Item 4. Information on the Company—Our Structure and History—ChipMOS TECHNOLOGIES INC”.

(3)

Mosel owned 10,850,052 (2,712,513) shares indirectly through Giant Haven, and 344,592 (86,146) shares indirectly through Mou-Fu Investment Ltd. In June 2006, Mosel sold 6,956,522 (1,739,130) shares through its wholly-owned subsidiary, Giant Haven pursuant to our shelf registration statement. In July 2007, Mosel sold 8,121,266 (2,030,316) shares through Giant Haven to ProMOS and Powertech Technology, and we then granted Giant Haven, ProMOS and Powertech Technology certain rights to require us to register these shares for sale under the Securities Act. Mosel is a public company listed on the Taiwan Stock Exchange.

(4)	Excludes shares owned by PacMOS Technologies Holdings Limited, or PacMOS, that may be beneficially owned by Mosel. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Convertible Notes” for more information on PacMOS’ holding of our convertible notes.

(5)	According to the Schedule 13G filed by DLS Capital Management, LLC with the SEC on January 31, 2011.

(6)	Excludes Mosel’s beneficial ownership of our common shares which may be considered to be beneficially held by some of our directors or officers. Includes shares held by certain family members of certain directors.

As of March 31, 2011, approximately 56% of our common shares were held of record by shareholders located in the United States. All holders of our common shares have the same voting rights with respect to their shares.

Related Party Transactions

Siliconware Precision Industries Co., Ltd.

As of March 31, 2011, Siliconware Precision owned 9.3% of our outstanding common shares and 15.8% of ChipMOS Taiwan’s outstanding shares. On March 27, 2007, we completed a share purchase and subscription transaction with ChipMOS Taiwan and Siliconware Precision, under which we and ChipMOS Taiwan purchased all of Siliconware Precision’s equity interest in ChipMOS Taiwan, and Siliconware Precision subscribed to 12,174,998 (3,043,749 shares as taking into effect of 1-for-every-4 reverse stock split effective on January 21, 2011) of our newly issued common shares through a private placement. ChipMOS Taiwan became our wholly-owned subsidiary on September 14, 2007. In February 2010, we agreed to sell 15.8% of ChipMOS Taiwan’s outstanding shares to Siliconware Precision. The share purchase transaction was completed in January 2011. As of March 31, 2011, we owned 84.2% of ChipMOS Taiwan’s outstanding shares. Siliconware Precision is an independent provider of semiconductor testing and packaging services. Siliconware Precision currently has, and is expected to continue to have from time to time in the future, contractual and other business relationships with us. From time to time, Siliconware Precision provides assembly services to us. Often, Siliconware Precision renders these assembly services directly to our customers through customer referrals from us. On January 1, 2001, ChipMOS Taiwan entered into a subcontracting agreement for a term of two years with Siliconware Precision, pursuant to which Siliconware Precision is obligated to provide assembly services to us. This agreement was extended for another two years from January 2004 to December 2005. Sales to Siliconware Precision in 2009 was NT$195 thousand, in 2008 and 2010, we did not outsource to Siliconware Precision.

Mosel Vitelic Inc.

As of March 31, 2011, Mosel indirectly owned 8.6% of our outstanding common shares. Mosel designs and manufactures semiconductor products, including DRAM, SRAM, flash memory, LCD and other flat-panel display driver semiconductors and power-related semiconductors. Mosel and its affiliates currently have, and are expected to continue to have from time to time in the future, contractual and other business relationships with us. Our relationships include the following:

•

Rental revenue from Mosel was NT$2 million in 2006.

•

In 2008, 2009 and 2010, we paid NT$148 thousand, NT$148 thousand and NT$148 thousand (US$5 thousand) in website fees to Mosel for provision of certain website services.

Registration Rights Agreements with Siliconware Precision, Giant Haven, ProMOS and Powertech Technology Inc.

In March 2007, we issued 12,174,998 (3,043,749) common shares pursuant to a share purchase and subscription agreement with ChipMOS Taiwan and Siliconware Precision, and we entered into a registration rights agreement, dated March 27, 2007, with Siliconware Precision, pursuant to which Siliconware Precision agreed not to sell or otherwise transfer any of our common shares it acquired in the share purchase and acquisition for a period of nine months after March 27, 2007, and we granted to Siliconware Precision certain rights, including demand registration, “piggyback” registration and Form F-3 registration rights, to require us to register its common shares for sale under the Securities Act. In addition, we entered into a registration rights agreement, dated August 8, 2007, with Giant Haven, ProMOS and Powertech Technology Inc., pursuant to which we granted to Mosel, ProMOS and Powertech Technology Inc. certain registration rights, including customary demand and “piggyback” registration rights, common shares for the sale of our common shares under the Securities Act. In March 2009, ThaiLin acquired 4,060,633 (1,015,158) common shares from ProMOS pursuant to its enforcement of the collateral under a Stock Pledge Agreement entered into between ThaiLin and ProMOS dated December 3, 2008.

DenMOS Technology Inc.

We do not own any equity interest in DenMOS. As of March 31, 2011, Mosel directly owned 44.1% of common shares of DenMOS. Sales to DenMOS were NT$9 million, NT$1 million and nil in 2008, 2009 and 2010, respectively.

On October 15, 2003, we entered into a long-term agreement with DenMOS, under which we reserve a specified amount of capacity for LCD and other flat-panel display driver semiconductor testing and assembly services to DenMOS and under which DenMOS guarantees to place orders in the amount of the reserved capacity for a period of 48 months. This agreement supersedes a similar agreement that we entered into on May 25, 2002. The long-term agreement was automatically terminated on December 31, 2006.

SyncMOS Technologies Inc.

We do not own any equity interest in SyncMOS Technologies, Inc., or SyncMOS. As of March 31, 2011, Mosel indirectly owned 41.5% of SyncMOS Technologies Inc. In 2008, 2009 and 2010, we provided storage services to SyncMOS and rental revenue from SyncMOS was NT$2,208 thousand, NT$2,208 thousand and NT$2,208 thousand (US$76 thousand), respectively.

ChipMOS TECHNOLOGIES (Shanghai) LTD.

Since 2002, we have managed our PRC operations, ChipMOS Shanghai, through Modern Mind, our controlled subsidiary. Whilst we did not own any equity interest in Modern Mind, we had controlled Modern Mind through our ownership of the MMT Notes. Under the MMT Assignment Agreement, ChipMOS has agreed to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin.

Under a technology transfer agreement dated August 1, 2002, we licensed certain technologies and systems, and agreed to provide certain technical support and consulting services to ChipMOS Shanghai relating to those technologies and systems, and ChipMOS Shanghai paid an aggregate of US$25 million to us in 2002 for the technology and services we provide under this agreement.

On April 22, 2004, ChipMOS Hong Kong and ChipMOS Shanghai entered into an exclusive services agreement, pursuant to which ChipMOS Shanghai will provide its services exclusively to ChipMOS Hong Kong or customers designated by ChipMOS Hong Kong. Under the exclusive services agreement, ChipMOS Hong Kong will purchase and consign to ChipMOS Shanghai all of the equipment required to render those services. The exclusive services agreement has a term of ten years and will automatically be renewed for periods of ten years, unless terminated by either party at least 30 days prior to the expiration of such ten-year term. In addition, ChipMOS Hong Kong may terminate the exclusive services agreement at any time by giving 30 days’ prior notice. The exclusive services agreement was terminated on July 1, 2010.

On July 1, 2010, ChipMOS Bermuda and ChipMOS Shanghai entered into an exclusive services agreement, pursuant to which ChipMOS Shanghai will provide its services exclusively to ChipMOS Bermuda or customers designated by ChipMOS Bermuda. Under the exclusive services agreement, ChipMOS Bermuda agrees to procure some of the equipment and consign such equipment for use by ChipMOS Shanghai. The exclusive services agreement has a term of ten years and will automatically be renewed for periods of ten years, unless terminated by either party at lease 30 days prior to the expiration of such ten-year term. In addition, ChipMOS Bermuda may terminate the exclusive services agreement at any time by giving 30 days’ prior notice.

ThaiLin Semiconductor Corp.

On March 4, 2008, ChipMOS Taiwan made a loan in an amount of NT$145 million that bears interest at a rate of 4.69% per annum to Kolin, a major shareholder of ThaiLin. The loan is secured by a pledge by Kolin of 11 million common shares of ThaiLin. On August 22, 2008, Kolin repaid NT$15 million of the loan. On December 23, 2008, ChipMOS Taiwan notified Kolin to proceed with the transfer of the collateral’s ownership, the payment of unpaid loan and interest accrued in the amount of NT$130 million, and the payment of interest incurred due to loan repayment default under the loan. On January 20, 2009, Kolin informed ChipMOS that it could not fulfill request made by ChipMOS, including the transfer of shares since it is prohibited to do so under an interim restrictive order of disposition. Subsequently, Kolin was granted on March 27, 2009, pursuant to a ruling of Taiwan District Court on (Civil Ruling no.7 and No.9 of 2009), the approval for its reorganization and declaration of creditor’s rights application. Therefore, such shares shall still be deemed as the creditor’s collateral. ChipMOS made the creditor’s rights application on April 21, 2009. On January 31, 2011, a final ruling of Taiwan High Court (Civil Ruling No.186 of 2010) confirmed its approval of the organization plan of Kolin. As of the date of this Annual Report on Form 20-F, the reorganization execution of Kolin by its court appointed administrator is still ongoing.

As of March 31, 2011, ThaiLin held 6,474,211 of our outstanding shares, corresponding to 19.9% of all of our outstanding shares. ThaiLin’s current holding includes 4,060,633 (1,015,158) shares or 3.1% of our outstanding shares acquired pursuant to ThaiLin’s enforcement of the collateral provided by ProMOS under the Stock Pledge Agreement dated December 3, 2008, entered into between ThaiLin and ProMOS, 2,025,455 (506,364) shares or 1.6% of our outstanding shares accumulated from the Rule 10b5-1/10b-18 securities purchase program launched in December 2008, and 1,868,239 (467,059) shares or 1.4% of our outstanding shares acquired pursuant to the interest shares payment and 4,485,630 shares or 13.8% of our outstanding shares acquired pursuant to the conversion of 2009 Notes in March 2011.

ProMOS Technologies Inc.

As of March 31, 2011, Mosel directly and indirectly owned 12.0% of ProMOS. Following the transfer of Mosel’s DRAM business to ProMOS in 2003, sales to ProMOS accounted for 18% of our net revenue in 2008, 6% of our net revenue in 2009 and 12% of our net revenue in 2010.

On July 1, 2003, ChipMOS Taiwan entered into a long-term agreement with ProMOS, under which ChipMOS Taiwan reserves a specified amount of capacity for DRAM testing and assembly services to ProMOS and under which ProMOS guarantees to place orders in the amount of the reserved capacity. This agreement was superseded in July 2007 when ChipMOS Taiwan and ProMOS entered into a new long-term agreement with similar terms and conditions, except that under the new agreement, ProMOS will give ChipMOS six month rolling forecast on testing and assembly service orders to be placed to us, and ProMOS guarantees that such orders will represent no less than certain percentage of ProMOS’ total production volume of these products (excluding OEM products). The price for the services of ChipMOS Taiwan under this agreement will be agreed upon quarterly, subject to certain price adjustments. If ChipMOS Taiwan is unable to test and assemble the agreed number of DRAM, ProMOS may use a third party to cover the shortfall and ChipMOS Taiwan may be liable for, among other damages, any operation loss of ProMOS caused by such delay or any additional costs in using a third party to cover the shortfall. If ProMOS fails to place orders in the amount of the reserved capacity, ChipMOS Taiwan is entitled to damages calculated based on the difference between the value of the reserved capacity and the value of the actual used capacity, provided that the value of the capacity by ChipMOS Taiwan that has been used for other customers shall be deducted. In March 2008, ProMOS failed to place orders in the amount of the reserved capacity. In November 2008, we entered into a revised subcontracting contract with ProMOS by requiring ProMOS to provide wafers with a value of 80% of the subcontracting fee as collateral. In May 2009, a further revised subcontracting contract was entered into by and between us and ProMOS under which ProMOS provided us with wafer as pledge and Work-In-Process, or WIP and existing finished goods as lien material. Part of ProMOS’ receivables will be recovered through sales of the pledged wafer and lien material back to ProMOS with a discount to market price, and the remaining outstanding accounts receivables will be secured by equipment mortgage under the same contract arrangement. Effective March 2009, we started to request prepayment from ProMOS. As of December 31, 2009, other receivables from ProMOS amounted to NT$409 million and 100% allowance was made by ChipMOS Taiwan. NT$7 million (US$240 thousand) was received by April 2010. Under the amended subcontracting contract, ProMOS paid ChipMOS Taiwan NT$200 million (US$7 million) in May 2010. The remaining NT$202 million (US$7 million) was paid in nine monthly installments with final installment payment ending on March 15, 2011. As of December 31, 2010, ChipMOS Taiwan received NT$336 million (US$12 million) and the related allowance of NT$409 million (US$14 million) was reversed to other non-operating income. As of the date of this Annual Report on Form 20-F, all payments have been received. In May 2010, the collection term provided to ProMOS was revised to 30 days upon delivery and this was further revised to 45 days upon delivery in October 2010.

As of December 31, 2009, other receivables from ProMOS amounted to NT$55 million and 100% allowance was made by ThaiLin. In June 2010, ThaiLin agreed a settlement with ProMOS in the amount of NT$24 million (US$1 million) and it was collected during the same year. The allowance of NT$24 million (US$1 million) was reversed to other non-operating income. Commencing in June 2010, the collection term was revised to 30 days upon delivery. See Note 19 to our consolidated financial statements contained in this Annual Report on Form 20-F.

Item 8.

Financial Information

Consolidated Financial Statements and Other Financial Information

Please see “Item 18. Financial Statements” and pages F-1 through F-60.

Legal Proceedings

In February 2006, ChipMOS Taiwan and ChipMOS USA received notice of a lawsuit filed by Tessera Technologies, Inc., or Tessera. The complaint was initially filed in United States District Court for the Northern District of California (Civil Action No. C05-04063CW), or the California court. In an amended complaint, Tessera added ChipMOS Taiwan and ChipMOS USA, among several other semiconductor companies, as co-defendants. The amended complaint alleges that ChipMOS Taiwan, ChipMOS USA and the other co-defendants infringed certain patents owned by Tessera and that ChipMOS Taiwan is in breach of a license agreement with Tessera, or the Tessera license agreement. Tessera also sought unspecified damages and injunctive relief. ChipMOS Taiwan and ChipMOS USA have responded to the lawsuit by denying Tessera’s claims of patent infringement and breach of contract. ChipMOS USA and ChipMOS Taiwan have also raised various counterclaims for declaratory judgment and related affirmative defenses that the Tessera patents are invalid and unenforceable. In May 2007, the California court, with the concurrence of ChipMOS Taiwan and ChipMOS USA, stayed all litigation in the California court as a result of a related investigation by the International Trade Commission, or ITC, initiated by Tessera against certain other co-defendants. In addition, a co-defendant in the Tessera lawsuit requested the United States Patent and Trademark Office to reexamine the patentability of each of Tessera’s patents that are at issue in the case in the California court. The requests were granted and, in February 2007, the U.S. Patent and Trademark Office concluded that certain claims of the patents were invalid on the basis of prior art. In April 2008, ChipMOS Bermuda, ChipMOS USA and ChipMOS Taiwan received notice that Tessera requested the ITC to initiate another investigation alleging that the sale for and after importation into the United States as well as importation into the United States of certain small format non-tape based BGA semiconductor packages by ChipMOS Bermuda, ChipMOS Taiwan and ChipMOS USA infringe three of the five Tessera patents at issue in the case pending in the California court. Tessera sought, among other things, an investigation by the ITC and general exclusion orders to prohibit the infringing products from entry into the United States. The ITC initiated the investigation in May 2008. On March 13, 2009, after the close of discovery, Tessera submitted a request to terminate the proceedings at the ITC, which the judge granted on July 17, 2009. No petitions for review were filed. The ITC issued an order to terminate the investigation on August 7, 2009. The stayed litigations in the Northern District of California and the Eastern District of Texas may resume once the ITC completes a companion investigation against other companies. Our counsel has not formed an opinion as to the outcome of the case.

In September 2007, ChipMOS and ChipMOS Taiwan filed five lawsuits against Walton Advanced Engineering, Inc. and Walton Chaintech Corporation in Taiwan Kaohsiung District Court and Taiwan Banciao District Court, alleging infringement by these two companies of ChipMOS Taiwan’s package related patents for SDRAM, DDR I SDRAM and DDR II SDRAM devices. ChipMOS and ChipMOS Taiwan have reached an official settlement agreement with Walton Advanced Engineering, Inc. and Walton Chaintech Corporation on April 29, 2010 to withdraw all the patent infringement lawsuits and invalidation complaints between each other without any condition related to compensation.

In April 1999, Motorola, Inc. (“Motorola”) and ChipMOS Taiwan entered into an immunity agreement (the “Agreement”) whereby each party covenanted not to sue each other for the use of certain Ball Grid Array (“BGA”) patents. In December 2004, Motorola spun off its semiconductor division, and thereby formed Freescale Semiconductor, Inc. (“Freescale”), who then assumed Motorola’s rights and obligations under the Agreement. On October 16, 2006, Freescale unilaterally terminated the Agreement, alleging that ChipMOS Taiwan breached the Agreement. ChipMOS Taiwan argued that Freescale’s unilateral termination of the Agreement has no legal effect, and continues to accrue royalty payments for products it believes are covered by the Agreement. The payments previously returned by Freescale and accrued by ChipMOS Taiwan have been deposited in a separate escrow account. On July 13, 2009, Freescale alleged that ChipMOS Taiwan breached the Agreement by failing to pay royalties on certain BGA packages assembled by ChipMOS Taiwan. ChipMOS Taiwan filed an answer to deny all allegations, and also filed counterclaims against Freescale alleging that Freescale engaged in patent misuse by seeking to obtain royalties on certain of ChipMOS Taiwan’s BGA products that were not covered by any Freescale patent included under the Agreement, and for declaratory judgment of patent non-infringement and invalidity. On December 11, 2009, Freescale filed a motion to dismiss the declaratory judgment counterclaims filed by ChipMOS Taiwan and to stay all other patent related claims and issues until its breach of contract claims could be decided. On April 1, 2011, a Joint Scheduling Order was issued by the Court. The trial date has been scheduled for Septemebr 19, 2011. The Company’s counsel has not formed any opinion as to the outcome of the case.

Pursuant to the long-term service agreement we have entered into with Spansion in September 2005, Spansion agreed to provide ChipMOS with six month rolling forecast on testing and assembly service orders to be placed to us. In January 2009, Spansion has defaulted on its payment obligations under the long-term service agreement and ChipMOS has subsequently terminated the long-term service agreement with Spansion on February 19, 2009. On March 1, 2009, Spansion has filed for a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On January 25, 2010, ChipMOS Taiwan entered into a Transfer of Claim Agreement to sell to Citigroup the general unsecured claim reflected in the proof of claim against Spansion filed by ChipMOS Taiwan in U.S. Bankruptcy Court. Based on the Transfer of Claim Agreement, in February 2010, we received payment of approximately US$33 million for the sale of accounts receivable for testing and assembly services provided to Spansion in the amount of approximately US$66 million to US$70 million, and in October 2010, we received payment of approximately US$68 million for the damage claim. See “Item 4. Information on the Company— Customers”.

On December 28, 2009, Fulcrum Credit Partners LLC (“Fulcrum”) filed a complaint in Texas state court against ChipMOS Taiwan, ChipMOS USA and Citigroup alleging breach of contract, promissory estoppel, unjust enrichment and a claim for declaratory judgment, arising from Fulcrum’s alleged oral agreement to purchase ChipMOS Taiwan’s claims against Spansion. ChipMOS Taiwan was not served, though ChipMOS USA was served. ChipMOS Taiwan was of the opinion that Fulcrum did not follow the proper procedures and therefore ChipMOS Taiwan has no obligation to sell the claim to Fulcrum. On January 22, 2010, ChipMOS USA responded by removing the complaint to the U.S. District Court for the Western District of Texas. On January 29, 2010, ChipMOS USA filed a motion to transfer venue to the Delaware Bankruptcy Court. Fulcrum filed its opposition to the transfer motion, and argument was held in the Western District of Texas. On February 17, 2010, Fulcrum filed an amended complaint in federal court alleging breach of contract and unjust enrichment claims against ChipMOS Taiwan and ChipMOS USA. On March 3, 2010, ChipMOS USA moved for dismissal from federal court, asserting, inter alia, a complete defense in that the alleged contract does not exist and, even if it did, ChipMOS USA was not a party, since ChipMOS Taiwan was not served with the amended complaint. Fulcrum filed its response to the motion to dismiss on March 15, 2010. On July 30, 2010, ChipMOS Taiwan and ChipMOS USA have reached an official global settlement agreement with Fulcrum. Both ChipMOS and Fulcrum withdrew all complaints and claims against each other, group entities and any other parties covered in the prior filings in Texas and California of the United States.

Other than the matters described above, we were not involved in any material litigation in 2010 and are not currently involved in any material litigation.

For certain information regarding legal proceedings relating to certain of our current and former directors, see “Item 3.—Key Information—Risk Factors—Risks Related to Our Business—The ongoing criminal proceeding of and adverse publicity associated with Mr. Shih-Jye Cheng, our Chairman and Chief Executive Officer, and Mr. Hung-Chiu Hu, our former director, could have a material adverse effect on our business and cause our stock price to decline”.

Dividend Policy

To date, we have not distributed any dividends. We currently intend to retain future earnings, if any, to finance the expansion of our business and thus do not expect to pay any cash dividends for the foreseeable future. In addition, we have no current plans to pay stock dividends.

100

Item 9.

The Offer and Listing

Listing

Since March 17, 2010, the NASDAQ Capital Market has been the principal trading market for our common shares, which are not listed or quoted on any other markets in or outside the United States. Our common shares were formerly quoted on the NASDAQ Global Market (formerly the NASDAQ National Market) under the symbol “IMOS” since June 19, 2001, and our common shares were formerly quoted on the NASDAQ Global Select Market since July 1, 2006. The CUSIP number for our common shares is “G2110R114”. Our Shareholders approved a reverse stock split of ChipMOS’s common stock in January 2011 with a ratio of 1-for-every-4 shares effective on January 21, 2011. As a result, the number of outstanding shares of ChipMOS common stock is reduced to 27,725,782 shares, from 110,908,341 shares prior to the reverse stock split becoming effective. As of March 31, 2011, there were 32,580,771 common shares issued and outstanding. The table below sets forth for the periods indicated, historical prices for the high, low and average closing prices on the NASDAQ National Market, the NASDAQ Global Select Market or the NASDAQ Capital Market for our common shares.


	NASDAQ Price per share⁽¹⁾ (US$)
	High		Low		Average
2006		32.40		21.80		25.41
2007		31.56		16.44		25.70
2008		16.40		0.74		9.32
2009		3.97		0.80		2.45
First Quarter		1.84		0.80		1.18
Second Quarter		3.32		1.52		2.47
Third Quarter		2.32		3.97		2.99
Fourth Quarter		2.68		3.76		3.10
2010		7.68		2.40		4.80
First Quarter		3.28		2.40		2.86
Second Quarter		7.68		3.02		5.84
Third Quarter		6.00		3.60		4.77
November		5.92		4.92		5.47
December		6.36		5.64		5.94
Fourth Quarter		6.36		4.92		5.63
2011
January		7.08		6.24		6.59
February		8.12		6.64		7.43
March		8.80		7.30		7.90
First Quarter		8.80		6.24		7.33
April		8.82		8.08		8.59
May (through May 27, 2011)		9.81		7.71		8.34

Note:

(1)	The figures in the table contain historical prices reflecting the effect of our reverse stock split which was approved by our Shareholders on January 21, 2011.

Item 10.

Additional Information

Description of Share Capital

Our authorized share capital consists of 62 million common shares, par value US$0.04 per share, and 19 million preferred shares, par value US$0.04 per share.

101

Common Shares

Each shareholder is entitled to one vote for each common share held on all matters submitted to a vote of shareholders. Cumulative voting for the election of directors is not provided for in our bye-laws, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. The common shares are not entitled to preemptive rights and are not subject to conversion or redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of common shares would be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all liabilities.

Preferred Shares

Currently there are no specific rights attached to the preferred shares. The specific rights of the preferred shares could include rights, preferences or privileges in priority to our common shares and the establishment of such rights or the delegation to the board of directors to establish such rights will need to be approved by our shareholders. As of March 31, 2011, no preferred shares have been issued by our company.

Bermuda Law

We are an exempted company organized under the Bermuda Companies Act. The rights of our shareholders are governed by Bermuda law and our memorandum of association and bye-laws. The Bermuda Companies Act differs in some material respects from laws generally applicable to United States corporations and their shareholders.

Dividends

Under Bermuda law, a company may pay dividends that are declared from time to time by its board of directors unless there are reasonable grounds for believing that the company is, or would after the payment be, unable to pay its liabilities as they become due or that the realizable value of its assets would thereby be less than the aggregate of its liabilities, issued share capital and share premium accounts. The holders of common shares are entitled to receive dividends out of assets legally available for such purposes at times and in amounts as our board of directors may from time to time determine. Any dividend unclaimed for a period of six years from its date of declaration will be forfeited and will revert to our company.

Voting Rights

Under Bermuda law, except as otherwise provided in the Bermuda Companies Act or our bye-laws, questions brought before a general meeting of shareholders are decided by a majority vote of shareholders present at the meeting. Our bye-laws provide that, subject to the provisions of the Bermuda Companies Act, and except for the resolutions for approving the extraordinary transaction, any question properly proposed for the consideration of the shareholders will be decided by a simple majority of the votes cast, either on a show of hands or on a poll, with each shareholder present (and each person holding proxies for any shareholder) entitled to one vote on a show of hands, or on a poll, one vote for each fully paid-up common share held by the shareholder. In the case of an equality of votes cast, the chairman of the meeting shall have a second or casting vote. Any resolution for any of the following extraordinary transactions will require the approval of shareholders holding at least 70.0% of the total voting rights of all the shareholders having the right to vote at such meeting:

•

a resolution for the merger, amalgamation or any other consolidation of us with any other company, wherever incorporated;

•

a resolution for the sale, lease, exchange, transfer or other disposition of all or substantially all of our consolidated assets; or

•

a resolution for the adoption of any plan or proposal for the liquidation of our company.

102

Rights in Liquidation

Under Bermuda law, in the event of liquidation or winding-up of a company, after satisfaction in full of all claims of creditors and subject to the preferential rights accorded to any series of preferred shares, the proceeds of the liquidation or winding-up are distributed pro rata in species or in kind among the holders of our common shares in accordance with our bye-laws.

Meetings of Shareholders

Under Bermuda law, a company is required to convene at least one general shareholders’ meeting as an Annual General Meeting each calendar year. Bermuda law provides that a special general meeting may be called by the board of directors and must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote. Bermuda law also requires that shareholders be given at least five days’ advance notice of a general meeting but the accidental omission to give notice to any person does not invalidate the proceedings at a meeting. Under our bye-laws, we must give each shareholder written notice at least five days prior to the annual general meeting, unless otherwise agreed by all shareholders having the right to vote at that annual general meeting, and written notice at least five days prior to any special general meeting, unless otherwise agreed by a majority of shareholders having a right to vote at that special general meeting, and together holding at least 95% of the paid-up capital of the company carrying the right to vote at that meeting.

Under Bermuda law, the number of shareholders constituting a quorum at any general meeting of shareholders is determined by the bye-laws of the company. Our bye-laws provide that at least two shareholders present in person or by proxy and holding shares representing at least 50% of the total voting rights of all shareholders having the right to vote at the meeting constitute a quorum. Our bye-laws further provide that, in respect of a general meeting adjourned for lack of quorum, at least two shareholders present in person or by proxy holding shares representing 33¹/3% of the total voting rights of all shareholders having the right to vote at the meeting constitute a quorum.

Access to Books and Records and Dissemination of Information

Under Bermuda law, members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include a company’s certificate of incorporation, its memorandum of association (including its objects and powers), and any alteration to its memorandum of association and documents relating to an increase or reduction of authorized capital. The shareholders have the additional right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which, unless agreed by all shareholders and directors, must be laid before the annual general meeting. The register of shareholders of a company is also open to inspection by shareholders without charge and by members of the general public on the payment of a fee. A company is required to maintain its share register in Bermuda but may, subject to the provisions of Bermuda law, establish a branch register outside Bermuda. We maintain a share register in Hamilton, Bermuda and a branch register in New Jersey, USA. A company is required to keep at its registered office a register of its directors and officers which is open for inspection for not less than two hours each day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.

Election or Removal of Directors

Under Bermuda law and our bye-laws, directors are elected or appointed at an annual general meeting and serve until re-elected or re-appointed or until their successors are elected or appointed, unless they are earlier removed for cause or resign or otherwise cease to be directors under Bermuda law or our bye-laws.

A director may be removed for cause at a special general meeting of shareholders specifically called for that purpose, provided that the director is served with at least 14 days’ notice. The director has a right to be heard at that meeting. Any vacancy created by the removal of a director at a special general meeting may be filled at that meeting by the election of another director in his or her place or, in the absence of any election by the shareholders, by the board of directors.

103

Board Actions

Our bye-laws provide that the quorum necessary for the transaction of business is two directors of the board, and that questions arising at a properly convened meeting of the board of directors must be approved by a majority of the votes present and entitled to be cast. In the case of an equality of votes, the chairman of the meeting is entitled to a second or casting vote.

The board of directors may appoint any of our directors to act as our managing director or other senior executive, on such terms and conditions as it may determine, including with respect to remuneration.

Amendment of Memorandum of Association and Bye-laws

Bermuda law provides that the memorandum of association of a company may, with the consent of the Minister of Finance of Bermuda (if required), be amended by a resolution passed at a general meeting of shareholders of which due notice has been given. Our bye-laws, other than the bye-law separating our board of directors into three classes, may be amended by the board of directors if the amendment is approved by a majority of votes cast by our directors and by our shareholders by a resolution passed by a majority of votes cast at a general meeting. Any amendment to our bye-law separating a board of directors into three classes must be approved by our board of directors and by shareholders of shares representing at least 60% of our outstanding shares.

Under Bermuda law, the holders of an aggregate of no less than 20% in par value of a company’s issued share capital or any class of issued share capital have the right to apply to the Bermuda Court for an annulment of any amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment that alters or reduces a company’s share capital as provided in the Bermuda Companies Act. Where an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda Court. An application for the annulment of an amendment of the memorandum of association must be made within 21 days after the date on which the resolution altering the company’s memorandum of association is passed and may be made on behalf of the person entitled to make the application by one or more of their number as they may appoint in writing for the purpose. No application may be made by persons voting in favor of the amendment.

Appraisal Rights and Shareholder Suits

Under Bermuda law, in the event of an amalgamation of two Bermuda companies, a shareholder who did not vote in favour of the amalgamation and who is not satisfied that fair value has been paid for such shareholder’s shares may apply to the Bermuda Court to appraise the fair value of those shares. The Bermuda Companies Act provides that, subject to the terms of a company’s bye-laws, the amalgamation of a Bermuda company with another company requires the amalgamation agreement to be approved by the board of directors and, except where the amalgamation is between a holding company and one or more of its wholly-owned subsidiaries or between two or more wholly-owned subsidiaries, by meetings of the holders of shares of each company and of each class of such shares at a meeting of the shareholders by seventy-five percent of the members present and entitled to vote at that meeting in respect of which the quorum shall be two persons holding or representing at least one-third of the issued shares of each company or class, as the case may be. Under our bye-laws, any resolution proposed for consideration at any general meeting to approve the merger, amalgamation or any other consolidation of our company with any other company, wherever incorporated shall require the approval of our shareholders holding shares representing at least 70% of the total voting rights of all our shareholders, and the quorum to be at least 2 shareholders present in person or by proxy holdings shares representing at least 50% of the total voting rights of all the shareholders.

Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda Court, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong done to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company’s memorandum of association or bye-laws. Further consideration would be given by the Bermuda Court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

104

When the affairs of a company are being conducted in a manner oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Bermuda Court for an order regulating the company’s conduct of affairs in the future or compelling the purchase of the shares by any shareholder, by other shareholders or by the company.

Exchange Controls

The following discussion is based on the advice of Appleby, our Bermuda counsel.

The BMA, has designated us as non-resident for exchange control purposes. The BMA has granted its consent under the Exchange Control Act 1972 and regulations promulgated thereunder for the issue or transfer to non-residents of Bermuda for exchange control purposes of our common shares, subject to the common shares remaining quoted on the NASDAQ Capital Market.

Share Issuance and Transfers by Non-Bermuda and Bermuda Residents

Under Bermuda law, there are no limitations on the rights of non-Bermuda residents to hold or vote their shares of Bermuda companies. Because we have been designated as a non-resident for Bermuda exchange control purposes, there are no restrictions on our ability to transfer funds in and out of Bermuda or to pay dividends to United States residents who are holders of our common shares other than in respect of local Bermuda currency.

Under Bermuda law, we are an exempted company. An exempted company is exempt from the provisions of Bermuda law, which stipulate that at least 60% of the equity must be beneficially owned by Bermuda persons. Persons regarded as residents of Bermuda for exchange control purposes require specific consent under the Exchange Control Act 1972 to acquire securities issued by us. The Exchange Control Act 1972 permits companies to adopt bye-law provisions relating to the transfer of securities. None of Bermuda law, our memorandum of association or our bye-laws imposes limitations on the right of foreign nationals or non-residents of Bermuda to hold our shares or vote such shares.

As an exempted company, we may not participate in certain business transactions, including: (1) the acquisition or holding of land in Bermuda, except (i) land acquired for its business by way of lease or tenancy agreement for a term not exceeding fifty years, or (ii) with the consent of the Minister of Finance granted in his discretion, land by way of lease or tenancy agreement for a term not exceeding twenty-one years in order to provide accommodation or recreational facilities for its officers and employees; (2) the taking of mortgages on land in Bermuda to secure an amount in excess of US$50,000 without the consent of the Bermuda Minister of Finance; or (3) the carrying on of business of any kind in Bermuda, except in furtherance of our business carried on outside Bermuda or under a license granted by the Bermuda Minister of Finance. In addition, present BMA policy permits no more than 20% of the share capital of an exempted company to be held by Bermuda persons.

The Bermuda government actively encourages foreign investment in exempted entities like us that are based in Bermuda but do not operate in competition with local business. In addition to having no restrictions on the degree of foreign ownership, we are subject neither to taxes on our income or dividends nor to any foreign exchange controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be accumulated by us without limitation.

Director’s Interests

Under the Bermuda Companies Act, a director of a company may, notwithstanding his office, be a party to or otherwise interested in any transaction or arrangement with the company or in which the company is otherwise interested. He or she may also be a director or officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any corporate body promoted by the same company or an interested company. Therefore, where it is necessary, so long as a director of a Bermuda company declares the nature of his or her interest at the first opportunity at a meeting of the board or by writing to the directors as required by the Bermuda Companies Act, that director shall not by reason of his or her office be accountable to a company for any benefit he or she derives from any office or employment to which the bye-laws of the company allow him or her to be appointed or from any transaction or arrangement in which the bye-laws of such company allow him or her to be interested, and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit. A general notice to the directors by a director or officer declaring that he or she is a director or officer or has an interest in a person and is to be regarded as interested in any transaction or arrangement made with that person shall be sufficient declaration of interest in relation to any transaction or arrangement so made.

105

Share Issuance and Transfer

We have been designated as a non-resident for exchange control purposes by the BMA, whose permission for the issuance and transfer of common shares has been obtained subject to the common shares being quoted on the NASDAQ Capital Market.

The transfer of common shares between persons regarded as non-resident in Bermuda for exchange control purposes and the issuance of shares after the completion of the currently contemplated offering of our common shares to those persons may be effected without specific consent under the Exchange Control Act 1972 of Bermuda and regulations thereunder subject to the common shares remaining quoted on the NASDAQ Capital Market. Issuance and transfer of shares to any person regarded as resident in Bermuda for exchange control purposes require specific prior approval under the Exchange Control Act 1972.

There are no limitations on the rights of persons regarded as non-residents of Bermuda for foreign exchange control purposes who own common shares to hold or vote their common shares. Since we have been designated as a non-resident for Bermuda exchange control purposes, there are no restrictions on our ability to transfer funds in and out of Bermuda or to pay dividends to United States residents or other non-residents of Bermuda who are holders of common shares, other than in respect of local Bermuda currency. Furthermore, it is not our intent to maintain Bermuda dollar deposits and, accordingly, will not pay dividends on the common shares in Bermuda currency.

Bermuda law requires that share certificates be issued only in the names of corporations or individuals. Where an applicant for common shares acts in a special capacity, such as an executor or trustee, certificates may, at the request of that applicant, record the capacity in which the applicant is acting. Our recording of any special capacity, however, shall not be construed as obliging us either to investigate, or to incur any responsibility or liability in respect of, the proper administration of any trust or estate. Regardless of whether or not we have had notice of a trust, no notice shall be taken of any trust, equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or any other right in respect of any common shares.

Transfer Agent and Registrar

Appleby Management (Bermuda) Ltd. (formerly known as Reid Management Limited) serves as our principal registrar and transfer agent in Bermuda for the common shares. Mellon Investor Services, LLC serves as our United States transfer agent and registrar for the common shares.

Material Contracts

We have entered into the following contracts within the two years preceding the date of this Annual Report on Form 20-F that are or may be material:

•

Registration rights agreements, dated December 18, 2009, by and between the Company and PacMOS and six individual noteholders, pursuant to which we granted certain registration rights for our common shares converted from the convertible notes or paid in certain other payments such as interest and a make-whole amount.

•

A registration rights agreement, dated December 24, 2009, by and between the Company and ThaiLin, pursuant to which we granted to ThaiLin certain registration rights for our common shares converted from the convertible notes or paid in certain other payments such as interest and a make-whole amount.

106

•

On February 26, 2010, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with Siliconware Precision to sell to Siliconware Precision our holding of 133 million common shares of ChipMOS Taiwan with a consideration of approximately NT$1,630 million (US$56 million). The purchase shares represent 15.8% of the total number of ChipMOS Taiwan’s outstanding shares. Under the terms and conditions of the Share Purchase Agreement, Siliconware Precision paid the purchase price in four installments to ChipMOS Bermuda, with the final installment scheduled to be paid on or about March 31, 2011. The share purchase transaction was completed in January 2011 and subsequently the Company owned 84.2% of ChipMOS Taiwan’s outstanding shares.

•

On February 26, 2010, ChipMOS Taiwan entered into an equipment purchase agreement (the “Equipment Purchase Agreement”) with Siliconware Precision to purchase its DRAM testers and LCD driver assembly and test equipment with a purchase price of approximately NT$1,630 million (US$56 million). Under the terms and conditions of the Equipment Purchase Agreement, ChipMOS Taiwan will pay the purchase price in four installments to Siliconware Precision, with the final installment paid on or before March 31, 2011. All of the purchased equipment will be shipped to and installed at ChipMOS’ plant no later than July 31, 2010. In January 2011, the Company has paid the final installment to SPIL and completed the Equipment Purchase Agreement transaction.

•

On April 22, 2011, the Company entered MMT Assignment Agreement with ThaiLin to sell the MMT Notes to ThaiLin for a purchase price of approximately US$40 million subject to certain closing conditions. Post completion of MMT Assignment Agreement transaction, ThaiLin is expected to immediately convert the MMT Notes into common shares of Modern Mind and purchase all of the remaining common shares of Modern Mind from Jesper, with ChipMOS Shanghai becoming a wholly-owned subsidiary of ThaiLin. The MMT Assignment Agreement is expected to be completed in the fourth quarter of 2011.

Please see also “Item 7. Major Shareholders and Related Party Transactions” for summaries of contracts with certain of our related parties.

Bermuda Taxation

This summary is based on laws, regulations, treaty provisions and interpretations now in effect and available as of the date of this Annual Report on Form 20-F. The laws, regulations, treaty provisions and interpretations, however, may change at any time, and any change could be retroactive to the date of issuance of our common shares. These laws, regulations and treaty provisions are also subject to various interpretations, and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below.

At the date hereof, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or our shareholders other than shareholders ordinarily resident in Bermuda. We are not subject to stamp or other similar duty on the issuance, transfer or redemption of our common shares.

We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertaking Tax Protection Act 1966 that, in the event there is enacted in Bermuda any legislation imposing tax computed on profits or income or computed on any capital assets, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not be applicable to us or to our operations, or to the common shares, debentures or our other obligations until March 28, 2016, except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such common shares, debentures or our other obligations or any real property or leasehold interests in Bermuda owned by us. No reciprocal income tax treaty affecting us exists between Bermuda and the United States.

As an exempted company, we are liable to pay in Bermuda an annual registration fee calculated on a sliding scale basis by reference to our assessable capital, which is the aggregate of our authorized common share capital and the premium on our issued common shares currently at a rate not exceeding US$31,120 per annum.

107

United States Federal Income Taxation

In General

This section describes the material United States federal income tax consequences generally applicable to ownership by a U.S. holder (as defined below) of our common shares. It applies to you only if you hold your common shares as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

•

a dealer in securities;

•

a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;

•

a tax-exempt organization;

•

a life insurance company;

•

a person liable for alternative minimum tax;

•

a person that actually or constructively owns 10% or more of our voting stock;

•

a person that holds common shares as part of a straddle or a hedging or conversion transaction; or

•

a person whose functional currency is not the US dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions all as currently in effect. These laws are subject to change, possibly on a retroactive basis. There is currently no comprehensive income tax treaty between the United States and Bermuda.

You are a U.S. holder if you are a beneficial owner of common shares and you are:

•

a citizen or resident of the United States;

•

a domestic corporation;

•

an estate whose income is subject to United States federal income tax regardless of its source; or

•

a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

If a partnership holds the common shares, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. If you hold the common shares as a partner in a partnership you should consult your tax advisor with regard to the United States federal income tax treatment of an investment in the common shares.

You should consult your own tax advisor regarding the United States federal, state and local and the Bermuda and other tax consequences of owning and disposing of common shares in your particular circumstances.

This discussion addresses only United States federal income taxation.

Taxation of Dividends

Under the United States federal income tax laws, and subject to the passive foreign investment company, or PFIC, rules discussed below, if you are a U.S. holder, the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation. If you are a noncorporate U.S. holder, dividends paid to you in taxable years beginning before January 1, 2011, that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15% provided that you hold the common shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends we pay with respect to the common shares generally will be qualified dividend income provided that, in the year that you receive the dividend, the common shares are readily tradable on an established securities market in the United States. We believe that our shares, which are listed on the NASDAQ, are readily tradable on an established securities market in the United States; however, there can be no assurance that our shares will continue to be readily tradable on an established securities market.

108

The dividend is taxable to you when you receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the common shares and thereafter as capital gain.

Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate.

Dividends will be income from sources outside the United States, but dividends paid in taxable years beginning before January 1, 2007, generally will be “passive” or “financial services” income, and dividends paid in taxable years beginning after December 31, 2006, will depending on your circumstances, be “passive” or “general” income which, in either case, is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you. You should consult your own tax advisor regarding the foreign tax credit rules.

Taxation of Capital Gains

Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your common shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount that you realize and your tax basis in your common shares. Capital gain of a noncorporate U.S. holder that is recognized in taxable years beginning before January 1, 2011, is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. The deductibility of capital losses is subject to limitations. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

PFIC Rules. We believe that our common shares should not be treated as stock of a Personal Foreign Investment Company, or PFIC, for United States federal income tax purposes, but this conclusion is a legal and factual determination that is made annually and thus may be subject to change. If we were to be treated as a PFIC, unless a U.S. holder elects to be taxed annually on a mark-to-market basis with respect to the shares, gain realized on the sale or other disposition of your common shares would in general not be treated as capital gain. Instead, if you are a U.S. holder, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the common shares and would not be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, your common shares will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your common shares. Dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are treated as a PFIC with respect to you either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

Documents on Display

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. These materials may be inspected and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission.

109

Item 11.

Quantitative and Qualitative Disclosure about Market Risk

Market Risks

Our exposure to financial market risks relates primarily to changes in interest rates and foreign exchange rates. To mitigate these risks, we utilize derivative financial instruments, the application of which is primarily for hedging, and not for speculative, purposes.

Interest Rate Risks

As of December 31, 2010, we had aggregate debt outstanding of NT$13,785 million (US$473 million), which was incurred for capital expenditure and general operating expenses. Of our outstanding debt as of December 31, 2010, 86% bears interest at variable rates. The interest rate for the majority of our variable rate debt varies based on a fixed percentage spread over the prime rate established by our lenders. Our variable rate debt had an annual weighted average interest rate of 2.3% as of December 31, 2010. Accordingly, we have cash flow and earnings exposure due to market interest rate changes for our variable rate debt. An increase in interest rates of 1% would increase our annual interest charge by NT$119 million (US$4 million) based on our outstanding indebtedness as of December 31, 2010.

As of December 31, 2009 and 2010, ChipMOS Taiwan had no interest rate swap agreements outstanding.

Foreign Currency Exchange Rate Risks

Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the NT dollar, the Japanese yen and the US dollar. As of December 31, 2010, 45.3% of our financial assets and 10.4% of our financial liabilities are denominated in Japanese yen and US dollars. To minimize foreign currency exchange risk, from time to time we utilize forward exchange contracts and foreign currency options to hedge our exchange rate risk on foreign currency assets or liabilities positions. These hedging transactions help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements. An average appreciation of the NT dollar against all other relevant foreign currencies of 5% would increase our annual exchange loss by NT$125 million (US$4 million) based on our outstanding assets and liabilities denominated in foreign currencies as of December 31, 2010. As of December 31, 2008, 2009 and 2010, we had no outstanding forward exchange or foreign currency option contracts.

See Note 23 of our audited consolidated financial statements for additional information on these derivative transactions.

Item 12.

Description of Securities Other Than Equity Securities

Not applicable.

110

PART II

Item 13.

Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15.

Controls and Procedures

Disclosure Controls and Procedures. An evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the chief executive officer and chief financial officer concluded that these disclosure controls and procedures were effective as of December 31, 2010.

Management’s Annual Report on Internal Control Over Financial Reporting. Management’s Report on Internal Control Over Financial Reporting is set forth below.

Management’s Report on Internal Control Over Financial Reporting

June 3, 2011

Management of ChipMOS TECHNOLOGIES (Bermuda) LTD. (together with its consolidated subsidiaries, the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with generally accepted accounting principles in the Republic of China and the required reconciliation to generally accepted accounting principles in the United States.

As of December 31, 2010, the Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, conducted an assessment of the effectiveness of the Company’s internal control over financial reporting using criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s management has concluded that the Company’s internal control over financial reporting as of December 31, 2010 was effective.

Moore Stephens, an independent registered public accounting firm, has audited our consolidated financial statements included in the Annual Report of the Company on Form 20-F for the year ended December 31, 2010 and has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2010. The attestation report is set forth in “Item 18. Financial Statements”.


/s/ Shih-Jye Cheng		/s/ Shou-Kang Chen
Name:	Shih-Jye Cheng	Name:	Shou-Kang Chen
Title:	Chairman and Chief Executive Officer	Title:	Chief Financial Officer

Changes in Internal Control Over Financial Reporting. During 2010, no change to our internal control over financial reporting occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A.

Audit Committee Financial Expert

Our Board of Directors have determined that Chin-Shyh Ou, one of our independent directors, qualified as audit committee financial expert and meets the independence requirement as defined in Item 16A to Form 20-F.

Item 16B.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics, which applies to our directors, officers and employees. A copy of our Code of Business Conduct and Ethics is filed as Exhibit 11.1 to this Annual Report on Form 20-F.

111

Item 16C.

Principal Accountant Fees and Services

The table below summarizes the aggregate fees that we paid or accrued for services provided by Moore Stephens for the years ended December 31, 2009 and 2010.


	2009		2010
	NT$		NT$
	(In thousands)
Audit Fees	$	11,055	$	10,549
Audit Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—

Total	$	11,055	$	10,549

Audit Fees. This category includes the audit of our annual financial statements and services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for those fiscal years. For 2009 and 2010, this category primarily include the audit of our financial statements and our internal control over financial reporting contained in this Annual Report on Form 20-F.

Audit-Related Fees. This category includes fees reasonably related to the performance of the audit or review of our financial statements and not included in the category of Audit Fees (described above).

All non-audit services are pre-approved by our Audit Committee on a case-by-case basis. Accordingly, we have not established any pre-approval policies and procedures.

All audit services that Moore Stephens was engaged to carry out after May 6, 2003, the effective date of revised Rule 2-01(c)(7) of Regulation S-X entitled “Audit Committee Administration of the Engagement” on strengthening requirements regarding auditor independence, were pre-approved by the Audit Committee.

Item 16D.

Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F.

Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G.

Corporate Governance

Our corporate governance practices are governed by applicable Bermuda law, specifically, the Bermuda Companies Act, and our memorandum of association and bye-laws. Also, because our securities are listed on the NASDAQ, we are subject to corporate governance requirements applicable to NASDAQ-listed foreign private issuers under NASDAQ listing rules.

Under NASDAQ Rule 5615(a)(3), NASDAQ-listed foreign private issuers may, in general, follow their home country corporate governance practices instead of most NASDAQ corporate governance requirements. However, all NASDAQ-listed, foreign private issuers must comply with NASDAQ Rules 5605(c)(2)(A)(ii), 5605(c)(3), 5625 and 5640.

112

Item 16G requires a foreign private issuer to provide in its annual report filed with the Securities and Exchange Commission a brief, general summary of any significant ways its corporate governance practices differ from those followed by NASDAQ-listed domestic companies. The table below provides this summary information as required by Item 16G and by NASDAQ Rule 5615(a)(3):


NASDAQ Listing Rule	Corporate Governance Practice To Be Followed by Domestic Companies	Our Corporate Governance Practice
5605(b)	Requires a majority independent board and an independent director executive session.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5605(c)(1)	Audit committee charter requirements.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5605(c)(2)(A)(ii)	Audit committee composition and independence requirements.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5605(c)(2)(A)(i), (iii), (iv)	Audit committee financial sophistication requirements.	We follow governance practices under Bermuda law: Bermuda Companies Act does not have such requirement.

5605(c)(3)	Audit committee responsibilities and authority requirements.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5605(d), (e)	Requires independent director oversight of executive officer compensation and director nominations.	We follow governance practices under Bermuda law: Bermuda Companies Act does not have such requirement.

5610	Requires a code of conduct for directors, officers and employees.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5620	Annual shareholder meeting requirements.	We follow governance practices under Bermuda law. The Bermuda Companies Act and our bye-laws provide for certain requirements for the annual shareholder meeting, including the following:

		(a) an annual general meeting at least once in every calendar year;

		(b) Bermuda Companies Act does not have express provisions requiring proxy solicitation; and

		(c) under bye-law 49, the quorum for any annual general meeting shall be at least two shareholders present in person or by proxy and holding shares representing at least fifty percent (50%) of the total voting rights of all the shareholders having the right to vote at such meeting and entitled to vote.

5625	Requires an issuer to notify NASDAQ of any material noncompliance with the Rule 5600 series.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5630	Requires oversight of related party transactions.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

5635	Circumstances that require shareholder approval.	We follow governance practices under Bermuda law. The Bermuda Companies Act and our bye-laws provide for certain circumstances which require shareholders’ approval, including the following:

		(a) under bye-law 5, subject to the Bermuda Companies Act, all or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time be altered or abrogated with the consent in writing of the holders of not less than 75% of the issued shares of that class or with the sanction of a resolution of our shareholders passed at a separate general meeting of the holders of such shares voting in person or by proxy;

113


NASDAQ Listing Rule	Corporate Governance Practice To Be Followed by Domestic Companies	Our Corporate Governance Practice
		(b) under bye-law 129, subject to the Bermuda Companies Act and our bye-laws, any resolution proposed for consideration at any general meeting to approve (i) the merger, amalgamation or any other consolidation of us with any other company, wherever incorporated; (ii) any sale, lease, exchange, transfer or other disposition of all or substantially all of our consolidated assets; and (iii) the adoption for any plan or proposal for our liquidation, shall require the approval of our shareholders holding shares representing at least 70% of the total voting rights of all the shareholders having the right to vote at such meeting; and

		(c) under the Bermuda Companies Act, there are provisions setting out the requirements as well as specified shareholders’ approval for a scheme of arrangement, compulsory acquisition or amalgamation.

5640	Shareholder voting rights requirements.	We follow the same NASDAQ listing rule governance practice as followed by domestic companies.

114

PART III

Item 17.

Financial Statements

The Company has elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

Item 18.

Financial Statements

The financial statements and related information of the Company are located at pages F-1 to F-60.

Item 19.

Exhibits


Exhibits		Description
1.1		Memorandum of Association of ChipMOS TECHNOLOGIES (Bermuda) LTD.⁽¹⁾

1.2		Bye-laws of ChipMOS TECHNOLOGIES (Bermuda) LTD.⁽¹⁰⁾

2.1		Certificate of Incorporation of ChipMOS TECHNOLOGIES (Bermuda) LTD., dated August 15, 2000.⁽¹⁾

4.1		Joint Venture Agreement, dated July 14, 1997, between Mosel Vitelic Inc. and Siliconware Precision Industries Co., Ltd.⁽¹⁾

4.2		Asset Sales Agreement, dated June 14, 1999, between Microchip Technology Taiwan and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.3		Tessera Compliant Chip License Agreement, dated April 20, 1999, between Tessera Inc. and ChipMOS TECHNOLOGIES INC.⁽¹⁾
4.4		License Agreement, dated April 1, 1999, between Fujitsu Ltd. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.5		Sales Agreement, dated February 10, 2000, between Sharp Corp. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.6		Raw Materials Processing Agreement, dated August 10, 2000, between Mosel Vitelic Inc. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.7		Raw Materials Processing Agreement, dated January 1, 2001, between Siliconware Precision Co. Ltd. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.8		Integrated Circuit Processing Agreement, dated January 1, 2001, between Siliconware Precision Co. Ltd. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.9		Integrated Circuit Processing and Warehousing Management Agreement, dated August 10, 2000, between Mosel Vitelic Inc. and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.10		Land Lease Agreement, dated November 26, 1997, between Science Based Industrial Park Administration and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.11		Land Lease Agreement, dated November 26, 1997, between Science Based Industrial Park Administration and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.12		Land Lease Agreement, dated September 1, 1997, between Science Based Industrial Park Administration and ChipMOS TECHNOLOGIES INC.⁽¹⁾

4.13		Purchase Agreement, dated July 31, 1997, between ChipMOS TECHNOLOGIES INC. and Mosel Vitelic Inc.⁽¹⁾

4.14		Form of Share Exchange Covenant Letter from the Company to the Shareholders.⁽¹⁾

4.15		Amendment to the Integrated Circuit Processing and Warehousing Management Agreement, dated August 10, 2000, between Mosel Vitelic Inc. and ChipMOS TECHNOLOGIES INC, dated September 1, 2001.⁽²⁾

4.16		Purchase Agreement, dated October 15, 2003, between ChipMOS TECHNOLOGIES INC. and DenMOS Technology Inc.⁽²⁾

4.17		Sale and Purchase Agreement, dated April 25, 2003, between ChipMOS TECHNOLOGIES INC. and Ron How Investment Corp. (English Translation)⁽³⁾

4.18		Sale and Purchase Agreement, dated April 25, 2003, between ChipMOS TECHNOLOGIES INC. and Yuan Shan Investment Corp. (English Translation)⁽³⁾

4.19		Sale and Purchase Agreement, dated April 25, 2003, between ChipMOS TECHNOLOGIES INC. and Mosel Vitelic Inc. (English Translation)⁽³⁾

115


Exhibits		Description

4.20		Laser Stamping Machine Lease Agreement, dated November 1, 2002, between ChipMOS TECHNOLOGIES INC. and CHANTEK ELECTRONIC CO., LTD. (English Translation)⁽³⁾

4.21		Automatic Stamping Machine Lease Agreement, dated December 1, 2002, between ChipMOS TECHNOLOGIES INC. and CHANTEK ELECTRONIC CO., LTD. (English Translation)⁽³⁾

4.22		Raw Materials Processing Agreement, dated January 1, 2003, between ChipMOS TECHNOLOGIES INC. and CHANTEK ELECTRONIC CO., LTD. (English Translation)⁽³⁾

4.23		Integrated Circuit Processing Agreement, dated January 1, 2003, between ChipMOS TECHNOLOGIES INC. and CHANTEK ELECTRONIC CO., LTD. (English Translation)⁽³⁾

4.24		Technology Transfer Agreement, dated December 24, 2002, between ChipMOS TECHNOLOGIES INC. and ThaiLin Semiconductor Corp. (English Translation)⁽³⁾

4.25		Tester Equipment Lease Agreement, dated November 14, 2002, between ChipMOS TECHNOLOGIES INC. and ThaiLin Semiconductor Corp. (English Translation)⁽³⁾

4.26		Tester Equipment Lease Agreement, dated December 3, 2002, between ChipMOS TECHNOLOGIES INC. and ThaiLin Semiconductor Corp. (English Translation)⁽³⁾
4.27		Joint Engagement Letter, undated, by and among Ultima Electronics Corp., ChipMOS TECHNOLOGIES INC. and Sun-Fund Securities Ltd. (English Translation)⁽³⁾

4.28		Lease Agreement, dated June 1, 2002, between ChipMOS TECHNOLOGIES INC. and SyncMOS Technologies, Inc. (English Translation)⁽³⁾

4.29		Technology Transfer Agreement, dated August 1, 2002, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES (Shanghai) LTD.⁽³⁾

4.30		Promissory Note from Modern Mind Technology Limited to Jesper Limited, dated November 4, 2002.⁽³⁾

4.31		Deed of Variation, dated December 2, 2002, between Modern Mind Technology Limited and Jesper Limited.⁽³⁾

4.32		Deed of Assignment, dated December 27, 2002, between Jesper Limited and ChipMOS TECHNOLOGIES (Bermuda) LTD.⁽³⁾

4.33		Deed of Assignment, dated June 25, 2003, between Jesper Limited and ChipMOS TECHNOLOGIES INC.⁽³⁾

4.34		Agreement, dated May 3, 2003, between Jesper Limited and Modern Mind Technology Limited.⁽³⁾

4.35		Master loan agreement, dated July 12, 2004, among ChipMOS TECHNOLOGIES (Bermuda) LTD., Modern Mind Technology Limited and Jesper Limited.⁽⁵⁾

4.36		Cooperation Agreement, dated March 27, 2002, between Shanghai Qingpu Industrial Zone Development (Group) Company and ChipMOS TECHNOLOGIES (Bermuda) LTD. (English Translation)⁽³⁾

4.37		Deed of assignment, dated December 17, 2003, between ChipMOS TECHNOLOGIES INC. and ChipMOS TECHNOLOGIES (Bermuda) LTD.⁽⁴⁾

4.38		Supplemental deed of assignment, dated May 14, 2004 between ChipMOS TECHNOLOGIES INC. and ChipMOS TECHNOLOGIES (Bermuda) LTD.⁽⁴⁾

4.39		Second supplemental deed of assignment, dated October 11, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁵⁾

4.40		Assignment agreement, dated April 7, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁴⁾

4.41		Supplemental assignment agreement, dated May 14, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁴⁾

4.42		Second supplemental assignment agreement, dated October 11, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁵⁾

4.43		Patent license agreement, dated April 7, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁴⁾

4.44		Supplemental patent license agreement dated July 8, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁵⁾

116


Exhibits		Description

4.45		Second supplemental patent license agreement dated October 11, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁵⁾

4.46		Third supplemental patent license agreement dated December 30, 2004, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁵⁾

4.47		Assembly and Testing Service Agreement, dated November 27, 2005, between ChipMOS TECHNOLOGIES INC. and Spansion LLC.⁽⁶⁾

4.48		Share Purchase and Subscription Agreement, dated February 13, 2007, among ChipMOS TECHNOLOGIES (Bermuda) LTD., ChipMOS TECHNOLOGIES INC. and Siliconware Precision Industries Co., Ltd.⁽⁷⁾

4.49		Registration Rights Agreement, dated March 27, 2007, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and Siliconware Precision Industries Co., Ltd.⁽⁷⁾

4.50		Share Exchange Agreement, dated as of April 12, 2007, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁹⁾

4.51		Assignment Agreement, dated April 12, 2007, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ChipMOS TECHNOLOGIES INC.⁽⁸⁾

4.52		Form of Change In Control Severance Agreement.⁽⁹⁾

4.53		Southern Taiwan Science Park Administration Land Lease Agreement, dated June 1, 2007, between Southern Taiwan Science Park Administration and ChipMOS TECHNOLOGIES INC. (English Translation)⁽⁹⁾

4.54		Second Amendment to Assembly and Test Service Agreement, dated July 16, 2007, by and between Spansion LLC and ChipMOS TECHNOLOGIES INC.⁽⁹⁾

4.55		Service Agreement for Integrated Circuit Products, dated July 17, 2007, by and between ProMOS Technologies Inc. and ChipMOS TECHNOLOGIES INC. (English Translation)⁽⁹⁾

4.56		Registration Rights Agreement, dated August 8, 2007, among ChipMOS TECHNOLOGIES (Bermuda) LTD., Giant Haven Investment Limited, ProMOS Technologies Inc. and Powertech Technology Inc.⁽⁹⁾

4.57		Third Amendment to Assembly and Test Services Agreement, dated November 30, 2007, by and between Spansion LLC and ChipMOS TECHNOLOGIES INC.⁽⁹⁾

4.58		Science Park Administration Land Lease Agreement, dated December 1, 2007, between Science Park Administration and ChipMOS TECHNOLOGIES INC. (English Translation)⁽⁹⁾

4.59		Lease Agreement, dated April 2, 2008, between ChipMOS TECHNOLOGIES INC. and ThaiLin Semiconductor Corp. (English Translation)⁽⁹⁾

4.60		Master Lease Agreement and Addendums to the Master Lease Agreement, dated November 9, 2009, between ChipMOS TECHNOLOGIES INC. and GE Money Taiwan Limited.⁽¹¹⁾

4.61		Transfer of Claim Agreement, dated January 25, 2010, between ChipMOS TECHNOLOGIES INC. and Citigroup Financial Products Inc.⁽¹¹⁾

4.62		Share Purchase Agreement, dated February 26, 2010, between ChipMOS TECHNOLOGIES (Bermuda) LTD. and Siliconware Precision Industries Co., Ltd.⁽¹¹⁾

4.63		Equipment Purchase Agreement, dated February 26, 2010, between ChipMOS TECHNOLOGIES INC. and Siliconware Precision Industries Co., Ltd.⁽¹¹⁾

4.64		Assignment and Assumption Agreement, effective on April 22, 2011 between ChipMOS TECHNOLOGIES (Bermuda) LTD. and ThaiLin Semiconductor Corp.

8.1		List of principal subsidiaries of ChipMOS TECHNOLOGIES (Bermuda) LTD.

11.1		Code of Business Conduct and Ethics.⁽⁴⁾

12.1		Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act.

12.2		Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act.

13.1		Certification of Chief Executive Officer required by Rule 13a-14(b) under the Exchange Act.

117


Exhibits		Description

13.2		Certification of Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act.

15.1		Consent of independent registered public accounting firm.

(1)	Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-13218), filed on February 28, 2001.

(2)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 17, 2002.

(3)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 30, 2003.

(4)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 17, 2004.

(5)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 29, 2005.

(6)	Incorporated by reference to our Registration Statement on Form F-3 (File No. 333-130230), filed on December 9, 2005.

(7)	Incorporated by reference to Schedule 13D filed with the United States Securities and Exchange Commission by Siliconware Precision Industries Co., Ltd. on April 4, 2007.

(8)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 8 2007.

(9)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 6, 2008.

(10)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 4, 2009.

(11)	Incorporated by reference to our Annual Report on Form 20-F (File No. 0-31106), filed on June 4, 2010.

We have not included as exhibits certain instruments with respect to our long-term debt, the amount of debt authorized under each of which does not exceed 10% of our total assets, and we agree to furnish a copy of any such instrument to the Commission upon request.

118

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all the requirements for filing on Form 20-F and it has duly caused this Annual Report on Form 20-F to be signed on its behalf by the undersigned, thereunto duly authorized, in Taipei, Taiwan, Republic of China, on June 3, 2011.


ChipMOS TECHNOLOGIES (Bermuda) LTD.

By:		/s/ Shih-Jye Cheng
Name:		Shih-Jye Cheng
Title:		Chairman and Chief Executive Officer

119

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm			F-2

Consolidated Balance Sheets			F-4

Consolidated Statements of Operations			F-6

Consolidated Statements of Changes in Equity			F-8

Consolidated Statements of Cash Flows			F-9

Notes to Consolidated Financial Statements			F-11

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

ChipMOS TECHNOLOGIES (Bermuda) LTD.

We have audited the accompanying consolidated balance sheets of ChipMOS TECHNOLOGIES (Bermuda) LTD. and subsidiaries (collectively, the “Company”) (see Note 1) as of December 31, 2009 and 2010, and the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010, all expressed in New Taiwan dollars. We have also audited the Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of China and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2009 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the Republic of China. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO).

F-2

Accounting principles generally accepted in the Republic of China vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2010, and the determination of equity and financial position at December 31, 2009 and 2010, to the extent summarized in Note 25.

/s/ Moore Stephens

Certified Public Accountants

Hong Kong

March 15, 2011

F-3

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)


	December 31,
	2009			2010
	NT$			NT$			US$ (Note 3)
ASSETS
CURRENT ASSETS

Cash and cash equivalents		3,884,828			7,143,265			245,136
Restricted cash and cash equivalents (Note 20)		243,849			546,807			18,765
Financial assets at fair value through profit and loss (Notes 2 and 4)		119,027			2,999			103
Investments with no active market (Notes 2, 7 and 20)		100,000			—			—
Notes receivable		27,931			13,980			480
Accounts receivable - net of allowance for doubtful receivables and sales return allowances of NT$2,407,172 in 2009 and NT$197,311 in 2010 (Notes 2 and 5)
Related parties (Note 19)		205			257,982			8,853
Third parties		2,441,765			2,816,072			96,639
Other receivables - net of allowance for doubtful receivables and sales return allowances of NT$529,758 in 2009 and NT$64,783 in 2010 (Notes 2 and 5)
Related parties (Note 19)		—			66,378			2,278
Third parties		130,131			182,028			6,247
Inventories - net (Notes 2 and 6)		862,064			1,279,804			43,919
Deferred income tax - net (Notes 2 and 18)		356,310			278,711			9,565
Prepaid expenses and other current assets		265,123			202,272			6,941

Total Current Assets		8,431,233			12,790,298			438,926


LONG-TERM INVESTMENTS (Notes 2 and 7)
Financial assets carried at cost		19,966			10,537			362
Investments with no active market (Note 20)		200,000			—			—

Total long-term investments		219,966			10,537			362


PROPERTY, PLANT AND EQUIPMENT - NET (Notes 2, 8 and 20)
Cost
Land		532,605			452,738			15,537
Buildings and auxiliary equipment		9,371,645			8,721,205			299,286
Machinery and equipment		43,396,295			35,222,825			1,208,745
Furniture and fixtures		1,361,181			1,289,149			44,240
Transportation equipment		41,720			36,396			1,249
Tools		3,123,201			2,970,633			101,943
Leasehold improvements		2,441			2,223			76
Leased equipment (Notes 2, 15 and 20)		2,363,168			2,149,768			73,774

Total cost		60,192,256			50,844,937			1,744,850
Accumulated depreciation (Note 8)		(38,163,921	)		(33,342,105	)		(1,144,204	)
Accumulated impairment		(1,356,377	)		(1,310,474	)		(44,972	)
Construction in progress and advance payments		97,034			1,080,610			37,084

Net Property, Plant and Equipment		20,768,992			17,272,968			592,758


INTANGIBLE ASSETS - NET (Notes 2 and 9)		102,822			94,265			3,235


OTHER ASSETS
Employee dormitory buildings - net of accumulated depreciation of NT$200,531 in 2009 and NT$152,639 in 2010 (Note 2)		284,029			262,735			9,016
Refundable deposits		33,797			20,295			697
Prepaid pension (Notes 2 and 16)		19,784			26,825			920
Deferred income tax – net (Notes 2 and 18)		213,366			417,931			14,342
Others (Note 2)		282,231			419,176			14,385

Total Other Assets		833,207			1,146,962			39,360


TOTAL ASSETS		30,356,220			31,315,030			1,074,641

The accompanying notes are an integral part of the consolidated financial statements.

F-4

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

December 31, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)


	December 31,
	2009			2010
	NT$			NT$			US$ (Note 3)
LIABILITIES AND EQUITY

CURRENT LIABILITIES
Bank loans (Notes 10 and 20)		2,363,319			1,494,651			51,292
Current portion of long-term loans (Notes 14 and 20)		1,553,949			4,925,739			169,037
Convertible notes (Note 13)		—			65,834			2,259
Deferred credit		2,323			2,181			75
Accounts payable		737,997			690,060			23,681
Other payables
Related parties (Note 19)		26			13			1
Third parties (Note 11)		696,122			896,706			30,772
Income tax payable (Note 2)		19,658			18,799			645
Payables to contractors and equipment suppliers (Note 19)		201,171			790,598			27,131
Capital leases payable (Notes 15 and 20)		821,214			822,047			28,210
Accrued expenses and other current liabilities (Note 12)		525,710			990,896			34,005

Total Current Liabilities		6,921,489			10,697,524			367,108


LONG-TERM LIABILITIES
Convertible notes (Note 13)		554,537			108,304			3,717
Derivative liabilities (Note 13)		129,967			96,788			3,321
Capital leases payable (Notes 15 and 20)		1,453,791			631,744			21,680
Long-term loans (Notes 14 and 20)		11,239,310			5,640,132			193,553

Total Long-Term Liabilities		13,377,605			6,476,968			222,271


OTHER LIABILITIES
Deferred credit		97,575			89,425			3,069
Accrued pension cost (Notes 2 and 16)		3,666			3,665			125
Guarantee deposits		3,668			3,989			137

Total Other Liabilities		104,909			97,079			3,331


Total Liabilities		20,404,003			17,271,571			592,710


COMMITMENTS AND CONTINGENCIES (Note 21)

EQUITY (Notes 2 and 17)⁽¹⁾
Capital stock NT$1.303 (US$0.04) par value
Authorized 62,500 thousand common shares and 18,750 thousand preferred shares
Issued 27,638 thousand common shares (2009: 20,993 thousand common shares)
Outstanding 25,715 thousand common shares (2009: 19,471 thousand common shares)		27,557			36,008			1,236
Capital surplus		12,860,097			14,040,716			481,836
Deferred compensation		(8,692	)		(1,577	)		(54	)
Accumulated losses		(5,417,002	)		(3,772,270	)		(129,453	)
Cumulative translation adjustments		404,517			326,051			11,189
Treasury stock		(81,715	)		(128,614	)		(4,414	)

Total Shareholders’ Equity		7,784,762			10,500,314			360,340
Noncontrolling interests		2,167,455			3,543,145			121,591

Total Equity		9,952,217			14,043,459			481,931


TOTAL LIABILITIES AND EQUITY		30,356,220			31,315,030			1,074,641

(1)	The outstanding shares and par value reflect the reverse stock split of the Company’s common stock with a ratio of 1-for-every-4 shares effective on January 21, 2011.

The accompanying notes are an integral part of the consolidated financial statements.

F-5

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2008, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars, Except Earnings Per Share)


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$ (Note 3)
NET REVENUE (Notes 2, 19 and 24)
Related parties		3,122,925			668,906			2,033,342			69,778
Third parties		13,887,237			11,481,402			15,176,391			520,810

Total Net Revenues		17,010,162			12,150,308			17,209,733			590,588


COST OF REVENUE (Notes 19 and 24)
Related parties		3,574,156			885,119			2,408,321			82,646
Third parties		13,395,724			14,776,333			14,155,682			485,782

Total Cost of Revenue		16,969,880			15,661,452			16,564,003			568,428


GROSS PROFIT (LOSS)		40,282			(3,511,144	)		645,730			22,160


OPERATING EXPENSES (Note 19)
Research and development (Note 2)		435,583			375,283			412,753			14,165
General and administrative		885,645			657,802			677,618			23,254
Sales and marketing (Notes 2 and 5)		2,362,686			561,231			64,382			2,209

Total Operating Expenses		3,683,914			1,594,316			1,154,753			39,628


LOSS FROM OPERATIONS		(3,643,632	)		(5,105,460	)		(509,023	)		(17,468	)


NON-OPERATING INCOME
Gain on embedded derivative		—			50,740			—			—
Foreign exchange gain - net (Note 2)		143,932			14,683			—			—
Rental		12,099			12,307			12,648			434
Interest (Note 19)		112,132			37,297			15,861			544
Cash dividend from financial assets		—			—			9,194			316
Fair value gain on financial assets		—			62,674			3,918			134
Subsidy income		—			4,128			—			—
Gain on disposal of property, plant and equipment (Note 2)		38,634			10,274			104,310			3,580
Gain on disposal of financial assets		5,954			—			15,819			543
Gain on partial disposal of a subsidiary		—			—			31,372			1,076
Gain on redemption on convertible notes		66,808			—			—			—
Gain on extinguishment of convertible notes		—			412,337			—			—
Gain on disposal of land use rights		69,524			—			—
Claim received (Note 2)		—			—			2,118,490			72,700
Recovery of allowance for doubtful receivables (Notes 2, 5 and 19)		—			—			2,716,880			93,235
Other		105,898			63,751			183,491			6,297

Total Non-Operating Income		554,981			668,191			5,211,983			178,859

The accompanying notes are an integral part of the consolidated financial statements.

F-6

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

For the Years Ended December 31, 2008, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars, Except Earnings Per Share)


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$ (Note 3)
NON-OPERATING EXPENSES
Interest		765,005			439,411			683,486			23,455
Financing cost		35,503			37,081			39,613			1,359
Fair value loss on financial assets		148,569			—			—			—
Foreign exchange loss - net (Note 2)		—			—			292,567			10,040
Loss on disposal of property, plant and equipment (Note 2)		2,408			152			83,593			2,869
Impairment loss on long-term investments (Note 7)		220,183			—			9,429			324
Impairment loss on property, plant and equipment		1,599,424			25,543			—			—
Impairment loss on other assets		3,460			—			391,646			13,440
Impairment loss on goodwill		917,181			—			—			—
Loss on embedded derivative		105,110			—			260,654			8,945
Loss on sale of receivables (Note 2)		—			—			1,067,791			36,643
Other		44,889			49,262			62,615			2,149

Total Non-Operating Expenses		3,841,732			551,449			2,891,394			99,224

INCOME (LOSS) BEFORE INCOME TAX, NONCONTROLLING INTERESTS AND INTEREST IN BONUSES PAID BY SUBSIDIARIES		(6,930,383	)		(4,988,718	)		1,811,566			62,167

INCOME TAX (EXPENSE) BENEFIT (Notes 2 and 18)		(120,792	)		420,662			99,360			3,410

INCOME (LOSS) BEFORE NONCONTROLLING INTERESTS AND INTEREST IN BONUSES PAID BY SUBSIDIARIES		(7,051,175	)		(4,568,056	)		1,910,926			65,577

NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		143,297			149,373			(266,194	)		(9,135	)
INTEREST IN BONUSES PAID BY SUBSIDIARIES		(362,367	)		—			—			—

NET INCOME (LOSS) ATTRIBUTABLE TO ChipMOS		(7,270,245	)		(4,418,683	)		1,644,732			56,442

EARNINGS (LOSS) PER SHARE - BASIC⁽¹⁾		(346.63	)		(223.35	)		68.61			2.35

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC⁽¹⁾		20,974			19,784			23,971			23,971

EARNINGS (LOSS) PER SHARE - DILUTED (Note 2)⁽¹⁾		(346.63	)		(230.15	)		67.38			2.31

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED (Note 2)⁽¹⁾		20,974			22,254			26,806			26,806

(1)	The outstanding shares and per share information reflect the reverse stock split of the Company’s common stock with a ratio of 1-for-every-4 shares effective on January 21, 2011.

The accompanying notes are an integral part of the consolidated financial statements.

F-7

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2008, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan Dollars, Except Number of Shares)


	CAPITAL STOCK ISSUED					CAPITAL SURPLUS			DEFERRED COMPENSATION			RETAINED EARNINGS (ACCUMULATED LOSSES)			CUMULATIVE TRANSLATION ADJUSTMENTS (Note 2)			TREASURY STOCK			NON- CONTROLLING INTERESTS			TOTAL EQUITY
	CAPITAL STOCK ISSUED
	Shares⁽¹⁾			Amount
	(Thousands)			NT$		NT$			NT$			NT$			NT$			NT$			NT$			NT$
BALANCE, January 1, 2008		20,960			27,517		12,475,936			(69,368	)		6,291,008			277,464			—			3,245,571			22,248,128
Exercise of stock Options		32			40		4,508			—			—			—			—			—			4,548
Issue of option warrants		—			—		21,743			43,368			—			—			—			—			65,111
Repurchase of convertible notes (“CN”)		—			—		197,299			—			—			—			—			—			197,299
Net loss for 2008		—			—		—			—			(7,270,245	)		—			—			(143,297	)		(7,413,542	)
Adjustment of equity method for long-term investments		—			—		84,595			—			(19,082	)		—			—			—			65,513
Changes in noncontrolling interests		—			—		—			—			—			—			—			(778,715	)		(778,715	)
Stock purchased by a subsidiary		(49	)		—		—			—			—			—			(1,779	)		—			(1,779	)
Translation adjustments		—			—		—			—			—			156,250			—			—			156,250

BALANCE, DECEMBER 31, 2008		20,943			27,557		12,784,081			(26,000	)		(998,319	)		433,714			(1,779	)		2,323,559			14,542,813
Issue of option warrants		—			—		73,292			17,308			—			—			—			—			90,600
Net loss for 2009		—			—		—			—			(4,418,683	)		—			—			(149,373	)		(4,568,056	)
Adjustment of equity method for long-term investments		—			—		2,724			—			—			—			—			—			2,724
Changes in noncontrolling interests		—			—		—			—			—			—			—			(6,731	)		(6,731	)
Stock purchased by a subsidiary		(1,472	)		—		—			—			—			—			(79,936	)		—			(79,936	)
Translation adjustments		—			—		—			—			—			(29,197	)		—			—			(29,197	)

BALANCE, DECEMBER 31, 2009		19,471			27,557		12,860,097			(8,692	)		(5,417,002	)		404,517			(81,715	)		2,167,455			9,952,217

Exercise of stock option		19			23		1,427			—			—			—			—			—			1,450
Issue of option warrants		—			—		36,757			7,115			—			—			—			—			43,872
Net profit for 2010		—			—		—			—			1,644,732			—			—			266,194			1,910,926
Interest payment for CN		290			879		75,236			—			—			—			(46,899	)		—			29,216
CN conversion		5,935			7,549		1,070,459			—			—			—			—			—			1,078,008
Adjustment of equity method for long-term investments		—			—		(3,260	)		—			—			—			—			—			(3,260	)
Changes in noncontrolling interests		—			—		—			—			—			—			—			3,710			3,710
Disposal of a subsidiary		—			—		—			—			—			—			—			1,105,786			1,105,786
Translation adjustments		—			—		—			—			—			(78,466	)		—			—			(78,466	)

BALANCE, DECEMBER 31, 2010		25,715			36,008		14,040,716			(1,577	)		(3,772,270	)		326,051			(128,614	)		3,543,145			14,043,459

(1)	The outstanding shares reflect the reverse stock split of the Company’s common stock with a ratio of 1-for-every-4 shares effective on January 21, 2011.

The accompanying notes are an integral part of the consolidated financial statements.

F-8

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2008, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars)


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$ (Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) attributable to ChipMOS		(7,270,245	)		(4,418,683	)		1,644,732			56,442
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		6,999,590			6,340,321			6,132,868			210,462
Amortization of intangible and other assets		174,934			184,275			148,761			5,105
Amortization of discount of convertible notes		184,829			3,737			11,762			404
Interest payment from conversion of CN		—			—			276,891			9,502
Allowance for doubtful receivables		2,292,229			1,064,771			73,882			2,535
Recovery of allowance for doubtful receivables		(119,815	)		(560,854	)		(2,718,171	)		(93,280	)
Deferred compensation		65,111			90,600			43,872			1,506
Gain on disposal of property, plant and equipment - net		(36,226	)		(10,122	)		(20,717	)		(711	)
Gain on disposal of land use right		(69,524	)		—			—			—
Gain on extinguishment of convertible notes		—			(412,337	)		—			—
Gain on disposal of financial assets		—			—			(15,819	)		(543	)
Gain on partial disposal of a subsidiary		—			—			(31,372	)		(1,076	)
Gain on redemption of convertible notes		(66,808	)		—			—			—
Loss (gain) on embedded derivative		105,110			(50,740	)		260,654			8,945
Impairment loss on long-term investments		220,183			—			9,429			324
Impairment loss on goodwill		917,181			—			—			—
Impairment loss on property, plant and equipment		1,599,424			25,543			—			—
Impairment loss on other assets		3,460			—			391,646			13,440
Fair value loss (gain) on financial assets		148,569			(62,674	)		(3,918	)		(134	)
Accrued pension cost		(7,486	)		(8,288	)		(7,044	)		(242	)
Deferred income tax - net		(215,608	)		(447,683	)		(126,966	)		(4,357	)
Noncontrolling interests		(143,297	)		(149,373	)		266,194			9,135
Changes in operating assets and liabilities
Financial assets at fair value through profit and loss		261,564			102,137			124,813			4,283
Notes receivable		(181,142	)		181,243			13,950			479
Accounts receivable		1,175,360			(1,241,354	)		1,563,610			53,658
Other receivables		(146,822	)		(399,651	)		383,356			13,156
Inventories		47,533			137,166			(423,180	)		(14,522	)
Prepaid expenses and other current assets		71,050			(238	)		60,565			2,078
Other assets		449,802			409			61			2
Accounts payable		(502,241	)		263,564			(43,357	)		(1,488	)
Other payables		22,157			68,422			202,253			6,940
Income tax payable		(401,283	)		18,078			(858	)		(29	)
Accrued expenses and other liabilities		(409,554	)		65,162			473,312			16,243
Deferred credit		(3,809	)		(2,404	)		(2,304	)		(79	)

Net Cash Provided by Operating Activities		5,164,226			781,027			8,688,905			298,178

CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in restricted cash and cash equivalents		47,135			(172,804	)		(303,637	)		(10,420	)
Proceeds from sales of property, plant and equipment		113,595			19,080			899,076			30,854
Proceeds from sales of long-term investment		—			—			10,953			376
Proceeds from liquidation of a long-term investment		—			105,000			—			—
Proceeds from redemption of held-to-maturity financial assets and financial assets with no active market		—			350,000			300,000			10,295
Proceeds from sales of intangible assets		73,709			—			—			—
Proceeds from sales of employee dormitory buildings		—			7,048			—			—
Acquisitions of:
Property, plant and equipment		(2,390,911	)		(1,244,631	)		(4,467,696	)		(153,318	)
Deferred assets		(139,505	)		(107,771	)		(17,913	)		(615	)
Employee dormitory building		(2,025	)		(82	)		(11,102	)		(381	)
Decrease in refundable deposits		1,088			1,628			3,102			106

Net Cash Used in Investing Activities		(2,296,914	)		(1,042,532	)		(3,587,217	)		(123,103	)

The accompanying notes are an integral part of the consolidated financial statements.

F-9

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Years Ended December 31, 2008, 2009 and 2010 (Notes 1 and 17)

(In Thousands of New Taiwan and U.S. Dollars)


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$ (Note 3)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on:
Bank loans		(291,444	)		(382,071	)		(928,668	)		(31,869	)
Long-term loans		—			(1,572,518	)		(2,227,389	)		(76,438	)
Convertible notes		(3,498,282	)		(681,958	)		—			—
Treasury stock		(1,779	)		(25,085	)		—			—
Proceeds from:
Bank loans		1,787,638			—			60,000			2,059
Convertible notes		—			164,710			131,085			4,498
Long-term loans		1,386,370			—			—			—
Issuance of capital stock		4,548			—			1,450			50
Sales of subsidiary		—			—			1,133,049			38,883
Changes in noncontrolling interests		(778,715	)		(6,731	)		3,710			128
Increase (decrease) in guarantee deposits		(3,648	)		(143	)		323			11

Net Cash used in Financing Activities		(1,395,312	)		(2,503,796	)		(1,826,440	)		(62,678	)


EFFECT OF EXCHANGE RATE CHANGES ON CASH		46,329			(1,780	)		(16,811	)		(577	)


Net increase (decrease) in cash and cash equivalents		1,518,329			(2,767,081	)		3,258,437			111,820

Cash and cash equivalents, beginning of the year		5,133,580			6,651,909			3,884,828			133,316


Cash and cash equivalents, end of the year		6,651,909			3,884,828			7,143,265			245,136


SUPPLEMENTAL INFORMATION
Income tax paid		747,551			10,675			27,651			949

Interest paid		641,727			424,964			383,581			13,163


NON-CASH FINANCING ACTIVITIES
Current portion of long-term loans		4,603,637			1,553,949			4,925,739			169,037
Extinguishment of convertible notes (Note 13)		—			503,213			—			—
Interest payment for CN in shares		—			—			296,180			10,164

PARTIAL CASH PAID FOR INVESTING ACTIVITIES
Cash paid for acquisition of property, plant and equipment
Total acquisitions		2,188,393			3,479,682			4,237,278			145,411
Decrease (Increase) in payables to contractors and equipment suppliers		202,518			(2,235,051	)		230,418			7,907

		2,390,911			1,244,631			4,467,696			153,318

The accompanying notes are an integral part of the consolidated financial statements.

F-10

ChipMOS TECHNOLOGIES (Bermuda) LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND BUSINESS

ChipMOS TECHNOLOGIES (Bermuda) LTD. (ChipMOS Bermuda) was incorporated under the laws of Bermuda on August 1, 2000, and its common shares have been traded on the NASDAQ Global Select Market since June 2001. In February 2010, ChipMOS Bermuda submitted an application to the NASDAQ Stock Market to transfer its listing to The NASDAQ Capital Market from The NASDAQ Global Select Market. The NASDAQ Stock Market has determined that the Company meets the NASDAQ Capital Market initial listing criteria set forth in Listing Rule 5505. Its common shares have been traded on the NASDAQ Capital Market since March 17, 2010. As of December 31, 2010, ChipMOS Bermuda was 10.13% (2009: 13.33%) owned by Mosel Vitelic Inc. (MVI) through its wholly-owned subsidiary, Giant Haven Investment Ltd. and its indirectly-owned subsidiary, Mou-Fu Investment Ltd. (Mou-Fu) and 11.01% (2009: 14.50%) owned by Siliconware Precision Industries Co. Ltd (SPIL). As of December 31, 2010, ChipMOS Bermuda owned 88.96% (2009: 100%) of the outstanding common shares of ChipMOS TECHNOLOGIES INC. (ChipMOS Taiwan).

LOGO

ChipMOS Taiwan was incorporated in Taiwan on July 28, 1997 as a joint venture company between MVI and SPIL. Its operations consist of testing and assembly of semiconductors. In connection with a corporate restructuring on January 12, 2001, the holders of an aggregate of 583,419 thousand common shares of ChipMOS Taiwan executed a Purchase and Subscription Agreement whereby they transferred their shares of ChipMOS Taiwan to ChipMOS Bermuda in exchange for 14,585 thousand common shares in ChipMOS Bermuda. The selling shareholders, who previously held an aggregate of 70.25% of the entire outstanding common shares of ChipMOS Taiwan, thus became the holders of the entire outstanding common shares of ChipMOS Bermuda. Because 100% of the outstanding common shares of ChipMOS Bermuda were owned by former shareholders of ChipMOS Taiwan, the exchange of shares has been accounted for as a merger as if ChipMOS Bermuda was the acquirer. Equity and operations attributable to ChipMOS Taiwan shareholders not participating in the exchange offer were reflected as noncontrolling interests in the historical financial statements. In March 2007, ChipMOS Bermuda, ChipMOS Taiwan and SPIL completed a share purchase and subscription transaction whereby ChipMOS Bermuda purchased 100% of SPIL’s equity interest in ChipMOS Taiwan at US$0.75 per share. SPIL also subscribed to 3,043,749 newly issued common shares of ChipMOS Bermuda through a private placement of US$6.28 per share. After the transaction, ChipMOS Taiwan became a 99.14% subsidiary of ChipMOS Bermuda and SPIL owned 14.7% of ChipMOS Bermuda. In September 2007, another share exchange transaction was completed whereby ChipMOS Bermuda offered to exchange one share of ChipMOS Bermuda for 8.4 shares of ChipMOS Taiwan shares. The exchange was completed in September 2007 and ChipMOS Taiwan became a wholly-owned subsidiary of ChipMOS Bermuda. In February 2010, ChipMOS Bermuda entered into a Share Purchase Agreement with SPIL to sell to SPIL the holding of 133,000 thousand common shares of ChipMOS Taiwan for a consideration of NT$1,630,580 thousand. Under the Share Purchase Agreement, SPIL will pay the purchase price in four installments to ChipMOS Bermuda with the final installment scheduled to be paid on or about March 31, 2011. Post completion of the share purchase transaction, SPIL holds approximately 15.8% of the total number of ChipMOS Taiwan’s outstanding shares and ChipMOS Bermuda holds approximately 84.2% of the total number of ChipMOS Taiwan’s outstanding shares. As of December 31, 2010, SPIL has acquired 93,033 thousand common shares (approximately 11.04%) of ChipMOS Taiwan and ChipMOS Bermuda held a 88.96% interest in ChipMOS Taiwan.

F-11

1.	ORGANIZATION AND BUSINESS (continued)

ThaiLin Semiconductor Corp. (ThaiLin) was incorporated on May 15, 1996 and is listed on the GreTai Securities Market in Taiwan. ThaiLin is engaged in wafer and semiconductor testing services. On December 31, 2002, ChipMOS Taiwan acquired an equity interest of 41.8% in ThaiLin. On December 1, 2003, ChipMOS Taiwan obtained controlling influence over ThaiLin’s decisions on its operations, personnel and financial policies. Therefore, ThaiLin has been consolidated into these financial statements from December 1, 2003 in spite of the fact that ChipMOS Taiwan holds an equity interest of less than 50% in ThaiLin. As of December 31, 2010, ChipMOS Taiwan held a 42.87% equity interest in ThaiLin.

ChipMOS Japan Inc. (ChipMOS Japan) was incorporated in Japan in June 1999, and ChipMOS USA Inc. (ChipMOS USA) was incorporated in the United States of America in October 1999. These two companies engage in sales and customer services and all the expenses incurred from these activities are charged to current income. ChipMOS Japan began generating revenue in 2000, while ChipMOS USA began generating revenue in 2001. As of December 31, 2010, ChipMOS Taiwan owned 100% of the outstanding shares of ChipMOS USA. ChipMOS Japan was liquidated in October 2009.

MODERN MIND TECHNOLOGY LIMITED (Modern Mind) was incorporated in the British Virgin Islands on January 29, 2002. Modern Mind conducts its operations through ChipMOS TECHNOLOGIES (Shanghai) LTD. (ChipMOS Shanghai). ChipMOS Bermuda acquired a 100% equity interest in Modern Mind on December 12, 2002, and then transferred it to Jesper Limited (Jesper) on December 31, 2002. In December 2002 and 2003, ChipMOS Bermuda acquired from Jesper and ChipMOS Taiwan, respectively, convertible notes issued by Modern Mind that are convertible into a controlling equity interest in Modern Mind if the repayment is not made when due. Accordingly, ChipMOS Bermuda is deemed to have a controlling interest in Modern Mind.

ChipMOS Shanghai a wholly-owned subsidiary of Modern Mind, was established in the People’s Republic of China (PRC) on June 7, 2002. ChipMOS Shanghai is engaged in wafer testing, semiconductor assembly and testing, and module and subsystem manufacturing. ChipMOS Shanghai commenced commercial production in 2003.

ChipMOS Bermuda controls both Modern Mind and its 100% subsidiary, ChipMOS Shanghai, as ChipMOS Bermuda possesses the power to direct or cause the direction of the management and policies of Modern Mind by contract or otherwise and thereby has established a parent-subsidiary relationship over Modern Mind and ChipMOS Shanghai. For this reason, Modern Mind and ChipMOS Shanghai have been consolidated into these financial statements in spite of the fact that ChipMOS Bermuda does not hold an equity interest in Modern Mind.

ChipMOS TECHNOLOGIES (H.K.) Limited (ChipMOS HK) was incorporated in Hong Kong on November 18, 2002. It is engaged in semiconductor testing and assembly services and trading of spare parts and tools. ChipMOS HK is a wholly-owned subsidiary of ChipMOS Bermuda. As of December 31, 2010, ChipMOS HK was in the process of liquidation.

2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements include the accounts of ChipMOS Bermuda and all subsidiaries in which ChipMOS Bermuda (hereinafter, referred to individually or collectively as the “Company”) holds a controlling interest or voting interests in excess of 50% in accordance with the requirements of ROC Statement of Financial Accounting Standards (“SFAS No. 7”). All significant intercompany accounts and transactions have been eliminated.

The Company’s consolidated financial statements include for 2008, 2009 and 2010, the financial results of ChipMOS Taiwan and its subsidiaries, ThaiLin, ChipMOS Japan and ChipMOS USA, ChipMOS HK and Modern Mind and its wholly-owned subsidiary, ChipMOS Shanghai.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, accounts and other receivables.

At December 31, 2009 and 2010, the Company had credit risk exposure of uninsured cash in banks of approximately NT$4,128,277 thousand and NT$7,690,072 thousand (US$263,091 thousand), respectively.

A substantial portion of revenue is earned from a small number of customers on credit and generally without any requirement of collateral.

F-12

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company had one customer that had balances greater than ten percent of total notes and accounts receivable as of December 31, 2009 and 2010, respectively:


	December 31,
	2009		2010
Third party
Spansion LLC (Spansion)		46%		8%
Novatek Microelectronics Corp. (Novatek)		6%		20%

As of December 31, 2009, full allowance was made against all receivables from Spansion. On January 25, 2010, ChipMOS Taiwan entered into a definitive Transfer of Claim Agreement to sell to Citigroup Financial Products Inc. (Citigroup) the general unsecured claim reflected in the proof of claim against Spansion. The claim that is the subject of the Transfer of Claim Agreement includes accounts receivable for testing and assembly services provided to Spansion (the “Undisputed Claim”). In February 2010, ChipMOS Taiwan received from Citigroup the purchase price for the Undisputed Claim of NT$1,118,574 thousand against accounts receivable of NT$2,186,365 thousand. A loss on sale of receivables of NT$1,067,791 thousand was recognized and the related allowance for doubtful receivables of NT$2,186,365 thousand was reversed. The Transfer of Claim Agreement also includes the sale of breach of contract and liquidated damages rights against Spansion in the amount of NT$2,118,490 thousand, which was received in October 2010.

Credit evaluation of each customer is performed and reserves for potential credit losses are maintained.

Use of estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the recorded amounts of assets, liabilities, revenue and expenses of the Company. The Company continually evaluates these estimates, including those related to allowances for doubtful amounts, inventories, useful lives of properties, income tax valuation allowances, pension plans and the fair value of financial instruments. The Company bases its estimates on historical experience and other assumptions, which it believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

Cash equivalents

Repurchase notes with original maturity dates of three months or less are classified as cash equivalents.

Financial assets/liabilities at fair value through profit and loss

Financial assets and liabilities at fair value through profit and loss include investments and liabilities held for trading purposes and those designated as financial assets/liabilities reported at fair value. Transaction costs directly attributable to the acquisition or issuance of these financial assets and liabilities are expensed immediately as incurred. Subsequent to initial recognition, financial assets and liabilities are remeasured at fair value and the changes shall be recognized in earnings.

Financial assets carried at cost

Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Investments with no active market

Investments with no active market are carried at amortized cost using the effective interest method. The Company assesses at each balance sheet date whether there is any objective evidence that the investments are impaired. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is recognized and measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the investment’s original effective interest rate. The carrying amount of the investment shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account. The reversal shall not result in a carrying amount of the investment that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal shall be recognized in profit or loss.

F-13

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for doubtful receivables

The allowance for doubtful receivables reflects estimates of the expected amount of the receivables that the Company will not be able to collect. The Company first examines the available information regarding any customer that the Company has reason to believe may be unable to meet its financial obligations. For these customers, the Company uses its judgment, based on the available facts and circumstances, and records a specific allowance for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific allowances are reevaluated and adjusted as additional information is received. Secondly, for all other customers, the Company maintains an allowance based on a range of percentages applied to aging categories. These percentages are based on our historical collection and write-off experience. Additional allowances may be required in the future if the financial condition of our customers or general economic conditions deteriorate, and this additional allowance would reduce the Company’s net income.

Allowances for sales returns and discounts

Allowances for sales returns and discounts are provided based on the sales returns from past experience; such provisions are deducted from sales and the related costs of products are deducted from cost of products sold.

Inventories

Inventories are stated at the lower of standard cost (which adjusted to approximate weighted average cost on the balance sheet date) or net realizable value. Inventory write-down is made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs. Prior to January 1, 2009, inventories were stated at the lower of cost or market value. Any write-down was made on a total-inventory basis. Market value represented replacement cost for raw materials and net realizable value for finished goods and work in progress.

Long-term investments

Investments in shares of stock of companies wherein the Company exercises significant influence on operational or financial decisions are accounted for using the equity method. Under the equity method, the investments are initially carried at cost and subsequently adjusted for the proportionate equity of the Company in the net income or net loss of the investees.

The Company will discontinue its recognition of its equity in the net loss of the investees when the carrying value of the investment (including advances) is reduced to zero. However, in cases where the Company guarantees the obligations or is committed to provide further financial support to an investee, or if the investee’s losses are temporary and evidence sufficiently shows imminent return to profitability in the foreseeable future, then the Company continues to recognize its share in the net loss of the investees. (The resulting credit balances of the long-term investments are presented as part of other receivables from related parties.)

Translation adjustments resulting from the process of translating the investees’ financial statements into the functional currency of the Company are recorded as cumulative translation adjustments in the statement of changes in equity.

Property, plant and equipment and employee dormitory buildings

Property, plant and equipment and employee dormitory buildings (presented as part of Other Assets) are stated at cost less accumulated depreciation. Major additions, renewals and improvements are capitalized while maintenance and repairs are expensed as incurred.

The initial estimate of the service lives of property, plant and equipment is as follows: machinery and equipment, 1 to 5 years; buildings and auxiliary equipment, 1 to 54 years; furniture and fixtures, 1 to 5 years; tooling, 1 to 2 years; transportation equipment, 5 years; and leasehold improvements, the shorter of lease term or 1 to 10 years. Salvage value is considered when determining the basis of depreciated assets. If items of property, plant and equipment and employee dormitory buildings are still in good condition and useful at the end of their original service lives, the salvage value is depreciated over any extended useful life.

Upon sale or disposal of items of properties, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to current income.

Leased assets

Assets under capital leases are recorded at the lower of the fair value of the leased assets and the present value of the minimum lease payments of such assets. The leased assets are depreciated over the shorter of lease terms or the estimated useful life of the leased assets.

F-14

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangible assets

Intangible assets are recorded at cost except for donation from the government, which is measured at fair value. Subsequent to their initial recognition, the book values are the cost and their incremental value that resulted from revaluation minus accumulated amortization and impairment loss.

Amortization is computed using the straight-line method. The Company reevaluates the residual value, estimated useful lives, and amortization method at least once every year. Changes in the above factors will be regarded as changes in accounting estimate.

Deferred charges

Deferred charges are amortized using the straight-line method over the following periods: technology know-how, 5 years; technology license fees, 5 years; software, 2 to 4 years; bond issuance costs, using the average method.

Goodwill and negative goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Company’s interest in the fair value of the identifiable assets and liabilities of an investee company at the date of acquisition. Goodwill is recognized as an asset and carried at cost less accumulated impairment.

Goodwill arising on the acquisition of an associate or a jointly controlled entity is included within the carrying amount of the associate or jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

Negative goodwill arising on consolidation represents the excess of the Company’s interest in the fair value of the identifiable assets and liabilities of an investee company over the cost of acquisition at the date of acquisition. Negative goodwill is allocated to the related assets according to the method applied to identify net assets at the process of acquisition.

Goodwill is tested for impairment on an annual basis regardless of whether there is any indication of impairment. Recognized impairment losses of goodwill cannot be reversed.

Asset impairment

The Company reviews its long-lived assets, including properties, assets leased to others and deferred charges, to look for any indication that an asset may be impaired as of the balance sheet date. An impairment loss is recognized whenever the recoverable amount of the asset of the cash-generating unit is below the carrying amount of an asset. If there is an indicator that an asset may be impaired, then the Company calculates the recoverable amount of the asset or the cash-generating unit. An asset’s recoverable amount is the higher of the value in use of the asset or cash-generating unit to which it belongs and its fair value.

If an asset impairment loss (excluding goodwill) is reversed, the increase in the carrying value resulting from the reversal is credited to current income or debited to accumulated impairment to increase the carrying value of the asset to its recoverable amount. However, loss reversal is limited to the carrying value (net of depreciation or amortization) of the asset as if the impairment had not been recognized.

Reverse stock split

On January 21, 2011, the Company’s shareholders approved a one-for-four share combination of its common stock which became effective on January 21, 2011. As a result of this reverse stock split, every four shares of the Company’s common stock that were issued and outstanding as of January 21, 2011 were automatically combined into one issued and outstanding share with par value change from US$0.01 to US$0.04 per share, and the number of authorized but unissued shares of the Company’s common stock was proportionally reduced. A proportionate adjustment was also made to the Company’s outstanding stock options and convertible notes. No fractional shares were issued in connection with this reverse stock split, but rather shareholders who were entitled to fractional shares received cash in lieu of receiving fractional shares. All references within this document to earnings (loss) per share reflect this reverse stock split. Additionally, the number of common shares and stock options, and the price per common share, stock option and convertible notes, reflect this reverse stock split.

F-15

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition

The company recognized revenue upon completion of testing and assembly services. Other criteria that the Company uses to determine when to recognize revenue are: (1) existence of persuasive evidence of the services provided, (2) customers’ fixed commitment to use our service, (3) the selling price is fixed or determinable and (4) collectibility is reasonably assured.

The Company does not take ownership of: (1) bare semiconductor wafers received from customers that it assembles into finished semiconductors, and (2) assembled semiconductors received from the customers that it tests. The title and risk of loss remains with the customer for those bare semiconductors and/or assembled semiconductors. Accordingly, the customer-supplied semiconductor materials are not included in the consolidated financial statements.

These policies are consistent with provisions in the Financial Accounting Statement Board Accounting Standard Codification (FASB ASC) 605 “Revenue Recognition”.

The Company does not provide warranties to customers except in cases of defects in the assembly services provided and deficiencies in testing services provided. An appropriate sales allowance is recognized in the period during which the sale is recognized, and is estimated based on historical experience.

Government grant

A government grant is recognized at its fair value and credited to the income statement. Where the grant relates to an asset, the fair value is credited to a deferred income account and is recognized as income over the periods necessary to match the related amortization of the asset, on a systematic basis.

Research and development costs

Research and development costs consist of expenditure incurred during the course of planned research and investigation aimed at discovery of new knowledge which will be useful for developing new products or production processes, or significantly enhancing existing products or production processes, and the implementation of such through design and testing of product alternatives or construction of prototypes. All expenses incurred in connection with the Company’s research and development activities are charged to current income.

Pension and retirement costs

Defined benefit pension costs are recorded based on actuarial calculations. Provisions for pension costs are accrued based on actuarially determined amounts which include service cost, interest, amortization of unrecognized net transition obligation and expected return on pension assets. Unrecognized net transition obligation is amortized over 15 years.

Retirement benefit contributions are made to a pension scheme and/or retirement funds, the assets of which are managed by independent investment firms and/or government agencies. Contributions are made based on a percentage of the employees’ salaries and bonus, if applicable, and are charged to the statement of operations as incurred.

F-16

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

Income tax

The Company has adopted the inter-period income tax allocation method. Deferred income tax assets are recognized for the tax effects of deductible temporary differences, unused tax credits, and operating loss carryforwards and those of taxable temporary differences are recognized as deferred income tax liabilities. A valuation allowance is provided for deferred tax assets that are not certain to be realized. A deferred tax asset or liability is classified as current or non-current based on the classification of the related asset or liability. However, if a deferred asset or liability cannot be related to an asset or liability in the financial statements, then it is classified as current or non-current based on the expected reversal dates of the temporary difference.

Any tax credit arising from the purchase of machinery, equipment and technology, research and development expenditures, personnel training, or investments in important technology-based enterprise is recognized as incurred.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Income taxes (10%) on unappropriated earnings generated by ChipMOS Taiwan and ThaiLin are recorded as an expense in the year when the stockholders have effectively resolved that earnings shall be retained.

Advertising costs

Advertising costs included in sales and marketing expenses are expensed when incurred.

Foreign-currency transactions

Foreign-currency transactions, except for derivative financial instruments, are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except those foreign currencies-denominated investments in shares of stock where such differences are accounted for as translation adjustments under equity. ROC SFAS No. 14, “Accounting for Foreign-Currency Transactions,” applies to foreign operations, with the local currency of each foreign subsidiary as its functional currency. The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: assets and liabilities - current rate; equity - historical rates; income and expenses - weighted average rate during the year. The resulting translation adjustment is recorded as a separate component of equity.

Earnings (Loss) per share

Earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding in each period, adjusted retroactively for reverse stock split, stock dividends and stock bonuses issued subsequently. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock equivalents, including stock options and warrants, and convertible securities in the weighted average number of common shares outstanding for the year, if dilutive.

The following table reconciles the denominator to calculate basic and diluted earnings (loss) per share:


	December 31,
	2008		2009		2010
	(in thousands)
Basic number of shares		20,974		19,784		23,971
Add: stock options		—		—		288
convertible notes		—		2,470		2,547


Diluted number of shares		20,974		22,254		26,806

F-17

2.	SIGNIFICANT ACCOUNTING POLICIES (continued)

The following table reconciles the numerator to calculate basic and diluted earnings per share:


	Year ended December 31,
	2008			2009			2010
	NT$			NT$			NT$		US$
	(in thousands)
Net income (loss) attributable to ChipMOS		(7,270,245	)		(4,418,683	)		1,644,732		56,442
Add: interest expense and other income/expenses (net of tax)		—			(703,046	)		161,381		5,538


Income (loss) attributable to ChipMOS adjusted for the effects of assumed exercise of options and conversion of notes		(7,270,245	)		(5,121,729	)		1,806,113		61,980

Stock-based compensation

Effective January 1, 2008, the Company adopted SFAS No. 39 “Share-based Payment”. Prior to adoption of SFAS No. 39, employee stock-based compensation has been accounted for under the intrinsic value based method. After the adoption of SFAS No. 39, employee stock-based compensation has been measured at the fair value of the options at grant date using an option valuation model. The total stock-based compensation expense resulting from stock options is included in the consolidated statement of operations.

Share appreciation rights have been accounted for using the fair value method. Cash-settled stock appreciation rights have been recognized as a liability.

Bonuses to employees, directors and supervisors

Effective January 1, 2008, the Company adopted Interpretation No. 2007-052 issued by the Accounting Research and Development Foundation (No. 2007-052). Prior to adoption of No. 2007-052, bonuses to employees, directors and supervisors were recorded as an appropriation of retained earnings when they are paid out. After the adoption of No. 2007-052, bonuses to employees, directors and supervisors were accrued and recorded in the consolidated statements of operations according to the Company’s Articles of Incorporation.

Convertible notes

Convertible notes issued before January 1, 2006 were accounted for in accordance with SFAS No. 21 “Accounting for Convertible Bonds” and thus, the related interest premium payable and amortization of discount or premium should be recognized.

Convertible notes issued after January 1, 2006 are split into liability and equity components. If a convertible debt instrument has an embedded call or put option feature, the assessment of whether the call or put option is closely related to the host debt contract is made in accordance with SFAS No. 34 “Financial Instruments: Recognition and Measurement”. If the derivatives embedded in the convertible notes are not closely related to the host debt contract, the put and call option features are carried at fair value with gains and losses in earnings.

When holders of convertible notes exercise their conversion right, the book value of the note is credited to common stock at an amount equal to the par value of the common stock and the excess is credited to capital surplus. No gain or loss is recognized upon conversion of notes.

Treasury stock

The Company’s stock held by its subsidiaries is treated as treasury stock. Treasury stock is stated at cost and shown as a deduction in equity. When the Company retires treasury stock, the treasury stock account is reduced and the common stock as well as the capital surplus — additional paid-in capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the par value and additional paid-in capital, the difference is charged to capital surplus — treasury stock transactions and to retained earnings for any remaining amount.

F-18

3.	TRANSLATION INTO U.S. DOLLAR AMOUNTS

The Company maintains its accounts and expresses its consolidated financial statements in New Taiwan dollars. For convenience purposes, U.S. dollar amounts presented in the accompanying consolidated financial statements have been translated from New Taiwan dollars to U.S. dollars at the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York as of December 30, 2010, which was NT$29.14 to US$1.00. These convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

4.	FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS

December 31,

2009

2010

NT$

US$

(in thousands)

Stock

119,027

2,999

103

5.	ALLOWANCE FOR DOUBTFUL RECEIVABLES AND SALES RETURN ALLOWANCES

The changes in the allowances are summarized as follows:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Balance, beginning of year		260,599			2,433,013			2,936,930			100,787
Additions		2,292,229			1,064,771			73,882			2,535
Reversal		(119,815	)		(560,854	)		(2,718,181	)		(93,280	)
Write off		—			—			(30,537	)		(1,048	)

Balance, end of year		2,433,013			2,936,930			262,094			8,994

The allowance/reversal of allowance for doubtful receivables was recorded in sales and marketing expenses and other non-operating income, respectively. The allowance/reversal of allowance for sales return was recorded in sales discount and returns in net revenue. Included in the reversal of allowance for doubtful receivables were recovery of doubtful receivables from Spansion of NT$2,282,085 thousand (NT$2,186,365 thousand was recovered from the sale of receivable to Citigroup) and ProMOS Technologies Inc. (ProMOS) of NT$432,999 thousand, respectively.

F-19

6.	INVENTORIES - NET


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Finished goods		120,280			98,521			3,381
Work in progress		273,912			234,478			8,047
Raw materials		667,936			1,011,539			34,713

		1,062,128			1,344,538			46,141
Less - allowance for losses		(200,064	)		(64,734	)		(2,222	)

		862,064			1,279,804			43,919

The changes in the inventory valuation allowances are summarized as follows:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Balance, beginning of year		63,772			102,142			200,064			6,866
Additions		41,704			100,150			3,107			107
Reversals		(3,334	)		(2,228	)		(138,437	)		(4,751	)

Balance, end of year		102,142			200,064			64,734			2,222

7.	LONG-TERM INVESTMENTS


	December 31,
	2009					2010
	Carrying Value			% of Ownership		Carrying Value						% of Ownership
	NT$					NT$			US$
	(in thousands, except percentage interests)
Equity method:
Ultima Technology Corp. (Ultima Technology)		—			30		—			—			—
Cost method:
Best Home Corp. Ltd. (Best Home)		—			19		—			—			—
DigiMedia Technologies Co., Ltd. (DigiMedia Cayman)		198,666			11		198,666			6,818			11
Validity Sensors Inc.		19,956			—		19,956			685			—
Tashee Golf & Country Club		10			—		10			—			—
Less: Accumulated impairment		(198,666	)				(208,095	)		(7,141	)

		19,966					10,537			362
Investments with no active market:
Bonds		300,000					—			—
Less: current portion		(100,000	)				—			—

		219,966					10,537			362

The net income of Ultima Technology for the years ended December 31, 2008, 2009 and 2010 was not accounted for by the Company as the investment was fully impaired since 2006.

The summarized financial information for Ultima Technology is not presented as no financial information is available.

F-20

7.	LONG-TERM INVESTMENTS (continued)

The investment in Ultima Technology and Best Home were disposed of in November 2010 and the proceeds were NT$621 thousand and NT$10,363 thousand, respectively.

During 2008, impairment losses of NT$21,517 thousand and NT$198,666 thousand were recognized in respect of investment in Sun Fund Securities Ltd. (Sun Fund) and DigiMedia Cayman.

During 2010, impairment loss of NT$9,429 thousand was recognized in respect of the investment in Validity Sensors Inc.

Since Sun Fund commenced the liquidation, the proceeds of NT$105,000 thousand and NT$13,162 thousand were received in September 2009 and November 2010, respectively. As of December 31, 2010, Sun Fund has completed the liquidation.

The bonds were transferred from ProMOS to offset the receivables from ProMOS. They are recoverable in four installments of NT$100,000 thousand each on June 28 of each year up to June 28, 2012. The bonds carry interest at Chinfon Bank’s one year fixed deposit rate plus 1.375%. NT$201,000 thousand of the bonds were pledged for short-term loans of ChipMOS Taiwan. NT$100,000 thousand was recovered on June 28, 2009. The remaining NT$300,000 thousand was early redeemed on March 17, 2010.

8.	PROPERTY, PLANT AND EQUIPMENT – NET

Accumulated depreciation consists of the following:


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Buildings and auxiliary equipment		3,090,722		2,756,570		94,597
Machinery and equipment		31,448,875		26,603,781		912,964
Furniture and fixtures		906,323		881,180		30,240
Transportation equipment		28,816		25,699		882
Tools		2,635,672		2,452,104		84,149
Leased equipment		52,166		621,244		21,319
Leasehold improvements		1,347		1,527		53

		38,163,921		33,342,105		1,144,204

As of December 31, 2010, certain of the above buildings and machinery were mortgaged as collateral for long-term loans and capital lease payable (Notes 14, 15 and 20).

9.	INTANGIBLE ASSETS – NET


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Land use rights
Cost		118,893			111,621			3,831
Accumulated amortization		(16,071	)		(17,356	)		(596	)

Carrying value		102,822			94,265			3,235

The amortization charge for 2010 amounted to NT$2,399 thousand (2009: NT$2,491 thousand, 2008: NT$2,851 thousand). The weighted average amortization period is 50 years (2009: 50 years). The estimated aggregate amortization charge for the five years ending December 31, 2011, 2012, 2013, 2014 and 2015 amounts to approximately NT$2,400 thousand each year. The land use rights were pledged as collateral for a credit facility (Note 20).

F-21

10.	BANK LOANS


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Unsecured loans:
Loans for import of machinery:
JPY37,710 thousand, repayable by March 2010, annual interest at 1.42812%		13,066		—		—
JPY4,190 thousand, repayable by April 2010, annual interest at 1.41015%		1,452		—		—
US$1,458 thousand, repayable by February 2011, annual interest at 1.47992% - 1.55391%		—		42,457		1,458
JPY16,200 thousand, repayable by April 2011, annual interest at 0%		—		5,803		198
US$1,350 thousand, repayable by May 2011, annual interest at 0%		—		39,326		1,350
JPY117,000 thousand, repayable by May 2011, annual interest at 0%		—		41,909		1,438
US$2,968 thousand, repayable by June 2011, annual interest at 2.13531% - 2.14588%		—		86,458		2,968

Loans for import:
US$38 thousand, repayable by June 2010, annual interest at 2.376%		1,200		—		—
JPY183,907 thousand, repayable by January 2010, annual interest at 1.4408% - 1.446%		63,724		—		—
JPY183,719 thousand, repayable by March 2010, annual interest at 1.1117% - 1.426%		63,659		—		—
JPY104,381 thousand, repayable by May 2010, annual interest at 1.39852% - 1.661%		36,168		—		—
US$27 thousand, repayable by January 2011, annual interest at 2.376%		—		787		27
JPY181,115 thousand, repayable by January 2011, annual interest at 1.2611%		—		64,875		2,226
JPY114,262 thousand, repayable by February 2011, annual interest at 1.247357%		—		40,929		1,404

Loans for working capital:
NT$227,050 thousand, repayable by January 2010, annual interest at 3.62% - 3.77%		227,050		—		—
NT$142,500 thousand, repayable by February 2010, annual interest at 2.362%		142,500		—		—
NT$323,000 thousand, repayable by March 2010, annual interest at 2.362%		323,000		—		—
NT$114,000 thousand, repayable by June 2010, annual interest at 2.362% - 3.3%		114,000		—		—
NT$85,500 thousand, repayable by October 2010, annual interest at 2.2%		85,500		—		—

F-22

10.	BANK LOANS (continued)


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
NT$190,000 thousand, repayable by December 2010, annual interest at 2.88%		190,000		—		—
NT$332,340 thousand, repayable by January 2011, annual interest at 2.989% - 3.74%		—		332,340		11,405
NT$368,800 thousand, repayable by February 2011, annual interest at 2.462% - 2.498%		—		368,800		12,656
NT$13,680 thousand, repayable by June 2011, annual interest at 3.3%		—		13,680		469
NT$85,500 thousand, repayable by October 2011, annual interest at 2.525%		—		85,500		2,934

Secured loans:

Loans for import:
NT$95,000 thousand, repayable by August 2010, annual interest at 2.6%		95,000		—		—
NT$95,000 thousand, repayable by February 2011, annual interest at 3.125%		—		95,000		3,260

Loans for working capital:
NT$190,000 thousand, repayable by January 2010, annual interest at 3.75% - 4.0%		190,000		—		—
NT$294,500 thousand, repayable by February 2010, annual interest at 3.48%		294,500		—		—
NT$47,500 thousand, repayable by May 2010, annual interest at 2.6%		47,500		—		—
NT$475,000 thousand, repayable by December 2010, annual interest at 2.3256%		475,000		—		—
NT$212,040 thousand, repayable by December 2011, annual interest at 2.488%		—		212,040		7,277
NT$4,747 thousand, repayable by April 2011, annual interest at 3.125%		—		4,747		163
NT$60,000 thousand, repayable by January 2011, annual interest at 1.80% - 1.90%		—		60,000		2,059

		2,363,319		1,494,651		51,292

Unused credit lines of short-term bank loans, as of December 31, 2010, totaled approximately NT$908,363 thousand, which will expire from January 2011 to December 2011.

The weighted average interest rate for bank loans was 2.8424% per annum in 2010 (2009: 2.8% per annum).

Certain short-term loans were secured by time deposits and investments with no active market (Notes 7 and 20).

F-23

11.	OTHER PAYABLES – THIRD PARTIES


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Miscellaneous factory expenses		384,487		243,153		8,344
Others		311,635		653,553		22,428

		696,122		896,706		30,772

12.	ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Accrued bonus		281,212		345,103		11,843
Others		244,498		645,793		22,162

		525,710		990,896		34,005

13.	CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES


	December 31,
	2009		2010
	NT$		NT$			US$
	(in thousands)
Convertible notes		554,537		174,138			5,976
Less: current portion		—		(65,834	)		(2,259	)

Non-current portion		554,537		108,304			3,717

Derivative liabilities - non-current		129,967		96,788			3,321

Convertible notes due 2009 (CN due 2009)

On November 3, 2004, ChipMOS Bermuda issued US$85,000 thousand (NT$2,476,900 thousand) CN due 2009. The CN due 2009 bore interest at 1.75% per annum. The noteholders might convert any outstanding notes into common shares of ChipMOS Bermuda, initially at the conversion price of US$7.85, at any time during the period from the 41^st day after the latest original issuance date of the notes to the close of business on the fifth business day before the stated maturity date, subject to prior repurchase or redemption. The conversion price was subject to certain adjustments. On November 3, 2005, the conversion price was adjusted to US$6.28 per share from the initial conversion price of US$7.85 per share, pursuant to the terms of the CN due 2009. The market price of the Company’s stock on November 3, 2005 was US$6.00. There was no fixed discount to the common shares’ market price in relation to conversion. On December 20, 2004, ChipMOS Bermuda repurchased US$699 thousand (NT$20,369 thousand) of the CN due 2009. No conversion had taken place during 2005, 2007 and 2008.

On October 18, 2006, noteholders of CN due 2009 converted US$7,000 thousand (NT$203,980 thousand) in aggregate principal amount into 1,114,649 common shares of ChipMOS Bermuda pursuant to ChipMOS Bermuda’s induced conversion offer, dated October 17, 2006. Pursuant to the induced conversion offer, ChipMOS Bermuda paid approximately US$490 thousand (NT$14,279 thousand) to the converting noteholders.

The noteholders of CN due 2009 had an option to cause ChipMOS Bermuda to repurchase for cash all or a portion of the notes on November 3, 2006 at a repurchase price equal to 100% of the principal amount of the notes plus any accrued and unpaid interest to, but excluding, the date of repurchase (put option). On November 3, 2006, ChipMOS Bermuda repurchased US$6,300 thousand (NT$183,582 thousand) CN due 2009 pursuant to the put option. After November 3, 2006, noteholders may cause ChipMOS Bermuda to repurchase the CN due 2009 only upon the occurrence of certain fundamental changes.

During 2008, ChipMOS Bermuda repurchased CN due 2009 US$2,000 thousand (NT$58,280 thousand), US$11,000 thousand (NT$320,540 thousand), and US$2,000 thousand (NT$58,280 thousand) on August 29, September 9, and December 2, respectively.

F-24

13.	CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (continued)

On October 21, 2009, ChipMOS Bermuda entered into an exchange transaction with a noteholder holding in an aggregate principal amount of US$45,000 thousand of the CN due 2009 (see CN due 2014 below). The exchange transaction was accounted for as an extinguishment of debt. A gain of NT$412,337 thousand was recorded as non-operating income in the statement of operations. On November 3, 2009, ChipMOS Bermuda repaid the remaining outstanding CN due 2009 in aggregate principal amount of US$2,001 thousand (NT$58,309 thousand) plus accrued and unpaid interest at maturity to the remaining noteholders.

The exercise price and the number of common shares converted of the CN due 2009 have not been adjusted for the reverse stock split as it matured on November 3, 2009.

Convertible notes due 2011 (CN due 2011)

On September 29, 2006, ChipMOS Bermuda issued US$100,000 thousand (NT$2,914,000 thousand) CN due 2011. The CN due 2011 bear interest at 3.375% per annum. The noteholders may convert any outstanding notes into common shares of ChipMOS Bermuda, initially at the conversion price of US$27.40, at any time during the period from the 41^st day after the latest original issuance date of the notes to the close of business on the fifth business day before the stated maturity date, subject to prior repurchase or redemption. The conversion price will be subject to certain adjustments. No conversion has taken place during 2006 to 2010. On November 29, 2007, ChipMOS Bermuda repurchased US$1,000 thousand (NT$29,140 thousand) of CN due 2011.

On May 23, 2008, ChipMOS Bermuda repurchased US$1,415 thousand (NT$41,233 thousand) of CN due 2011. On June 2, June 13, June 17, and June 30 2008, ChipMOS Bermuda repurchased US$5,000 thousand (NT$145,700 thousand), US$8,660 thousand (NT$252,352 thousand), US$1,000 thousand (NT$29,140 thousand), and US$2,000 thousand (NT$58,280 thousand) of CN due 2011, respectively.

The noteholders of CN due 2011 have an option to cause ChipMOS Bermuda to repurchase for cash all or a portion of the notes on September 29, 2008 at a repurchase price equal to 100% of the principal amount of the notes plus any accrued and unpaid interest to, but excluding, the date of repurchase (put option). On September 29, 2008, ChipMOS Bermuda repurchased aggregate principal US$78,665 thousand (NT$2,292,298 thousand) pursuant to the put option offer. After September 29, 2008, noteholders may cause ChipMOS Bermuda to repurchase the CN due 2011 only upon the occurrence of certain fundamental changes.

At any time on or after September 29, 2008, the Company may also at its option redeem the notes for cash at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, (a) in whole or in part, if the market price of the Company’s common shares has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period, or (b) in whole only, if at least 90% of the initial aggregate principal amount of the notes have been converted, repurchased or redeemed (call option).

Convertible notes due 2014 (CN due 2014)

On October 21, 2009, ChipMOS Bermuda completed an exchange transaction with a noteholder of CN due 2009 in an aggregate principal amount of US$45,000 thousand for US$15,300 thousand (NT$445,842 thousand) in cash and US$15,750 thousand (NT$458,955 thousand) in new convertible notes of ChipMOS Bermuda due October 21, 2014. The CN due 2014 bear interest at 10% per annum (10%CN due 2014). In connection with the exchange transaction, the Company recorded a gain of NT$412,337 thousand. The gain was recorded in non-operating income in the statement of operations in 2009.

The noteholder may convert any outstanding notes into common shares of ChipMOS Bermuda, initially at the conversion price of US$6.00 per share, at any time during the period from the 41^st day after the closing date to the close of business on the tenth business day prior to the stated maturity date, subject to prior repurchase or redemption (Conversion) The conversion price will be subject to certain adjustment. In addition to the common shares issuable upon conversion, an amount equal to the sum of any make-whole amount and any accrued and unpaid interest relating to the portion of the notes being converted is paid to the converting holder. Make-whole amount is the amount of interest that would have accrued with respect to applicable conversion date, change of control repurchase date or redemption date, as the case may be, until the stated maturity, discounted to present value using the published yield on treasury notes of the U.S. Federal Government having a comparable remaining tenor on the determination date plus 50 basis points; provided, however, the additional 50 basis points shall not be added if the applicable treasury note rate is greater than two percent (2%); in each case, the make-whole amount shall be calculated by the Company. At any time after the issuance date, if (i) the closing sale price of the common shares on an eligible market exceeds two hundred percent (200%) of the conversion price then in effect for a period of 20 consecutive trading days ending on the fifth trading day immediately preceding the company conversion notice date, (ii) the average daily trading volume of the common shares trading on an eligible market over such company conversion measuring period equals or exceeds one percent (1%) of the then outstanding common shares and (iii) no equity conditions failure has occurred and is continuing, the Company shall have the right to convert some or all of the outstanding principal amount of the Convertible Instruments as designated in a company conversion notice on the company conversion date. (Company conversion)

F-25

13.	CONVERTIBLE NOTES AND DERIVATIVE LIABILITIES (continued)

At any time prior to the maturity date, the Company may redeem all or part of the outstanding amount in cash. On the applicable redemption date, the Company shall redeem the outstanding principal amount specified in the redemption notice by paying in cash to the trustee as of the date of the redemption notice an amount equal to (a) the Principal amount being redeemed plus (b) the sum of any make-whole amount and any accrued and unpaid interest (to but excluding the redemption date), if any, in each case relating to the outstanding portion of the CN due 2014 being redeemed. If the Company redeems the CN due 2014 of a holder, the holder may nevertheless exercise its right to convert its CN due 2014 until the close of business on the day that is five business days immediately preceding the redemption date. (Redemption)

Interest on the CN due 2014 is payable at the Company’s option on each interest payment date (1) in whole in cash, (2) in whole in common shares or (3) in a combination of cash and common shares; provided, however, that in the case of the payment of common shares, in whole or in part, there shall not have been an equity conditions failure.

On December 29, 2009, ChipMOS Bermuda issued US$5,120 thousand (NT$149,197 thousand) CN due 2014 which bear interest at 8% per annum (8%CN due 2014). The terms of 8%CN due 2014 are the same as 10%CN due 2014 except the conversion price, coupon rate and the maturity date. The conversion price of 8%CN due 2014 is US$5.00 per share and the coupon rate is 8%. The maturity date is December 29, 2014.

During 2010, the noteholder of 10%CN due 2014 converted all 10%CN due 2014 into 2,625 thousand common shares of the Company. In connection with the make-whole clause, the Company issued 1,956 thousand common shares to the noteholder as interest payment of US$6,872 thousand (NT$200,250 thousand).

During 2010, noteholders of 8%CN due 2014 converted US$2,000 thousand (NT$58,280 thousand) in aggregate principal amount into 400 thousand common shares of our Company. In connection with the make-whole clause, the Company issued 106 thousand common shares to the noteholders as interest payment of US$702 thousand (NT$20,456 thousand).

Convertible notes due 2015 (CN due 2015)

On March 8 and 16, 2010, ChipMOS Bermuda issued US$1,500 thousand (NT$43,710 thousand) and US$3,000 thousand (NT$87,420 thousand) CN due 2015, respectively, which bear interest at 8% per annum. The terms of CN due 2015 are the same as CN due 2014 except the conversion price, coupon rate and maturity date. The conversion price of CN due 2015 is US$5.0 per share and the coupon rate is 8%. The maturity date is March 8, 2015 and March 16, 2015, respectively.

In May 2010, noteholders of CN due 2015 converted US$3,000 thousand (NT$87,420 thousand) in aggregate principal amount into 600 thousand common shares of our Company. In connection with the make-whole clause, the Company issued 248 thousand common shares to the noteholders as interest payment of US$1,133 thousand (NT$33,016 thousand).

In accordance with ROC SFAS No. 34, the notes are recorded as liabilities using the effective interest method. The Company bifurcated the Conversion and Company conversion features from the CN due 2014 and 2015 and recorded the embedded derivatives as derivative liabilities at fair value. The fair value of the derivative liabilities was determined using the Binomial Lattice model. The Redemption feature is clearly and closely related to the notes as the redemption payoff by the Company is the debt plus unpaid and accrued interest and make-whole amount.

F-26

14.	LONG-TERM LOANS


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Syndicated bank loans within guarantee provided by ChipMOS Taiwan, repayable annually from August 2009 to August 2011, interest at floating rate (1.26219% and 1.28438% as of December 31, 2009 and 2010, respectively)		2,144,929		642,317		22,043
Syndicated bank loans collateralized by equipment, repayable quarterly from June 2005 to December 2010, interest at floating rate (1.065% as of December 31, 2009)		107,826		—		—
Syndicated bank loans collateralized by equipment, repayable semi-annually from November 2006 to May 2012, interest at floating rate (2.85% and 2.97% as of December 31, 2009 and 2010, respectively)		356,250		317,287		10,888
Syndicated bank loans collateralized by buildings, repayable in September 2011, interest at floating rate (2.355% and 2.475% as of December 31, 2009 and 2010, respectively)		475,000		450,000		15,443
Syndicated bank loans repayable quarterly from March 2009 to September 2011, interest at floating rate (2.505% and 2.625% as of December 31, 2009 and 2010, respectively)		356,250		337,500		11,582
Bank loans, repayable quarterly from February 2006 to November 2011, interest at fixed rate of 4.69%		118,750		112,500		3,861
Bank loans collateralized by equipment, repayable quarterly from March 2006 to December 2010, interest at floating rate (1.28% as of December 31, 2009)		88,000		—		—
Syndicated bank loans collateralized by equipment, repayable semi-annually from April 2008 to April 2013, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		4,071,429		3,814,190		130,892
Syndicated bank loans collateralized by equipment, repayable semi-annually from June 2010 to December 2013, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		2,100,000		1,995,000		68,463
Bank loans collateralized by equipment, repayable quarterly from September 2008 to June 2013, interest at floating rate (3.41% and 3.53% as of December 31, 2009 and 2010, respectively)		237,500		225,000		7,721
Bank loans repayable quarterly from December 2008 to September 2013, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		261,250		247,500		8,493

F-27

14.	LONG-TERM LOANS (continued)


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Bank loans collateralized by equipment, repayable quarterly from December 2007 to December 2011, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		168,625			159,750			5,482
Bank loans collateralized by buildings, repayable semi-annually from June 2009 to December 2015, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		760,000			720,000			24,708
Bank loans collateralized by equipment, repayable quarterly from September 2009 to March 2012, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		285,000			263,395			9,039
Bank loans, repayable quarterly from March 2010 to December 2014, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		100,000			95,000			3,260
Bank loans collateralized by buildings, repayable semi-annually from January 2010 to July 2012, interest at floating rate (2.2% and 2.2% as of December 31, 2009 and 2010, respectively)		300,000			285,000			9,780
Bank loans collateralized by equipment, repayable quarterly from May 2007 to February 2012, interest at floating rate (2.016% - 2.112% and 2.182% - 2.311% as of December 31, 2009 and 2010, respectively)		862,450			479,139			16,443
Bank loans repayable quarterly from April 2011 to January 2015, interest at floating rate (1.86% as of December 31, 2010)		—			200,000			6,864
Bank loans repayable quarterly from March 2011 to December 2012, interest at floating rate ( 3.75% as December 31, 2010)		—			68,400			2,347
Bank loans repayable quarterly from March 2011 to December 2012, interest at fixed rate ( 4.00% as December 31, 2010)		—			32,983			1,132
Bank loans, repayable quarterly from March 2011 to December 2012, interest at floating rate (2.458% as December 31, 2010)		—			68,400			2,347
Bank loans, repayable quarterly from March 2011 to December 2012, interest at floating rate ( 2.3256% as December 31, 2010)		—			39,000			1,338
Bank loans, repayable quarterly from March 2011 to December 2012, interest at floating rate (1.214% as December 31, 2010)		—			13,510			464

		12,793,259			10,565,871			362,590
Less - current portion		(1,553,949	)		(4,925,739	)		(169,037	)

		11,239,310			5,640,132			193,553

Unused credit lines of long-term bank loans as of December 31, 2010 totaled approximately NT$500,000 thousand.

Under syndicated bank loans facility agreements, ChipMOS Bermuda, ChipMOS Taiwan and ThaiLin are required to maintain certain financial ratios. ThaiLin was waived from compliance of the times interest earned ratio requirement for 2009, and ChipMOS Taiwan was waived from compliance of the financial ratio requirements for 2009 and 2010. ThaiLin was in compliance with the financial ratio requirements as of December 31, 2010.

F-28

14.	LONG-TERM LOANS (continued)

Pursuant to a bank creditors meeting and the approval notice from Standard Chartered Bank on February 9, 2010, ChipMOS Bermuda, as borrower, and ChipMOS Taiwan, as guarantor were waived from compliance of the financial ratio requirements as of December 31, 2008 and December 31, 2009

As of December 31, 2010, certain land and buildings and machinery were mortgaged as collateral for the long-term loans (Note 20).

On January 14, 2009, a meeting was arranged by ChipMOS Taiwan with all the banks that have loans due in 2009 to 2013 for an extension of repayments and amendments on other terms and conditions on these loans (“amendments”). A bank creditors’ meeting hosted by Bank of Taiwan, the largest bank creditor, was held on February 13, 2009 to discuss ChipMOS Taiwan’s request for an extension of loan repayment and amendments. At the meeting, it was resolved that the extension of loan repayment and amendments be approved and applicable to all bank creditors with loans due in 2009 to 2013 once the bank creditors with loans due in 2009 to 2013 whose loans aggregated over 50% of the total bank loans due in 2009 to 2013 agreed. On April 6, 2009, Bank of Taiwan issued a letter to ChipMOS Taiwan informing ChipMOS Taiwan that the bank creditors whose loan amounts aggregated over 50% of the total bank loans due in 2009 to 2013 formally agreed to the extension of loan repayment and amendments.

In April 2009, ChipMOS Bermuda applied to Standard Chartered Bank for the waiver of financial covenants of borrower and guarantor. In February 2010, Standard Chartered Bank issued a notice to ChipMOS Bermuda informing ChipMOS Bermuda that majority lenders approval had been obtained to the waiver request.

On March 4, 2010, a meeting was arranged by ChipMOS Bermuda with Standard Chartered Bank as lead banker of the syndicated loan of US$74,500 thousand (NT$2,170,930 thousand). The Company’s application for early repayment of the outstanding loan in four installments was approved in April 2010 without penalty. The last installment was repaid in January 2011.

On November 18, 2010 a meeting was hosted by Bank of Taiwan, the largest bank creditor, to discuss ChipMOS Taiwan’s request for an extension of repayment for short-term loans of NT$1,467,571 thousand (US$50,363 thousand). Over 50% of the banks agreed by December 27, 2010 and the repayment of short-term loans were extended to December 31, 2012 but with quarterly repayment starting from March 31, 2011. The key extended repayment terms and conditions include: agreement by ChipMOS Taiwan to repay 20% of the outstanding short-term loans on December 31, 2010 and to repay the balance in eight installments by setting aside NT$50,000 thousand per month with Bank of Taiwan from January 2011 till December 2012.

In the same meeting, ChipMOS Taiwan also agreed to set aside NT$300,000 thousand per month for 2011, NT$270,000 thousand per month for 2012 and NT$150,000 thousand per month for 2013 with Bank of Taiwan for the long-term loan repayment.

Future minimum principal payments under the long-term loans as of December 31, 2010 are as follows:


	Amount
	NT$		US$
	(in thousands)
2011		4,925,739		169,037
2012		3,358,443		115,252
2013		1,874,189		64,317
2014		235,000		8,064
2015		172,500		5,920

		10,565,871		362,590

F-29

15.	CAPITAL LEASES PAYABLE


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Capital leases payable		2,275,005			1,453,791			49,890
Less: current portion		(821,214	)		(822,047	)		(28,210	)

Non-current portion		1,453,791			631,744			21,680

ChipMOS Taiwan originally leased some equipment under operating leases. As part of the plan to remediate the financial difficulty, ChipMOS Taiwan negotiated with the lessors and converted the leases of certain equipment into capital leases in November 2009. The capital leases mature from 2012 to 2013 and have buy-out options but they cannot be renewed, terminated or refunded. The leased equipment and the corresponding capital leases payable are recorded at the lower of the fair value of the leased equipment and the present value of the minimum lease payments of such assets. The capital leases are repayable in quarterly instalments and carry interest at floating rates of 3.9567% - 3.9609% and 4.0888% - 4.0973% as of December 31, 2009 and 2010, respectively.

As of December 31, 2010, the cost and accumulated depreciation of the leased equipment amounted to NT$2,149,768 thousand and NT$621,244 thousand, respectively. The depreciation charge for the year amounted to NT$569,078 thousand.

Future minimum lease payments under the capital leases as of December 31, 2010 are as follows:


	Amount
	NT$		US$
	(in thousands)
2011		822,047		28,210
2012		573,659		19,687
2013		58,085		1,993

		1,453,791		49,890

Under the capital leases, ChipMOS Taiwan is required to maintain certain financial ratios, starting from 2010. As of December 31, 2010, ChipMOS Taiwan was in compliance.

ChipMOS Taiwan obtained permission from the syndicated loan borrowers (see Note 14 above) and pledged certain land and buildings and equipment to the above lessors (Note 20). ChipMOS Taiwan also placed 104,695 thousand shares of ThaiLin under the custody of Bank of Taiwan.

16.	PENSION PLAN

ChipMOS Taiwan and ThaiLin have established defined benefit pension plans for all of their regular employees, which provide benefits based on the length of service and the average monthly salary for the six-month period immediately before retirement.

ChipMOS Taiwan and ThaiLin make monthly contributions, equal to 2% of salaries and wages, to a pension fund that is administered by a pension fund monitoring committee and deposited in the Central Trust of China in the Republic of China.

Taiwan has a new pension scheme law effective July 1, 2005. The new pension scheme is a defined contribution scheme. All new employees who join or joined ChipMOS Taiwan and ThaiLin on or after July 1, 2005 must participate in the new scheme. Existing employees can choose to stay with the old scheme or to join the new scheme. Under the new scheme, ChipMOS Taiwan and ThaiLin are required to contribute 6% of the employees’ salaries into the employees’ own pension fund accounts managed by the government.

The employees of ChipMOS Shanghai are required to participate in a central pension scheme operated by the local municipal government. Contributions are made based on a percentage of the employees’ salaries and bonuses, if applicable, and are charged to the income statement as incurred.

F-30

16.	PENSION PLAN (continued)

Certain pension information is as follows:

Net pension cost


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Service cost		1,585			1,518			1,325			45
Interest cost		12,395			11,340			12,292			422
Projected return on plan assets		(7,865	)		(6,857	)		(5,140	)		(176	)
Amortization		53			53			53			2
Curtailment loss		6,666			7,362			8,149			280

		12,834			13,416			16,679			573

Reconciliation of the fund status of the plan and accrued pension cost


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Actuarial present value of benefit obligations
Vested benefit obligation		506			506			486			17
Nonvested benefit obligation		236,480			245,276			304,253			10,441

Accumulated benefit obligation		236,986			245,782			304,739			10,458
Additional benefits based on future salaries		261,269			300,603			359,728			12,344

Projected benefit obligation		498,255			546,385			664,467			22,802
Plan assets at fair value		(291,532	)		(314,992	)		(343,823	)		(11,799	)

Projected benefit obligation in excess of Plan assets		206,723			231,393			320,644			11,003
Unrecognized net transition obligation		(504	)		(451	)		(398	)		(14	)
Unrecognized prior service cost		4,617			4,411			4,205			144
Unrecognized net gain		(218,665	)		(251,471	)		(347,611	)		(11,928	)

Prepaid pension		(7,829	)		(16,118	)		(23,160	)		(795	)

Actuarial assumptions


	2008		2009		2010
Discount rate used in determining present values		2.38%		2.38%		1.88%
Future salary increase rate		4.25%		4.25%		4.25%
Expected rate of return on plan assets		2.38%		1.88%		2.00%

Changes in pension fund


	Year Ended December 31,
	2008		2009		2010
	NT$		NT$		NT$		US$
	(in thousands)
Company contributions		32,780		21,705		23,844		818

Payment of benefits		—		—		—		—

17.	SHAREHOLDERS’ EQUITY

Under ROC Company Law, capital surplus can only be used to offset deficits, except that capital surplus generated from (1) donations (donated capital) or (2) the excess of the issue price over the par value of capital stock (including stocks issued for new capital and mergers, and the purchase of treasury stock) can be transferred to capital as stock dividends when no deficit remains and shareholders approve such distribution.

ChipMOS Taiwan’s Articles of Incorporation provide that the following may be appropriated from the accumulated net income, after deducting any previously accumulated deficit and 10% legal reserve, subject to shareholders’ approval: (a) 10% as bonuses to employees, (b) not more than 0.5% as remuneration to directors and supervisors, (c) a special reserve, if deemed necessary, and (d) dividends to shareholders.

F-31

17.	SHAREHOLDERS’ EQUITY (continued)

ThaiLin’s Articles of Incorporation provide that the following may be appropriated from the accumulated net income, after deducting any previously accumulated deficit and 10% legal reserve, subject to shareholders’ approval: (a) not more than 0.5% as remuneration to directors and supervisors, (b) not less than 10% as bonuses to employees, and (c) dividends to shareholders but not less than 50% should be distributed as cash dividends to shareholders.

These appropriations and the disposition of the remaining net income shall be resolved by the shareholders in the following year and given effect in the financial statements of that year.

The aforementioned appropriation for legal reserve shall be made until the reserve equals the aggregate par value of ChipMOS Taiwan’s and ThaiLin’s outstanding capital stock. The reserve can only be used to offset a deficit, or when its balance has reached 50% of the aggregate par value of the outstanding capital stock of ChipMOS Taiwan and ThaiLin, and up to 50% thereof can be distributed as stock dividends.

Stock Options

The Share Option plan provides that the directors, officers, employees and consultants of ChipMOS Bermuda and its affiliates may be granted options to purchase common shares of ChipMOS Bermuda at specified exercise prices.

The following table summarizes information about stock options outstanding at December 31, 2010.

Year

of Grant

Exercise
Price

Number

Outstanding

Market
Price

at Grant

Market

Price

at Year
End

Number

Exercisable
on

or after

Number

Exercisable
on

or after

Number

Exercisable
on

or after

Number

Exercisable
on

or after

Number

Exercisable
on

or after

US$

2006

19.244

~ 22.882

380,513

22.64

~ 26.92

6.12

13,500

August

2006

93,552

August ~

December

2007

91,227

August ~

December

2008

91,227

August ~

December

2009

91,007

August ~

December

2010

2007

14.552

~ 25.908

342,492

17.12

~ 30.48

6.12

13,500

August

2007

82,839

January ~

December

2008

82,839

January ~

December

2009

82,824

January ~

December

2010

80,490

January ~

December

2011

2008

0.748

~ 11.9

802,147

0.88

~ 14.00

6.12

17,500

August ~

November

2008

198,944

January ~

December

2009

199,181

January ~

December

2010

194,401

January ~

December

2011

192,121

January ~

December

2012

2009

0.8528

~ 2.55

430,320

1.0032

~ 3.00

6.12

25,097

August ~

November

2009

92,124

January ~

November

2010

104,367

January ~

November

2011

104,366

January ~

November

2012

104,366

January ~

November

2013

2010

2.448

~ 5.474

158,582

2.88

~ 6.44

6.12

21,250

August

2010

36,208

January ~

September

2011

33,708

January ~

August

2012

33,708

January ~

August

2013

33,708

January ~

August

2014

2,114,054

Commencing from January 1, 2008, the Company has applied SFAS No. 39 for stock options issued to employees in accounting for its stock option plans. Therefore, NT$371,095 thousand (US$12,735 thousand) of compensation expense has been recognized with NT$43,874 thousand (US$1,506 thousand) (2009: NT$90,600 thousand) being accounted for through the statement of operations. The Company issued 160,660 (2009: 494,394) stock options in 2010 to its employees. In 2010, 212,049 (2009: 174,295) stock options were forfeited, 353,800 (2009: 96,250) stock options were expired and 19,246 (2009: nil) stock options were exercised, leaving 2,114,054 (2009: 2,538,489) stock options outstanding at December 31, 2010.

F-32

17.	SHAREHOLDERS’ EQUITY (continued)

Share Appreciation Rights

The share appreciation rights plan provides that the directors, officers and employees of ChipMOS Bermuda and its affiliates may be granted cash-settled share appreciation rights.

The following table summarizes information about share appreciation rights outstanding at December 31, 2010.

Year

of Grant

Exercise
Price

Number

Outstanding

Market
Price

at Grant

Market

Price

at Year
End

Number

Exercisable
on

Or after

Number

Exercisable
on

or after

Number

Exercisable
on

or after

Number

Exercisable
on

or after

US$

2006

19.244

~ 22.882

186,523

22.64

~ 26.92

6.12

46,729

August ~
December
2007

46,723

August ~
December
2008

46,723

August ~
December
2009

46,348

August ~
December
2010

2007

14.552

~ 25.908

72,375

17.12

~ 30.48

6.12

18,375

January ~

December
2008

18,375

January ~

December
2009

18,375

January ~

December
2010

17,250

January ~

December
2011

2008

0.748

~ 11.9

99,619

0.88

~ 14.00

6.12

25,284

January ~

December
2009

25,281

January ~

December
2010

24,527

January ~

December
2011

24,527

January ~

December
2012

2009

0.884

~ 2.55

251,742

1.04

~ 3.00

6.12

53,973

January ~

August

2010

65,923

January ~

August

2011

65,923

January ~

August

2012

65,923

January ~

August

2013

2010

2.448

~ 3.06

17,248

2.88

~ 3.6

6.12

4,312

March ~

August

2011

4,312

March ~

August

2012

4,312

March ~

August

2013

4,312

March ~

August

2014

627,507

During the year, 18,625 (2009:293,265) rights were granted, 89,300 (2009: 51,165) rights were forfeited and 15,300 (2009: nil) rights were exercised. As of December 31, 2010, there were 627,507 (2009: 713,482) share appreciation rights outstanding.

The Company recognized compensation expense of NT$27,809 thousand (US$954 thousand) (2009: NT$11,025 thousand) in respect of share appreciation rights at fair value.

18.	INCOME TAX EXPENSE

A reconciliation of income tax expense – current before tax credits and income tax expense on income (loss) before income tax at statutory rates is shown below:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Tax on pretax income (loss) at 0%		—			—			—			—
Tax on pretax income (loss) at applicable statutory rates		(1,117,426	)		(1,322,415	)		538,998			18,497
Tax effect:
Losses carried forward		227,739			1,088,819			(61,646	)		(2,115	)
Tax exempt income		134,173			—			—			—
Permanent differences		460,272			(105,083	)		(183,426	)		(6,295	)
Temporary differences		647,470			346,995			(256,756	)		(8,811	)

Income tax expense - current before tax credits		352,228			8,316			37,170			1,276

The ROC statutory tax rate for 2008, 2009 and 2010 were 25%, 25% and 17%, respectively.

The PRC statutory rate for 2008 onwards was 25%.

F-33

18.	INCOME TAX EXPENSE (BENEFIT) (continued)

Income tax expense consists of:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Income tax expense - current before tax credits		352,228			8,316			37,170			1,276
Additional 10% on the unappropriated earnings		166,318			—			—			—
Income tax credits		(165,909	)		—			(9,445	)		(324	)
Separate and foreign income tax		—			—			—			—

Income tax for the current year		352,637			8,316			27,725			952
Net change in deferred income tax assets (liabilities) for the year
Tax credits		(22,867	)		4,080			515,421			17,688
Temporary differences		(647,470	)		(310,264	)		289,610			9,938
Losses (recognized) utilized		(227,739	)		(1,088,819	)		82,057			2,816
Valuation allowances		867,948			804,420			(1,124,766	)		(38,599	)
Deferred tax effect of change in tax rate		—			139,526			80,935			2,777
Adjustment of prior years’ taxes		(201,717	)		22,079			29,658			1,018


Income tax expense (benefit)		120,792			(420,662	)		(99,360	)		(3,410	)

Since the Company is an exempted company incorporated in Bermuda, a tax-free country, tax on pretax income is calculated at the Bermuda statutory rate of 0% for each year.

ChipMOS Taiwan, under Science Park Regulations, is entitled to an exemption from ROC income taxes for a period of four years on income attributable to the expansion of its production capacity as a result of purchases of new equipment funded by capital increases. Such tax exemption expired on December 31, 2008.

In accordance with the relevant tax rules and regulations in the PRC, ChipMOS Shanghai enjoys income tax exemptions for the first two profitable years and 50% reductions for the following three years. Tax losses can only be carried forward for five years. ChipMOS Shanghai is subject to PRC income tax at 25% since January 1, 2009.

Deferred income tax assets and liabilities are summarized as follows:


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Net current deferred income tax assets:
Unrealized foreign exchange losses		3,200			25,248			866
Tax credits		552,781			285,891			9,811
Loss of market price decline and obsolete and slow-moving inventories		36,969			10,430			358
Unrealized loss on sale allowances		22,791			31,932			1,096
Allowance for doubtful receivables		554,152			11,013			378
Others		7,406			4,768			163

		1,177,299			369,282			12,672
Less: Valuation allowances		(820,989	)		(90,571	)		(3,107	)

		356,310			278,711			9,565


Net non-current deferred income tax (liabilities) assets:
Losses carried forward		1,445,742			1,178,333			40,437
Tax credits		412,308			163,777			5,620
Depreciation differences		(368,862	)		(93,342	)		(3,203	)
Unrealized impairment loss on idle fixed assets		8,387			13,114			450
Others		294,474			236,306			8,109

		1,792,049			1,498,188			51,413
Less: Valuation allowances		(1,578,683	)		(1,080,257	)		(37,071	)

		213,366			417,931			14,342

The deferred income tax components are measured at respective applicable statutory rates as of December 31, 2009 and 2010 of 20% and 17%, respectively for ChipMOS Taiwan and ThaiLin and 25% for ChipMOS Shanghai.

F-34

18.	INCOME TAX EXPENSE (BENEFIT) (continued)

The balance and year of expiry of unused investment tax credits and losses carried forward as of December 31, 2010 are as follows:


Year of expiry	R & D expenditures		Machinery and equipment		Losses carried forward
	NT$		NT$		NT$
	(in thousands)
2011		65,571		220,320		85,378
2012		52,448		38,599		112,994
2013		31,470		17,609		129,843
2014		—		23,651		94,180
2015		—		—		46,856
2018		—		—		42,603
After 2018		—		—		666,479


		149,489		300,179		1,178,333

The deferred tax assets relate to investment tax credits on research and development expenditure and purchases of machinery and equipment which will expire from 2011 to 2014. Under ROC tax regulations, tax credits can be utilized to reduce current income tax obligations only to the extent of 50% of such income tax obligations except in the year when such tax credits will expire, in which case, the entire amount of expiring tax credits may be utilized to reduce the current income tax obligation. The foregoing limitation on the utilization of tax credits, the expiry dates of the tax credits, the level of tax credits expected to be generated from future operations and the level of non-taxable income attributable to the four-year income tax holiday on capacity expansion led management to conclude that it is unlikely that these investment tax credits will be fully realized. Losses carried forward can be used to deduct current income tax obligations up to the extent of taxable income and will expire after ten years if not fully utilized by the Company. Accordingly, a valuation allowance on deferred tax assets is recognized as of December 31, 2009 and 2010.

The tax losses of ChipMOS Shanghai will expire after five years.

According to ROC tax law, ChipMOS Taiwan’s and ThaiLin’s unappropriated earnings generated in 1998 and thereafter are subject to a tax of 10% in the year when the shareholders resolve that such earnings shall be retained. The retained earnings as of December 31, 2009 and 2010 consist of:


	December 31,
	2009			2010
	NT$			NT$		US$
	(in thousands)
Before 1998		—			—		—
1998 and thereafter		(2,815,527	)		2,593,408		88,998


		(2,815,527	)		2,593,408		88,998

The income tax returns of ChipMOS Taiwan and ThaiLin through 2007 and 2008, respectively, have been assessed by the tax authorities.

19.	RELATED PARTY TRANSACTIONS

The Company engages in business transactions with the following related parties:

MVI: A major shareholder.

DenMOS Technology Inc. (DenMOS): An investee of MVI.

ProMOS: An investee of MVI.

SPIL: A major shareholder.

F-35

19.	RELATED PARTY TRANSACTIONS (continued)

The significant transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:


	Year Ended December 31,
	2008		2009			2010
	NT$		NT$			NT$			US$
	(in thousands)
During the year
Revenue
ProMOS		3,114,149		667,800			2,033,342			69,778
DenMOS		8,776		911			—			—
SPIL		—		195			—			—

		3,122,925		668,906			2,033,342			69,778

Purchases of materials
ProMOS		164,609		—			—			—

Other expenses
MVI		148		148			148			5
DenMOS		—		1			—			—
SPIL		—		—			766			26

		148		149			914			31

Other revenue
ProMOS		—		26,800			412			14

Interest income
ProMOS		252		1,183			—			—


			December 31,
			2009			2010
			NT$			NT$			US$
			(in thousands)
At the end of year

Accounts receivable
ProMOS				—			259,415			8,902
SPIL				205			—			—

Less: Allowances for doubtful receivables				—			(1,433	)		(49	)

				205			257,982			8,853


Other receivables
ProMOS				463,536			66,378			2,278
Less: Allowances for doubtful receivables				(463,536	)		—			—

				—			66,378			2,278


Advance receipts
ProMOS				1,947			—			—


Other payables
MVI				26			13			1


Payables to contractors and equipment suppliers
SPIL				—			490,000			16,815

F-36

19.	RELATED PARTY TRANSACTIONS (continued)

18%, 5% and 12% of the Company’s 2008, 2009 and 2010 sales were made to ProMOS. The price was agreed upon quarterly, based on the then fair market price. The collection term for ProMOS was originally 75 days after month end. On November 13, 2008, ChipMOS Taiwan and ProMOS revised the subcontracting contract by requiring ProMOS to provide wafers with a value of 80% of the subcontracting fee as collateral. Effective March 2009, ChipMOS Taiwan started to request prepayments from ProMOS. In May 2010, the collection term was revised to 30 days after delivery and it was further revised to 45 days after delivery in October 2010. In September 2008, ThaiLin revised the collection term for ProMOS from 75 days to 105 days after month end. In April 2009, ThaiLin started to request prepayments from ProMOS. In June 2010, the collection term was revised to 30 days after delivery.

Other related parties have normal collection terms of 60 days after month end. The selling price is the same as for other customers.

The payment terms for purchases from related parties are the same as those from other suppliers.

In 2008, ProMOS used its machinery of NT$407,460 thousand, and bonds of NT$250,000 thousand and NT$400,000 thousand, to settle the payable to ChipMOS Taiwan.

In 2009, ProMOS used 1,015 thousand shares of ChipMOS Bermuda to settle the other receivables of NT$30,000 thousand and accounts receivable of NT$24,851 thousand.

On December 29, 2009, a director of the Company purchased NT$29,140 thousand (US$1,000 thousand) 8%CN due 2014 (Note 13).

As of December 31, 2009, other receivables from ProMOS amounted to NT$408,999 thousand and 100% allowance was made by ChipMOS Taiwan. NT$7,000 thousand was received by April 2010. Under the amended subcontracting contract ProMOS paid ChipMOS Taiwan NT$200,000 thousand in May 2010. The remaining NT$201,999 thousand will be paid in nine monthly installments ending on March 15, 2011. Nine post-dated checks were received. As of December 31, 2010, ChipMOS Taiwan received NT$335,999 thousand and the related allowance of NT$408,999 thousand was reversed to other non operating income.

As of December 31, 2009, other receivables from ProMOS amounted to NT$54,537 thousand (US$1,872 thousand) and 100% allowance was made by ThaiLin. In June 2010, ThaiLin agreed a settlement with ProMOS in the amount of NT$24,000 thousand and it was collected during the year. The allowance of NT$24,000 thousand was reversed to other non-operating income.

In February 2010, ChipMOS Taiwan has entered into an Equipment Purchase Agreement with SPIL to purchase SPIL’s DRAM test and LCD driver assembly and test operation lines with purchase price of approximately NT$1,630,580 thousand (US$55,957 thousand). Under the terms and conditions of the Equipment Purchase Agreement, ChipMOS Taiwan will pay the purchase price in four installments to SPIL with the final installment scheduled to be paid on or before March 31, 2011. As of December 31, 2010, the unpaid was NT$ 490,000 thousand and it was paid in January 2011.

At the same time, ChipMOS Bermuda has also entered into a Share Purchase Agreement with SPIL to sell to SPIL its holding of 133,000 thousand common shares of ChipMOS Taiwan with a consideration of NT$1,630,580 thousand (US$55,957 thousand). Under the terms and conditions of the Share Purchase Agreement, SPIL will pay the purchase price in four installments to the Company with the final installment scheduled to be paid on or about March 31, 2011. As of December 31, 2010, SPIL has acquired 93,033 thousand common shares of ChipMOS Taiwan. The transaction was completed in January 2011.

The Company consults its ROC counsel on certain related party transactions and obtains legal opinions, as appropriate, to ensure that such transactions do not violate relevant ROC laws and regulations.

F-37

20.	PLEDGED OR MORTGAGED ASSETS

The Company provided certain assets as collateral mainly for short and long-term bank loans, capital leases and customs duty guarantee, which were as follows:


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Restricted cash and cash equivalent		243,849		546,807		18,765
Investments with no active market		201,000		—		—
Land		452,738		452,738		15,537
Buildings		5,447,920		6,270,155		215,173
Machinery and Equipment		10,086,997		6,345,521		217,760
Leased equipment		2,311,002		1,636,115		56,147
Land use right		—		94,265		3,235

		18,743,506		15,345,601		526,617

21.	SIGNIFICANT COMMITMENTS AND CONTINGENCIES

As of December 31, 2010, ChipMOS Taiwan leased parcels of land from the Hsinchu and Tainan Science Park under several agreements expiring on various dates from 2017 to 2026, with renewal options.

The future minimum lease payments under the above-mentioned leases as of December 31, 2010 are as follows:


Year	Amount
	NT$		US$
	(in thousands)
2011		24,126		828
2012		23,142		794
2013		23,142		794
2014		23,142		794
Thereafter		122,723		4,212


Total minimum lease payments		216,275		7,422

As of December 31, 2010, ChipMOS USA leased its office under an agreement expiring in 2015. The future minimum lease payments as of December 31, 2010 are as follow:


Year	Amount
	NT$		US$
	(in thousands)
2011		2,939		101
2012		3,030		104
2013		2,944		101
2014		2,854		98
2015		2,940		101


Total minimum lease payments		14,707		505

As of December 31, 2010, ChipMOS Taiwan had capital commitments in relation to purchase of plant and machinery in the amount of NT$816,900 thousand (US$28,034 thousand).

As of December 31, 2010, ThaiLin had capital commitments in relation to purchase of plant and machinery in the amount of NT$10,419 thousand (US$358 thousand).

As of December 31, 2010, ChipMOS Shanghai had capital commitments in relation to purchase of plant and machinery in the amount of NT$50,427 thousand (US$1,731 thousand).

F-38

21.	SIGNIFICANT COMMITMENTS AND CONTINGENCIES (continued)

On April 1, 1999, Motorola, Inc. (“Motorola”) and ChipMOS Taiwan entered into an immunity agreement (the “Agreement”), that each party covenanted not to sue each other for the use of certain Ball Grid Array (“BGA”) patents pursuant to the Agreement. In December 2004, Motorola spun off its semiconductor division and thereby formed Freescale Semiconductor, Inc. (“Freescale”). Subsequently, Freescale assumed Motorola’s rights and obligations under the Agreement. On October 16, 2006, Freescale unilaterally terminated the Agreement, alleging ChipMOS Taiwan breach of the Agreement. Under the Agreement, ChipMOS Taiwan agreed to pay running royalties for its manufacturing of certain BGA packages covered by Motorola (now Freescale) patents pursuant to the Agreement. As such, ChipMOS Taiwan argued Freescale’s unilateral termination of the Agreement has no legal effect. ChipMOS Taiwan has continued to accrue royalty payments for products it believes are covered by the Agreement. The payments previously returned by Freescale and accrued by ChipMOS Taiwan have been deposited in a separate escrow account. On July 13, 2009, Freescale alleged that ChipMOS Taiwan breached the Agreement by failing to pay royalties on certain BGA packages assembled by ChipMOS Taiwan. Freescale claims that such packages are covered by one or more Freescale patents identified in the Agreement while ChipMOS Taiwan contends that such packages are not covered by any of Freescale’s patents in the Agreement. ChipMOS Taiwan filed an answer to deny all allegations and also filed counterclaims against Freescale alleging Freescale for engaging in patent misuse by seeking to obtain royalties on certain of ChipMOS Taiwan’s BGA products that were not covered by any Freescale patent included under the Agreement, and for declaratory judgement of patent non-infringement and invalidity. In response, on December 11, 2009, Freescale filed a motion to dismiss the declaratory judgment counterclaims filed by ChipMOS Taiwan and to stay all other patent related claims and issues until its breach of contract claims could be decided. That motion and the initial case management conference were held on March 5, 2010 and the motions were deemed submitted. A Summary Judgment granting in part and denying in part of motion of both Freescale and ChipMOS Taiwan was given by court on July 29, 2010. A trial date is scheduled for September 19, 2011. The Company’s counsel has not formed any opinion as to the outcome of the case.

On April 20, 1999, ChipMOS Taiwan entered into a semiconductor packaging technology license agreement with Tessera Technologies, Inc. (Tessera). In February 2006, ChipMOS Taiwan and ChipMOS USA received notice of a patent infringement lawsuit brought by Tessera, alleging infringement of several Tessera patents and breach of an existing license agreement with ChipMOS Taiwan. The fact discovery has been stayed in accordance with a Northern District of California Court order issued on May 24, 2007. On April 21, 2008, Tessera requested that the International Trade Commission (ITC) investigate ChipMOS Bermuda, ChipMOS Taiwan and ChipMOS USA (collectively referred to as the Companies) on the basis of alleged violations of Section 337 of the Tariff Act of 1930. In its request for investigation (“ITC-649 Investigation”), Tessera alleged that the Companies infringed certain patents among which are three that were the subject of the stayed litigation in the Northern District of California. Tessera also requested that the ITC issue an exclusion order to enjoin the importation of accused products into the United States. On September 30, 2008, Judge of Northern District of California Court (“Judge”) granted a motion to extend the hearing date from March 16 to March 24, 2009 and target date from August 28 to November 2, 2009. On February 10, 2009, the Judge ordered the procedural schedule in the ITC-649 Investigation be stayed until the ITC issues its Final Determination in the ITC-605 Investigation. The target date of Initial Determination was also extended from December 7, 2009 to February 8, 2010. On March 13, 2009, after the close of discovery, Tessera submitted a request to terminate the ITC-649 Investigation. On July 17, 2009, the Judge issued an order granting the request to terminate the ITC-649 Investigation. No petitions for review were filed. The ITC had determined not to review the Initial Determination and issued an order to terminate the investigation on August 7, 2009. The ITC’s Final Determination for the ITC-605 Investigation issued in May 2009 was appealed to the Federal Circuit. On December 21, 2010, the Federal Circuit issued an opinion and affirmed ITC’s Final Determination. This appeal is not yet final as it was petitioned to the Federal Circuit for a rehearing. The stayed litigations may resume once the ITC completes a companion investigation against other companies in the ITC-605 Investigation. The Company’s counsel has not formed an opinion as to the outcome of the case.

22.	POST BALANCE SHEET EVENTS

On January 21, 2011, the Company’s shareholders approved a one-for-four reverse stock split of its common stock which became effective on January 21, 2011. As a result of this reverse stock split, every four shares of the Company’s common stock that were issued and outstanding as of January 21, 2011 were automatically combined into one issued and outstanding share with par value change from US$0.01 to US$0.04 per share, and the number of authorized but unissued shares of the Company’s common stock was proportionally reduced. A proportionate adjustment was also made to the Company’s outstanding stock options and convertible notes. No fractional shares were issued in connection with this reverse stock split, but rather shareholders who were entitled to fractional shares received cash in lieu of receiving fractional shares.

On January 10, 2011, SPIL paid NT$490,000 thousand (US$16,815 thousand) to ChipMOS Bermuda to purchase the remaining 39,967 thousand common shares of ChipMOS Taiwan. Upon completion of the transaction, SPIL owned a 15.8% interest in ChipMOS Taiwan.

F-39

23.	DERIVATIVE FINANCIAL INSTRUMENTS

ChipMOS Taiwan has entered into forward exchange contracts and foreign currency options for the years ended December 31, 2008, 2009 and 2010 to hedge its exchange rate risk on foreign-currency assets or liabilities and anticipated transactions. No derivative financial instrument was used during 2009 and 2010. Information on the derivative transactions is as follows:

Forward exchange contracts

As of December 31, 2009 and 2010, there were no outstanding forward contracts.

Financial risk information

Credit risk. Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade and other receivables). The Company performs ongoing credit evaluation of the debtors’ financial condition and maintains an allowance for doubtful receivables based on historical collection, write-off experience and individual examination of available information regarding the customers. The banks with which the Company has entered into the above contracts are reputable and, therefore, the Company is not expected to be exposed to significant credit risks.

Market risk and hedge strategy. The Company’s financial assets at fair value through profit and loss are stated at market value, which is affected by the stock prices in the open stock market. The financial assets with no active market and held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates will result in changes in fair values of these debt securities. Subject to turmoil in the global financial market, the Company had evaluated its financial instruments and the Company believed the exposure to market risk as of December 31, 2010 was not significant. The Company is exposed to market risks arising from changes in currency exchange rates due to U.S. dollar denominated accounts receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order to manage these exposures, the Company sometimes enters into forward contracts and option contracts.

Liquidity risk. Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. Prudent liquidity risk management implies maintaining sufficient cash. The Company monitors and maintains a level of bank balances deemed adequate to finance its operations. The Company employs projected cash flow analysis to manage liquidity risk by forecasting the amount of cash required and monitoring the working capital of the group to ensure that all liabilities due and known funding requirements could be met. In addition, there are unused credit lines for contingency purposes.

Cash flow interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s short and long term bank loans with floating interest rates. At December 31, 2010, it is estimated that a general increase or decrease of 1% in interest rates, with all other variables held constant, would increase the Company’s cash outflow by NT$135,143 thousand.

F-40

23.	DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The estimated fair values of the Company’s financial instruments are as follows:


	December 31,
	2009				2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
	NT$		NT$		NT$		NT$		US$
	(in thousands)
Assets
Cash and cash equivalents		3,884,828		3,884,828		7,143,265		7,143,265		245,136
Restricted cash and cash equivalents		243,849		243,849		546,807		546,807		18,765
Financial assets at fair value through profit and loss		119,027		119,027		2,999		2,999		103
Notes receivable		27,931		27,931		13,980		13,980		480
Accounts receivable:
Related parties		205		205		257,982		257,982		8,853
Third parties		2,441,765		2,441,765		2,816,072		2,816,072		96,639
Other receivables:
Related parties		—		—		66,378		66,378		2,278
Third parties		130,131		130,131		182,028		182,028		6,247
Long-term investments		19,966		19,966		10,537		10,537		362
Investments with no active market		300,000		300,000		—		—		—
Refundable deposits		33,797		33,797		20,295		20,295		697

Liabilities
Bank loans		2,363,319		2,363,319		1,494,651		1,494,651		51,292
Accounts payable:
Third parties		737,997		737,997		690,060		690,060		23,681
Other payables:
Related parties		26		26		13		13		1
Third parties		696,122		696,122		896,706		896,706		30,772
Payables to contractors and equipment suppliers		201,171		201,171		790,598		790,598		27,131
Capital leases payable (including current portion)		2,275,005		2,275,005		1,453,791		1,453,791		49,890
Convertible notes (including current portion)		554,537		596,227		174,138		194,672		6,681
Derivative liabilities		129,967		129,967		96,788		96,788		3,321
Long-term loans (including current portion)		12,793,259		12,793,259		10,565,871		10,565,871		362,590
Guarantee deposits		3,668		3,668		3,989		3,989		137

Fair values of financial instruments were determined as follows:

Short-term financial instruments – the carrying values approximate the fair values due to its short-term nature.

Financial assets at fair value through profit and loss – open market values.

Long-term investments – market value for listed companies and net equity value for the others.

Investments with no active market – amortized cost.

Refundable deposits and guarantee deposits – future values.

Long-term liabilities – based on forecasted cash flows discounted at current interest rates of similar long-term liabilities. The fair value of convertible notes in 2009 and 2010 is determined by option pricing models. Other long-term liabilities are their carrying values as they use floating interest rates.

The fair value of non-financial instruments was not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not equal the fair value of the Company.

F-41

23.	DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The following table details the Company’s exposure to foreign currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate:


	Year Ended December 31,
	2009						2010
	Foreign Currency		Exchange Rate		NT$		Foreign Currency		Exchange Rate		NT$
	(in thousands)
Financial Assets
U.S. Dollar		160,978		31.99		5,149,649		147,837		29.13		4,292,417
Japanese Yen		677,171		0.3465		234,692		1,990,578		0.3582		713,015

Financial Liabilities
U.S. Dollar		94,179		31.99		3,012,803		44,698		29.13		1,302,025
Japanese Yen		1,261,023		0.3465		436,888		958,859		0.3582		373,454

24.	SEGMENT AND GEOGRAPHIC INFORMATION

The Company engages mainly in the research and development, manufacturing, assembly and testing of semiconductors. In accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 280-10-50, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews these segment results by Testing, Assembly, Testing and Assembly for LCD and other Flat-Panel Display Driver Semiconductors when making decisions about allocating resources and assessing the performance of the Company. Financial segment information required by FASB ASC 280-10-50 is as follows:

Semiconductor testing, assembly and LCD and other flat-panel display driver semiconductors services.


	2008
	Testing		Assembly			LCD			Segment Totals		Corporate & Other Assets		Consolidated Totals
	NT$		NT$			NT$			NT$		NT$		NT$
	(in thousands)
Revenue from customers		8,787,047		5,417,621			2,805,494			17,010,162		—		17,010,162
Cost of revenues		7,926,469		5,741,513			3,301,898			16,969,880		—		16,969,880

Segment gross profit (loss)		860,578		(323,892	)		(496,404	)		40,282		—		40,282

Total operating expenses														(3,683,914	)
Other non operating income														554,981
Interest expense														(765,005	)
Fair value loss on financial asset														(148,569	)
Loss on embedded derivative														(105,110	)
Impairment loss recognized during the year														(1,602,884	)
Other non operating expense														(1,220,164	)

Loss before income tax, noncontrolling interests and interest in bonuses paid by subsidiaries														(6,930,383	)

Depreciation and amortization		4,051,282		1,392,195			1,680,046			7,123,523		51,001		7,174,524

Expenditure for segment assets		1,234,483		739,019			212,161			2,185,663		2,730		2,188,393

F-42

24.	SEGMENT AND GEOGRAPHIC INFORMATION (continued)


	2009
	Testing			Assembly			LCD			Segment Totals			Corporate & Other Assets		Consolidated Totals
	NT$			NT$			NT$			NT$			NT$		NT$
	(in thousands)
Revenue from customers		5,171,207			4,352,836			2,626,265			12,150,308			—		12,150,308
Cost of revenues		7,362,399			5,111,252			3,187,801			15,661,452			—		15,661,452

Segment gross loss		(2,191,192	)		(758,416	)		(561,536	)		(3,511,144	)		—		(3,511,144	)

Total operating expenses																(1,594,316	)
Fair value gain on financial asset																62,674
Gain on extinguishment of convertible notes																412,337
Gain on embedded derivative																50,740
Other non operating income																142,440
Interest expense																(439,411	)
Impairment loss recognized during the year																(25,543	)
Other non operating expense																(86,495	)

Loss before income tax, noncontrolling interests and interest in bonuses paid by subsidiaries																(4,988,718	)

Segment assets		12,160,688			4,790,237			3,818,067			20,768,992			—		20,768,992

Long-term investment																219,966
Corporate and other assets																9,367,262

Total assets																30,356,220

Depreciation and amortization		3,779,168			1,206,440			1,491,615			6,477,223			47,373		6,524,596

Expenditure for segment assets		3,188,750			233,298			57,634			3,479,682			—		3,479,682


	2010
	Testing			Assembly		LCD		Segment Totals		Corporate & Other Assets		Consolidated Totals
	NT$			NT$		NT$		NT$		NT$		NT$			US$
	(in thousands)
Revenue from customers		6,169,705			6,258,815		4,781,213		17,209,733		—		17,209,733			590,588
Cost of revenues		6,417,644			6,053,881		4,092,478		16,564,003		—		16,564,003			568,428

Segment gross profit (loss)		(247,939	)		204,934		688,735		645,730		—		645,730			22,160

Total operating expenses													(1,154,753	)		(39,628	)
Fair value gain on financial asset													3,918			134
Recovery of allowance for doubtful receivables													2,716,880			93,235
Claim received													2,118,490			72,700
Other non operating income													372,695			12,790
Interest expense													(683,486	)		(23,455	)
Loss on embedded derivative													(260,654	)		(8,945	)
Impairment loss recognized during the year													(391,646	)		(13,440	)
Loss on sale of receivables													(1,067,791	)		(36,643	)
Other non operating expense													(487,817	)		(16,741	)

Income before income tax, noncontrolling interests and interest in bonuses paid by subsidiaries													1,811,566			62,167

Segment assets		8,681,506			3,866,062		4,725,400		17,272,968		—		17,272,968			592,758

Long-term investment													10,537			362
Corporate and other assets													14,031,525			481,521

Total assets													31,315,030			1,074,641

Depreciation and amortization		3,797,698			1,020,979		1,429,645		6,248,322		33,307		6,281,629			215,567

Expenditure for segment assets		1,380,029			512,489		2,344,760		4,237,278		—		4,237,278			145,411

The corporate and other assets consist of the total current assets, intangible assets and other assets.

F-43

24.	SEGMENT AND GEOGRAPHIC INFORMATION (continued)

Net revenue:


	Year Ended December 31,
	2008		2009		2010
	NT$		NT$		NT$		US$
	(in thousands)
Area
ROC		10,304,575		7,330,964		12,684,431		435,293
U.S.		5,773,109		3,998,989		3,780,058		129,721
Korea		468,967		352,642		430,746		14,782
Japan		111,774		167,475		120,673		4,141
Others		351,737		300,238		193,825		6,651


		17,010,162		12,150,308		17,209,733		590,588

c.	Net sales to customers representing at least 10% of net total sales:


	Year Ended December 31,
	2008				2009				2010
	Amount		%		Amount		%		Amount		%		Amount
	NT$				NT$				NT$				US$
	(in thousands)
Customer
Spansion		3,927,770		23		1,867,515		15		1,086,031		6		37,269
ProMOS		3,114,149		18		667,800		5		2,033,342		12		69,778
Novatek		1,596,596		9		1,403,887		12		3,166,799		18		108,675
Micron Technology Inc.		1,063,241		6		1,252,507		10		1,477,440		9		50,701

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the Republic of China (“ROC GAAP”), which differ in the following respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”):

Bonuses to employees, directors and supervisors

According to ROC regulations and the Articles of Incorporation of ChipMOS Taiwan and ThaiLin, a portion of distributable earnings should be appropriated as bonuses to employees and remuneration to directors and supervisors of ChipMOS Taiwan and ThaiLin. The remuneration to directors and supervisors is paid in cash, while bonuses to employees may be granted in cash or stock or both. ChipMOS Bermuda’s portion of these appropriations is charged to earnings of ChipMOS Bermuda under ROC GAAP based on the amount to be paid as provided by ChipMOS Taiwan and ThaiLin’s Articles of Incorporation and is presented as a separate line item below noncontrolling interest in the accompanying consolidated statements of operations. During 2008, ChipMOS Taiwan and ThaiLin paid NT$386,698 thousand and NT$57,908 thousand, respectively, to directors, supervisors and employees as bonuses. During 2009, ChipMOS Taiwan and ThaiLin did not pay any bonuses to directors, supervisors and employees. Commencing from January 1, 2009, bonuses to employees, directors and supervisors were accrued according to the Articles of Incorporation. As ChipMOS Taiwan and ThaiLin incurred losses for the year ended December 31, 2009, no bonuses were accrued. During 2010, ChipMOS Taiwan and ThaiLin accrued nil and NT$28,653 thousand to employees, directors and supervisors as bonuses. There are no difference between ROC GAAP and U.S. GAAP effective January 1, 2009.

F-44

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

Technologies transferred in payment of capital stock

Pursuant to a Joint Venture Agreement entered into between MVI and SPIL on July 28, 1997, MVI and SPIL contributed, as payment for their subscription in the shares of stock of ChipMOS Taiwan, technologies relating to the testing and assembly of semiconductors at an agreed value of NT$750,000 thousand. Under ROC GAAP, such technology transfers in payment of capital stock are recorded as an intangible asset, and amortized by systematic charges to income over the periods estimated to be benefited. As permitted under ROC GAAP, the Company uses a five-year amortization period. Under U.S. GAAP, the technology contribution cannot be recognized due to the unavailability of a fair value for the technologies. Therefore, the carrying value of the technologies has been adjusted to zero under U.S. GAAP.

Start-up costs

ROC GAAP requires start-up costs to be deferred and amortized in a systematic manner over its estimated useful beneficial life. Start-up costs include all costs incurred prior to production readiness. On the other hand, U.S. GAAP primarily requires that start-up costs be expensed as incurred. Some of the expenses were recorded in manufacturing expenses and therefore also affect ending inventory balances under U.S. GAAP.

Depreciation of property, plant and equipment and employee dormitory building

Under ROC GAAP, the estimated life of a building can be as long as 55 years based on the ROC Internal Revenue Code. For U.S. GAAP purposes, building lives are estimated to be 25 years. Some of the depreciation expenses were recorded in manufacturing expenses and therefore also affect ending inventory balances under U.S. GAAP.

Transfer of building and facilities from MVI

The Company purchased buildings and facilities from MVI in 1997. The costs of assets purchased from MVI were based on MVI’s book value of such building and facilities on a specified cut-off date plus an additional payment of NT$173,174 thousand representing compensation to MVI. This additional payment of NT$173,174 thousand was capitalized by the Company as allowed under ROC GAAP. Under U.S. GAAP, assets acquired are recorded at amounts that do not exceed their fair values. Also, generally under U.S. GAAP, the transferee should record the assets transferred from related parties with significant influence at the predecessor’s basis. Therefore, the transfer of assets from MVI was recorded at MVI’s predecessor cost basis and NT$173,174 thousand was deducted from the capital surplus and building and facilities for the purposes of U.S. GAAP. Some of the related depreciation expenses were recorded in manufacturing expenses and therefore also affect ending inventory balances under U.S. GAAP.

Impairment of long-lived assets

Impairment assessments are made by the Company when events and circumstances exist that indicate the carrying value of these assets may not be recoverable. In view of the sustained losses incurred by ChpiMOS Shanghai, the Company reviewed ChipMOS Shanghai’s property, plant and equipment and land use rights for potential impairment as at December 31, 2009 and 2010.

Under U.S. GAAP, impairment losses for assets to be held and used are recorded in current period earnings and create a new cost basis for related assets going forward, and cannot be reversed subsequently. Under U.S. GAAP, in accordance with FASB ASC 360 “Property, Plant and Equipment”, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Fair value is determined by the Company using future cash flows discounted at current rates. There are no differences in impairment loss recognized under ROC GAAP and U.S. GAAP in 2008, 2009 and 2010.

Earnings per share (EPS)

In calculating the weighted average number of shares outstanding for EPS purposes under ROC GAAP, employee bonus shares have been treated as outstanding for all periods in a manner similar to a stock split or stock dividend. Under U.S. GAAP, employee bonus shares have been considered separately from the stock dividend or split and have been treated as outstanding from the date of shareholder approval.

F-45

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

Interest capitalization

Under ROC GAAP, interest on borrowings during construction conceptually should be capitalized in the assets that are constructed or produced for a company’s own use. However, if equity capital is raised during a year, no capitalization interest is recorded for the amount of property acquired up to the equity capital raised in that year. Under U.S. GAAP, FASB ASC 835 “Interest”, interest is generally capitalized on assets until they are available and ready for use.

Inventories stated at lower of cost or market

ROC GAAP allows assessment of carrying values of inventories on an aggregate basis. An allowance was made when the aggregate carrying values of inventories were higher than market.

Under U.S. GAAP, the Company’s assessed inventories at the lower of cost or market on an item-by-item basis. This resulted in an additional write-off of NT$36,818 thousand which was charged to the consolidated statement of operations as a component of cost of revenue in 2008.

Under ROC GAAP and effective January 1, 2009, the Company adopted the revised SFAS No. 10. The Company is required to assess inventories at the lower of cost or market on an item-by-item basis. Therefore, there are no difference between ROC GAAP and U.S. GAAP effective January 1, 2009. The adjustment in 2009 relates to reversal of the allowance made under U.S. GAAP in 2008.

Convertible notes

Under ROC GAAP, there is no requirement to account for the fair value of a conversion feature embedded in CN due 2009 as it was issued before January 1, 2006. Under U.S. GAAP, the Company accounts for the fair value of the conversion feature of its convertible notes in accordance with FASB ASC 815 “Derivative and Hedging”, which require the Company to bifurcate and separately account for the conversion feature as embedded derivatives contained in the Company’s convertible notes. The Company carried these embedded derivatives on its balance sheet at fair value and changes in fair values of these embedded derivatives are reflected in the consolidated statement of operations. Commencing January 1, 2006, ROC GAAP requires the Company to bifurcate and separately account for put and call option features contained in the Company’s convertible notes issued after 2005. The Company issued convertible notes (CN due 2011) on September 29, 2006. The Company carried the put and call options of the CN due 2011 on the balance sheet at fair value with changes in fair values reflected in the consolidated statement of operations. The other conversion features are recorded in equity. (See Note 26 i.)

Commencing from January 1, 2006, under ROC GAAP, the issue costs of convertible notes are recorded as a reduction of the convertible notes. Under U.S. GAAP the issue costs are capitalized as deferred assets and amortized over the period of the convertible notes.

There is no difference under ROC GAAP and U.S. GAAP in accounting for the CN due 2014 and 2015 (See Note 13).

Share-based payments

Under ROC GAAP, the Company followed Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), in accounting for its employee stock option plans prior to January 1, 2008. Under APB No. 25, when the exercise price of the Company’s stock options is less than the market price of the underlying shares on the date of grant, compensation expense is recognized. Under U.S. GAAP, commencing from January 1, 2006, the Company applies FASB ASC 718 “Compensation – Stock Compensation”, with respect to options and warrants issued to non-employees. FASB ASC 718 requires the use of option valuation models to measure the fair value of the options and warrants at the measurement date. The total stock-based compensation expense resulting from stock options was included in the consolidated statements of operations. There is no difference between ROC GAAP and U.S. GAAP effective January 1, 2008 upon adoption of ROC SFAS No. 39 for options granted since January 1, 2008.

F-46

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

Defined Benefit Pension Plans

Under U.S. GAAP, commencing from January 1, 2006, the Company applies FASB ASC 715 “Compensation – Retirement Benefits”. FASB ASC 715 requires an employer that sponsors one or more defined benefit pension plans or other postretirement plans to 1) recognize the funded status of a plan, measured as the difference between plan assets at fair value and the benefit obligation, in the balance sheet; 2) recognize in equity as a component of accumulated other comprehensive loss, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not yet recognized as components of net periodic benefit cost; 3) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end balance sheet; and 4) disclose in the notes to the financial statements additional information about the effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. Under ROC GAAP, there is no such requirement for recognition.

Income tax expense

Effective January 1, 2007, the Company adopted FASB ASC 740 “Income Taxes”. FASB ASC 740 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognizing of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions and income tax disclosures.

Uncertain tax positions have been classified as non-current income tax liabilities unless these are expected to be paid in one year. The Company’s policy for interest and penalties related to income tax exposure is to recognize interest and penalties as a component of the provision of income taxes in the consolidated statement of operations.

The Company is potentially subject to income tax audits in the ROC and internationally until the applicable statute of limitations expire. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years, potentially subject to examination, in the significant tax and business jurisdictions in which the Company operates:


Jurisdiction		Tax Years Subject to Examination
Republic of China		5 Years
United States		3 Years
Hong Kong		6 Years
People’s Republic of China		Unlimited

As of December 31, 2010, the allowance for current tax assets was decreased by NT$3,001 thousand (US$103 thousand).

The Company’s subsidiaries are currently under examination by the relevant tax authorities for various tax years. The Company regularly assesses the potential outcome of these examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes it has appropriately accrued for uncertain tax benefits. However, audit outcomes and timing of audit settlements and future events that would impact the previously recorded unrecognized tax benefits and the range of anticipated increases or decreases in unrecognized tax benefits are subject to significant uncertainty. It is possible that the ultimate outcome of current or future examinations may exceed current unrecognized tax benefits in amounts that could be material, but cannot be estimated as of December 31, 2010. The effective tax rate and net income in any given future period could therefore be materially impacted.

There are no such provisions under ROC GAAP.

F-47

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

Cash and cash equivalents

Under ROC GAAP, cash and cash equivalents include time deposits regardless of its maturity date. Under U.S. GAAP, cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less. Thus, time deposits with original maturities of more than three months are classified as cash equivalents under ROC GAAP but should be included in other current assets under U.S. GAAP.

Classification of non-operating income (expenses)

Under ROC GAAP, gains on disposal of plant and equipment, land use rights, scrap material and tooling and claim received are recorded as non-operating income; and loss on sale of receivables, impairment losses on property, plant and equipment, other assets, and goodwill are recorded as non-operating expenses as these items represent revenue and expenses not arising from ordinary operating activities.

Under U.S. GAAP, gains on disposal of plant and equipment, land use rights, scrap material and tooling and claim received are recorded as other operating income; and loss on sale of receivables, impairment losses on property, plant and equipment, other assets, and goodwill are recorded as operating expenses.

The following reconciles net income (loss) and equity under ROC GAAP as reported in the accompanying consolidated financial statements to net income and equity amounts determined under U.S. GAAP, giving effect to adjustments for the differences listed above.


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Net income (loss) attributable to ChipMOS

Net income (loss) based on ROC GAAP		(7,270,245	)		(4,418,683	)		1,644,732			56,442
Adjustments:
Amortization of deferred charge		(13,719	)		(446	)		(446	)		(15	)
Amortization of start-up costs		1,694			1,597			35			1
Pension expenses		(11,797	)		(17,358	)		(22,075	)		(758	)
Depreciation of property, plant and equipment and employee dormitory building		(56,169	)		(56,430	)		(56,125	)		(1,926	)
Transfer of building and facilities from MVI		196			160			159			6
Interest capitalization		(15,539	)		(14,064	)		—			—
Reversal of accrual for bonuses to employees, directors and supervisors		368,945			—			—			—
Loss on inventory valuation		(36,818	)		36,818			—			—
Impairment loss on goodwill		(52,007	)		—			—			—
Effect of U.S. GAAP adjustments on income taxes		29,608			12,319			13,260			455
Adjustment for uncertain tax positions		10,785			20,228			3,001			103
Stock-based compensation		(257,460	)		(40,705	)		13,252			455
Amortization of discount on convertible notes		(95,468	)		(88,603	)		—			—
Gain on embedded derivative liabilities		306,701			—			—			—
Loss on redemption of convertible notes		(97,227	)		—			—			—
Noncontrolling interests		10,859			14,880			21,109			724

Net increase (decrease) in net income		92,584			(131,604	)		(27,830	)		(955	)


Net income (loss) based on U.S. GAAP		(7,177,661	)		(4,550,287	)		1,616,902			55,487


Earnings (loss) per share - basic		(342.24	)		(230.00	)		67.45			2.31


Earnings (loss) per share - diluted		(342.24	)		(236.60	)		66.35			2.28


Number of weighted average shares outstanding - basic		20,974			19,784			23,971			23,971


Number of weighted average shares outstanding - diluted		20,974			20,749			26,806			26,806

F-48

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)

The following table reconciles the denominator to calculate basic and diluted earnings (loss) per share:


	December 31,
	2008		2009		2010
	(in thousands)
Basic number of shares		20,974		19,784		23,971
Add: Stock options		—		—		288
Convertible notes		—		965		2,547


Diluted number of shares		20,974		20,749		26,806

The following table reconciles the numerator to calculate basic and diluted earnings (loss) per share:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Net income (loss) based on U.S. GAAP		(7,177,661	)		(4,550,287	)		1,616,902			55,487
Add: Amortization of discount on convertible notes		—			3,737			9,909			340
Interest expense (net of tax)		—			(309,298	)		(18,423	)		(632	)
Loss (gains) on embedded derivative		—			(50,740	)		181,436			6,227
Amortization of deferred charge on convertible notes		—			—			446			15
Foreign exchange gain		—			(2,658	)		(11,541	)		(396	)

Income (loss) attributable to ChipMOS adjusted for the effects of assumed exercise of options and conversion of notes		(7,177,661	)		(4,909,246	)		1,778,729			61,041


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Equity

Equity based on ROC GAAP		14,542,813			9,952,217			14,043,459			481,931

Adjustments:
Technology transfer in payment of capital stock
Original cost		(750,000	)		(750,000	)		(750,000	)		(25,738	)
Accumulated amortization of technology transfer in payment of capital stocks		750,000			750,000			750,000			25,738
Start-up costs
Original cost		(51,283	)		(49,825	)		—			—
Accumulated amortization of start-up costs		49,705			49,825			—			—
Net effect on inventories		(54	)		(35	)		—			—
Depreciation of property, plant and equipment and employee dormitory building		(227,438	)		(283,868	)		(339,993	)		(11,668	)
Transfer of building and facilities from MVI
Original cost		(173,174	)		(173,174	)		(173,174	)		(5,943	)
Depreciation and gain on disposal of building and facilities from MVI		170,361			170,519			170,677			5,857
Net effect on inventories		(6	)		(4	)		(3	)		—
Pension expenses		(237,321	)		(278,795	)		(390,980	)		(13,417	)
Loss on inventory valuation		(36,818	)		—			—			—
Impairment loss on goodwill		(52,007	)		—			—			—
Interest capitalization		118,757			118,757			118,757			4,075
Amortization of interest capitalization		(129,717	)		(143,781	)		(143,781	)		(4,934	)
Effect of U.S. GAAP adjustments on income taxes		62,968			75,287			88,547			3,039
Adjustment for uncertain tax positions		(24,475	)		(4,247	)		(1,246	)		(43	)
Equity component of convertible notes		(466,151	)		(466,151	)		(466,151	)		(15,997	)
Loss on redemption of convertible notes		(129,299	)		(129,299	)		(129,299	)		(4,437	)
Amortization of deferred charge		(38,376	)		(38,822	)		(39,268	)		(1,348	)
Amortization of discount on convertible notes		(518,966	)		(607,569	)		(607,569	)		(20,850	)
Gain on embedded derivative liabilities		1,242,621			1,242,621			1,242,621			42,644
Noncontrolling interests		52,007			—			—			—

Net decrease in equity		(388,666	)		(518,561	)		(670,862	)		(23,022	)

Equity based on U.S. GAAP		14,154,147			9,433,656			13,372,597			458,909

F-49

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Changes in equity based on U.S. GAAP
Balance, beginning of the year		21,650,888			14,154,147			9,433,656			323,736
Stock purchased by a subsidiary		(1,779	)		(79,936	)		—			—
Interest payment for convertible notes		—			—			29,216			1,003
Convertible notes conversion		—			—			1,078,008			36,994
Issuance of option warrants		65,111			90,600			43,872			1,505
Exercise of option warrants		4,548			—			1,450			50
Stock-based compensation		257,460			40,705			(13,252	)		(455	)
Cumulative translation adjustments		156,250			(29,197	)		(78,466	)		(2,693	)
Net income (loss) for the year		(7,177,661	)		(4,550,287	)		1,616,902			55,487
Adjustment of equity method for long-term Investment		95,186			2,724			(3,260	)		(112	)
Unrecognized pension expenses		952			(20,760	)		(53,698	)		(1,842	)
Noncontrolling interests		(896,808	)		(174,340	)		1,318,169			45,236


Balance, end of the year		14,154,147			9,433,656			13,372,597			458,909

A reconciliation of the significant balance sheet accounts to the approximate amounts determined under U.S. GAAP is as follows:


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Current assets

As reported		8,431,233			12,790,298			438,926
U.S. GAAP adjustments
Effect of inventory adjustments:
Start-up costs		(35	)		—			—
Depreciation of fixed assets		1,101			1,059			36
Transfer of building and facilities from MVI		(4	)		(3	)		—
Adjustment for uncertain tax positions		(6,207	)		(6,207	)		(213	)


As adjusted		8,426,088			12,785,147			438,749


Property, plant and equipment - net

As reported		20,768,992			17,272,968			592,758
U.S. GAAP adjustments
Depreciation of fixed assets		(266,913	)		(321,365	)		(11,028	)
Transfer of building and facilities from MVI		(2,655	)		(2,497	)		(86	)
Interest capitalization		(25,024	)		(25,024	)		(859	)


As adjusted		20,474,400			16,924,082			580,785


Other assets

As reported		833,208			1,146,962			39,360
U.S. GAAP adjustments
Depreciation of employee dormitory building		(18,056	)		(19,687	)		(676	)
Deferred charge		780			334			12
Effect of U.S. GAAP adjustment on income tax		75,287			88,547			3,039
Adjustments for uncertain tax position		1,960			4,961			170


As adjusted		893,179			1,221,117			41,905

F-50

25.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)


	December 31,
	2009		2010
	NT$		NT$		US$
	(in thousands)
Other liabilities

As reported		104,909		97,079		3,331
U.S. GAAP adjustments
Pension		278,795		390,980		13,417


As adjusted		383,704		488,059		16,748

As a result of the adjustments presented above, the approximate amounts of total assets under U.S. GAAP were NT$30,116,454 thousand and NT$31,035,148 thousand as of December 31, 2009, and 2010, respectively.

The following U.S. GAAP condensed statements of operations for the years ended December 31, 2008, 2009 and 2010 have been derived from the audited financial statements and reflect the adjustments presented above. Certain accounts have been reclassified to conform to U.S. GAAP.


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Net revenue		17,010,162			12,150,308			17,209,733			590,588
Cost of revenue		(17,068,345	)		(15,690,962	)		(16,634,902	)		(570,861	)

Gross profit (loss)		(58,183	)		(3,540,654	)		574,831			19,727
Other operating income		193,955			97,265			5,039,578			172,943
Operating expenses		(6,571,724	)		(1,726,537	)		(2,670,660	)		(91,649	)

Income (loss) from operations		(6,435,952	)		(5,169,926	)		2,943,749			101,021
Non-operating income (expenses) - net		(815,465	)		2,176			(1,197,383	)		(41,091	)

Income (loss) before income tax		(7,251,417	)		(5,167,750	)		1,746,366			59,930

Net income (loss) attributable to ChipMOS		(7,177,661	)		(4,550,287	)		1,616,902			55,487

F-51

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP

Recent accounting pronouncements

In April 2010, the FASB issued Accounting standard Update No. 2010-13 (“ASU 2010-13”). This update is to address the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. FASB ASC 718 “Compensation – Stock Compensation” provides guidance on the classification of a share–based payment award as either not a market, performance, or service condition is required to be classified as a liability. This update is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The adoption of ASU No. 2010-13 is unlikely to have a material impact on the Company’s results and financial position.

In December 2010, the FASB issued ASU 2010-29 to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. This update is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of ASU No. 2010-29 may impact the Company’s disclosure in its consolidated financial statements in future periods.

FASB ASC 820 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:

Level 1—Quoted market prices in active markets for identical assets or liabilities

Level 2—Inputs other than level 1 that are either directly or indirectly observable

Level 3—Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The following table sets forth the assets measured at fair value on a recurring basis, by input level, as of December 31, 2010:

Level 1

Level 2

Level 3

Total

NT$

(in thousands)

Financial assets at fair value through profit and loss

2,999

—

2,999

Financial assets at fair value through profit and loss include investments in stocks and open-ended funds, which are measured using quoted price in active markets and are classified as Level 1.

F-52

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Income tax expense

Income (loss) before income tax, noncontrolling interest and interest in bonuses paid by subsidiaries consists of the following:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Bermuda		(1,359,727	)		80,964			(951,545	)		(32,654	)
ROC		(3,782,118	)		(5,170,100	)		2,242,375			76,952
Others		(2,109,572	)		(78,614	)		455,536			15,632

		(7,251,417	)		(5,167,750	)		1,746,366			59,930

Income tax expense (benefit) consists of:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Income tax for the current year
Bermuda		346,754			6,267			6,585			226
ROC		4,867			—			19,366			664
Others		1,016			2,049			1,774			61

		352,637			8,316			27,725			951
Deferred income tax
ROC		(332,955	)		(483,604	)		(143,227	)		(4,915	)
Others		262,435			(1	)		(29,777	)		(1,022	)

		(70,520	)		(483,605	)		(173,004	)		(5,937	)
Adjustment of prior years’ income taxes		(201,717	)		22,080			29,658			1,018


Income tax expense (benefit)		80,400			(453,209	)		(115,621	)		(3,968	)

F-53

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Income tax expense (continued)

Reconciliation between the income tax calculated on pre-tax financial statement income based on the statutory tax rate and the income tax expense which conforms to U.S. GAAP is as follows:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Tax on pretax income (loss) at 0%		—			—			—			—
Tax on pretax income (loss) at applicable statutory rates		(1,147,034	)		(1,334,734	)		525,738			18,042
Additional 10% on the unappropriated earnings		166,318			—			—			—
Tax effects of:
Tax-exempt (income) loss		134,173			—			—			—
Permanent differences
Non-taxable (gain)/loss on sales of investment		(2,153	)		358			5,089			175
Non-deductible investment losses		74,792			(17,167	)		(135,961	)		(4,666	)
Non-deductible expense		378,483			(91,828	)		(53,479	)		(1,835	)
Other		9,150			3,554			925			31
Temporary differences		—			28,026			32,854			1,127
Tax credits - utilized		(165,909	)		—			(9,445	)		(324	)
- deferred		(22,867	)		4,080			515,421			17,688
Valuation allowance		871,769			703,359			(1,127,767	)		(38,702	)
Losses carried forward		227,739			1,088,819			(61,646	)		(2,115	)
Losses carried forward - deferred		(227,739	)		(981,013	)		82,057			2,816
Deferred tax effect of change in tax rate		—			139,526			80,935			2,777
Adjustment of prior year’s income tax		(216,322	)		3,811			29,658			1,018


Income tax expense (benefit)		80,400			(453,209	)		(115,621	)		(3,968	)

The components of net deferred income tax assets were as follows:


	December 31,
	2009			2010
	NT$			NT$			US$
	(in thousands)
Deferred income tax assets
Current
Unrealized foreign exchange loss		3,200			25,248			866
Tax credits		552,781			285,891			9,811
Loss of market price decline and obsolete and slow-moving inventories		36,969			10,430			358
Unrealized loss on sale allowances		22,791			31,932			1,096
Allowance for doubtful receivables		554,152			11,013			378
Others		(450	)		1,015			35

		1,169,443			365,529			12,544
Valuation allowance		(819,340	)		(93,025	)		(3,192	)

		350,103			272,504			9,352


Non-current
Tax credits		412,308			163,777			5,620
Losses carried forward		1,445,742			1,178,333			40,437
Impairment loss		8,387			13,114			450
Building		665			638			22
Start-up costs		8			2			—
Others		302,521			248,106			8,514

		2,169,631			1,603,970			55,043
Valuation allowances		(1,576,724	)		(1,075,298	)		(36,901	)

		592,907			528,672			18,142

Deferred income tax liabilities
Non-current
Depreciation differences		(302,294	)		(17,233	)		(591	)


		290,613			511,439			17,551

F-54

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Pension plans

The impact of the adoption of FASB ASC 715 has been reflected within the consolidated financial statements as follows:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Components of net periodic benefit cost
Service cost		1,579			1,518			1,325			45
Interest cost		12,463			11,340			12,292			422
Project return on plan assets		(7,910	)		(6,857	)		(5,140	)		(176	)
Net amortization and deferral:
Unrecognized net transition obligation		(293	)		53			53			2
Curtailment loss		7,295			7,568			8,355			287
Net prior service cost		(56	)		(206	)		(206	)		(7	)


Net periodic benefit cost		13,078			13,416			16,679			573


Recognized in other comprehensive income:
Unrecognized net transition obligation		(62	)		66			248			9
Net prior service cost		(4,149	)		8,978			(8,243	)		(284	)
Unrecognized actuarial loss		3,259			15,329			52,498			1,802


Total recognized in other comprehensive income		(952	)		24,373			44,503			1,527


Total recognized in total benefit cost and other comprehensive income		12,126			37,789			61,182			2,100

The estimated net transition assets and actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into benefits cost in 2011 is NT$121 thousand (US$4 thousand) and NT$9,961 thousand (US$342 thousand), respectively.


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Changes in benefit obligation
Benefit obligation at beginning of Year		475,794			496,548			546,385			18,750
Service cost		1,579			1,518			1,325			46
Interest cost		12,463			11,340			12,292			422
Plan amendments		(3,581	)		—			—			—
Actuarial loss		10,293			36,979			104,465			3,585

Benefit obligation at end of year		496,548			546,385			664,467			22,803


Changes in plan assets
Fair value of plan assets at beginning of year		249,596			291,532			314,992			10,810
Actual return on plan assets		9,156			1,755			4,415			152
Employer contribution		32,780			21,705			24,416			838

		291,532			314,992			343,823			11,800

Funds status		(205,016	)		(231,393	)		(320,644	)		(11,003	)
Unrecognized actuarial loss		(24,476	)		(31,285	)		(47,175	)		(1,619	)


Net amount recognized (recognized as accrued pension cost)		(229,492	)		(262,678	)		(367,819	)		(12,622	)

F-55

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Pension plans (continued)

Amounts recognized in accumulated other comprehensive income, net of noncontrolling interests, consist of:


	2009			2010
	NT$			NT$			US$
	(in thousands)
Unrecognized net transition obligation (asset)		(2,685	)		(2,366	)		(81	)
Net prior service cost		(3,436	)		(3,347	)		(115	)
Unrecognized loss		243,090			332,792			11,420

Gross amount recognized		236,969			327,079			11,224
Noncontrolling interests		(11,384	)		(47,796	)		(1,640	)

Total recognized in total benefit cost and other comprehensive income		225,585			279,283			9,584


	2008			2009			2010
Actuarial assumptions
Discount rate		2.75%			2.25%			1.75%
Rate of compensation increase		4.25%			4.25%			4.25%
Expected return on plan assets		3.00%			1.5%			2.00%

The accumulated benefit obligation for all defined benefit pension plans was NT$247,402 thousand and NT$304,931 thousand at December 31, 2009 and 2010, respectively.

There were no pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2009 and 2010.

The plan assets are all invested in the Bank of Taiwan (previously known as Central Trust of China). The plan benefits are based on employees’ years of service and compensation. The plan assets primarily consist of cash, government loans, equity securities, notes and bonds.

The fair value of the plan assets was NT$314,992 thousand and NT$343,823 thousand (US$11,800 thousand) at December 31, 2009 and 2010, respectively. As of December 31, 2009 and 2010, these assets were allocated among asset categories as follows:


Asset category	2009		2010		Current maximum allocation policy
Equity securities		24%		38%		40%
Bonds		28%		18%
Notes		5%		11%
Government loans		1%		1%
Cash		42%		32%

Total		100%		100%

Under ROC regulation, government authority will collect the fund as Labor Retirement Fund and determine the assets allocation and investment policy.

ChipMOS Taiwan and ThaiLin anticipate contributing NT$24,673 thousand to their pension plans during 2011.

The Company has no other post-retirement or post-employment benefit plans.

F-56

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Statements of cash flows

ROC SFAS No. 17, “Statement of Cash Flows” has been applied. Its objectives and principles are similar to those set out in FASB ASC 230, “Statement of Cash Flows. The principal differences between the standards relate to classification. Summarized cash flow data by operating, investing and financing activities are as follows:


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Net cash inflow (outflow) from:
Operating activities		4,890,631			1,633,419			8,504,005			291,833
Investing activities		(2,296,914	)		(1,042,532	)		(3,587,217	)		(123,103	)
Financing activities		(1,405,512	)		(2,503,796	)		(1,826,440	)		(62,678	)

		1,188,205			(1,912,909	)		3,090,348			106,052
Effect of changes in foreign exchange rate		46,329			(1,780	)		(16,811	)		(577	)
Cash and cash equivalents at the beginning of year		4,356,483			5,591,017			3,676,328			126,161

Cash and cash equivalents at the end of year		5,591,017			3,676,328			6,749,865			231,636

Statements of comprehensive income


	Year Ended December 31,
	2008			2009			2010
	NT$			NT$			NT$			US$
	(in thousands)
Net income based on U.S. GAAP		(7,177,661	)		(4,550,287	)		1,616,902			55,487
Other comprehensive income (loss):
Translation adjustment		156,250			(29,196	)		(78,466	)		(2,692	)


Comprehensive income		(7,021,411	)		(4,579,483	)		1,538,436			52,795

Statements of accumulated other comprehensive income


	Unrecognized Pension Costs			Translation Adjustment			Accumulated Other Comprehensive Income
	NT$			NT$			NT$
December 31, 2008		(204,825	)		433,714			228,889
Addition in 2009		(20,760	)		(29,196	)		(49,956	)

December 31, 2009		(225,585	)		404,518			178,933
Addition in 2010		(53,698	)		(78,466	)		(132,164	)

December 31, 2010		(279,283	)		326,052			46,769

F-57

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Shareholders’ equity

Employee stock-based compensation has been accounted for under FASB ASC 715.

The Company has in place a Share Option Plan (2001 Plan). Under the terms of the plan, the exercise price set on the grant of share options may not be less than the par value of a Company Share on the date of grant of such option. In August 2006, the Company adopted a second Share Option Plan (2006 Plan). The number of shares that may be issued under the two plans is 4,000,000 shares and may consist in whole or part of authorized but unissued shares of the Company which are not reserved for any other purpose. No consideration is payable for the grant of an option.

Under the plans, options may be granted to all directors, officers, employees and consultants of the Company and its affiliates. Options are exercisable for a maximum of ten years from the date on which such option is granted and five years from the date on which such option is granted if the holder of the option owns more than 10% of the combined voting power of the Company at the time the option is granted.

In September 2006, the Company adopted a share appreciation rights plan. The share appreciation rights plan provides that the directors, officers and employees of the Company and its affiliates may be granted cash-settled share appreciation rights.

The fair value for options granted has been estimated at the date of grant using the Black-Scholes Option Pricing Model with the following weighted average assumptions:

Year of grant

Risk free
interest rate

Expected life

Expected volatility

Expected
dividend yield

2006

4.62% ~ 4.74%

4.25 years

102.67% ~ 133.21%

2007

3.32% ~ 5.04%

4.25 years

134.71% ~ 171.09%

2008

1.30% ~ 3.42%

4.25 ~ 6 years

97.83% ~ 188.06%

2009

1.32% ~ 2.39%

4.25 ~ 5 years

139.36% ~ 163.82%

2010

0.86% ~ 2.48%

3.25 ~ 7 years

153.18% ~ 213.94%

The following table presents the stock option activity for the year ended December 31, 2009 and 2010.


	Number of Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
				US$		US$
						(in thousands)
Outstanding at December 31, 2008		2,314,640			14.84
Granted		494,394			2.52
Forfeited		(174,295	)		15.84
Expired		(96,250	)		6.96

Outstanding at December 31, 2009		2,538,489			12.68
Granted		160,660			3.60
Forfeited		(212,049	)		11.84
Exercised		(19,246	)		2.44
Expired		(353,800	)		20.72


Outstanding at December 31, 2010		2,114,054			10.80		2,103


Exercisable at December 31, 2009		1,125,613			17.92


Exercisable at December 31, 2010		1,196,611			12.84		581


Vested and expected to vest in 2009		2,467,845			12.80


Vested and expected to vest in 2010		2,068,182			8.28		2,027

F-58

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Shareholders’ equity (continued)

The aggregate intrinsic value in the table above represents the total intrinsic value (i.e., the difference between the Company’s closing stock price of US$6.12 on December 31, 2010 (December 31, 2009: US$2.84) and the exercise price, times the number of options) that would have been received by the option holders had all option holders exercised their options on December 31, 2010. The total intrinsic value of options exercised during the year ended December 31, 2010 was NT$2,069 thousand (US$71 thousand) (2009: nil). The total fair value of options vested and forfeited during the year ended December 31, 2010 was NT$75,997 thousand (US$2,608 thousand) (2009: NT$94,157 thousand). The number of options vested during the year ended December 31, 2010 was 19,246 (2009: nil). The weighted average remaining contractual term of the outstanding options at December 31, 2010 was 3.8 (2009: 4.0) years.

As of December 31, 2010, nil (2009: NT$12,810 thousand) of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of 2.3 years.

The Company’s employees have the ability to exercise a stock option (i.e., remit cash consideration to the Company for the exercise price) in exchange for stock during the vesting period of the award.

The following table presents a summary of the number of and weighted average grant date fair values regarding the unvested share options as of December 31, 2010 and changes during the year then ended:


	Number of Options			Weighted Average Fair Value
				US$
Unvested options outstanding at December 31, 2008		1,439,178			12.24
Granted		494,394			2.68
Vested		(346,401	)		11.88
Forfeited		(174,295	)		16.92

Unvested options outstanding at December 31, 2009		1,412,876			8.40
Granted		160,660			3.91
Vested		(444,044	)		9.18
Forfeited		(212,049	)		12.3

Unvested options outstanding at December 31, 2010		917,443			6.66

The Company’s determination of fair value of employee share options on the date of grant using the Black Scholes Option Pricing Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards. Option pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with FASB ASC 715 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

F-59

26.	ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP (continued)

Convertible notes

The Company accounts for the conversion option in the convertible notes as derivative liabilities in accordance with FASB ASC 815. The discount attributable to the issuance date aggregate fair value of the conversion option, totaling NT$458,659 thousand (US$15,740 thousand), is being amortized using the effective interest method over the term of the convertible notes.

The change in fair value on revaluation of the embedded derivative liabilities represents the difference between the fair value of the embedded derivative liabilities at their original issue date and their fair value on December 31, 2010 using option pricing models. As of December 31, 2010, the fair value of the embedded derivative liabilities amounted to NT$96,788 thousand (US$3,321 thousand). The effect of the fair market value adjustment of NT$260,654 thousand (US$8,945 thousand) was recorded in the consolidated statement of operations.

The following assumptions were applied to the convertible notes using the option pricing model:

December 31,
2010

CN due 2011

8%CN due 2014

8%CN due 2015

Market price

US$

6.12

US$

6.12

US$

6.12

Conversion price

US$

27.40

US$

5.00

US$

5.00

Term

5 years

Volatility

29.5248%

83.9600%

82.2200%

Risk-free interest rate

1.3820%

1.516%

1.613%

Please refer to Note 13 for details of the terms of the convertible notes.

F-60

Assignment and Assumption Agreement, effective on April 22, 2011

Exhibit 4.64

ChipMOS TECHNOLOGIES (Bermuda) LTD.

as Assignor

-and-

THAILIN SEMICONDUCTOR CORP.

as Assignee

ASSIGNMENT AND ASSUMPTION AGREEMENT

in respect of

Master Loan Agreement dated as of July 12, 2004 among ChipMOS TECHNOLOGIES

(Bermuda) LTD., as lender, Modern Mind Technology Limited, as borrower, and

Jesper Limited, as guarantor

and

Pledge Agreement dated as of July 12, 2004 among Modern Mind Technology Limited,

as pledgor, ChipMOS TECHNOLOGIES (Bermuda) LTD., as pledgee, and ChipMOS

TECHNOLOGIES (Shanghai) LTD.

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (“Assignment Agreement”) is made on April 22, 2011.

BETWEEN:

(1)

ChipMOS TECHNOLOGIES (Bermuda) LTD., an exempted company incorporated under the laws of Bermuda, with registered office at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. (“Assignor”); and

(2)

ThaiLin Semiconductor Corp., a company organized and incorporated under the laws of the Republic of China with registered office at No.4, Jen-De Road, FongShan Village, HuKou Township, Hsinchu County, Taiwan, R.O.C. (“Assignee”).

Whereas, the Assignor, Jesper Limited, a company incorporated under the laws of the British Virgin Islands (“Jesper Limited”) and Modern Mind Technology Limited, a company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of Jesper Limited (“Modern Mind”) have entered into a Master Loan Agreement dated as of July 12, 2004 (the “Master Loan Agreement”), under which the Assignor was willing to provide Modern Mind a loan of US$62,821,354.16 in the form of a demand note on the terms and conditions set forth herein and may be willing to provide Modern Mind with additional funds, should Assignor in its sole and absolute discretion decide from time to time to provide additional funds;

Whereas, in accordance with the Master Loan Agreement, based on Modern Mind’s issued demand note loan requests, the Assignor has provided a US$62,821,354.16 loan under Demand Note Loan dated July 29, 2004, a US$10,000,000.00 loan under the Demand Note Loan dated November 4, 2004, a US$10,000,000.00 loan under the Demand Note Loan dated December 15, 2004, a US$10,000,000.00 loan under the Demand Note Loan dated March 14, 2005, a US$20,000,000.00 loan under the Demand Note Loan dated September 26, 2005, a US$10,000,000.00 loan under the Demand Note Loan dated October 25, 2006, a US$7,500,000.00 loan under the Demand Note Loan dated August 4, 2008; accordingly, Modern Mind respectively issued demand promissory notes at the amount of US$62,821,354.16 on July 29, 2004, US$10,000,000.00 on November 4, 2004, US$10,000,000.00 on December 15, 2004, US$10,000,000.00 on March 14, 2005, US$20,000,000.00 on September 26, 2005, US$10,000,000.00 on October 25, 2006, US$7,500,000.00 on August 4, 2008;

Whereas, the Assignor, Modern Mind and ChipMOS TECHNOLOGIES (Shanghai) LTD. (“ChipMOS Shanghai”) have entered into a Pledge Agreement dated as of July 12, 2004 (the “Pledge Agreement”), under which Modern Mind agreed to secure the performance of all of its obligations under the Master Loan Agreement and any of the aforesaid demand note(s) and therefore created a pledge by way of a perfected first priority security interest in favor of the Assignor in all of its right, title, interest and benefits in and to, whether now owned or hereafter acquired by the Assignor and wherever located, (i) all of the equity interests of ChipMOS Shanghai that Modern Mind holds and will hold (the “Pledged Shares”), (ii) all rights and privileges of Modern Mind with respect to the Pledged Shares, now or hereinafter acquired, all proceeds, income and profits hereof and all property received in addition thereto, in exchange or substitution therefore, and (iii) any other assets of the Modern Mind;

Whereas, in accordance with the Pledge Agreement and by way of security for the performance of its obligations under the Pledge Agreement, Modern Mind and ChipMOS Shanghai have respectively executed a power of attorney to irrevocably appoint the Assignor to be its attorney and in the name of Modern Mind or ChipMOS Shanghai, as the case may be, and on its behalf and as its act and deed, to sign, seal, execute, deliver and perfect all documents and to do all acts and things deemed necessary or reasonably required by the Assignor for the discharge of any of the obligations of Modern Mind or ChipMOS Shanghai, as the case may be, under the Pledge Agreement including without limitation executing any documents which may be necessary to transfer title to the Pledged Shares required by the Pledge Agreement;

Whereas, under the Master Loan Agreement, Jesper Limited agreed to guarantee all of Modern Mind’s obligations under the aforesaid Demand Note(s) and to pledge to the Assignor all of the outstanding Modern Mind Shares as security for such guarantee and to secure the prompt performance of all of Jesper Limited’s obligations under the Master Loan Agreement;

Whereas, notwithstanding the foregoing executed Pledge Agreement, Modern Mind did not deliver the stock certificates representing the Pledged Shares to the Assignor, and any and all of the registration or acts necessary for creating and perfecting the pledge in accordance with the Pledge Agreement under applicable laws has never been completed and conducted;

Whereas, the Assignor wishes to assign, and the Assignee wishes to assume, all rights and obligations of the Assignor under the Master Loan Agreement, and Pledge Agreement and the documents related thereto (“Related Documents”), subject to the terms and conditions herein.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the Assignor and the Assignee agree as follows:

1.	Interpretation

Unless the context requires otherwise, terms and expressions defined in the Master Loan Agreement and Pledge Agreement shall have the same meanings when used in this Assignment Agreement.

2.	Assignment and Assumption

The Assignor and the Assignee agree that with effect on and from the date of the Closing (defined below), the Assignor assigns to the Assignee, and the Assignee assumes, all of the rights and obligations of the Assignor under the Master Loan Agreement and Pledge Agreement.

The Assignee shall pay the consideration for this Assignment Agreement at the amount of US$39,950,000 by means of wire transfer of immediately available funds to the Assignor’s designated account at or prior to the Closing.

3.	CONDITIONS PRECEDENT TO COMPLETION

3.1	Conditions Precedent to Obligations of Assignee. The obligation of the Assignee to close this assignment is subject to the fulfillment, prior to, or simultaneously with, Closing, of the following conditions, any one or more of which may be waived by the Assignee:

(a)

the warranties under Section 5 provided by the Assignor remain true and correct in all material respects on the Closing Date;

(b)

Consent and Acknowledgement of this Assignment Agreement has been signed respectively by Modern Mind, Jesper Limited and ChipMOS Shanghai;

(c)

the Assignor has duly attended to, and carried out, all corporate procedures that are necessary to effect its execution, delivery and performance of this Assignment Agreement and the other related documents to which it is as a party, and the transactions contemplated hereby and thereby;

(d)

all consents and approvals of, notices to and filings or registrations with any governmental authority or any other person required pursuant to any applicable law or regulation of any governmental authority to consummate the transactions contemplated under this Assignment Agreement and related documents (to the extent that such transactions are to be completed on or prior to the Closing Date), shall have been obtained or made; and

(e)

the Assignee’s investment in ChipMOS Shanghai’s shares, if the Assignee decides to convert any outstanding amounts under the demand note under the Master Loan Agreement into the Modern Mind shares after the Closing of this Assignment Agreement, has been approved by the Investment Commission, Ministry of Economic Affairs, ROC.

3.2	Conditions Precedent to Obligations of the Assignor. The Assignor’s obligation to closing this transaction is subject to the fulfillment, prior to or simultaneously with Closing, of the following conditions, any one or more of which may be waived by the Assignor:

(a)

the warranties under Section 6 provided by the Assignee remains true and correct in all material respects on the Closing Date;

(b)

the Assignee has duly attended to, and carried out, all corporate procedures that are necessary to effect its execution, delivery and performance of this Assignment Agreement and other related documents to which it is as a party, and the transactions contemplated hereby and thereby; and

(c)

all consents and approvals of, notices to and filings or registrations with any governmental authority or any other person required pursuant to any applicable law or regulation of any governmental authority to consummate the transactions contemplated under this Assignment Agreement and other related documents (to the extent that such transactions are to be closed on or prior to the Closing Date), shall have been obtained or made.

4.	CLOSING

4.1	Time. Closing shall take place when all the conditions precedent set forth in Sections 3 (other than those conditions precedent that by their terms cannot be fulfilled until the Closing) are satisfied or waived or, at such other time and place as the Parties may agree.

4.2	Actions at Closing. At Closing,

(a)

the Assignor shall deliver to the Assignee an original copy of each of Master Loan Agreement, Pledge Agreement, Related Documents and copies of material documents and correspondences related thereto;

(b)

the Assignee shall pay the consideration by wire transfer of immediately available funds to an account designated by the Assignor;

(c)

the originals of Consent and Acknowledgement of this Assignment Agreement in the form substantially set out in Annex 1 signed by Modern Mind, Jesper Limited and ChipMOS Shanghai shall have been respectively delivered to the Assignor and Assignee; and

(d)

the Technology Transfer Agreement in the form substantially set out in Annex 2 shall have been executed by the Assignor and ChipMOS TECHNOLOGIES (Shanghai) LTD.

5.	Representations and Warranties of the Assignor

The Assignor hereby represents and warrants to the Assignee that:

(a)

it is a company limited by shares and duly incorporated and validly existing under the laws of the Bermuda;

(b)

it has full power, authority and legal right, and all necessary corporate action has been taken in order to authorize it to enter into this Assignment Agreement;

(c)

the Master Loan Agreement and Pledge Agreement together with the Related Documents which it has delivered or will deliver to the Assignee at the time of Closing is a complete set, and there have been no amendments thereto or variations thereof which the Assignor has not made known to the Assignee;

(d)

(i) the Master Loan Agreement and Pledge Agreement and the Related Documents are in full force and effect, subject to any necessary approvals of, and registrations and filings with the governmental authority, (ii) the Assignor has no defaults under the Master Loan Agreement and Pledge Agreement or any of the Related Documents or defaults which remain uncured as of the date hereof, (iii) the Assignor has not received any notices of default from Modern Mind;

(e)

neither the Assignor’s rights under the Master Loan Agreement, the Pledge Agreement and the Related Documents nor any part thereof is subject to any assignment, pledge, lien, charge or other encumbrance in favor of any other person prior to the date of this Assignment Agreement; and

(f)

there are no actions, suits or proceedings pending or threatened by or against it in connection with or arising out of the Master Loan Agreement, the Pledge Agreement and the Related Documents.

6.	Representations and Warranties of the Assignee

The Assignee hereby represents and warrants to the Assignor that:

(a)

it is a company limited by shares and duly incorporated and validly existing under the laws of the Republic of China; and

(b)

it has full power, authority and legal right, and all necessary corporate action has been taken in order to authorize it to enter into this Assignment Agreement.

7.	Effective date and Termination

This Agreement shall become effective upon execution by both parties and may be terminated by either party on or after October 31, 2011, by written notice to the other party if the Closing has not occurred on or prior to such date.

8.	Notice of Assignment

The Assignor and the Assignee agree to give notice of assignment in the form substantially set out in Annex 1 to Modern Mind, Jesper Limited and ChipMOS Shanghai, and the Assignor further agrees to procure the acknowledgement and consent of assignment from Modern Mind, Jesper Limited and ChipMOS Shanghai.

9.	Further Assurance

The Assignor agrees to execute any relevant document and do any act or thing which the Assignee may reasonably request with a view to giving effect to the assignment contemplated under this Assignment Agreement.

10.

Notices

Each notice, demand or other communication to be given or made hereunder shall be given or made in writing and delivered or sent to the relevant party at its address or fax number set out below (or such other address or fax number as the addressee has by five (5) days’ prior written notice specified to the other party):


To the Assignor:		ChipMOS TECHNOLOGIES (Bermuda) LTD.
		Address: No.1, R&D Rd. 1, Hsinchu Science Park, Taiwan, R.O.C.
		Fax Number: +886-3-5668981
		Attention: S. K. Chen


To the Assignee:		ThaiLin Semiconductor Corp.
		Address: No.4, JenDe Road, FongShan Village, HuKou Township, Hsinchu County, Taiwan, R.O.C.
		Fax Number: +886-3-5972042
		Attention: Julia Wei

Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered (a) if given or made by letter, when actually delivered to the relevant address, and (b) if given or made by fax, when dispatched with electronic confirmation of complete and error-free transmission Provided that, if such day is not a working day in the place to which it is sent, such notice, demand or other communication shall be deemed delivered on the next following working day at such place.

11.

Miscellaneous

(a)

Law and Jurisdiction. This Assignment Agreement shall be governed by, and construed in accordance with the laws of the Republic of China. The Assignor and the Assignee agree that any legal action or proceeding arising out of or relating to this Assignment Agreement may be brought in the Hsinchu District Court as the court of first instance and hereby irrevocably submit to the non-exclusive jurisdiction of such court.

(b)

Entire Agreement. This Assignment Agreement and each of the Annexure attached hereto constitute the final agreement between the parties, and represent the complete and exclusive statement of the parties’ agreement on the matters contained herein and therein. All prior and contemporaneous negotiations, understandings and agreements between the parties with respect to the matters contained herein and therein are superseded by this Assignment Agreement.

(c)

Severability. If any provision of this Assignment Agreement is determined to be invalid, illegal or unenforceable, the remaining provisions of this Assignment Agreement shall remain in full force and effect, if the essential terms and conditions of this Assignment Agreement for each party remain valid, binding and enforceable.

IN WITNESS WHEREOF, this Assignment Agreement has been executed on the date first above written.


The Assignor:

ChipMOS TECHNOLOGIES (Bermuda) LTD.

By:		/s/ S. J. Cheng
Name:		S. J. Cheng
Title:		Chairman and CEO

The Assignee:

ThaiLin Semiconductor Corp.

By:		/s/ Chang-Por Wu
Name:		Chang-Por Wu
Title:		Director

ANNEX 1

Notice of Assignment

[ ], 2011

To:	Modern Mind Technology Limited

Jesper Limited

ChipMOS TECHNOLOGIES (Shanghai) LTD.

Re:

Notice of Assignment in respect of the Master Loan Agreement and the Pledge Agreement dated July 12, 2004

We refer to the Master Loan Agreement dated July 12, 2004 entered into by ChipMOS TECHNOLOGIES (Bermuda) LTD. (the “Assignor”), Jesper Limited (“Jesper”) and Modern Mind Technology Limited (“Modern Mind”) and the Pledge Agreement among Modern Mind, Assignor and ChipMOS TECHNOLOGIES (Shanghai) LTD. (the “Master Loan Agreement and Pledge Agreement”). Unless otherwise defined in this notice, capitalized terms used herein shall have the same meanings given to the terms in the Master Loan Agreement and Pledge Agreement.

We hereby give you notice that, by an assignment and assumption agreement dated April 22, 2011 (“the Assignment Agreement”) made between the Assignor and ThaiLin Semiconductor Corp. (the “Assignee”), the Assignor has assigned and the Assignee has assumed, all of the rights and obligations of the Assignor under the Master Loan Agreement and Pledge Agreement;

As from the date of this notice, all notices and other communications to the Assignee under the Master Loan Agreement and Pledge Agreement shall be sent to the following address and fax numbers:

ThaiLin Semiconductor Corp.

Address: No.4, JenDe Road, FongShan Village, HuKou Township, Hsinchu County, Taiwan, R.O.C.

Fax Number: +886-3-5972042

Attention: Julia Wei

You are requested to sign the Acknowledgement and Consent of this notice enclosed herewith and return the same to the Assignor and the Assignee.

The Assignor:


ChipMOS TECHNOLOGIES (Bermuda) LTD.

By:


Name:		S. J. Cheng
Title:		Chairman and CEO

The Assignee:


ThaiLin Semiconductor Corp.

By:


Name:		Chang-Por Wu
Title:		Director

Acknowledgement and Consent

We acknowledge receipt of this notice and consent to the assignment and the terms of this notice.


Modern Mind Technology Limited

By:


Name:		Tung Siu-Lan, Ponti
Title:		Director

We acknowledge receipt of this notice and consent to the assignment and the terms of this notice.


Jesper Limited

By:


Name:		Tung Siu-Lan, Ponti
Title:		Director

We acknowledge receipt of this notice and consent to the assignment and the terms of this notice.


ChipMOS TECHNOLOGIES (Shanghai) LTD.

By:


Name:		Charles Chun-Ming, Cheng
Title:		Chairman

Confidential

ANNEX 2

TECHNOLOGY TRANSFER AGREEMENT

This Technology Transfer Agreement (this “Agreement”) is made and executed as of this [ ] day of [ ], 2011, by and between ChipMOS TECHNOLOGIES (Bermuda) LTD., a company incorporated under the laws of Bermuda, and having its principal office of business located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. (hereinafter referred to as “ChipMOS Bermuda”), and ChipMOS TECHNOLOGIES (Shanghai) LTD., a company incorporated under the laws of the People’s Republic of China (“PRC”), and having its principal office of business located at 9688 Songze Ave., Qingpu Industrial Zone, Shanghai, China. (hereinafter referred to as “ChipMOS Shanghai”)

(Each of ChipMOS Bermuda and ChipMOS Shanghai shall be referred to individually as a “Party” or collectively as the “Parties.”)

WHEREAS, ChipMOS Bermuda and ChipMOS Shanghai have entered into a Technology Transfer Agreement dated as of August 1, 2002, under which ChipMOS Bermuda transferred certain technologies for the package assembly and testing of wafer and semiconductor products it controls to ChipMOS Shanghai and ChipMOS Shanghai obtained such said technologies from ChipMOS Bermuda;

WHEREAS, ChipMOS Bermuda controls certain technologies for the package assembly and testing of wafer and semiconductor products;

WHEREAS, ChipMOS Bermuda has the right and desires to continue transferring the aforesaid technologies to ChipMOS Shanghai; and

WHEREAS, ChipMOS Shanghai wishes to continue obtaining from ChipMOS Bermuda, and ChipMOS Bermuda wishes to transfer said technologies, and provide technical support and consulting services to ChipMOS Shanghai.

NOW, THEREFORE, in consideration of the representations, warranties and covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

Confidential

Article I Definitions

1.1

“Confidential Information” shall mean all information that is disclosed to a Party by the other Party in connection with this Agreement that is conveyed (a) in written, graphic, machine readable or other tangible form and conspicuously marked “confidential,” “proprietary” or in some other manner to indicate its confidential nature; or (b) orally, provided that such information is designated in writing as confidential or proprietary within thirty (30) days of such oral disclosure.

1.2	“Effective Date” shall mean the date (i) on which the relevant Governmental Authority grant the necessary approvals or registration for the purpose of giving effect to or official registration of this Agreement, or (ii) August 1, 2012, whichever is later.

1.3	“Governmental Authority” shall mean the government agencies involved with the approval or registration of technology transfer and license hereof.

1.4	“Improvements” shall mean any modifications, improvements, changes or derivative works to the Licensed Technology, Technical Documentation or Services.

1.5	“Licensed Products” shall mean all products using the Licensed Technology, and assembled and tested at facilities of ChipMOS Shanghai.

Confidential

1.6

“Licensed Technology” shall mean, collectively, Patents and Know-How which are licensed or provided pursuant to the terms of this Agreement, and are necessary for package assembly or testing of semiconductor products which is controlled by ChipMOS Bermuda as of the date of this Agreement. The Licensed Technology is exclusively set forth in Annex I. For purposes of this Agreement, (a) “Patents” means all patent rights and all right, title and interest in all patent applications and patents to issue on them, all letters patent or equivalent rights and applications, including any reissue, extension, division, continuation or continuation-in-part applications throughout the world; (b) “Know-How” means all technical information (including but not limited to technical data or specifications, drawings, engineering information, process or production information, formulas, information on compositions of matter, techniques or methods, software or computer programs, and proprietary tools) related to the package assembly or testing of semiconductor products, which is available at ChipMOS Bermuda as of the date of this Agreement.

1.7	“Services” shall mean technical support or consulting services ChipMOS Bermuda tenders to ChipMOS Shanghai under this Agreement.

1.8

“Subsidiary” shall mean any company, partnership, joint venture, or other entity which directly or indirectly controls, is controlled by or is under common control with a Party. Control shall mean the possession of more than fifty percent (50%) of the voting stock or the power to direct or cause the direction of the management and policies of the controlled entity, whether through the ownership of voting securities, by contract or otherwise, but only for so long as such control exists.

1.9

“Technical Documentation” shall mean all drawings, data, charts, graphs, procedure books, operation manuals and data, technical processes and other tangible technical literature, necessary for the package assembly or testing of the semiconductor products, which is controlled by ChipMOS Bermuda as of the date of this Agreement.

1.10	“Term” means the effective term of this Agreement.

Confidential

Article II Technology Transfer

2.1	ChipMOS Shanghai agrees to acquire from ChipMOS Bermuda, and ChipMOS Bermuda agrees to transfer to ChipMOS Shanghai the Licensed Technology.

2.2

The Parties agree that the transfer of the Licensed Technology shall be implemented by way of delivery of Technical Documentation and provision of technical support and consulting services in accordance with this Agreement. The Parties acknowledge and agree that the nature of the transfer hereunder shall be that of grant of license under the Licensed Technology without transferring the title or ownership thereof, and the Licensed Technology shall remain the exclusive and proprietary property of ChipMOS Bermuda at all times and for all purposes.

Article III Consideration

3.1	In consideration for the transfer of Licensed Technology and the license granted under Articles 2 and 6, ChipMOS Shanghai shall pay ChipMOS Bermuda the lump sum license fee in the amount of US$ [,,.]

3.2	Payments by ChipMOS Shanghai to ChipMOS Bermuda are to be transferred and shall be made to the following bank account of ChipMOS Bermuda (unless written notice of change is given by ChipMOS Bermuda or otherwise indicated in ChipMOS Bermuda’s relevant invoice):

BENEFICIARY: CHIPMOS TECHNOLOGIES (Bermuda) LTD.

ACCOUNT NO.: 1069-694-008309

BENEFICIARY’S BANK: TAIWAN COOPERATIVE BANK

OFFSHORE BANKING BRANCH

BANK ADDRESS: No. 23 Chung Cheng Road, Hsinchu, Taiwan

SWIFT CODE: TACBTWTP106

THRU BANK: CITIBANK N.A NEW YORK

(SWIFT CODE: CITIUS33)

3.3	Payment of the lump sum license fee set forth in Article 3.1 shall be made by installments by ChipMOS Shanghai to ChipMOS Bermuda at US$ [,,] on the last day of each quarter during the term of this Agreement.

Confidential

Article IV Delivery of Technical Documentation

4.1	ChipMOS Bermuda shall deliver the Technical Documentation to ChipMOS Shanghai in accordance with the schedule to be agreed upon by the Parties.

4.2

Unless the nature of the Technical Documentation being delivered requires a physical delivery, all Technical Documentation shall be delivered by electronic means with encryption, to the extent permissible under the applicable law, or other due safeguard for the transmission with necessary assistance from ChipMOS Shanghai.

4.3	In the case of physical delivery of Technical Documentation, the delivery shall be made at the risk and expense of ChipMOS Shanghai.

4.4	In the case of electronic transfer, ChipMOS Bermuda shall give an advance notice to ChipMOS Shanghai of such transmission, and will maintain records of the data replicated; and ChipMOS Shanghai shall inform ChipMOS Bermuda of receipt of such data within three days from receipt.

4.5	ChipMOS Shanghai shall be responsible for maintaining a database compatible with ChipMOS Bermuda’s system for ensuring the security of the data, and for controlling access by its employees.

Article V Services

5.1

ChipMOS Bermuda shall provide Services to ChipMOS Shanghai in accordance with this Agreement. The Services may include, but not limited to, support and advice regarding implementation of transfer of Licensed Technology and troubleshooting. The Services are intended to assist ChipMOS Shanghai in achieving an earlier time-to-market, implementation superiority, advance information on technology trends, in connection with the Licensed Technology and the Licensed Products. Notwithstanding the foregoing, the specific amount and type of the Services and the resources extended by ChipMOS Bermuda to render the Services shall be mutually agreed to by the relevant parties from time to time.

Confidential

5.2

During the stages of implementation of transfer of Licensed Technology at the facilities of ChipMOS Shanghai, ChipMOS Bermuda shall, by the request of ChipMOS Shanghai, dispatch its engineers to provide on-site Services by way of giving instruction and guidance to the staff of ChipMOS Shanghai with respect to the Licensed Technology. The period of Services shall be no longer than 6 months from the Effective Date.

5.3	During the Term, ChipMOS Bermuda shall provide the off-site Services during its normal business hours by methods of off-site communication including electronic mail, facsimile transmission, and telephone communication.

5.4

During the Term, ChipMOS Bermuda shall send technical experts to the facilities of ChipMOS Shanghai to carry out training program as pre-scheduled and agreed by the Parties. The training program will be designed by ChipMOS Bermuda with the goal to have the technical staff of ChipMOS Shanghai familiarize with the operation of the Licensed Technology, and the package assembly and testing of the Licensed Products.

5.5	ChipMOS Shanghai shall provide ChipMOS Bermuda with all the necessary assistances facilitating the provision of the Services by ChipMOS Bermuda. The Parties shall designate their respective coordinators for the transfer of Licensed Technology and provision of the Services.

Confidential

Article VI License

6.1

Subject to the terms and conditions of this Agreement, ChipMOS Bermuda hereby grants to ChipMOS Shanghai a non-exclusive, non-transferable right and license (without the right to grant sublicenses) (“License”) within the territory of the People’s Republic of China (exclusive of its independent customs regions) under the Licensed Technology to package, assemble, test, make, use, develop, import, sell, lease and otherwise dispose of any kind of Licensed Products. ChipMOS Shanghai shall not transfer or assign the License nor shall have the rights and licenses under this Agreement exercised or enjoyed by any third party. The License shall be valid for the Term unless terminated earlier under Sections 13.2 and 13.3.

Article VII Improvements

7.1

All Improvements made after Effective Date jointly (provided that the features of such improvements are such that it is impossible to separate them for the purpose of applying for or obtaining the relevant patent protection) by one or more employees of ChipMOS Shanghai, as applicable, with one or more employees of ChipMOS Bermuda (including ChipMOS Bermuda’s employees seconded or assigned to work at facilities of ChipMOS Shanghai) shall be jointly owned by ChipMOS Shanghai, as applicable, and ChipMOS Bermuda, and each of them shall have the right to use such jointly owned Improvements, subject to the following conditions:

7.1.1

ChipMOS Shanghai and ChipMOS Bermuda shall each have the right to grant licenses (including the right for any licensee to grant sublicenses) to third party (unless such third party is a competitor of ChipMOS Bermuda) without compensation to the other party and/or their employees, and necessary consent is hereby given by the other party for the granting of such licenses as may be required by the law of any country; and

7.1.2

The expenses and costs in procuring and maintaining the intellectual property protection for the jointly owned Improvements shall be equally shared by ChipMOS Shanghai and ChipMOS Bermuda. ChipMOS Shanghai and ChipMOS Bermuda shall agree whether to apply for patent or other appropriate protection and, if so, which party shall prepare and prosecute such application and in which countries corresponding applications shall be filed and by whom.

7.2	The Improvements solely made by the employees of a party shall be solely owned by that party. ChipMOS Shanghai and ChipMOS Bermuda agree to keep secret and confidential the Improvements solely made by or jointly made with the other party.

7.3

During the Term, ChipMOS Shanghai shall notify ChipMOS Bermuda of Improvements it has made. If the Improvements are solely owned by ChipMOS Shanghai, ChipMOS Shanghai shall grant ChipMOS Bermuda an unrestricted, non-exclusive, fully paid-up, royalty-free, worldwide and perpetual right and license (with the right to grant sublicenses) under such patents or other intellectual properties arising therefrom, to use, make, have made, develop, have developed, sell, import, lease and otherwise dispose of semiconductor products and to use any apparatus and/or material and any method and/or process in the manufacture of such products.

7.4	During the Term, ChipMOS Bermuda shall grant to ChipMOS Shanghai non-exclusive right and license under the Improvements solely owned by ChipMOS Bermuda at terms and conditions to be agreed upon by ChipMOS Shanghai and ChipMOS Bermuda.

Article VIII Expenses and Taxes

8.1	ChipMOS Shanghai shall be responsible for all expenses incurred by ChipMOS Shanghai or ChipMOS Bermuda in relation to the transfer of the Licensed Technology and provision of the Services.

Confidential

8.2

ChipMOS Shanghai shall be responsible to pay all applicable taxes, levies, duties, similar governmental charges of any type or nature in connection with this Agreement under the tax laws and regulations, and penalties and interest of PRC, if any (“Imposts”). ChipMOS Bermuda shall be responsible to pay all applicable Imposts in connection with this Agreement on the basis of its net income under tax laws and regulations of Bermuda or other jurisdictions. All payments and consideration payable to ChipMOS Bermuda hereunder shall be net of any Imposts. The Parties will consult each other and cooperate in minimizing any applicable Imposts payable by the Parties.

Article IX Warranties

9.1	ChipMOS Bermuda represents and warrants that:

(i) ChipMOS Bermuda has the requisite power and authority to enter into this Agreement and to perform its obligations hereunder; and this Agreement has been duly authorized and is enforceable upon the Effective Date against ChipMOS Bermuda in accordance with its terms;

(ii) ChipMOS Bermuda has the right to transfer the Licensed Technology and to grant the License; and

(iii) The Licensed Technology and Technical Documentation to be transferred hereunder shall be provided on an “AS IS” basis and shall be the same in both scope and contents as those available at ChipMOS Bermuda on the date of this Agreement; and

9.2	ChipMOS Shanghai represents and warrants that:

(i) ChipMOS Shanghai has the requisite power and authority to enter into this Agreement, to receive the rights and licenses granted herein, and to perform its obligations hereunder upon the Effective Date;

Confidential

(ii) This Agreement has been duly authorized and is enforceable against ChipMOS Shanghai upon the Effective Date in accordance with its terms;

(iii) ChipMOS Shanghai shall use the Licensed Technology on the Licensed Products only; and

(iv) ChipMOS Shanghai, by execution hereof, acknowledges, covenants and agrees that it has not been induced in any way by ChipMOS Bermuda or its employees to enter into this Agreement, and further warrants and represents that (a) it has conducted sufficient due diligence investigation with respect to Licensed Technology in all respects, including without limitation, the legal status and the technical effectiveness thereof; and (b) ChipMOS Shanghai has adequate knowledge and expertise, or has utilized knowledgeable expert consultants, to conduct the due diligence investigation.

9.3

Nothing contained in this Agreement shall be construed as a warranty or representation that the possession or use of any Licensed Technology or Technical Documentation provided under this Agreement and/or the manufacture, sale, lease, use or other disposition of systems, apparatus, material, processes, circuits, devices, software and products hereunder will be free from infringement of intellectual property rights of third parties.

9.4

ChipMOS Bermuda makes no representation or warranty as to the condition or accuracy, sufficiency or suitability for ChipMOS Shanghai’s use of any Licensed Technology, Technical Documentation or Services provided under this Agreement, or for the quality or successful manufacture of any product or process made hereunder, nor does ChipMOS Bermuda assume any responsibility or liability for any costs, losses or damages, whether indirect, consequential or incidental, which might arise out of ChipMOS Shanghai’s possession or use thereof

Confidential

9.5

ChipMOS Shanghai, by execution hereof, acknowledges and agrees that all representation and warranties made, or obligations, responsibilities and liabilities assumed by ChipMOS Bermuda under the Joint Development Agreement made and executed by and between ChipMOS TECHNOLOGIES INC. and ChipMOS Bermuda on January 1, 2007 (“Master Agreement”) shall apply to ChipMOS Shanghai as if it were assuming the contractual position of ChipMOS Bermuda as a Licensee under the Master Agreement. ChipMOS Shanghai further agrees to be bound by the Master Agreement, and that ChipMOS TECHNOLOGIES INC. shall be a third party beneficiary of this Agreement and shall have the same rights and privileges (but not the obligations and liabilities) as those of ChipMOS Bermuda hereunder and may exercise such rights and privileges directly to ChipMOS Shanghai.

Article X Indemnification

10.1

Each Party (the “Indemnifying Party”) shall indemnify and hold the other Party (the “Indemnified Party”) and its directors, officers, employees, agents and consultants (“Indemnified Persons”) harmless from and against any and all damages, losses, claims, expenses, costs (including reasonable attorneys’ fees and litigation or arbitration costs) or other liability incurred by the Indemnified Party and Indemnified Persons, arising out of or relating to any breach of a representation, warranty or covenant of the Indemnifying Party under this Agreement. Provided that the Indemnified Party shall provide to the Indemnifying Party prompt written notice of any such claim for which indemnification is sought and shall further provide reasonable cooperation in the defense and all related settlement negotiations thereof. The Indemnifying Party shall have the right to control the defense of a claim for which indemnification is sought hereunder, Notwithstanding any of the foregoing, the Indemnified Party shall have the right, in its absolute discretion and at its sole cost, to employ attorneys of its own choice in the defense of such claim. The indemnification liability of either Party hereunder shall in no event exceed the consideration for transfer of the Licensed Technology as described in Section 3.1.

10.2	ChipMOS Shanghai agrees to maintain liability insurance coverage on the Licensed Products consistent with sound business practice.

Confidential

Article XI Third Parties Claim

11.1

In case of a third party’s infringement claim directed to the use of Licensed Technology, Technical Documentation or Services, or the manufacture or sales of the Licensed Products (“Third Party Claim”), the Parties agree to cooperate fully with each other. At the request and expense of the Party being subject to the Third Party Claim, the other Party shall provide necessary assistance and permit access to its personnel, records, papers, and information necessary for the defense thereof. The assistance and access provided by either Party hereunder shall be the sole and exclusive obligation of that Party with respect to the Third Party Claim.

Article XII Confidentiality

12.1

The Licensed Technology and Technical Documentation shall be deemed as Confidential Information for all purposes and at all times. Notwithstanding the above, information shall not be deemed confidential if it is proved with conclusive evidence, which (i) is or becomes generally known to the public through no unlawful act or fault of the receiving Party; (ii) was known to the receiving Party at the time of disclosure; (iii) is disclosed with the prior written approval of the disclosing Party; (iv) was independently developed by the receiving Party without any use of or reference to the Confidential Information of the disclosing Party; or (v) becomes known to the receiving Party from a source other than the disclosing Party without breach of this Agreement and not subject to confidentiality duty.

Confidential

12.2

Each Party agrees that it shall not use or disclose to any person or entity the Confidential Information of the other Party, except that each Party may (a) use the Confidential Information of the other Party to carry out the activities expressly permitted hereunder, (b) disclose the Confidential Information of the other Party to those persons who have a need to know such Confidential Information in order to carry out the activities expressly permitted hereunder on behalf of the receiving Party and who are bound by confidentiality obligations no less stringent than those contained herein, and (c) disclose the Confidential Information as required by judicial order or other legal obligation, provided that, in such event, the Party subject to such obligation shall promptly notify the other Party to allow intervention (and shall cooperate with the other Party) to contest or minimize the scope of the disclosure (including application for a protective order). Each Party agrees to take precautions to prevent unauthorized disclosure or use of the Confidential Information of the other Party, and such precautions shall be consistent with the precautions used to protect the receiving Party’s own confidential information of like significance, but in no event less than the care exercised by a reasonable business person in the protection of its valuable confidential information. In the event that a receiving Party learns or has reason to believe that any person who has had access to the Confidential Information of the other Party has violated or intends to violate the terms of this Agreement, the receiving Party shall immediately notify the other Party and shall cooperate with the other Party in seeking any relief against any such person or violation.

12.3

All Confidential Information of a disclosing Party shall remain the sole property of such disclosing Party. Upon the termination of this Agreement, or at any time the disclosing Party requires, the receiving Party shall return the Confidential Information of the other Party and not keep or retain any copies of the other Party’s Confidential Information.

12.4	ChipMOS Shanghai shall not disclose or publicize the existence or the terms of this Agreement, without the prior written consent of ChipMOS Bermuda.

12.5

ChipMOS Shanghai shall procure non-disclosure undertakings from its employees having access to the Confidential Information of ChipMOS Bermuda on a need-to-know basis. The terms of the non-disclosure undertaking shall be no less stringent than those contained herein. ChipMOS Shanghai shall provide to ChipMOS Bermuda list of the foregoing employees and copies of the non-disclosure undertakings, and shall update the list in a timely manner.

Confidential

12.6

In the event of any unauthorized disclosure or use of ChipMOS Bermuda’s Confidential Information by any of ChipMOS Shanghai’s employees (in such case, it shall be deemed as violation by ChipMOS Shanghai), ChipMOS Bermuda shall have the right to commence legal proceedings directly against such employee, and such direct claim shall be addressed and granted in the non-disclosure undertaking executed by ChipMOS Shanghai’s employees. The damages that would be suffered by ChipMOS Bermuda as a result of a breach of the provisions of this Article XII may not be calculable and that an award of a monetary judgment for such a breach would be an inadequate remedy. Consequently, ChipMOS Bermuda shall have the right, in addition to any other rights it may have, to obtain, in any court of competent jurisdiction, injunctive relief or the like to restrain any breach or threatened breach of any provision of this Article XII or otherwise to specifically enforce any of the provisions hereof. In the event of ChipMOS Shanghai’s breach (including the breach by its employees) of any of the provisions of this Article XII, ChipMOS Shanghai agrees to pay ChipMOS Bermuda liquidated damages in the amount of US$ 1,000,000 for each such breach. These remedies are in addition to any other remedy, including, without limitation, the recovery by ChipMOS Bermuda of its actual damages in excess of the liquidated damages, available to ChipMOS Bermuda.

12.7	The confidentiality obligations of the Parties and their employees shall survive the termination or expiration of this Agreement.

Article XIII Term and Termination

13.1	This Agreement and the License shall come into force on the Effective Date and shall remain in full force and effect for ten (10) years from Effective Date, unless and until earlier terminated hereunder.

Confidential

13.2

Each Party may terminate this Agreement by delivering written notice to the other Party in the event that: (i) the other Party materially breaches this Agreement and, to the extent such breach is curable, fails to cure such breach within ten (10) days following the date the breaching Party receives written notice from the non-breaching Party describing such breach; (ii) the other Party materially breaches this Agreement and such breach is not curable; (iii) a petition for the other Party’s bankruptcy has been filed and is not discharged within thirty (30) days, whether voluntary or involuntary; (iv) an assignment of the other Party’s assets is made for the benefit of creditors; (v) the appointment of a trustee or receiver is made to take charge of the other Party’s business for any reason; (vi) the other Party becomes insolvent or ceases to conduct business in the normal course. For purposes of this Section 13.2, any breach of Articles VI and XII, Sections 9.2 (iii), and 16.5 shall be deemed an incurable breach.

13.3

This Agreement and the License shall automatically terminate upon: (i) the board of directors of ChipMOS Shanghai passes the resolution of winding up ChipMOS Shanghai; (ii) termination of the Master Agreement for whatsoever reasons; or (iii) ChipMOS Shanghai ceases to be a SUBSIDIARY controlled by ChipMOS Bermuda as defined in Section 1.9 of the Master Agreement, provided, however, that ChipMOS Bermuda shall refund ChipMOS Shanghai the proportionate consideration in Section 3.1 for the remaining Term of the License. Upon the termination of this Agreement and receipt of the foregoing proportionate refund of consideration, ChipMOS Shanghai shall cease to use any of Licensed Technology or Technical Documentation, unless otherwise authorized by ChipMOS Bermuda.

13.4	Notwithstanding the foregoing, the termination or expiration of this Agreement shall not relieve either Party of any liability or obligation that accrued prior to such termination or expiration.

Confidential

Article XIV Arbitration

14.1

All matters, questions, disputes, differences or claims arising between the Parties as to (i) the effect, interpretation or application of this Agreement, (ii) their respective rights, duties or liabilities hereunder, or (iii) any act, matter or thing arising out of or in connection with this Agreement (the “Difference”), shall first be resolved through friendly negotiations between the Parties. Such negotiations shall commence within a period of seven (7) working days of the issue of notice (the “Notice”) in writing by one Party to the other Party (the “Notified Party”) calling for the same.

14.2

In the event that such negotiations fail to resolve the Difference within a period of forty-five (45) working days from the date of receipt of the Notice by the Notified Party, such Difference shall be finally settled by and pursuant to Hong Kong Arbitration Law and the rules of the Hong Kong International Arbitration Center by arbitrator(s) appointed in accordance with the established rules of such arbitration body. The arbitration proceedings shall be conducted in Hong Kong and in the English language.

14.3	Unless otherwise provided herein, the Parties shall be responsible for the payment of their respective costs in connection with any arbitration proceeding.

14.4

The existence of a Difference between the Parties hereto, or the initiation or continuance of any arbitration proceedings referred to above, shall not delay or otherwise postpone the performance of the undisputed obligations of the Parties hereto and the arbitrator shall take full cognizance and give due consideration to such performance, if any, in the making of the final award.

14.5

The arbitral award shall be final and binding on the Parties, and the judgment thereon may be rendered by any court having jurisdiction thereof or application may be made to such court for judicial recognition of the award or an order of enforcement, as the case may be. In the event that the arbitral award or judgment rendered thereon is entered by a court of competent jurisdiction for judicial recognition or an order of enforcement, the Parties shall waive all of their rights to object thereto insofar as permissible under the applicable laws.

Confidential

Article XV Force Majeure

15.1

No Party shall be held liable or responsible to the other Party for failure or delay in fulfilling or performing any obligation under this Agreement if such failure or delay is caused by actions or events which are beyond the reasonable control of the affected Party, the effect of which is to prevent or interfere with that Party’s performance hereunder, including, without limitation, (i) any natural disasters or public enemy, fire, explosion, accident, embargo, or any other circumstances of like or different character commonly referred to as force majeure; or (ii) interruption of or delay in transportation or shortage or failure of supply of materials or equipment, breakdowns, strikes, or other labor strike from whatever cause arising; or (iii) compliance by either Party with any valid order, action, directive, or request of any governmental official, department, agency, or authority. Each Party agrees to give the other Party prompt written notice of the occurrence of any such condition and the extent to which the affected Party will be unable to fully perform its obligations hereunder. Each Party further agrees to use all reasonable efforts to correct such conditions as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform such obligation, provided that, in the event of such prevention or delay as aforesaid, the Parties hereto, instead of exercising the aforesaid option, may consult with each other in order to mutually determine the course of action to be taken, in order to minimize the effects of such prevention or delay and continue the operation of this agreement.

Article XVI General Provisions

16.1	This Agreement shall be governed by and interpreted in accordance with the laws of Hong Kong Special Administrative Region without giving effect to its conflict of laws principles.

Confidential

16.2	Should any provision of this Agreement or the application of such provision to any person or circumstance be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby.

16.3	No alteration, amendment, waiver, cancellation or any other change in any term or condition of this Agreement shall be valid or binding on either Party unless the same shall have been mutually assented to in writing by both Parties.

16.4

The failure of either Party to enforce at any time any of the provisions of this Agreement, or the failure to require at any time performance by the other Party of any of the provisions of this Agreement, shall in no way be construed to be a present or future waiver of such provisions, nor in any way affect the right of either Party to enforce each and every such provision thereafter. The express waiver by either Party of any provision, condition or requirement of this Agreement shall not constitute a waiver of any future obligation to comply with such provision, condition or requirement.

16.5

Unless otherwise provided herein, ChipMOS Shanghai shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, by operation of law or otherwise, this Agreement or any or its rights (including, without limitation, the License) or obligations under this Agreement without the prior written consent of ChipMOS Bermuda, which consent may be withheld in ChipMOS Bermuda’s sole discretion. Any purported assignment, sale, transfer, delegation or other disposition of this Agreement or the License, except as permitted herein, shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns.

16.6

All notices, requests and other communications under this Agreement shall be in writing and shall be deemed to have been duly given, if delivered by hand, at the time of receipt or, if communicated by cable or similar electronic means, at the time receipt thereof has been confirmed by return electronic communication or signal that the message has been clearly received or, if mailed, seven (7) days after mailing, registered airmail return receipt requested, with postage prepaid.

Confidential

In case of ChipMOS Bermuda:

Contact person: S. K. Chen

Title: Chief Financial Officer

Address: No.1, R&D Rd. 1, Hsinchu Science Park, Taiwan, R.O.C.

In case of ChipMOS Shanghai:

Contact person: Carl Lei

Title: Vice President

Address: 9688 Songze Ave., Qingpu Industrial Zone, Shanghai, China

Provided, however, that if a Party shall have designated a different address by notice to the other Party, then to the last address so designated.

16.7

The terms and conditions of this Agreement constitute the entire agreement between the Parties and supersede all previous agreements and understandings, whether oral or written, between the Parties hereto with respect to the subject matter hereof. Unless specifically set forth in this Agreement, no representations, warranties or covenants have been made, assumed or agreed to by the Parties and no agent of the Parties has been authorized to make or agree to any such representations, warranties or covenants.

16.8	The captions or headings of the Articles of this Agreement are for reference only and are not to be construed in any way as part of this Agreement.

16.9	This Agreement shall be in English. All communications and notices to be made or given pursuant to this Agreement shall be in the English language.

Confidential

16.10

This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. A Party may deliver this Agreement by transmitting a facsimile of this Agreement signed by such Party to the other Party, which facsimile signature shall be deemed an original.

(Signatures on following page.)

Confidential

IN WITNESS WHEREOF, the Parties have executed this Agreement and caused their respective corporate seals to be affixed by their officers thereunto duly authorized as of the day and year first written above.

ChipMOS TECHNOLOGIES (Shanghai) LTD.

By:

Name: Charles Chun-Ming, Cheng

Title: Chairman

ChipMOS TECHNOLOGIES (Bermuda) LTD.

By:

Name: S. J. Cheng

Title: Chairman and CEO

Confidential

ANNEX I LIST OF LICENSED TECHNOLOGY

List of principal subsidiaries of ChipMOS TECHNOLOGIES (Bermuda) LTD.

Exhibit 8.1

List of Principal Subsidiaries


Name		Place of Incorporation
ChipMOS TECHNOLOGIES INC.		Republic of China

MODERN MIND TECHNOLOGY LIMITED		British Virgin Islands

ChipMOS TECHNOLOGIES (Shanghai) LTD.		People’s Republic of China

ThaiLin Semiconductor Corp.		Republic of China

Certification of Chief Executive Officer required by Rule 13a-14(a)

Exhibit 12.1

CERTIFICATIONS

I, Shih-Jye Cheng, certify that:

1. I have reviewed this annual report on Form 20-F of ChipMOS TECHNOLOGIES (Bermuda) LTD.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 3, 2011


/s/ Shih-Jye Cheng
Name:		Shih-Jye Cheng
Title:		Chairman and Chief Executive Officer

Certification of Chief Financial Officer required by Rule 13a-14(a)

Exhibit 12.2

CERTIFICATIONS

I, Shou-Kang Chen, certify that:

1. I have reviewed this annual report on Form 20-F of ChipMOS TECHNOLOGIES (Bermuda) LTD.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 3, 2011


/s/ Shou-Kang Chen
Name:		Shou-Kang Chen
Title:		Chief Financial Officer

Certification of Chief Executive Officer required by Rule 13a-14(b)

Exhibit 13.1

ChipMOS TECHNOLOGIES (Bermuda) LTD.

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned, Shih-Jye Cheng, Chairman and Chief Executive Officer of ChipMOS TECHNOLOGIES (Bermuda) LTD. (the “Company”), hereby certifies, to his knowledge, that the Company’s Annual Report on Form 20-F for the year ended December 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 3, 2011


/s/ Shih-Jye Cheng
Name:		Shih-Jye Cheng
Title:		Chairman and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

Certification of Chief Financial Officer required by Rule 13a-14(b)

Exhibit 13.2

ChipMOS TECHNOLOGIES (Bermuda) LTD.

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned, Shou-Kang Chen, Chief Financial Officer of ChipMOS TECHNOLOGIES (Bermuda) LTD. (the “Company”), hereby certifies, to his knowledge, that the Company’s Annual Report on Form 20-F for the year ended December 31, 2010 (the “Report”) fully complies with the requirements of Section13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 3, 2011


/s/ Shou-Kang Chen
Name:		Shou-Kang Chen
Title:		Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

Consent of independent registered public accounting firm.

Exhibit 15.1

June 3, 2011

The Board of Directors

ChipMOS TECHNOLOGIES (Bermuda) LTD.

No. 1, R & D Road 1

Hsinchu Science Park

Hsinchu City, 30076

Republic of China

Attention: Mr. S.J. Cheng

Dear Sirs,

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-130230 on Form F-3 and Registration Statements Nos. 333-137838, 333-116670 and 333-85290 on Form S-8 of our report dated March 15, 2011, relating to the consolidated financial statements of ChipMOS TECHNOLOGIES (Bermuda) LTD. (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 20-F of the Company for the year ended December 31, 2010 (the “Annual Report”). We also consent to the inclusion of our report in the Annual Report.

Yours faithfully,

/s/ Moore Stephens

Certified Public Accountants

Hong Kong