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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 7/09/04  Asat Holdings Ltd                 20-F        4/30/04    9:348                                    RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Annual Report of a Foreign Private Issuer           HTML  1,529K 
 2: EX-1.2      Restated Articles of Association of Asat Holdings      1      6K 
                          Limited                                                
 3: EX-4.6      Indenture Dated As of January 26, 2004               113    594K 
 4: EX-4.8      Lease Agreement Dated As of May 7, 2004               17     64K 
 5: EX-12.1     Certification of Chief Executive Officer Pursant       2±    11K 
                          to Section 302                                         
 6: EX-12.2     Certification of Chief Financial Officer Pursant       2±    11K 
                          to Section 302                                         
 7: EX-13.1     Certification of Chief Executive Officer Pursant       1      8K 
                          to Section 906                                         
 8: EX-13.2     Certification of Chief Financial Officer Pursant       1      8K 
                          to Section 906                                         
 9: EX-14.1     Consent of Independent Auditors                        1      7K 

Table of Contents

As filed with the Securities and Exchange Commission on July 9, 2004

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

Commission file number 000-30842

ASAT Holdings Limited

(Exact name of Registrant as specified in its charter)

ASAT Holdings Limited

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

14th Floor, 138 Texaco Road

Tsuen Wan, New Territories

Hong Kong

(Address of principal executive office)

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

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

Class of ordinary shares, par value $0.01

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

None

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:

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 which financial statement item the registrant has elected to follow:

Item 17  ¨        Item 18  x

Table of Contents

 Table of Contents

PART I

PART II

PART III

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 GENERAL INFORMATION

In this Annual Report, the terms “we,” “us,” “our,” “our company,” “Company” and “ASAT” refer, as the context requires, either individually or collectively, to ASAT Holdings Limited (“ASAT Holdings”) and also to ASAT Limited (“ASAT HK”), ASAT, Inc., ASAT (Finance) LLC, Timerson Limited, ASAT (Cayman) Limited, ASAT Korea Limited, ASAT GmbH, ASAT (S) Pte Ltd., New ASAT (Finance) Limited, Newhaven Holdings Limited (“Newhaven”), RBR Trading Holding (Curaçao) N.V. (“RBR Antilles”) and R.B.R. Trading Holding B.V. (“RBR Netherlands”) which are each, direct or indirect, wholly owned subsidiaries of ASAT Holdings. Since ASAT S.A. has been under court administration since November 20, 2001, we no longer consolidate its financial results with our financial statements.

A “Glossary of Semiconductor Terms” set out definitions of technical terms used in this Annual Report.

We publish our financial statements in United States dollars, which are referred to as “Dollars” and “$”.

 FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements and information that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical fact, including, but not limited to, those that are identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “anticipates,” “projects” and similar expressions. Risks and uncertainties that could affect us include, without limitation, dependence on the highly cyclical nature of the semiconductor industry, our ability to rapidly develop and successfully bring to market advanced technologies and services, the incurrence of significant capital expenditures for manufacturing technology and equipment, the success of moving our assembly and test facilities from Hong Kong to Dongguan, operating new assembly and test facilities in China, our high leverage and the restrictive covenants contained in the agreements governing our indebtedness, fluctuating demand and continuous downward pressure on selling prices in the communications sector, inability to meet increased demands of customers, low capacity utilization rates, loss of a large customer, weaknesses in Asian economies, natural disasters, losses of power to our facilities in Dongguan, litigation with Motorola, volatility in the market prices of our ADSs, environmental regulation, fluctuations in foreign currency, uncertainty as to demand from our customers over both the long- and short-term, competitive pricing and declines in average selling prices we experience, the timing and volume of orders relative to our production capacity, complexity in our assembly processes, the availability of financing, competition and the greater operating and financial resources of competitors, ability to successfully complete potential acquisitions and integrate other parties into our business, dependence on raw material, equipment suppliers and the enforcement of intellectual property rights by or against us and the possible difficulties in obtaining additional financing. Should one or more of such risks and uncertainties materialize, or should any underlying assumption prove incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking statements. Any forward-looking statement or information contained in this document speaks only as of the date the statement was made.

All of our forward-looking statements made herein and elsewhere are qualified in their entirety by the risk factors discussed in Item 3 “Key Information—Risk Factors” and other cautionary statements appearing in Item 5 “Operating and Financial Review and Prospects” in this Annual report. These risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

We do not intend to update or revise any forward-looking statements made herein to reflect actual results or changes in assumptions, future events or otherwise.

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 GLOSSARY OF SEMICONDUCTOR TERMS

This glossary contains definitions and other terms as they relate to our businesses and as they are used in this report. As such, these definitions may not correspond to standard industry definitions.

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iii

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PART I

Not applicable.

Not applicable.

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 SELECTED FINANCIAL DATA

The following table represents selected historical consolidated financial data for ASAT for the five-year period ended April 30, 2004. The selected historical consolidated financial data below as of April 30, 2003 and 2004 and for the years ended April 30, 2002, 2003 and 2004 were derived from our audited consolidated financial statements as of such dates and for such periods included elsewhere in this Annual Report. The selected historical consolidated financial data below as of April 30, 2000, 2001 and 2002 and for the years ended April 30, 2000 and 2001 were derived from our audited consolidated financial statements as of such dates and for such periods, not included in this Annual Report. The financial information included in this Annual Report does not reflect our results of operations, financial position and cash flows in the future and our past operating results are no guarantee of our future operating performance. In this Annual Report, all references to fiscal years are to the Company’s fiscal years ended April 30th, thus the fiscal year 2004 refers to the fiscal year ended on April 30, 2004.

The selected historical consolidated financial data is qualified by reference to, and should be read in conjunction with, Item 5 “Operating and Financial Review and Prospects” and our consolidated financial statements and the related notes, included elsewhere in this Annual Report.

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EBITDA includes the following charges:

In fiscal year ended 2004, the Company incurred $10.3 million charges on early redemption of 12.5% senior notes, $2.4 million impairment of property, plant and equipment and $306 thousand facilities charges.

In fiscal year ended 2003, the Company incurred $81.8 million non-cash impairment of property, plant and equipment, $3.0 million specific and non recurring inventory write down and $713 thousand reorganization expenses.

In fiscal year ended 2002, the Company incurred $24.3 million write-off in relation to ASAT S.A., $4.5 million non-recoverable and unutilized architectural cost, $4.0 million specific and non recurring inventory write down and $2.3 million reorganization expenses.

In fiscal year ended 2001, the Company incurred $13.1 million charges for the early extinguishment of debt, $2.6 million reorganization expenses, $2.2 million specific and non recurring inventory write down and $442 thousand amortization of noncompete covenants.

In fiscal year ended 2000, the Company incurred $12.3 million impairment of property, plant and equipment, $6.8 million recapitalization cost and $1.0 million amortization of noncompete covenants.

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As a measure of our operating performance or liquidity, we believe that the most directly comparable measures to EBITDA are net income (loss) and net cash provided by (used in) operating activities. The following table reconciles our net income (loss) and net cash provided by (used in) operating activities to our definition of EBITDA on a consolidated basis for each of the five years ended April 30, 2000, 2001, 2002, 2003 and 2004.

Exchange Rate Information

The Hong Kong dollar is freely convertible into other currencies (including the U.S. dollar). Since 1983, the Hong Kong dollar has effectively been officially pegged to the U.S. dollar at the rate of approximately HK$7.80 = US$1.00. The market exchange rate of the Hong Kong dollar against the U.S. dollar continues to be influenced by the forces of supply and demand in the foreign exchange market. However, the Hong Kong government, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. We cannot assure you that the Hong Kong government will maintain the peg at HK$7.80 to US$1.00 or at all. Exchange rates between the Hong Kong dollar and other currencies are influenced by the rate between the U.S. dollar and such other currencies.

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 RISK FACTORS

Risks relating to our businesses include the following:

Our business is and will continue to be substantially affected by the highly cyclical nature of the semiconductor industry, which cyclicality is beyond our control.

Our business is substantially affected by market conditions in the semiconductor industry, which is highly cyclical. The industry has been subject to significant downturns characterized by reduced product demand, increased competition and declines in average selling prices and margins. Semiconductor industry conditions are often affected by manufacturing over-capacity and declining demand and reduced pricing in end-user markets.

Beginning in the fourth quarter of calendar year 2000, the semiconductor industry experienced a severe downturn. Accordingly, our customers cut back production orders, reflecting inventory corrections and lower demand experienced in their end-user markets. This downturn had a very pronounced and adverse effect on our sales and financial performance. In particular, we suffered the adverse implications of declining average selling prices, or ASPs, for assembled units. In part, this decline in ASPs reflected a shift in product mix to lower cost devices. However, a significant part of this decline in ASPs resulted from external pricing pressures throughout the downturn. In the event of future ASPs declines, we will need to continue to expand our production capacity and through-put to maintain or increase our revenues.

We believe the semiconductor industry began a modest recovery in the second quarter of calendar year 2002 and the overall demand for semiconductors has picked up significantly since the second quarter of calendar year 2003. However, any future downturn in the semiconductor industry similar to the last downturn would adversely affect our business, financial condition and results of operations and further erode our cash position. In that regard, if the downturn were to reoccur, we may be required to seek new financing. We may not be able to obtain any new financing on acceptable terms or at all. We may also be required to reduce our capital expenditures, which in turn could hinder our ability to implement our business plan, including the move of a substantial portion of our manufacturing facilities to Dongguan, China, and to maintain our competitiveness. Because of the downturn in the industry and the uncertainty of the recent gradual recovery, we continue to re-evaluate our product mix and the direction of our business. This re-evaluation as a result of the downturn led to significant write-down of property, plant and equipment in the amount of $81.8 million for the year ended April 30, 2003, and may necessitate additional write-downs in the future.

Our ability to rapidly develop and successfully bring to market advanced technologies and services is important to maintaining our competitive position and profitability.

The semiconductor industry is characterized by rapid technological developments and our research and development efforts may not yield commercially viable packages or test services to keep up with these technological changes. Any inability to meet our customers’ schedules for new product introductions could affect our revenue, growth and future customer relationships. Our customers seek advanced and quick time-to-market assembly and test capabilities for their increasingly complex end-user applications. Failure to advance our designs and process technologies successfully and in a timely manner could have a material adverse effect on our competitiveness and our profitability. Technological advances typically lead to rapid and significant decreases in prices for older products. Extended reliance on older products would reduce our gross margins and profitability, as prices decline in the face of newer, higher performance products.

We could be required to incur significant capital expenditures for manufacturing technology and equipment to remain competitive.

Semiconductor manufacturing has historically required, and in the future is likely to continue to require, a constant upgrading of process technology to remain competitive, as new and enhanced semiconductor processes are developed which permit the manufacture of smaller, more efficient and more powerful semiconductor

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devices. Our assembly and test facilities have required and will continue to require significant investments in manufacturing technology and equipment in the future. We have made substantial capital expenditures and installed significant production capacity to support new technologies and increase production volume. In addition, in connection with Phase II of our move to Dongguan, China, we expect to increase our capital expenditures in order to implement this move. Even though we cannot presently estimate the amount of this increase in capital expenditures beyond our fiscal year 2005, it could be significant. We cannot assure you that we will have sufficient capital resources to make further necessary investments in manufacturing technology and equipment. In addition, due to the long lead-times involved in the pre-deployment development and product qualification activities that must precede a new product release, we may be called upon to make substantial investments in both package design efforts and in new manufacturing equipment well in advance of our being able to record appreciable revenues derived from those new products. Further, during each stage of the long qualification process required by customers for our products, which could take up to six months to complete, there is a substantial risk that we will have to abandon a potential assembly or test service which is no longer marketable or technologically feasible or competitive and in which we have invested significant resources. Even if we are able to qualify new packages, a significant amount of time will have elapsed between our investment in new packages and the receipt of any related revenues.

Because our industry is highly competitive and many of our competitors have greater operating and financial resources, we may not be able to secure new customers or maintain our customer base.

The semiconductor packaging and test industry is highly competitive, with more than 40 independent providers of semiconductor assembly services worldwide. We believe our principal competitors include Advanced Semiconductor Engineering, Inc., Amkor Technology, Inc., ChipPAC, Inc., Carsem Semiconductor Sdn. Bhd. (a division of the Hong Leong Group), Siliconware Precision Industries Co., Ltd. and ST Assembly Test Services Ltd. Many of our competitors have greater operating capacity, financial resources than we do and have proven research and development and marketing capabilities. If demand for semiconductor assembly and test services were to continue to increase, our competitors would be at an advantage capturing this increased demand by utilizing their greater financial resources to more rapidly increase capacity. Many of our competitors also have established relationships with many large semiconductor companies that are current or potential customers of us. Further, lengthy qualification periods and a familiarity between potential customers and their current assembly service providers may limit our ability to secure new customers.

We also compete indirectly with the in-house assembly and test service resources of many of our largest customers, the integrated device manufacturers, or IDMs. These IDM customers may decide to shift some or all of the assembly and test services to internally sourced capacity.

Due to this highly competitive environment, we may experience difficulties in securing business from new customers, additional business from our existing customers or even maintaining our current level of business with our existing customers. In addition, if the trend for semiconductor companies to outsource their packaging needs does not continue, we may not be able to maintain our customer base.

If any of our competitors grow through acquisitions and we are unable to similarly grow, we may have difficulties competing against those competitors in terms of volume production, price competitiveness and array of services.

Some of our competitors with greater financial resources have been able to grow through acquisitions. There have been instances where one of our competitors has acquired the entire back end assembly operations of an IDM. A recent example occurred when Amkor acquired a substantial portion of the IBM assembly and test operations in China and Singapore. As a result of growth through acquisitions, these competitors may have increased capacity and may be better positioned to increase their market share by decreasing prices. Additionally, as a result of such acquisitions, these competitors may be able to provide a broader array of services. If we are unable to grow our business through acquisitions, we may have difficulties competing successfully against these

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competitors. A recent example of such merger and acquisition activities among our competitors would be the announced acquisition of ChipPAC, Inc. by ST Assembly Test Services Ltd. In addition, the indenture that governs our 9.25% senior notes due 2011 requires us to comply with certain covenants that limit our ability to enter into mergers or consolidations.

We face risks associated with potential acquisitions, investments, strategic partnerships or other ventures, including whether we can identify opportunities, complete the transactions and integrate the other parties into our business.

We believe that the semiconductor packaging industry may undergo consolidation, both with regard to consolidation among independent assembly service providers and with respect to the outsourcing of in-house assembly capacity of semiconductor IDMs. We believe it may become increasingly important to acquire or make investments in complementary businesses, facilities, technologies, services or products, or enter into strategic partnerships with parties who can provide access to those assets, if appropriate opportunities arise. From time to time we have had discussions with companies regarding our acquiring, investing in or partnering with their businesses, products, services or technologies, and we regularly engage in such discussions in the ordinary course of our business. We may not be able to identify suitable acquisition, investment or strategic partnership candidates, which may place us at a disadvantage if our competitors are able to grow their market share through acquisitions. If we do identify suitable candidates, we may not be able to complete those transactions on commercially acceptable terms or at all. If we acquire another company, we could have difficulty in integrating that company’s personnel, products, operations and technology. In addition, the key personnel of the acquired company may decide not to work for us. These difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses.

Our assembly processes are complex and prone to error, which may create defects and adversely affect production yields.

Assembly services are prone to human error and equipment malfunction. Defective packages may also result from:

These factors have periodically contributed to lower production yields and may continue to do so, particularly in connection with any expansion of capacity or change in processing steps. In addition, our production yields on new packaging technologies could be lower during the period necessary for us to develop the requisite expertise and experience with these processes. Any failure by us to maintain high quality standards or acceptable production yields, if significant and sustained, could result in the delays in shipments, increased costs or cancellation of orders, which could have a material adverse effect on our business, financial condition and results of operations.

In order to meet customer demands for one stop design, assembly and test services, we may be required to add new test equipment, which can be very capital intensive and may not result in expected revenues and/or margins.

We provide our customers with one stop package design, assembly and test services. Many of our customers seek to do business with independent assemblers who can provide a full range of assembly and semiconductor test services, particularly testing of mixed-signal semiconductors which perform both analog and digital

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functions. In order to satisfy such customer demands, we may be called upon to acquire additional test equipment capacity, which could require us to increase our capital expenditures on test equipment. Additionally, the use of mixed-signal test equipment involves complex software programming and the use of sophisticated and expensive equipment operated by a highly skilled workforce. However, customers requesting these types of test services are typically not willing to commit to the utilization of such additional capacity beyond their short-term forecasts. If these customers do not place these expected orders or we experience a general decrease in demand for our test services, we could have excess capacity and low utilization rates for our test equipment, which could increase our costs and negatively affect our expected revenues and/or margins. In addition, any failure by us to provide one stop design, assembly and test services could result in the loss of customers or sales of our services, which could have a material adverse effect on our business, financial condition and results of operations.

We have been operating at a net loss for each year since the fiscal year ended April 30, 2002.

We have been operating at a net loss for each year since the fiscal year ended April 30, 2002. Our net losses for the fiscal years ended April 30, 2002, 2003 and 2004 were $102.8 million, $99.1 million and $16.7 million, respectively. We cannot assure you that we will return to profitability.

Our principal market is in the communications sector which is subject to fluctuating demand and continuous downward pressure on selling prices.

A significant percentage of our net sales is derived from customers who use our assembly or test services for semiconductor devices used in the communications sector. This sector has been subject to extreme fluctuations in demand and, as a result, in the past we have experienced a prolonged industry-wide slowdown in demand in the communications sector, even though this sector appears to have shown signs of stabilization in calendar year 2003. Historically, the average selling price of communications products has continued to decrease, and the resulting pricing pressure on services provided by us has led to reductions in our net sales and decreasing margins. For the past three years, we have embarked upon a strategy to diversify our customer base and reduce dependency on the communications sector. However, the execution of our strategy continues to take time and may ultimately not be successfully implemented, especially if other independent assembly and test companies were to focus on the same market sectors that we have targeted. If we are unable to successfully implement our diversification strategy, our financial condition and results of operations could be materially adversely affected.

We may be unable to meet the increased demands of our customers, which could have a negative impact on our results of operations.

Our facilities historically had sufficient assembly and test services capacity to meet the demands of our customers. Beginning in the July 2003 quarter, there was a significant increase in overall semiconductor demand for some of our products and services, and in the April 2004 quarter our assembly processes were nearly at full capacity with a utilization rate of approximately 80% per quarter. A utilization rate of greater than 80% is considered to be operating effectively at full capacity due to the downtime required to change shifts and service machinery. Running equipment at full capacity for a lengthy period of time can have a negative impact on quality and cause bottle-necks in product through put which can result in missed scheduled delivery dates. Moreover, because the semiconductor assembly and test services business requires investment in expensive capital equipment and is characterized, from time to time, by intense demand, limited supply and long delivery cycles, we may not be able to readily increase our operating capacity. This would lead to a loss of sales of our assembly and test services, which could ultimately lead to a loss in market share and have a negative impact on our results of operations.

Our profitability has in past periods been affected by low capacity utilization rates, which are significantly influenced by factors outside of our control.

As a result of the capital intensive nature of our business, our operations are characterized by high fixed costs. Consequently, insufficient utilization of installed capacity can negatively affect our profitability. For

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example, in fiscal year 2003, our capacity utilization rates ranged from averages of approximately 42% to 67% per month for our assembly operations as a result of the weak demand for our assembly and test services resulting from the prolonged downturn in the semiconductor industry. If we experience low capacity utilization in future periods, our financial condition and results of operations could be adversely affected.

We generate a significant amount of revenue from a limited number of customers. The loss of, or reduced purchases by, one or more of our larger customers may have an adverse effect on our results of operations.

For the fiscal year ended April 30, 2004, our top five largest customers by net sales accounted for approximately 56.8% of net sales and our top ten largest customers by net sales accounted for approximately 74.3% of net sales. Our largest customer for that same year by net sales accounted for approximately 19.0% of net sales. For the year ended April 30, 2003, our top five customers by net sales accounted for approximately 63.2% of net sales and our top ten customers by net sales and accounted for approximately 77.5% of net sales. For the year ended April 30, 2003, our largest customer for that same period by net sales accounted for approximately 25.1% of net sales. If any key customer were to significantly reduce its purchases from us, our results of operations would likely be adversely affected. While sales to major customers may vary from period to period, a major customer that permanently discontinues or significantly reduces its purchases from us could be difficult to replace.

In line with industry practice, new customers usually require us to pass a lengthy and rigorous qualification process that can take up to six months at a significant cost to the customer. As a result, customers are reluctant to qualify new assembly and test service providers and it may be difficult for us to attract new major customers and/or break into new markets. In addition, if we fail to qualify packages with potential customers or customers with which we have recently become qualified do not use our services, then our customer base could become more concentrated with an even more limited number of customers accounting for a significant portion of our revenues. Furthermore, we believe that once a semiconductor company has selected a particular assembly and test company’s services, the semiconductor company generally relies on that vendor’s packages for specific applications and, to the extent possible, subsequent generations of that vendor’s packages. Accordingly, it may be difficult to achieve significant sales from a customer once it selects another vendor’s assembly and test services.

Because a significant portion of our production is in Asia, we are vulnerable to weaknesses in the economies of Asian countries.

Most of our important suppliers of raw materials, leadframes and the semiconductor chips delivered to us for assembly and test are located in Asia. Substantially all our customers are United States or European multinational companies and nearly 100% of our invoices are billed in U.S. Dollars. We estimate that approximately 49.2% of our net sales during the year ended April 30, 2004 and 43.2% of our net sales during the year ended April 30, 2003 represented packages shipped to distribution centers and destinations within Asia. These factors raise a number of financial, operational and business risks, including:

These factors could adversely affect both our operations and the operations of our suppliers and customers. In addition, the sharp economic downturn in Asia in recent years adversely affected our business by reducing demand for our customers’ products in Asia. Future economic downturns in Asia or elsewhere would likely be detrimental to our business, financial condition and result of operations.

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In moving our assembly and test facilities from Hong Kong to Dongguan, China, we may experience unanticipated costs, delays or business interruptions, which could adversely affect our financial condition and results of operations.

In August 2002, we entered into a 15-year lease agreement and a 6-year management agreement with the Dongguan Changan County Changshi Development Company, or “Changshi”, our development partner in the Zhenan Technology and Industrial Park, Changan County, Dongguan City in Dongguan, China. In August 2003, during Phase I of our move to China, construction of a modern 180,000 square foot facility was completed by Changshi to our specifications. Shortly thereafter, we started moving assembly equipment to this newly built, leased assembly and test facility. We have completed our internal qualification and customer qualification runs for the LPCC, TAPP and fpBGA product lines at this new facility. We have received our first orders for volume production for our Phase I China facility and expect to achieve significant commercial production during our July 2004 quarter. We also anticipate that we will have transferred approximately one-half of our current installed assembly and test capacity, measured as of the April 2004 quarter, to China by the end of our January 2005 quarter.

In the July 2004 quarter, construction on a 300,000 square foot Phase II factory building immediately adjacent to the Phase I facility was commenced. As with our Phase I facility, we entered into a long term lease agreement with Changshi and its subsidiary that holds the subject land use rights, Dongguan Changan ASAT Semiconductor Assembly and Test Factory, in May 2004 to construct this factory building. Under the terms of the lease agreement, we will lease the completed Phase II factory building from Changshi for a period of 15 years. The Phase II factory building is expected to house substantially all of the balance of our Hong Kong manufacturing operations plus provide space for the future expansion of our assembly and test operations.

We may experience unexpected costs or delays in moving our assembly and test equipment to the new facility during Phase I and/or II, which could have a material adverse impact on our financial condition and results of operations. In addition, we may not be able to achieve such results by such dates if our move is delayed for any reason, if we encounter other unexpected delays or if our customers fail to agree to qualify their products for assembly and/or test in this new facility. Any interruption in manufacturing or delays in shifting capacity to our China plant would have a material adverse impact on our financial condition and results of operations.

We have a new partner in China and do not have any significant experience working with this partner. Decisions that our partner makes in China with respect to our facility may not be consistent with our interests.

Our development partner in China, Changshi, is an entity established by the Dongguan government to develop and manage several newly designated industrial parks in Changshi prefecture Chang An town, Dongguan City, Guangdong Province. We believe that the interests of Changshi currently are aligned with our interests and their performance during the construction and facilitization of the Phase I facility met or exceeded our expectations with respect to the quality and timeliness of the construction of the Phase I facility. However, Changshi may not continue to perform at these levels or at all during the course of constructing the Phase II facility. Moreover, pursuant to our agreements with Changshi, they must now assist us in operating the Phase I facility to our requirements over a period of several years. In that regard, we do not have any significant experience working with Changshi. As a result, we could experience difficulties in our relationship with Changshi, and the decisions made by Changshi may not be consistent with our interests, which in either case could be disruptive to our operations. In addition, if Changshi were to breach one or more of their agreements with us, we would be called upon to initiate binding arbitration in Beijing before the China International Economic and Trade Arbitration Commission. The outcome of any such arbitration would be controlled by Chinese law and could be time consuming and unfavorable to us.

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Operating a new facility in China can be fraught with uncertainty and there can be no assurances that this China facility will bring intended benefits to us.

Many legal, operational and financial risks may prevent us from realizing our intended benefits in China in connection with our move of manufacturing operations to Dongguan, China. These risks include:

While China’s economy has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy in China, but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by governmental control over capital investments or changes in tax regulations applicable to us.

The economy in China has been transitioning from a planned economy to a more market-oriented economy. Despite recent transitions to a market-oriented economy, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China’s economic growth through allocation of resources, controlling payment of foreign currency denominated obligations, setting monetary and banking policy and providing preferential treatment of particular industries or companies.

The Chinese legal system is based on written statutes. These statutes remain largely untested and prior court decisions interpreting them may be noted for reference but have limited precedential value. Since 1979, the Chinese government has promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new and because of the limited volume of published cases and their non-binding nature, interpretation and enforcement of these laws and regulations involve significant uncertainty. In addition, as the Chinese legal system develops, changes in such laws and regulations, their interpretation or their enforcement may lead to additional restrictions on our business.

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With most of our operations conducted in two facilities in Hong Kong and with our new facility scheduled to become operational in Dongguan, China within the next few months, we are vulnerable to natural disasters, and other disruptive regional events, which could cause us to lose revenue and perhaps lose customers.

We currently conduct substantially all of our assembly operations in one of our facilities in Hong Kong and our test operations at another facility in Hong Kong and we expect to achieve significant commercial production at our newly leased Phase I China facility during our July 2004 quarter. Significant damage or other impediments to any of these facilities, whether as a result of fire, weather, disease, civil strife, industrial strikes, breakdowns of equipment, difficulties or delays in obtaining imported spare parts and equipment, natural disasters, terrorist incidents, industrial accidents or other causes could temporarily disrupt or even shut down our operations, which would have an adverse effect on our financial condition and operating results. For example, our existing operations in Hong Kong and our future operations in Dongguan are both vulnerable to regional typhoons that can bring with them destructive winds and torrential rains which can in turn cause plant closures and transportation interruptions.

With respect to our facilities in Hong Kong, we maintain insurance, including business interruption insurance, against some, but not all, of these events. With respect to the facility in Dongguan, China, Changshi has procured insurance covering the buildings and public liability insurance and we have procured insurance covering the contents of the buildings and public liability insurance. Because significant commercial production has not started at the facility in Dongguan, neither we nor Changshi have procured business interruption insurance. We cannot assure you that our insurance or the insurance procured by Changshi would be adequate to cover any direct or indirect loss or liability resulting from those events.

Our new facility is scheduled to become operational in Dongguan, China within the next few months and any disruptions in available power supply in Dongguan could disrupt our operations, reduce our revenues and increase our expenses.

Approximately one-half of our current installed assembly and test capacity, measured as of the April 2004 quarter, is expected to be transferred to the Dongguan factory by the end of our January 2005 quarter. Our assembly and test operations in China are dependent on a reliable source of electrical power. For economic and continuous manufacturing operations, we are dependent on electrical power supplied by state run power generating facilities. Although we have installed back-up generators in our new China facility and have dedicated power lines and substations, we will remain dependent on state supplied electrical power. China is now experiencing an electrical power shortfall that is expected to increase in the near term as the imbalance between capacity and demand grows. The projected power shortfall is expected to be most acute in southern China, including Dongguan where the Company’s factory is located. In Dongguan, demand for power exceeded supply during most of calendar year 2003. Should our Dongguan facility be subject to rolling blackouts or should the power shortage result in brownouts of increased severity, our operations may suffer temporary shutdowns or be otherwise inconvenienced. We believe that the potential for blackouts and brownouts that could affect our operations at the Dongguan facility will be highest during warm weather conditions.

We currently have a dedicated hi-voltage supply line and dedicated 11K volt transformers on site supporting the Dongguan facility. This line should not be subject to rolling blackouts as a dedicated power source. In addition, we currently have back-up generators supporting our Dongguan facility that can provide short term emergency power in the event of a power blackout or shortage. However, no assurances can be given that the transformers or the generators will be able to provide adequate power during prolonged blackouts. If the transformers or the generators are unable to provide power during prolonged blackouts, we would be temporarily unable to continue operations at this facility. Phase II of our move to China is expected to include the installation of a separate supply line from an alternative power plant which we expect to provide independent and continuous back-up power. Nevertheless, no assurances can be given that this separate power line will be able to provide adequate power during prolonged blackouts. Any interruption in our ability to continue our operations at the Dongguan facility could damage our reputation, harm our ability to retain existing customers and to obtain new

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customers, and could result in lost revenue and increased expenses, any of which would substantially harm our business and results of operations.

In addition to the above, if retail electricity prices rise dramatically in Dongguan, we would expect our expenses to increase and our operating results to be harmed.

We may not be able to continue to reduce our cost structure. Even if we do, it may not reduce our operating expenses by as much as we anticipate.

Beginning in 2001, in response to the severe downturn in the semiconductor sector, we began to reduce costs. Over the past nine quarters, or since the end of the January 2002 quarter, we have been implementing our corporate restructuring program in order to reduce our overall cost structure and improve profitability. We implemented cost savings measures, including reductions in material, labor, overhead and administrative costs. We continue to reduce our cost structure and have recently started the installation of the SAP enterprise resource planning solution and Camstar’s manufacturing tracking and execution system to enable us to implement improved business processes. We are also moving our assembly and test facilities from Hong Kong to a lower-cost facility in Dongguan, China. We cannot assure you that these cost saving measures will increase profitability or that any expected net savings will occur. During the remainder of calendar year 2004, we anticipate that there will be some additional expenses associated with commencing production in our China facility and in expanding our sales and marketing efforts in Asia and North America. In addition, with respect to our new information systems, there can be no assurances that we will not encounter delays, errors or cost-overruns or other adverse consequences in implementing such systems. As we upgrade our information systems, we may encounter difficulties in integrating such technology into our business and we may find that such new systems may not be appropriate for our business. If our new information systems prove to be inadequate or their implementation severely delayed, our business, financial condition and results of operations may be harmed.

We rely on the development and perfection of ownership interests in a substantial amount of intellectual property in our business. If we are unable to protect this intellectual property, we may lose advantages in innovation over our competitors.

We have patents, confidentiality agreements, collaborative agreements and other arrangements intended to protect certain of our proprietary manufacturing processes and product technologies. As of April 30, 2004, we had approximately 20 issued U.S. patents. In addition, during the October 2003 quarter, we entered into a “quad flat pack no lead” chipscale package, or QFN, patent cross-license agreement with Amkor Technology, Inc. These protections and any future measures we take might not adequately cover or protect our intellectual property. In particular, our competitors may be able to develop similar or superior products or manufacturing technologies, and many of these competitors invest greater amounts of capital towards such development efforts than we do. As a result, our patent portfolio may not have the breadth or depth of that of some of our competitors. Also, we cannot assure you that the Asian countries in which we manufacture and market our products will protect our intellectual property rights to the same extent as does the United States. That could leave us vulnerable to willful patent infringement or to the theft of trade secret information. However, even if we have valid protections in place, we may not have sufficient financial and legal resources to protect or enforce our rights. Furthermore, because many of our products and technologies are not covered by any patents or pending patent applications, they are susceptible to independent duplication and/or reverse engineering by competitors.

We are vulnerable to intellectual property infringement claims by third parties and may need to enforce our intellectual property rights against third parties.

The semiconductor industry is characterized by frequent claims regarding patent infringement. From time to time, third parties may claim that we are infringing on their intellectual property rights, particularly regarding patent rights in the highly competitive and technology intensive semiconductor sector. Such claims could have a serious adverse effect on our business and financial condition.

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If a third party were to bring a valid legal claim against us for patent infringement, we could be required to:

We may seek licenses from such parties, but they could either refuse to grant us a license or demand commercially unreasonable terms. We might not have sufficient resources both to pay for the licenses and to remain competitive. Such infringement claims could also cause us to incur substantial liabilities and to have to suspend or permanently cease the use of critical technologies or processes for the production and/or sale of major products.

We may also need to enforce our patents and other intellectual property rights against infringement by third parties. If we were called upon to defend against a claim of patent infringement, or were we compelled to litigate to assert our intellectual property rights, we could incur substantial legal and court costs and be required to consume substantial management time and engineering resources in the process.

We could be adversely affected by an adverse outcome in legal proceedings to which we are or in the future become subject.

We are or in the future may become involved in various intellectual property, product liability, commercial, environmental, and tax litigations and claims, government investigations and other legal proceedings that arise from time to time in the ordinary course of our business. Litigation is inherently unpredictable, and we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations. We are currently subject to litigation with Motorola. If we are found to be liable, this could have an adverse affect on our financial condition and results of operations. See Item 4 “Business Overview—Legal Proceedings.”

Since May 2002, we have assembled a senior management team to implement our business strategy, but no assurances can be given that they will be able to successfully implement our business strategy. The loss of key executive officers and engineers could negatively impact our business prospects. In addition, our inability to retain key personnel at all levels would limit our ability to develop new and enhanced assembly and test services.

We depend on our ability to attract and retain highly skilled technical, managerial, sales and marketing personnel. Since May 2002, we have assembled a senior management team to implement our strategy and continue to turn-around the company. However, our senior management team has on average been with us for less than two years and there can be no assurance that this team will be able to implement our strategy successfully. In addition, competition for highly skilled technical, managerial, sales and marketing personnel is intense, particularly in Hong Kong and Southern China and the retention of skilled engineering personnel in our industry typically requires competitive compensation packages. In attracting and retaining such personnel, we may be required to incur significantly increased compensation costs. We cannot predict whether we will be successful in attracting and retaining the personnel we need to successfully develop and market new and enhanced assembly and test services in order to sustain our growth and profitability.

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The loss of key suppliers or their failure to deliver sufficient quantities of materials on a timely basis could negatively impact our business prospects. Our inability to qualify second sources for certain suppliers could limit our production capabilities.

The principal materials used in our assembly process are polymer substrates, leadframes, gold wire and plastic molding compounds. In the ordinary course of business, we purchase most of our leadframes from QPL International Holdings Limited and its affiliates, or QPL, and our substrates from several suppliers in Japan, Korea and Hong Kong. To maintain competitive packaging operations, we must obtain from these suppliers, in a timely manner, sufficient quantities of acceptable quality materials and equipment at competitive prices. We purchase all of our materials on a purchase order basis and, have no long-term contracts with any suppliers. From time to time, particularly during industry upturns, vendors have extended lead times or limited the supply of required materials to us because of vendor capacity constraints and, consequently, we have experienced difficulty in obtaining acceptable materials on a timely basis. In addition, particularly during industry upturns, prices that we pay for materials may increase due to increased industry demand. This increase could negatively impact our operating results especially if we are unable to pass this cost on to our customers. Further, if any of our vendors, particularly QPL, were to cease operations for any reason, we may experience difficulty in obtaining acceptable materials from alternative vendors on a timely, cost-effective basis. For example, in the April 2004 quarter, an upstream vendor to one of our key suppliers announced the discontinuance of the production of metalized tape of a certain composition. This discontinuance forced the Company to send “end of life” notices to almost a dozen of its customers, several of whom were highly dependent on products assembled with the discontinued material.

Our customers may require us to complete a rigorous approval process with new vendors before we can utilize the new vendor. We cannot predict how much time this approval process will take to complete and we may not be able to utilize alternative sources on a timely or cost-effective basis. Our business and results could be negatively impacted if our ability to obtain sufficient quantities of materials and other supplies in a timely, cost-effective manner was substantially diminished or if there were significant increases in the cost of materials that we could not pass on to our customers.

Environmental, health and safety laws could impose material liability on us and our financial condition may be negatively affected if we are required to incur significant costs of compliance.

We are subject to environmental, health and safety laws in Hong Kong. These laws impose controls on our air and water discharges, on the storage, handling, discharge and disposal of chemicals, and on employee exposure to hazardous substances. If these laws were to change, they could require us to incur costs to maintain compliance and could impose liability to remedy the effects of hazardous substance contamination. Stricter enforcement of existing laws, the adoption of new laws or regulations or our failure to comply with these laws or regulations could cause us to incur material liabilities and require us to incur additional expense, curtail our operations and restrict our ability to grow.

Our operations in China will be required to comply with various Chinese environmental laws and regulations administered by the central and local government environmental protection bureaus, including any environmental rules introduced by the local Chinese governments in Dongguan, China. These laws impose controls on our air and water discharges, on the storage, handling, discharge and disposal of chemicals, and on employee exposure to hazardous substances and impose fees for the discharge of waste substances above prescribed levels, require the payment of fines for serious violations and provide that the Chinese national and local governments may at their own discretion close or suspend any facility which fails to comply with orders requiring it to cease or cure operations causing environmental damage. If these laws were to change, they could require us to incur costs to maintain compliance and could impose liability to remedy the effects of hazardous substance contamination. Stricter enforcement of existing laws, the adoption of new laws or regulations or our failure to comply with these laws or regulations could cause us to incur material liabilities and require us to incur additional expense, curtail our operations and restrict our ability to grow.

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QPL has provided us with chemical waste disposal services in Hong Kong due to our respective manufacturing operations being located in the same building. QPL, as the landlord of our assembly facility in Tsuen Wan, Hong Kong has provided these services to us pursuant to a license issued to QPL by the Hong Kong government, which must be renewed by October 31 every other year. However, in June 2003 QPL relocated all of its manufacturing operations from our shared facility to its new facility in Dongguan, China. QPL has agreed to continue to renew this license for our benefit and we received a renewal license in November 2003. Any failure on the part of QPL to obtain or to maintain such a license could materially and adversely affect our operations.

We do not anticipate making material environmental capital expenditures in connection with our current operations or the construction of the new facilities in Dongguan, China. However, we cannot predict whether future environmental, health and safety laws in either Hong Kong or China will require additional capital expenditures or impose other process requirements upon us, curtail our operations, or restrict our ability to expand our operations. We could be subject to material liabilities if the government adopts new environmental, health and safety laws, we fail to comply with new or existing laws, or other issues relating to hazardous substances arise.

Recent changes in environmental laws and regulations applicable to manufacturers of electrical and electronic equipment are causing us to redesign certain products, and may increase our costs and expose us to liability.

The implementation of new environmental regulatory legal requirements, such as lead free initiatives, could impact our product designs and manufacturing processes. Such impacts could affect the timing of compliant product introductions, the cost of our products as well as their commercial success. For example, a recent directive in the European Union bans the use of lead and other heavy metals in electrical and electronic equipment beginning in 2006. As a result, in advance of this deadline, some of our customers selling products in Europe have begun demanding products from component manufacturers that do not contain these banned substances. Because most of our existing assembly processes utilize a tin-lead alloy as a soldering material in the manufacturing process, we must redesign some of our assembly processes and products to respond to the new legislation if we are to meet customer demand. This redesign is resulting in increased research and development and manufacturing and quality control costs. And, the products we assemble to comply with the new regulatory standards may not perform as well as our current products. Moreover, if we are unable to successfully and timely redesign existing products and introduce new products that meet the standards set by environmental regulation and our customers, sales of our products could decline, which could materially adversely affect our business, financial condition and results of operations.

Changshi hires our Dongguan employees and we expect these employees to unionize. If we encounter future labor problems, we may fail to deliver our products in a timely manner, which could adversely affect our revenues and profitability.

Pursuant to the terms of the contract services agreement with Changshi, Changshi began hiring engineering, managerial and direct labor employees for staffing Phase I of the Dongguan facility and these workers will be employees of Changshi. However, these workers will have been selected by us and will be under our direct supervision and control. The employment agreements, which include workplace rules, salaries and benefits, have been drafted and approved by us and we believe that they are fully compliant with the employment laws of the PRC. None of these employees or our other employees are currently represented by a union. However, we expect the workers in our Dongguan factory to unionize, even though we are not sure what percentage of this workforce will be affected. It is possible that the union will be subject to collective bargaining and wage agreements. These agreements could increase our labor costs in China and have an adverse impact on our operating results. In addition, once unionized, this workforce may undertake labor protests and work stoppages, which could also have an adverse impact on our operating results. We cannot assure you that any potential issues with the expected

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labor union or other employees will be resolved favorably for us in the future, that we will be successful in negotiating any potential wage and collective bargaining agreements, that we will not experience significant work stoppages in the future or that we will not record significant charges related to those work stoppages.

Some of our costs are denominated in foreign currencies and the continued depreciation of the U.S. dollar against such foreign currencies could increase these costs.

While substantially all of our revenues are U.S. dollar denominated, a portion of our costs are denominated in other currencies, primarily Hong Kong dollars and to a lesser extent Japanese yen. The Hong Kong dollar historically has accounted for the largest share of our costs. Because the exchange rate of the Hong Kong dollar to the U.S. dollar has remained close to the current linked rate of HK$7.80 = $1.00 since 1983, we have not experienced significant foreign exchange gains or losses associated with that currency. However, the Hong Kong government could change the linked rate or abandon the link altogether. The Japanese yen has fluctuated significantly against the dollar in recent years and may continue to fluctuate. The depreciation of the U.S. dollar against the Hong Kong dollar or Japanese yen would generally increase our Hong Kong dollar or Japanese yen expenses, which could have an adverse effect on our financial condition and results of operations.

Additionally, we expect that if our new manufacturing facilities in Dongguan, China become fully operational, our exposure to fluctuations in the value of the Chinese Renminbi will significantly increase since expenses related to the Dongguan facility will be paid in Renminbi. The value of the Renminbi fluctuates and is subject to change in China’s political and economic conditions. Since calendar year 1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates on the world financial markets. However, the government of China could change or abandon its existing currency policy at its sole discretion. Recently, the Chinese government has been under increasing pressure from its trading partners to cause the Renminbi to appreciate against the U.S. dollar. If the Renminbi were to appreciate against the U.S. dollar, our costs relating to our planned China operations would increase resulting in lower potential margins from our China operations.

Economic, political and legal developments in Hong Kong could affect our business.

Our results of operations, financial position and prospects are subject to a significant degree to the economic, political and legal developments in Hong Kong. From July 1, 1997, Hong Kong became a Special Administrative Region of the People’s Republic of China when the People’s Republic of China resumed the exercise of sovereignty over Hong Kong. The basic policies of the People’s Republic of China regarding Hong Kong are embodied in the Basic Law of Hong Kong, which was adopted by the National People’s Congress of the People’s Republic of China on April 4, 1990 and came into effect on July 1, 1997. The Basic Law provides that Hong Kong will have a high degree of autonomy and enjoy executive, legislative and independent judicial power, including that of final adjudication, in accordance with the provisions of the Basic Law. Under the principle of “one country, two systems,” the socialist system and policies will not be practiced in Hong Kong, and the previous capitalist system and way of life shall remain unchanged for 50 years. There can be no assurance that economic, political and legal developments in Hong Kong will not adversely affect our operations.

Outbreaks of epidemics and communicable diseases in Hong Kong, China and other parts of Asia may disrupt our business operations, causing us to lose customers and revenue.

In early calendar year 2003, China, Hong Kong and certain other countries, largely in Asia, experienced the spread of the Severe Acute Respiratory Syndrome, or SARS, virus. The SARS virus was believed to have first originated in Southern China and then spread to Hong Kong before becoming an international health concern. The World Health Organization and several countries issued travel warnings against international travel to Hong Kong, China and several other Asian nations during the period of the alert. This severely curtailed customer

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visits to our facilities. In addition, we have been unable to obtain insurance coverage at commercially reasonable rates for business interruptions resulting from the spread of communicable diseases. In that regard, there can be no assurance that the SARS virus and/or a different or even more virulent influenza virus will not make a reappearance in the future. If such an outbreak were to occur in Hong Kong and China, and if the outbreak were to be prolonged, uncontrolled and/or associated with high mortality, our operations could be severely impacted, which may lead to plant closures and other emergency measures, which would have material adverse effect on our financial condition and results of operations. Furthermore, any outbreak in any of our premises or manufacturing plants could result in our management and employees being quarantined and our operations being required to be suspended.

The market price of our American Depositary Shares, or ADSs, may be volatile and you may not be able to resell your ADSs at or above the price you paid, or at all. In addition, the liquidity of the ADSs may also be adversely affected by any future transfer to the Nasdaq SmallCap Market.

Our ADSs have experienced substantial price volatility during the past three years, particularly as a result of variations between our anticipated and actual financial results, the published expectations of analysts, and announcements by our competitors and by us. From time-to-time, this volatility has been exacerbated by the relatively low average daily trading volumes of our ADSs. In addition, the stock market itself has experienced extreme price and volume fluctuations that have negatively affected the market price of the stocks of many technology and manufacturing companies. These factors, as well as general worldwide economic and political conditions, may materially adversely affect the market price of our ADSs in the future.

Our ADSs are currently quoted on The Nasdaq National Market under the symbol “ASTT”. Following our initial public offering, our ADSs were quoted on The Nasdaq National Market until June 2003. On October 17, 2002, we received a compliance notice from The Nasdaq Stock Market, Inc. stating that, for a period of 30 consecutive trading days, our ordinary shares had closed below the minimum bid price of $1.00 per share as required under the Nasdaq Marketplace Rule 4450(a)(5) for continued listing on The Nasdaq National Market. In accordance with Nasdaq’s Marketplace Rules, we had until April 15, 2003 to regain compliance with the Nasdaq’s continued listing requirements. Because we were unable to demonstrate compliance with the continued listing requirements, the Nasdaq Listings Qualifications Panel determined that we should transfer the listing of our ADSs to The Nasdaq SmallCap Market. In anticipation of this determination, we submitted an application to transfer the listing of our ADSs to The Nasdaq SmallCap Market on June 2, 2003. That application was approved and the transfer of our listing to The Nasdaq SmallCap Market became effective from July 1, 2003, and our ADSs were quoted on the NASDAQ SmallCap Market from July 1, 2003 to April 12, 2004. On April 12, 2004, the listing of our ADSs on The Nasdaq National Market once again became effective.

Following the transfer back to The Nasdaq National Market, our ADSs will continue to be traded under the trading symbol “ASTT.” However, in the future we may be unable to comply with the conditions for continued listing on The Nasdaq National Market and may be required to transfer the listing of our ADSs to The Nasdaq SmallCap Market again. The liquidity of our ADSs could be negatively impacted by any such transfer. For example, the demand for our ADSs may be curtailed by certain investment entities that have self-imposed restrictions and/or investment limitations regarding the trading in and holding of securities that are listed on the Nasdaq SmallCap Market.

We will require a significant amount of cash to fund operating and capital expenditures and to service our debt.

Our ability to fund operating and capital expenditures and to service debt will depend significantly on our ability to generate cash from operations. For the fiscal year ended April 30, 2003, the earnings to fixed charges deficiency was $114.3 million, and for the fiscal year ended April 30, 2004, the earnings to fixed charges deficiency was $16.7 million. For the purpose of this calculation, “earnings” consists of income (loss) before

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income taxes plus fixed charges, and “fixed charges” consists of interest expense including amortization of debt discount and debt issuance costs. We will need to continue generating cash flow at current levels to fund operating and capital expenditures and to service debt, including our 9.25% senior notes due 2011. However, we cannot assure you that we will be able to do so. Our ability to generate cash is subject to general economic, financial, competitive, industry, legal and other factors and conditions, many of which are outside our control. In particular, our operations are subject to cyclical downturns and price and demand volatility in the semiconductor industry. If we cannot generate sufficient cash to service our debt, we may have to, among other things, reduce capital and research and development expenditures, sell assets, restructure our debt, including the notes, or raise equity. We might not be able to take these actions or they may not be successful. Our ability to take many of these steps may be subject to approval by future creditors in addition to holders of the 9.25% senior notes due 2011.

We may not be able to finance future needs or adapt our business plan to change because of restrictions placed on us by the indenture governing our 9.25% senior notes.

The indenture governing our 9.25% senior notes contains, and those agreements governing our future debt may contain, various covenants that limit our ability to, among other things:

Our ability to comply with covenants contained in the indenture for our 9.25% senior notes and other indebtedness to which we may become a party may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in an acceleration of our indebtedness and cross-defaults under other indebtedness to which we may become a party. Any such acceleration or cross-default could require us to repay or repurchase debt, together with accrued interest, prior to the date it otherwise is due, which could adversely affect our financial condition.

Even if we are able to comply with all applicable covenants, the restrictions on our ability to operate our business in our sole discretion could harm our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

We are controlled by two principal groups of shareholders and their interests may conflict with your interests.

Several private equity funds separately managed by or affiliated with JPMP Master Fund Manager L.P. (formerly Chase Capital Partners), Olympus Capital Holdings Asia Holdings and Orchid Hong Kong Investment Holdings, respectively, referred to as the “investor group” in this Annual Report, collectively owned approximately 42% of the outstanding ordinary shares of ASAT Holdings as of April 30, 2004. The investor

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group has signed an agreement generally to vote in unison on certain matters. QPL and its controlling shareholder collectively owned approximately 43% of the ordinary shares of ASAT Holdings as of April 30, 2004. In addition, the investor group can acquire additional shares of ASAT Holdings from QPL in satisfaction of indemnification claims against QPL and under a credit support arrangement with creditors of QPL. The investor group and QPL together control ASAT Holdings’ board of directors, management and policies. The investor group and QPL are not obligated to provide any financing under their current shareholders’ agreement. The investor group and QPL are not obligated to exercise their rights as shareholders in the interests of ASAT Holdings or holders of the notes and may engage in activities that conflict with such interests. See Item 7 “Major Shareholders and Related Party Transactions.” Furthermore, disagreements between the investor group and QPL which cannot be resolved could adversely affect the management of our company. QPL and the investor group are subject to a shareholders’ agreement and vote together on certain matters, including directors.

 HISTORY AND DEVELOPMENT

ASAT Holdings was incorporated in the Cayman Islands on October 20, 1999, as a limited liability company under the Companies Law (Revised) of the Cayman Islands. The principal executive office for ASAT Holdings is located at 14^th Floor, 138 Texaco Road, Tsuen Wan, New Territories, Hong Kong. ASAT Holdings’ registered office in the Cayman Islands is Ugland House, P.O. Box 309, South Church Street, George Town, Grand Cayman, Cayman Islands. Our telephone number in Hong Kong is (852) 2408-7811 and the telephone number for our registered office in the Cayman Islands is (345) 949-8066.

Recapitalization

On October 29, 1999, three groups of private equity funds separately managed by or affiliated with JPMP Master Fund Manager, L.P. (formerly Chase Capital Partners), Olympus Capital Holdings Asia and Orchid Asia Holdings LLC purchased a 50% equity interest in ASAT Holdings from QPL. Following the completion of our offering of ADSs on July 14, 2000, this investor group held an approximately 43% equity interest in ASAT Holdings.

 BUSINESS OVERVIEW

We are an independent provider of semiconductor assembly and test services. We are a leading developer of advanced packages and have recently achieved significant growth in chipscale packages, including the fpBGA and LPCC package families. We are an acknowledged early developer of the QFN package, as evidenced by our U.S. patents covering this technology. Today, LPCCs, a QFN package, is our fastest growing package family both in units and in revenue.

We work closely with customers to design and provide advanced assembly and test solutions for each new product generation. Our sales offices and representatives are located in the United States, Germany, Hong Kong, Japan, South Korea and Singapore, allowing us to work directly with customers at their facilities to provide effective package design and customer service. Through this network we are able to provide rapid time-to-market and highly focused design and production solutions. During the year ended April 30, 2004, we shipped products to over 100 customers and many of our top customers are among the world’s largest semiconductor companies. Our top three customers (in alphabetical order) by net sales for the year ended April 30, 2004 were Altera, Analog Devices and Broadcom.

Over the past decade, we believe integrated semiconductor companies have increasingly outsourced the assembly and test of semiconductors to third parties, such as ASAT, in order to focus their capital on their core businesses and lower the costs of assembly and test.

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The semiconductor industry has been highly cyclical and beginning in the fourth quarter of calendar year 2000 experienced a sudden and severe downturn. After a prolonged downturn, we believe the semiconductor industry began a modest recovery in the second quarter of calendar year 2002 which appears to have accelerated in calendar year 2003. Beginning in 2001, in response to the severe downturn in the semiconductor sector, we began to reduce costs. Over the past nine quarters, or since the end of the January 2002 quarter, we have undergone significant changes as we have made progress in implementing our corporate restructuring program to increase our focus on developing advanced packages, diversifying our customer base, significantly improving our customer focus and reducing our costs.

With respect to our organizational structure, we have an experienced management team that was put in place beginning in May 2002. With respect to customers, we have recently implemented a comprehensive customer service program with our sales force and are leveraging our leading products to diversify our customer base to include the consumer and personal computer/data processing segments. With respect to costs, we have started the installation of a modern cost management information and control system which is expected to further reduce material costs, manufacturing labor costs, overhead costs and administrative costs. We have purchased and are installing the SAP enterprise resource planning software and the Camstar manufacturing tracking and execution system which will be the platforms to further enhance our customer service and cost containment efforts.

Furthermore, as part of our corporate restructuring program, we made a strategic decision to move substantially all of our Hong Kong manufacturing operations to China in order to significantly reduce our costs and access the high-growth semiconductor market in China. We plan to conduct this move in two phases. In August 2002, we entered into a 15-year lease agreement and a 6-year management agreement with Changshi, our development partner in the Zhenan Technology and Industrial Park, Changan County, Dongguan City in Dongguan, China. In August 2003, during Phase I of our move to China, construction of a modern 180,000 square foot facility was completed by Changshi to our specifications. Shortly thereafter, we started moving assembly equipment to this newly built, leased assembly and test facility. We have completed our internal qualification and customer qualification runs for the LPCC, TAPP and fpBGA product lines at this new facility. We have received our first orders for volume production for our China facility and expect to achieve significant commercial production during our July 2004 quarter. We also anticipate that we will have transferred approximately one-half of our current installed assembly and test capacity, measured as of the April 2004 quarter, to China by the end of our January 2005 quarter. In the July 2004 quarter, construction on a 300,000 square foot Phase II factory building immediately adjacent to the Phase I facility has commenced. As with our Phase I facility, we entered into a long term lease agreement with Changshi and its subsidiary that holds the subject land use rights, Dongguan Changan ASAT Semiconductor Assembly and Test Factory, in May 2004 to construct this factory building. Under the terms of the lease agreement, we will lease the completed Phase II factory building from Changshi for a period of 15 years. The Phase II factory building is expected to house substantially all of the balance of our Hong Kong manufacturing operations plus provide space for the future expansion of our assembly and test operations.

We believe that our restructuring efforts have contributed to our improved operating results in recent quarters and that we are well positioned to continue to grow our business profitably, even though no assurances can be given that we will be able to do so. In the fiscal year 2004, we had sales of $214.7 million compared to sales of $150.1 million in the fiscal year 2003, representing year-over-year growth of 43%. With the continued focus on our strategy and on our move to China, we expect to continue to improve our financial performance.

Semiconductor packaging protects the enclosed semiconductor chip and provides a network of connections between the chip and a printed circuit board. Non-CSP leadframe packages are a distinct packaging family type in that the chip is first attached to a metallic leadframe and then electrical interconnects (usually with fine gold bonding wires) are provided between the chip’s active components and the corresponding leadframe electrical contacts. The chip and leadframe are then encapsulated in plastic leaving external metal leads from the leadframe exposed and surrounding the edge of the package. These exposed leads will enable the device to be electrically

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connected to the circuit board on which it will be mounted. By contrast, in non-CSP laminate packages, the chip is mounted on a plastic substrate (not on a metallic leadframe) to which it is electrically connected (usually with fine gold bonding wires) to printed metallic interconnect circuitry that is in turn electrically connected to the printed circuit board via solder balls which have been incorporated as electrical contacts on the bottom of the package. Chipscale packages include both leadframe and laminate based packages and are typically used in high-end packaging of semiconductors for applications that require small device footprints and high electrical and thermal performance characteristics.

Business Strategy

Our overall strategy is to grow market share, focus on margins, lower costs and improve profitability. The principal elements of this strategy include:

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Semiconductor Packages

We offer assembly services for a broad range of semiconductor packaging including chipscale (small) and non-chipscale (large) packages. Most of the revenue derived from test services comes from test services performed in connection with assembly services and the revenue generated from only test is not significant to us. The following table sets forth the breakdown of net sales by product category and as a percentage of total net sales for the years indicated: