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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended March 31, 2006                                                    
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to          .                                  

Commission file number: 0-22594





Alliance Semiconductor Corporation


(Exact name of Registrant as specified in its charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 77-0057842                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)

2575 Augustine Drive


Santa Clara, California 95054-2914


(Address of principal executive offices including zip
code)


Registrants telephone number, including area code is
(408) 855-4900





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


|                              |  |                                     
|----------------------------- |  | ------------------------------------
|Title of Each Class           |  | Name of Exchange on which Registered
|                              |  |                                     
|Common Stock, par value $0.01 |  | The NASDAQ Stock Market LLC         

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


None


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ














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##### 










ALLIANCE SEMICONDUCTOR CORPORATION


FORM 10-K


For the Period Ended March 26, 2005


TABLE OF CONTENTS


|              |  |                                                                                                                      |             |      |        |  |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- | ----------- | ---- | ------ |  |  | 
|              |  |                                                                                                                      |             | Page |       
|Item Number   |  |                                                                                                                      | Description |      | Number | 
|              |  |                                                                                                                      |             |      |        | 
|PART I       
|Item 1.       |  | Business                                                                                                             |             |      | 2      | 
|Item 1A.      |  | Risk Factors                                                                                                         |             |      | 11     | 
|Item 2.       |  | Properties                                                                                                           |             |      | 15     | 
|Item 3.       |  | Legal Proceedings                                                                                                    |             |      | 16     | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                              |             |      | 18     | 
|             
|PART II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |             |      | 20     | 
|Item 6.       |  | Selected Financial Data                                                                                              |             |      | 20     | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |             |      | 21     | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |             |      | 37     | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |             |      | 38     | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosures                            |             |      | 38     | 
|Item 9A.      |  | Controls and Procedures                                                                                              |             |      | 39     | 
|Item 9B.      |  | Other Information                                                                                                    |             |      | 41     | 
|             
|PART III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |             |      | 41     | 
|Item 11.      |  | Executive Compensation                                                                                               |             |      | 43     | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |             |      | 48     | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |             |      | 49     | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                               |             |      | 51     | 
|             
|PART IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                       |             |      | 52     | 
|Signatures    |  |                                                                                                                      | 53          |     
|Exhibit Index |  |                                                                                                                      |             |     
|EXHIBIT 21.01
|EXHIBIT 23.01
|EXHIBIT 23.02
|EXHIBIT 31.01
|EXHIBIT 31.02
|EXHIBIT 32.01
|EXHIBIT 32.02







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PART I


Forward-Looking Statements









|        |         
|------- | --------
|Item 1. | Business



| |         
| | --------
| | Overview





Operational Diversification








2



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Proxy Contest




out-of


Disposition of Operating Business Units










3



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| |            
| | -----------
| | Investments



United Microelectronics Corporation






Tower Semiconductor Ltd.








| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Up to 1.2 million of the initial 3.9 million Tower
    shares acquired by us, together with all shares we acquired in
    excess of 5.4 million shares in exchange for payments made
    in accordance with the original Share Purchase Agreement, are
    available for sale, subject to the requirements of Rule 144
    or another applicable exemption from the Securities Act of 1933,
    as amended;
|
| |  | All shares acquired as a result of Towers rights offering
    in September 2002 and shares which may be acquired upon exchange
    of certain wafer credits are unrestricted and
    available-for-sale; and                                                                                                                                                                                              
|
| |  | For the remaining Tower shares acquired by us, we may not
    transfer, during the period between January 2006 and January
    2008, more than 6% of our total shares in any quarter on a
    cumulative basis and no more than 48% of our total shares by the
    end of this period.                                                                                                                     





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5



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|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |       |     |  |   |      |      | 
|----------- | ----- | ----------- | --------- | ---------- | ----- | - | ---------- | ---------- |  | -------- | ------- | ---- | ----- | ---------- | ----- | --- |  | - | ---- | ---- | 
|            |       |             |           |            |       |   |            | Investment |  |          |        
|            |       |             |           | Share      |       |   | Investment |            |  | in Wafer |         |      | Total |           
|            |       | # of Shares |           |            | Price |   |            | in Shares  |  |          | Credits |      |       | Investment |      
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      
|FY 2001     |       |             | 1,233,241 |            |       | $ | 13.24      |            |  | $        | 16.3    |      |       | $          | 14.7  |     |  | $ | 31.0 |     
|FQ1 2002    |       |             | 366,690   |            |       |   | 12.50      |            |  | $        | 4.6     |      |       | $          | 6.4   |     |  |   | 11.0 |     
|FQ2 2002(a) |       |             | 1,255,848 |            |       |   | 12.75      |            |  | $        | 16.0    |      |       | $          | (16.0 | )   |  |   |     |     
|FQ1 2003    |       |             | 1,071,497 |            |       |   | 6.16       |            |  | $        | 6.6     |      |       | $          | 4.4   |     |  |   | 11.0 |     
|FQ3 2003    |       |             | 1,344,829 |            |       |   | 4.91       |            |  | $        | 6.6     |      |       | $          | 4.4   |     |  |   | 11.0 |     
|FQ3 2003(b) |       |             | 794,995   |            |       |   | 5.03       |            |  | $        | 4.0     |      |       |            |       |     |  |   | 4.0  |     
|FQ1 2004    |       |             | 1,206,839 |            |       |   | 2.98       |            |  | $        | 3.6     |      |       |            |       |     |  |   | 3.6  |     
|FQ2 2004    |       |             | 228,546   |            |       |   | 2.98       |            |  | $        | 0.7     |      |       |            |       |     |  |   | 0.7  |     
|FQ3 2004    |       |             | 777,295   |            |       |   | 2.98       |            |  | $        | 2.3     |      |       |            |       |     |  |   | 2.3  |     
|FQ4 2004    |       |             | 628,611   |            |       |   | 7.00       |            |  | $        | 4.4     |      |       |            |       |     |  |   | 4.4  |     
|FQ2 2006(a) |       |             | 62,849    |            |       |   | 1.20       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ3 2006(a) |       |             | 39,199    |            |       |   | 1.58       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ4 2006(a) |       |             | 63,793    |            |       |   | 1.38       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ4 2006(a) |       |             | 2,455,905 |            |       |   | 1.58       |            |  | $        | 3.9     |      |       | $          | (3.9  | )   |  |   |     |     
|FQ4 2006(b) |       |             | 3,009,818 |            |       |   | 1.10       |            |  | $        | 3.3     |      |       |            |       |     |  |   | 3.3  |     
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      
|            | Total |             |           | 14,539,955 |       |   |            |            |  |          | $       | 72.6 |       |            | $     | 9.7 |  |   | $    | 82.3 | 
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      






|    |  |                                               
|--- |  | ----------------------------------------------
|(a) |  | Conversion of wafer credits to ordinary shares
|   
|(b) |  | Tower rights offering                         

Alliance Venture Management, LLC








6



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start-up start-up




7



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Solar Venture Partners, LP


e-commerce,




8



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| |                          
| | -------------------------
| | Equity Method Investments









| |                                   
| | ----------------------------------
| | The Investment Company Act of 1940





9



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PMC-Sierra








10



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| |          
| | ---------
| | Employees







| |                                            
| | -------------------------------------------
| | Web Site Access to Our Periodic SEC Reports

10-Q 10-K), 8-K),







|         |             
|-------- | ------------
|Item 1A. | Risk Factors

10-K,




| |                                                 
| | ------------------------------------------------
| | We may have difficulties meeting our cash needs.



11



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| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Most of our assets consist of securities that we have a
    limited ability to sell and which have experienced significant
    declines in value.

start-up




| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial condition could be harmed by efforts to
    comply with, or penalties associated with, the Investment
    Company Act of 1940.



12



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| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to maintain effective internal controls could have
    a material adverse effect on our business, operating results and
    stock price.

10-K.




| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial condition is likely to fluctuate and failure
    to meet financial expectations for any period may cause our
    stock price to decline.

period-to


13



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| |                                                                     
| | --------------------------------------------------------------------
| | Our stock price may be volatile and could decline
    substantially.





| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variations between our results and the published expectations of
    securities analysts;                                                                                          
|
| |  | changes in financial estimates or investment recommendations by
    securities analysts following our business;                                                                    
|
| |  | announcements by us of significant transactions;                                                                                                                                   
|
| |  | the inclusion or exclusion of our stock in various indices or
    investment categories, especially as compared to the investment
    profiles of our stockholders at a given time;
|
| |  | changes in economic and capital market conditions;                                                                                                                                 
|
| |  | changes in business regulatory conditions; and                                                                                                                                     
|
| |  | the trading volume of our common stock.                                                                                                                                            





| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | We are exposed to the risks associated with the slowdown
    in the U.S. and worldwide economy.





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | We may face significant expense as a result of ongoing
    obligations in connection with the disposition of our operating
    business units.





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Our income could be severely harmed by natural disasters
    or other disruptions.



14



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| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Any guidance that we may provide about our business or
    expected future results may prove to be inaccurate.





| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Compliance with changing regulation of corporate
    governance and public disclosure may result in additional
    expense.





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We may be unable to attract and retain key personnel who
    are critical to the success of our business.

work-in









|        |           
|------- | ----------
|Item 2. | Properties



15



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Balla Matter








16



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SegTec Ltd. Matter




Tower Semiconductor Ltd. Class Action


14a-9


17



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Patrizio Matter




Accrual for Potential Losses









|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders











|                   |  |            |            |  |                |        |   |              |        |  |           |  |  |  |   | 
|------------------ |  | ---------- | ---------- |  | -------------- | ------ | - | ------------ | ------ |  | --------- |  |  |  | - | 
|                   |  |            |            |  |                |        |   | Abstentions/ |       
|                   |  |            |            |  |                | Shares |   |              | Broker | 
|Name               |  | Shares For |            |  | Shares Against |        |   | withheld     |        |  | Non-Votes | 
|                   |  |            |            |  |                |        |   |              |        |  |           | 
|Bryant R. Riley    |  |            | 18,590,376 |  |                |        |  |              |        |  | 416,498   |  |  |  |  | 
|Alan B. Howe       |  |            | 18,593,279 |  |                |        |  |              |        |  | 413,595   |  |  |  |  | 
|Robert DAgostino  |  |            | 18,592,379 |  |                |        |  |              |        |  | 414,495   |  |  |  |  | 
|J. Michael Gullard |  |            | 18,593,879 |  |                |        |  |              |        |  | 412,995   |  |  |  |  | 
|C. N. Reddy        |  |            | 17,914,484 |  |                |        |  |              |        |  | 1,092,390 |  |  |  |  | 
|N. Damodar Reddy   |  |            | 17,410,252 |  |                |        |  |              |        |  | 1,596,622 |  |  |  |  | 

18



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Executive Officers of the Registrant




|                     |  |     |    |  |          |                                      
|-------------------- |  | --- | -- |  | -------- | -------------------------------------
|Name                 |  | Age |    |  | Position
|                     |  |     |    |  |         
|Melvin L. Keating    |  |     | 59 |  |          | President and Chief Executive Officer
|Karl H. Moeller, Jr. |  |     | 63 |  |          | Interim Chief Financial Officer      

Mr. Keating


Mr. Moeller




19



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                 |                                                                |      |   |      |     |  |   |      | 
|---------------- | -------------------------------------------------------------- | ---- | - | ---- | --- |  | - | ---- | 
|                 |                                                                | High |   |      | Low | 
|                 |                                                                |      |   |      |     | 
|Fiscal Year 2005 |                                                                |      |   |      |     |  |   |     
|                 | 1st Quarter (from March 28, 2004 to June 26, 2004)             |      | $ | 8.25 |     |  | $ | 5.22 | 
|                 | 2nd Quarter (from June 27, 2004 to September 25,
    2004)     |      |   | 5.95 |     |  |   | 3.54 | 
|                 | 3rd Quarter (from September 26, 2004 to
    December 25, 2004) |      |   | 3.74 |     |  |   | 3.26 | 
|                 | 4th Quarter (from December 26, 2004 to March 26,
    2005)     |      |   | 3.71 |     |  |   | 2.55 | 
|Fiscal Year 2006 |                                                                |      |   |      |     |  |   |     
|                 | 1st Quarter (from March 27, 2005 to June 25, 2005)             |      | $ | 2.56 |     |  | $ | 1.56 | 
|                 | 2nd Quarter (from June 26, 2005 to September 24,
    2005)     |      |   | 2.97 |     |  |   | 2.25 | 
|                 | 3rd Quarter (from September 25, 2005 to
    December 24, 2005) |      |   | 3.19 |     |  |   | 2.57 | 
|                 | 4th Quarter (from December 25, 2005 to March 31,
    2006)     |      |   | 2.89 |     |  |   | 2.54 | 



Dividend Policy




Issuer Purchases of Equity Securities









|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



20



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|                                                    |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |          |        |   |   |          |        |  
|--------------------------------------------------- | ----------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | - | ---- | -------- | ------ | - | - | -------- | ------ | -
|                                                    |                         | 2006 |         |        | 2005 |   |         | 2004   |   |   | 2003    |        |   | 2002 |         
|                                                    |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |         
|Selected Consolidated Statement of Operations Data: |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |          |        |   |   |          |       
|Gain/(loss) on continuing operations                |                         | $    | (5,812  | )      |      | $ | (9,225  | )      |   | $ | 13,019  |        |   | $    | (52,868  | )      |   | $ | (196,235 | )     
|Loss on discontinued operations, net of tax benefit |                         |      | (20,762 | )      |      |   | (40,586 | )      |   |   | (32,430 | )      |   |      | (53,180  | )      |   |   | (44,481  | )     
|                                                    |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |         
|Net Loss                                            |                         | $    | (26,574 | )      |      | $ | (49,811 | )      |   | $ | (19,411 | )      |   | $    | (106,048 | )      |   | $ | (240,716 | )     
|                                                    |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |         
|Net loss per share  Basic and Diluted:             |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |          |        |   |   |          |       
|                                                    | Continuing Operations   |      | $       | (0.16  | )    |   | $       | (0.26  | ) |   | $       | 0.37   |   |      | $        | (1.42  | ) |   | $        | (4.78  | )
|                                                    | Discontinued Operations |      |         | (0.59  | )    |   |         | (1.15  | ) |   |         | (0.92  | ) |      |          | (1.43  | ) |   |          | (1.08  | )
|                                                    |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |         
|Net loss per share                                  |                         | $    | (0.75   | )      |      | $ | (1.41   | )      |   | $ | (0.55   | )      |   | $    | (2.85    | )      |   | $ | (5.86    | )     
|Weighted average number of common shares:           |                         |      |         |        |      |   |         |        |   |   |         |        |   |      |          |        |   |   |          |       
|                                                    | Basic and Diluted       |      |         | 35,587 |      |   |         | 35,402 |   |   |         | 35,093 |   |      |          | 37,160 |   |   |          | 41,078 |  

|                                 |  |      |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                 |  | 2006 |         |  | 2005 |   |         | 2004 |  |   | 2003    |  |  | 2002 |        
|                                 |  |      |         |  |      |   |         |      |  |   |         |  |  |      |        
|Consolidated Balance Sheet Data: |  |      |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Working capital                  |  | $    | 31,151  |  |      | $ | 38,378  |      |  | $ | 93,384  |  |  | $    | 83,572  |  |  | $ | 323,791 | 
|Assets held for sale(1)          |  |      | 12,286  |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Total assets                     |  |      | 109,661 |  |      |   | 159,541 |      |  |   | 267,097 |  |  |      | 242,722 |  |  |   | 682,570 | 
|Stockholders equity             |  |      | 61,884  |  |      |   | 97,421  |      |  |   | 174,722 |  |  |      | 159,220 |  |  |   | 451,255 | 
|Long-term obligations            |  | $    | 45      |  |      | $ | 45      |      |  | $ | 241     |  |  | $    | 312     |  |  | $ | 4,808   | 






|    |                             
|--- | ----------------------------
|(1) | Reflected in working capital



|                                                    |                         |                  |         |        |                  |   |        |          |   |   |          |        |   |          |         |        |          |   |         |          |   |   |          |        |   |   |         |        |   |   |        |        |  
|--------------------------------------------------- | ----------------------- | ---------------- | ------- | ------ | ---------------- | - | ------ | -------- | - | - | -------- | ------ | - | -------- | ------- | ------ | -------- | - | ------- | -------- | - | - | -------- | ------ | - | - | ------- | ------ | - | - | ------ | ------ | -
|                                                    |                         | Fiscal Year 2006 |         |        | Fiscal Year 2005 |  
|                                                    |                         |                  |         |        |                  |  
|                                                    |                         | 4th Qtr.         |         |        | 3rd Qtr.         |   |        | 2nd Qtr. |   |   | 1st Qtr. |        |   | 4th Qtr. |         |        | 3rd Qtr. |   |         | 2nd Qtr. |   |   | 1st Qtr. |       
|                                                    |                         |                  |         |        |                  |   |        |          |   |   |          |        |   |          |         |        |          |   |         |          |   |   |          |       
|Gain/(loss) on continuing operations                |                         | $                | (4,838  | )      |                  | $ | 6,728  |          |   | $ | (2,650   | )      |   | $        | (5,052  | )      |          | $ | (12,439 | )        |   | $ | (2,736   | )      |   | $ | 3,037   |        |   | $ | 2,914  |       
|Loss on discontinued operations, net of tax benefit |                         |                  | (5,866  | )      |                  |   | (3,601 | )        |   |   | (5,462   | )      |   |          | (5,833  | )      |          |   | (10,718 | )        |   |   | (7,140   | )      |   |   | (13,184 | )      |   |   | (9,545 | )     
|Net gain/(loss)                                     |                         | $                | (10,704 | )      |                  | $ | 3,127  |          |   | $ | (8,112   | )      |   | $        | (10,885 | )      |          | $ | (23,157 | )        |   | $ | (9,876   | )      |   | $ | (10,147 | )      |   | $ | (6,631 | )     
|Net loss per share  Basic and Diluted:             |                         |                  |         |        |                  |   |        |          |   |   |          |        |   |          |         |        |          |   |         |          |   |   |          |        |   |   |         |        |   |   |        |       
|                                                    | Continuing Operations   |                  | $       | (0.14  | )                |   | $      | 0.19     |   |   | $        | (0.07  | ) |          | $       | (0.14  | )        |   | $       | (0.35    | ) |   | $        | (0.08  | ) |   | $       | 0.09   |   |   | $      | 0.08   |  
|                                                    | Discontinued Operations |                  |         | (0.16  | )                |   |        | (0.10    | ) |   |          | (0.16  | ) |          |         | (0.17  | )        |   |         | (0.30    | ) |   |          | (0.19  | ) |   |         | (0.38  | ) |   |        | (0.27  | )
|Net Loss                                            |                         | $                | (0.30   | )      |                  | $ | 0.09   |          |   | $ | (0.23    | )      |   | $        | (0.31   | )      |          | $ | (0.65   | )        |   | $ | (0.27    | )      |   | $ | (0.29   | )      |   | $ | (0.19  | )     
|Weighted average number of shares:                  |                         |                  |         |        |                  |   |        |          |   |   |          |        |   |          |         |        |          |   |         |          |   |   |          |        |   |   |         |        |   |   |        |       
|                                                    | Basic                   |                  |         | 35,600 |                  |   |        | 35,582   |   |   |          | 35,582 |   |          |         | 35,568 |          |   |         | 35,515   |   |   |          | 35,475 |   |   |         | 35,353 |   |   |        | 35,262 |  
|                                                    | Diluted                 |                  |         | 35,600 |                  |   |        | 35,594   |   |   |          | 35,582 |   |          |         | 35,568 |          |   |         | 35,515   |   |   |          | 35,475 |   |   |         | 35,353 |   |   |        | 35,262 |  






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



21



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Overview










22



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mark-to








23



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| |                             
| | ----------------------------
| | Critical Accounting Policies



Revenue Recognition










Inventory Valuation




Marketable Securities




24



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mark-to


Valuation of Alliance Ventures and Solar Venture
Investments






| |                      
| | ---------------------
| | Results of Operations



|                        |                                   |                                                             |                                          |      |      |      |   |      |     |      |    |      |      |      |  
|----------------------- | --------------------------------- | ----------------------------------------------------------- | ---------------------------------------- | ---- | ---- | ---- | - | ---- | --- | ---- | -- | ---- | ---- | ---- | -
|                        |                                   | 2006                                                        |                                          |      | 2005 |      |   | 2004 |    
|                        |                                   |                                                             |                                          |      |      |      |   |      |    
|Continuing operations   |                                   |                                                             |                                          |      |      |      |   |      |     |      |    |     
|                        | Revenue                           |                                                             |                                          |      |      |      |   |      |     |      |    |      |     
|                        |                                   | Gain on investments                                         |                                          |      | 309  | %    |   |      | 26  | %    |    |      | 360  | %   
|                        |                                   | Write-down of marketable securities and venture investments |                                          |      | (15  | )    |   |      | (57 | )    |    |      | (8   | )   
|                        |                                   | Loss in investees accounted for under the equity method     |                                          |      | (194 | )    |   |      | (69 | )    |    |      | (252 | )   
|                        |                                   |                                                             | Total revenue from continuing operations |      |      | 100  | % |      |     | (100 | )% |      |      | 100  | %
|                        | Expenses                          |                                                             |                                          |      |      |      |   |      |     |      |    |      |     
|                        |                                   | Research and development                                    |                                          |      |     |      |   |      |    |      |    |      | (30  | )   
|                        |                                   | General and administrative                                  |                                          |      | (119 | )    |   |      | (16 | )    |    |      | (90  | )   
|                        |                                   | Other expense, net                                          |                                          |      | 5    |      |   |      | (5  | )    |    |      | (97  | )   
|                        |                                   |                                                             | Total expenses of continuing operations  |      |      | (114 | ) |      |     | (21  | )  |      |      | (217 | )
|                        |                                   | (Provision)/ benefit for income taxes                       |                                          |      | (61  | )    |   |      | 89  |      |    |      | 268  |     
|                        |                                   | Minority interest in consolidated subsidiaries              |                                          |      | (2   | )    |   |      | 1   |      |    |      | 9    |     
|                        | Loss from continuing operations   |                                                             |                                          | (77  | )%   |      |   | (32  | )%  |      |    | 160  | %   
|Discontinued operations |                                   |                                                             |                                          |      |      |      |   |      |     |      |    |     
|                        | Memory products                   |                                                             |                                          | (121 | )    |      |   | (58  | )   |      |    | (113 | )   
|                        | Non-Memory products               |                                                             |                                          | (154 | )    |      |   | (82  | )   |      |    | (285 | )   
|                        | Loss from discontinued operations |                                                             |                                          | (275 | )%   |      |   | (140 | )%  |      |    | (398 | )%  
|                        | Net loss                          |                                                             |                                          | (352 | )%   |      |   | (172 | )%  |      |    | (238 | )%  
|                        |                                   |                                                             |                                          |      |      |      |   |      |    

25



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| |                        
| | -----------------------
| | Discontinued operations





| |                                                 
| | ------------------------------------------------
| | Net Revenue reflected in Discontinued Operations



|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |     |     |   
|------------------- | ----------------------- | -------------------------- | ------ | -------- | ------- |  | --- | --------- | -------- | - | ------------ | ------ | ------ | ------------ | --- | -- | ---------- | - | ------ | ---------- | ------ |  | ------ | -- | -- | - | - | --- | --- | -- | --- | --- | --- | --
|                    |                         | Years Ended March 31,      |        |          |         |  |     |           |          |   |             
|                    |                         |                            |        |          |         |  |     |           |          |   |             
|                    |                         |                            |        |          |         |  |     | March 31, |          |   | March 31,    |       
|                    |                         | 2006                       |        |          | 2005    |  |     | 2004      |          |   | 2006 vs 2005 |        |        | 2005 vs 2004 |    
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |    
|                    |                         |                            |        | % of Net |         |  |     |           | % of Net |   |              |        |        | % of Net     |     |    | Percentage |   |        | Percentage |       
|                    |                         | Amount                     |        |          | Revenue |  |     | Amount    |          |   | Revenue      |        |        | Amount       |     |    | Revenue    |   |        | Change     |        |  | Change |   
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|Memory segment:     |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    | SRAM                    |                            | $      | 8,302    |         |  |     | 34        | %        |   | $            | 10,211 |        |              |     | 43 | %          |   | $      | 11,603     |        |  |        | 44 | %  |   |   | (19 | )%  |    |     | (12 | )% 
|                    | DRAM                    |                            | $      | 48       |         |  |     | 0         | %        |   | $            | 1,576  |        |              |     | 7  | %          |   | $      | 6,257      |        |  |        | 23 | %  |   |   | (97 | )%  |    |     | (75 | )% 
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|                    |                         | Memory segment revenue     |        |          | 8,350   |  |     |           | 34       | % |              |        | 11,787 |              |     |    | 50         | % |        |            | 17,860 |  |        |    | 67 | % |   |     | (29 | )% |     |     | (34 | )%
|Non-memory segment: |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    | Analog and Mixed Signal |                            | $      | 10,833   |         |  |     | 44        | %        |   | $            | 7,337  |        |              |     | 31 | %          |   | $      | 4,316      |        |  |        | 16 | %  |   |   | 48  | %   |    |     | 70  | %  
|                    | System Solutions        |                            | $      | 5,351    |         |  |     | 22        | %        |   | $            | 4,475  |        |              |     | 19 | %          |   | $      | 4,495      |        |  |        | 17 | %  |   |   | 20  | %   |    |     | 0   | %  
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|                    |                         | Non-memory segment revenue |        |          | 16,184  |  |     |           | 66       | % |              |        | 11,812 |              |     |    | 50         | % |        |            | 8,811  |  |        |    | 33 | % |   |     | 37  | %  |     |     | 34  | % 
|Other               |                         |                            |       |          |         |  |     |           |          |   |             |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|Net revenue         |                         | $                          | 24,534 |          |         |  | 100 | %         |          | $ | 23,599       |        |        |              | 100 | %  |            | $ | 26,671 |            |        |  | 100    | %  |    |   | 4 | %   |     |    | (12 | )% 
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   



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|                                             |  |                       |        |  |      |   |        |      |  |   |        | 
|-------------------------------------------- |  | --------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                             |  | Years Ended March 31, |       
|                                             |  |                       |       
|                                             |  | 2006                  |        |  | 2005 |   |        | 2004 | 
|                                             |  |                       |        |  |      |   |        |      | 
|US                                           |  | $                     | 6,623  |  |      | $ | 8,160  |      |  | $ | 8,789  | 
|Canada and Central America                   |  |                       | 958    |  |      |   | 625    |      |  |   | 476    | 
|Taiwan                                       |  |                       | 4,424  |  |      |   | 3,047  |      |  |   | 3,245  | 
|Japan                                        |  |                       | 2,711  |  |      |   | 2,406  |      |  |   | 2,934  | 
|Hong Kong                                    |  |                       | 2,897  |  |      |   | 3,132  |      |  |   | 2,041  | 
|Asia (excluding Taiwan, Japan and Hong Kong) |  |                       | 4,438  |  |      |   | 2,971  |      |  |   | 2,617  | 
|United Kingdom                               |  |                       | 1,085  |  |      |   | 1,834  |      |  |   | 2,652  | 
|Europe (excluding United Kingdom)            |  |                       | 1,189  |  |      |   | 1,350  |      |  |   | 3,864  | 
|Rest of world                                |  |                       | 209    |  |      |   | 74     |      |  |   | 53     | 
|                                             |  |                       |        |  |      |   |        |      | 
|Net revenue                                  |  | $                     | 24,534 |  |      | $ | 23,599 |      |  | $ | 26,671 | 
|                                             |  |                       |        |  |      |   |        |      | 






|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended March 31, 2004, the geographic revenue
    is presented based on ship-to country of customer to be
    consistent with 2006 and 2005 presentation. These amounts had
    been previously reported based upon bill-to location of customer.





| |                                                             
| | ------------------------------------------------------------
| | Gross Profit (Loss) reflected in Discontinued
    Operations





|           |                     |      |        |       |      |            |        |              |   |  |    |     |  
|---------- | ------------------- | ---- | ------ | ----- | ---- | ---------- | ------ | ------------ | - |  | -- | --- | -
|           |                     |      |        |       |      | Percentage |       
|           |                     |      |        |       |      | Change     |       
|           |                     |      |        |       |      |            |       
|           |                     | 2006 |        |       | 2005 |            |        | 2006 vs 2005 |  
|           |                     |      |        |       |      |            |        |              |  
|Memory     |                     | $    | (2,613 | )     |      | $          | (6,186 | )            |   |  | 58 | %  
|Non-Memory |                     |      | 6,349  |       |      |            | 3,611  |              |   |  | 76 | %  
|           |                     |      |        |       |      |            |        |              |  
|           | Gross Profit (loss) |      | $      | 3,736 |      |            | $      | (2,575       | ) |  |    | 245 | %
|           |                     |      |        |       |      |            |        |              |  

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| |                                                                  
| | -----------------------------------------------------------------
| | Research and Development reflected in Discontinued
    Operations



|            |                                            |      |        |    |      |   |        |                   |   |   |              |    |   |              |    |     |    |  |     |    | 
|----------- | ------------------------------------------ | ---- | ------ | -- | ---- | - | ------ | ----------------- | - | - | ------------ | -- | - | ------------ | -- | --- | -- |  | --- | -- | 
|            |                                            |      |        |    |      |   |        | Percentage Change |  
|            |                                            |      |        |    |      |   |        |                   |  
|            |                                            | 2006 |        |    | 2005 |   |        | 2004              |   |   | 2006 vs 2005 |    |   | 2005 vs 2004 |   
|            |                                            |      |        |    |      |   |        |                   |   |   |              |    |   |              |   
|Net revenue |                                            | $    | 24,534 |    |      | $ | 23,599 |                   |   | $ | 26,671       |    |   |              | 4  | %   |    |  | (12 | )%
|            |                                            |      |        |    |      |   |        |                   |   |   |              |    |   |              |   
|R&D expense |                                            |      | 17,916 |    |      |   | 19,569 |                   |   |   | 22,240       |    |   |              | (8 | )%  |    |  | (12 | )%
|            |                                            |      |        |    |      |   |        |                   |   |   |              |    |   |              |   
|            | R&D expense as a percentage of net revenue |      |        | 73 | %    |   |        | 83                | % |   |              | 83 | % |              |    | (10 | )% |  |     |   | 
|            |                                            |      |        |    |      |   |        |                   |   |   |              |    |   |              |   



|           |                                                  |      |        |        |      |            |        |              |  |  |     |    |   
|---------- | ------------------------------------------------ | ---- | ------ | ------ | ---- | ---------- | ------ | ------------ |  |  | --- | -- | --
|           |                                                  |      |        |        |      | Percentage |       
|           |                                                  |      |        |        |      | Change     |       
|           |                                                  |      |        |        |      |            |       
|           |                                                  | 2006 |        |        | 2005 |            |        | 2006 vs 2005 | 
|           |                                                  |      |        |        |      |            |        |              | 
|Memory     |                                                  | $    | 4,868  |        |      | $          | 4,156  |              |  |  | 17  | % 
|Non-Memory |                                                  |      | 13,048 |        |      |            | 15,413 |              |  |  | (15 | )%
|           |                                                  |      |        |        |      |            |        |              | 
|           | R&D expense reflected in discontinued operations |      | $      | 17,916 |      |            | $      | 19,569       |  |  |     | (8 | )%
|           |                                                  |      |        |        |      |            |        |              | 





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| |                                                             
| | ------------------------------------------------------------
| | Goodwill Impairment reflected in Discontinued
    Operations





| |                                                                             
| | ----------------------------------------------------------------------------
| | Selling, General and Administrative reflected in
    Discontinued Operations



|                                                  |                                        |      |        |    |      |   |        |      |   |   |              |    |   |              |     |     |    |  |     |    |  
|------------------------------------------------- | -------------------------------------- | ---- | ------ | -- | ---- | - | ------ | ---- | - | - | ------------ | -- | - | ------------ | --- | --- | -- |  | --- | -- | -
|                                                  |                                        | 2006 |        |    | 2005 |   |        | 2004 |   |   | 2006 vs 2005 |    |   | 2005 vs 2004 |    
|                                                  |                                        |      |        |    |      |   |        |      |   |   |              |    |   |              |    
|Net revenue reflected in discontinued operations  |                                        | $    | 24,534 |    |      | $ | 23,599 |      |   | $ | 26,671       |    |   |              | 4   | %   |    |  | (12 | )%
|                                                  |                                        |      |        |    |      |   |        |      |   |   |              |    |   |              |    
|SG&A expense reflected in discontinued operations |                                        |      | 5,411  |    |      |   | 7,729  |      |   |   | 8,259        |    |   |              | (30 | )%  |    |  | (6  | )%
|                                                  |                                        |      |        |    |      |   |        |      |   |   |              |    |   |              |    
|                                                  | expense as a percentage of net revenue |      |        | 22 | %    |   |        | 33   | % |   |              | 31 | % |              |     | (33 | )% |  |     | 6  | %
|                                                  |                                        |      |        |    |      |   |        |      |   |   |              |    |   |              |    



|                                                |              |      |       |        |      |             |       |         |  |  |     |    |  
|----------------------------------------------- | ------------ | ---- | ----- | ------ | ---- | ----------- | ----- | ------- |  |  | --- | -- | -
|                                                |              |      |       |        |      | Percentage  |      
|                                                |              |      |       |        |      | Change 2006 |      
|                                                |              | 2006 |       |        | 2005 |             |       | vs 2005 | 
|                                                |              |      |       |        |      |             |       |         | 
|Memory reflected in discontinued operations     |              | $    | 1,074 |        |      | $           | 2,582 |         |  |  | (58 | )%
|Non-Memory reflected in discontinued operations |              |      | 4,337 |        |      |             | 5,147 |         |  |  | (16 | )%
|Corporate                                       |              |      | 8,979 |        |      |             | 4,726 |         |  |  | 90  | % 
|                                                |              |      |       |        |      |             |       |         | 
|                                                | SG&A expense |      | $     | 14,390 |      |             | $     | 12,455  |  |  |     | 16 | %
|                                                |              |      |       |        |      |             |       |         | 





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| |                           
| | --------------------------
| | Gain/(Loss) on Investments



|                                          |                           |      |        |        |      |   |       |       |  |   |        |        | 
|----------------------------------------- | ------------------------- | ---- | ------ | ------ | ---- | - | ----- | ----- |  | - | ------ | ------ | 
|                                          |                           | 2006 |        |        | 2005 |   |       | 2004  | 
|                                          |                           |      |        |        |      |   |       |       | 
|Sale of UMC shares                        |                           | $    | 16,714 |        |      | $ | 7,995 |       |  | $ | 29,473 |       
|Sale of Tower shares                      |                           |      | (50    | )      |      |   |       |       |  |   |        |       
|Sale of Adaptec shares                    |                           |      |        |        |      |   | (541  | )     |  |   | 1,098  |       
|Sale of Vitesse shares                    |                           |      |        |        |      |   | 258   |       |  |   |        |       
|Write-down of restricted cash             |                           |      |        |        |      |   |       |       |  |   | (1,284 | )     
|Realized gain on sale of an AVM investee  |                           |      | 5,811  |        |      |   |       |       |  |   |        |       
|Realized loss on sale of a Solar investee |                           |      | (100   | )      |      |   |       |       |  |   |        |       
|Realized gain on Solar investee sale      |                           |      | 944    |        |      |   |       |       |  |   |        |       
|                                          |                           |      |        |        |      |   |       |       | 
|                                          | Total gain on investments |      | $      | 23,319 |      |   | $     | 7,712 |  |   | $      | 29,287 | 
|                                          |                           |      |        |        |      |   |       |       | 





| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | $16.7 million gain on the sale of 139.3 million shares
    of UMC       
|
| |  | $50,000 loss on the sale of 1.2 million shares of Tower                 
|
| |  | $5.8 million gain on the sale of Athena, an AVM investee
    company    
|
| |  | $0.1 million loss on the sale of JP Mobile, a Solar
    investee company
|
| |  | $0.9 million gain on the sale of Netscaler, a Solar
    investee company





| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | $8.0 million gain on the sale of 45.4 million shares
    of UMC
|
| |  | $258,000 gain on the sale of 95,417 shares of Vitesse          
|
| |  | $544,000 loss on the sale of 154,444 shares of Adaptec         





| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | $29.5 million gain on the sale of 93.0 million common
    shares of UMC                                     
|
| |  | $1.3 million write-down of restricted cash related to our
    investment in Platys being acquired by Adaptec
|
| |  | $1.1 million gain on the sale of 362,173 common shares of
    Adaptec                                       



| |                                                                
| | ---------------------------------------------------------------
| | Write-Down of Marketable Securities and Venture
    Investments



30



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|                                    |                                                                        |      |        |        |      |   |         |         |   |  |        |        |  
|----------------------------------- | ---------------------------------------------------------------------- | ---- | ------ | ------ | ---- | - | ------- | ------- | - |  | ------ | ------ | -
|                                    |                                                                        | 2006 |        |        | 2005 |   |         | 2004    |  
|                                    |                                                                        |      |        |        |      |   |         |         |  
|Tower ordinary shares               |                                                                        | $    | (2,944 | )      |      | $ | (16,652 | )       |   |  |        |       
|Alliance Ventures investments      |                                                                        |      | (1,129 | )      |      |   | (2,686  | )       |   |  | (5,487 | )     
|Solar Venture Partners investments |                                                                        |      |       |        |      |   | (473    | )       |   |  | (300   | )     
|                                    |                                                                        |      |        |        |      |   |         |         |  
|                                    | Total write-downs of marketable securities and venture
    investments |      | $      | (4,073 | )    |   | $       | (19,811 | ) |  | $      | (5,787 | )
|                                    |                                                                        |      |        |        |      |   |         |         |  



| |                                                            
| | -----------------------------------------------------------
| | Loss in Investees Accounted for Under the Equity
    Method





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Summary Financial Data


|                 |                     |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |         |        |  
|---------------- | ------------------- | --------------------------------- | - | ------- | ------- | - | - | ------- | ------- | - | ----- | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------ | - | ---- | ------- | ------- | ----- | - | ------- | ------- | - | - | ------- | ------ | - | - | ------- | ------ | -
|                 |                     | 2006                              |   |         | 2005    |   |   | 2004    |        
|                 |                     |                                   |   |         |         |   |   |         |        
|                 |                     | Total                             |   |         | <20%    |   |   | >=20%   |         |   | Total |         |        | <20% |   |         | >=20%   |   |   | Total   |        |   | <20% |         |         | >=20% |  
|                 |                     |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |  
|Income Statement |                     |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |        
|                 | Revenue             |                                   | $ | 88,527  |         |   | $ | 73,075  |         |   | $     | 15,452  |        |      | $ | 42,335  |         |   | $ | 29,725  |        |   | $    | 12,610  |         |       | $ | 32,556  |         |   | $ | 16,097  |        |   | $ | 16,459  |       
|                 | Gross profit        |                                   | $ | 42,721  |         |   | $ | 30,293  |         |   | $     | 12,428  |        |      | $ | 23,416  |         |   | $ | 15,687  |        |   | $    | 7,729   |         |       | $ | 16,985  |         |   | $ | 9,020   |        |   | $ | 7,965   |       
|                 | Net loss            |                                   | $ | (50,163 | )       |   | $ | (36,492 | )       |   | $     | (13,671 | )      |      | $ | (77,796 | )       |   | $ | (41,331 | )      |   | $    | 36,465  | )       |       | $ | (78,265 | )       |   | $ | (56,808 | )      |   | $ | (21,457 | )     
|Balance Sheet    |                     |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |        
|                 | Current assets      |                                   | $ | 70,012  |         |   | $ | 48,619  |         |   | $     | 21,393  |        |      | $ | 80,534  |         |   | $ | 44,498  |        |   | $    | 36,036  |         |       | $ | 89,818  |         |   | $ | 53,670  |        |   | $ | 36,148  |       
|                 | Non-current assets  |                                   | $ | 69,240  |         |   | $ | 63,531  |         |   | $     | 5,709   |        |      | $ | 16,486  |         |   | $ | 6,409   |        |   | $    | 10,077  |         |       | $ | 9,528   |         |   | $ | 2,633   |        |   | $ | 6,895   |       
|                 |                     | Total assets                      |   | $       | 139,252 |   |   | $       | 112,150 |   |       | $       | 27,102 |      |   | $       | 97,020  |   |   | $       | 50,907 |   |      | $       | 46,113  |       |   | $       | 99,346  |   |   | $       | 56,303 |   |   | $       | 43,043 |  
|                 | Current liabilities |                                   | $ | 100,106 |         |   | $ | 89,365  |         |   | $     | 10,741  |        |      | $ | 29,056  |         |   | $ | 17,561  |        |   | $    | 11,495  |         |       | $ | 20,116  |         |   | $ | 8,814   |        |   | $ | 11,302  |       
|                 | Non-current         |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |         |       
|                 | Liabilities         |                                   | $ | 4,796   |         |   | $ | 1,448   |         |   | $     | 3,348   |        |      | $ | 4,217   |         |   | $ | 1,874   |        |   | $    | 2,343   |         |       | $ | 1,940   |         |   | $ | 604     |        |   | $ | 1,336   |       
|                 |                     | Total liabilities                 |   | $       | 104,902 |   |   | $       | 90,813  |   |       | $       | 14,089 |      |   | $       | 33,273  |   |   | $       | 19,435 |   |      | $       | 13,838  |       |   | $       | 22,056  |   |   | $       | 9,418  |   |   | $       | 12,638 |  
|                 | Preferred stock     |                                   | $ | 313,893 |         |   | $ | 245,100 |         |   | $     | 68,793  |        |      | $ | 358,641 |         |   | $ | 224,594 |        |   | $    | 134,047 |         |       | $ | 64,649  |         |   | $ | 184,569 |        |   | $ | 80,080  |       
|                 |                     | Total equity in loss of investees |   | $       | (14,652 | ) |   | $       | (6,418  | ) |       | $       | (8,234 | )    |   | $       | (16,936 | ) |   | $       | (5,595 | ) |      | $       | (11,341 | )     |   | $       | (15,355 | ) |   | $       | (8,990 | ) |   | $       | (6,365 | )
|                 | Number of companies |                                   |   | 15      |         |   |   | 8       |         |   |       | 7       |        |      |   | 15      |         |   |   | 6       |        |   |      | 9       |         |       |   | 14      |         |   |   | 6       |        |   |   | 8       |       

|                        |  |          |                   |            |      |  |      |      |  |  |      |  
|----------------------- |  | -------- | ----------------- | ---------- | ---- |  | ---- | ---- |  |  | ---- | -
|                        |  |          |                   | Ownership  |     
|                        |  |          |                   | Percentage |     
|                        |  |          |                   |            |     
|2006 Investee Companies |  | Industry |                   |            | 2006 |  |      | 2005 | 
|                        |  |          |                   |            |      |  |      |      | 
|Aperto Networks         |  |          | Networking        |            |      |  | 13.0 | %    |  |  | 14.5 | %
|Active Optical Networks |  |          | Networking        |            |      |  | 74.7 | %    |  |  | 33.6 | %
|Alta Analog             |  |          | Semiconductor     |            |      |  | 30.2 | %    |  |  | 32.4 | %
|Apollo Biotechnology    |  |          | Semiconductor     |            |      |  | 15.3 | %    |  |  | 15.3 | %
|Athena Semiconductor    |  |          | Semiconductor     |            |      |  |     |      |  |  | 41.4 | %
|BMI/ Bay Microsystems   |  |          | Semiconductor     |            |      |  | 3.1  | %    |  |  |     |  
|Cavium Networks         |  |          | Semiconductor     |            |      |  | 14.4 | %    |  |  | 15.4 | %
|Jazio                   |  |          | Semiconductor     |            |      |  |     |      |  |  | 5.1  | %
|Maranti Networks        |  |          | Networking        |            |      |  |     |      |  |  | 9.0  | %
|Minerva                 |  |          | Semiconductor     |            |      |  | 3.3  | %    |  |  |     |  
|Nazomi Communications   |  |          | Semiconductor     |            |      |  | 22.7 | %    |  |  | 23.6 | %
|Nethra Imaging          |  |          | Semiconductor     |            |      |  | 22.4 | %    |  |  | 25.0 | %
|SiNett Corporation      |  |          | Semiconductor     |            |      |  | 20.2 | %    |  |  | 21.6 | %
|Tharas Systems          |  |          | Design Automation |            |      |  | 13.5 | %    |  |  | 15.1 | %
|Selby Venture Partners  |  |          | Venture Investing |            |      |  | 14.3 | %    |  |  |     |  
|Vianeta Communications  |  |          | Software          |            |      |  | 39.7 | %    |  |  | 40.0 | %
|Xalted Networks         |  |          | Networking        |            |      |  | 19.2 | %    |  |  | 22.8 | %
|Xceive Corporation      |  |          | Semiconductor     |            |      |  | 28.7 | %    |  |  | 38.1 | %



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| |                   
| | ------------------
| | Other Expense, Net





| |                                    
| | -----------------------------------
| | Provision/ Benefit for Income Taxes









| |                                
| | -------------------------------
| | Liquidity and Capital Resources









| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | A decrease in inventory of $0.9 million, which was driven
    by the diversification away from the Memory products.

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| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A decrease in other assets by $4.8 million,
    $4.1 million of which came from the conversion of Tower
    Wafer Credits to Tower stock.                                                                                                                                                                                                         
|
| |  | A decrease in accounts payable, accrued liabilities and income
    taxes payable of $2.5 million which reflected reductions in
    operating expenditures as well as more timely payments to
    vendors.                                                                                                                                         
|
| |  | An increase in accounts receivable of $1.3 million,
    $0.8 million of which was due to the increased revenue,
    which was heavily weighted to the last half of the fiscal year,
    $0.2 million to reduction in employee receivables, and
    $0.7 million to sales of Tower stock in March 2006 which
    had not yet been remitted in cash.











34



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| |                                        
| | ---------------------------------------
| | Contractual Obligations and Commitments



|                 |             |  |   |     | 
|---------------- | ----------- |  | - | --- | 
|Operating Leases |             |  |   |    
|                 | Fiscal Year |  |   |     | 
|                 | 2007        |  | $ | 779 | 
|                 | 2008        |  |   | 134 | 
|                 |             |  |  
|                 | Total       |  | $ | 913 | 
|                 |             |  |  



| |                                                                  
| | -----------------------------------------------------------------
| | Effective Transactions with Related and Certain Other
    Parties











35



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start-up start-up






36



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e-commerce,









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk



Investment Risk






37



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Foreign Currency Risk











|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

10-K.







|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure



10-Q/A


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|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures


13a-15(e) 15d-15(e)






Managements Report on Internal Control over Financial
Reporting


13a-15(f) 15d-15(f)












39



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| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Minutes of meeting of the Compensation Committee were not
    available.                                      
|
| |  | Some controls in Inventory & Cost of Goods and General
    Ledger showed lack of proper authorizations.       
|
| |  | Board authorization for the Investment Manager to make
    investments on behalf of the Company was not found.
|
| |  | The Companys communications on closing the trading window
    were ineffective.                              







10-K.


Plan for Remediation of Material Weaknesses












Changes in Internal Control over Financial Reporting




40



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|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

Identification of Directors


|                      |  |     |    |  |                      |                                                                |       |  |      | 
|--------------------- |  | --- | -- |  | -------------------- | -------------------------------------------------------------- | ----- |  | ---- | 
|                      |  |     |    |  |                      | Director                                                       |      
|Name                  |  | Age |    |  | Principal Occupation |                                                                | Since | 
|                      |  |     |    |  |                      |                                                                |       | 
|Bryant R. Riley(1)(3) |  |     | 39 |  |                      | Founder and Chairman of B. Riley & Co, Inc.                    |       |  | 2005 | 
|Alan B. Howe(1)(2)    |  |     | 44 |  |                      | Vice President of Business Development of Covad Communications |       |  | 2005 | 
|Bob DAgostino(2)(3)  |  |     | 38 |  |                      | President of Q-mation                                          |       |  | 2005 | 
|J. Michael Gullard(2) |  |     | 60 |  |                      | General Partner of Cornerstone Management                      |       |  | 2005 | 
|C.N. Reddy            |  |     | 49 |  |                      | Executive Vice President for Investments and Director          |       |  | 1985 | 






|    |                                                             
|--- | ------------------------------------------------------------
|(1) | Member of the Compensation Committee.                       
|   
|(2) | Member of the Audit Committee.                              
|   
|(3) | Member of the Nominating and Corporate Governance Committee.

Bryant R. Riley


Alan B. Howe


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Bob DAgostino


J. Michael Gullard


C.N. Reddy


Identification of Executive Officers


10-K


Section 16(a) Beneficial Ownership Reporting
Compliance




Code of Ethics


10-K. 8-K.


42



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Executive Compensation




Summary Compensation Table


|                            |                                             |        |      |                     |        |        |              |          |  |              |                 |        |  |               |   |   |  |  |   |   | 
|--------------------------- | ------------------------------------------- | ------ | ---- | ------------------- | ------ | ------ | ------------ | -------- |  | ------------ | --------------- | ------ |  | ------------- | - | - |  |  | - | - | 
|                            |                                             |        |      |                     |        |        |              |          |  | Long Term    |                
|                            |                                             |        |      |                     |        |        |              |          |  | Compensation |                
|                            |                                             |        |      |                     |        | Awards |             
|                            |                                             |        |      | Annual Compensation |        |        |              |         
|                            |                                             |        |      |                     |        |        | Securities   |         
|                            |                                             | Fiscal |      |                     |        |        | Other Annual |          |  | Underlying   |                
|Name and Principal Position |                                             | Year   |      |                     | Salary |        |              | Bonus(3) |  |              | Compensation(4) |        |  | Options(#)(5) |  
|                            |                                             |        |      |                     |        |        |              |          |  |              |                 |        |  |               |  
|Melvin L. Keating,          |                                             |        | 2006 |                     |        |        | $105,000     |          |  |              |                |        |  |               |  |   |  |  |  |  
|                            | President & Chief Executive Officer(1)      |        |      |                     |        |        |              |          |  |              |                 |        |  |               |   |   |  |  |   |   | 
|N. Damodar Reddy,           |                                             |        | 2006 |                     |        |        | $300,000     |          |  |              |                |        |  |               |  |   |  |  |  |  
|                            | Chairman of the Board and former President, |        |      | 2005                |        |        |              | $300,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 
|                            | Chief Executive Officer and                 |        |      | 2004                |        |        |              | $300,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 
|                            | Interim Chief Financial Officer             |        |      |                     |        |        |              |          |  |              |                 |        |  |               |   |   |  |  |   |   | 
|C.N. Reddy,                 |                                             |        | 2006 |                     |        |        | $275,000     |          |  |              |                |        |  |               |  |   |  |  |  |  
|                            | Executive Vice President, Investments       |        |      | 2005                |        |        |              | $275,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 
|                            |                                             |        |      | 2004                |        |        |              | $275,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 
|Narender Venugopal,         |                                             |        | 2006 |                     |        |        | $175,000     |          |  | $            | 25,500          |        |  |               |  |   |  |  |  |  
|                            | Vice President and General Manager,         |        |      | 2005                |        |        |              | $176,667 |  |              | $               | 11,000 |  |               |   |  |  |  |   |  | 
|                            | Mixed Signal Business Unit                  |        |      | 2004                |        |        |              | $170,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 
|Robert Napaa,               |                                             |        | 2006 |                     |        |        | $168,200     |          |  | $            | 25,500          |        |  |               |  |   |  |  |  |  
|                            | Vice President Marketing,                   |        |      | 2005                |        |        |              | $171,667 |  |              | $               | 11,788 |  |               |   |  |  |  |   |  | 
|                            | Systems Solutions Business Unit             |        |      | 2004                |        |        |              | $165,000 |  |              |                 |       |  |               |   |  |  |  |   |  | 






|    |                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Melvin L Keating became Interim President and Chief Operating
    Officer and Interim Chief Financial Officer effective
    December 1, 2005.                                                                                                                             
|   
|(2) | N. Damodar Reddy resigned as the Companys President, Chief
    Executive Officer and Interim Financial Officer effective
    December 1, 2005.                                                                                                                           
|   
|(3) | Represents bonuses earned for services rendered during the
    fiscal year listed, even if paid after the end of the fiscal
    year.                                                                                                                                     
|   
|(4) | N. Damodar Reddy and C.N. Reddy were eligible to receive certain
    distributions of cash and marketable securities in their
    capacity as partners of Alliance Venture Management and/or Solar
    Ventures. See Certain Relationships and Related
    Transactions.
|   
|(5) | Excludes purchase rights pursuant to the 1996 Employee Stock
    Purchase Plan.                                                                                                                                                                                           

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Option Grants in Last Fiscal Year




|                   |  |                      |         |           |                  |  |    |             |  |                  |            |  |                |    |           |  |     |   |     |  |  |   |     | 
|------------------ |  | -------------------- | ------- | --------- | ---------------- |  | -- | ----------- |  | ---------------- | ---------- |  | -------------- | -- | --------- |  | --- | - | --- |  |  | - | --- | 
|                   |  |                      |         | Potential |                 
|                   |  | Individual Grants(1) |         |           | Realizable Value | 
|                   |  |                      |         |           | at Assumed       | 
|                   |  | Number of            |         |           | Percent of Total |  |    |             |  | Annual Rates of  |           
|                   |  | Securities           |         |           | Options          |  |    |             |  | Stock Price      |           
|                   |  | Underlying           |         |           | Granted to       |  |    |             |  | Appreciation for |           
|                   |  | Options              |         |           | Employees in     |  |    | Exercise or |  |                  |            |  | Option Term(2) |   
|                   |  | Granted              |         |           | Fiscal Year      |  |    | Base Price  |  |                  | Expiration |  |                |    |          
|Name               |  | (#)                  |         |           | (%)(3)           |  |    | ($/Sh)      |  |                  | Date       |  |                | 5% |           |  | 10% |  
|                   |  |                      |         |           |                  |  |    |             |  |                  |            |  |                |    |           |  |     |  
|Melvin L. Keating  |  |                      | 100,000 |           |                  |  | 23 | %           |  | $                | 2.92       |  |                |    | 12/1/2015 |  |     | $ | 476 |  |  | $ | 757 | 
|                   |  |                      | 100,000 |           |                  |  | 23 | %           |  | $                | 2.72       |  |                |    | 3/8/2016  |  |     | $ | 443 |  |  | $ | 705 | 
|N. Damodar Reddy   |  |                      |        |           |                  |  |   |             |  |                  |           |  |                |    |          |  |     |   |    |  |  |   |    | 
|C.N. Reddy         |  |                      |        |           |                  |  |   |             |  |                  |           |  |                |    |          |  |     |   |    |  |  |   |    | 
|Narender Venugopal |  |                      |        |           |                  |  |   |             |  |                  |           |  |                |    |          |  |     |   |    |  |  |   |    | 
|Robert Napaa       |  |                      |        |           |                  |  |   |             |  |                  |           |  |                |    |          |  |     |   |    |  |  |   |    | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | No stock appreciation rights were granted to the Named Executive
    Officers in the last fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(2) | The 5% and 10% assumed annual rates of compounded stock price
    appreciation are mandated by the SEC. There is no assurance
    provided to any executive officer or any other holder of the
    Companys securities that the actual stock price
    appreciation over the ten-year option term will be at the
    assumed 5% and 10% levels or at any other defined level. Unless
    the market price of the Common Stock appreciates over the option
    term, no value will be realized from the option grants made to
    the executive officers.
|   
|(3) | The Company granted stock options representing
    442,000 shares to employees in the last fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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




|                   |  |             |   |  |          |                        |            |                     |                      |            |                        |  |  |             |        |  |               |  |   |  |  |  |   | 
|------------------ |  | ----------- | - |  | -------- | ---------------------- | ---------- | ------------------- | -------------------- | ---------- | ---------------------- |  |  | ----------- | ------ |  | ------------- |  | - |  |  |  | - | 
|                   |  |             |   |  |          | Number of Securities   |            |                     | Value of Unexercised |           
|                   |  |             |   |  |          | Underlying Unexercised |            |                     | In-The-Money         |           
|                   |  | Shares      |   |  |          |                        | Options at |                     |                      | Options at |                       
|                   |  | Acquired on |   |  | Value    |                        |            | Fiscal Year End (#) |                      |            | Fiscal Year End ($)(2) | 
|                   |  | Exercise    |   |  | Realized |                        |            |                     |                      |            |                        | 
|Name               |  | (#)         |   |  | ($)(1)   |                        |            | Exercisable         |                      |            | Unexercisable          |  |  | Exercisable |        |  | Unexercisable | 
|                   |  |             |   |  |          |                        |            |                     |                      |            |                        |  |  |             |        |  |               | 
|N. Damodar Reddy   |  |             |  |  |          |                        |           |                     |                      |            | 290,000                |  |  |             | 60,000 |  |               |  |  |  |  |  |  | 
|C.N. Reddy         |  |             |  |  |          |                        |           |                     |                      |            | 210,000                |  |  |             | 40,000 |  |               |  |  |  |  |  |  | 
|Narender Venugopal |  |             |  |  |          |                        |           |                     |                      |            | 82,500                 |  |  |             | 67,500 |  |               |  |  |  |  |  |  | 
|Robert Napaa       |  |             |  |  |          |                        |           |                     |                      |            | 38,000                 |  |  |             | 64,500 |  |               |  |  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Value Realized represents the fair market value of
    the shares underlying the option on the date of exercise based
    on the per share closing price of the Companys Common
    Stock as reported on the NASDAQ National Market, less the
    aggregate exercise price, and may not be realized upon the sale
    of the shares underlying the option, and does not necessarily
    indicate that the optionee sold such shares.
|   
|(2) | The Value of Unexercised In-The-Money Options at Fiscal Year End
    is calculated based on the difference between the respective
    exercise prices of outstanding stock options and the closing
    price of the Companys Common Stock on March 31, 2006
    (the last day of trading for the fiscal year ended
    March 31, 2006) of $2.64 per share.                                                                            

44



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Report of Compensation Committee




General Compensation Policy
















Factors




Base Salary.


Stock-Based Incentive Compensation.


45



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Annual or Quarterly Cash Bonuses.


Chief Executive Officer Compensation




Effect of Section 162(m) of the Internal Revenue Code










| |                           
| | --------------------------
| | Alan B. Howe              
| | Bryant R. Riley (Chairman)

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Compensation Committee Interlocks and Insider
Participation




Performance Graph


Notwithstanding anything to the contrary set forth in any of
the Companys previous filings under the Securities Act or
the Exchange Act that might incorporate future filings,
including this Annual Report, in whole or in part, this section
entitled Performance Graph shall not be incorporated
by reference into any such filings or into any future filings,
and shall not be deemed soliciting material or filed under the
Securities Act or Exchange Act.




COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*


AMONG ALLIANCE SEMICONDUCTOR CORPORATION,


THE NASDAQ COMPOSITE INDEX


AND THE PHLX SEMICONDUCTOR INDEX







|  |                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------
|* | $100 invested on 3/31/01 in stock or index-including
    reinvestment of dividends. Fiscal year ending March 31.

|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        |  |  |  |  |        |  | 
|---------------------------------- |  |  | ----------------------- | ------ |  | ---- |  |  | ------ |  |  | ---- |  | ----- | ---- |  |  | ---- | ------ |  |  |  |  | ------ |  |  |  |  | ------ |  | 
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 
|                                   |  |  | Cumulative Total Return |        | 
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 
|                                   |  |  | 3/01                    |        |  | 3/02 |  |  | 3/03   |  |  | 3/04 |  |       | 3/05 |  |  | 3/06 |       
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 
|Alliance Semiconductor Corporation |  |  |                         | 100.00 |  |      |  |  | 99.10  |  |  |      |  | 27.53 |      |  |  |      | 65.46  |  |  |  |  | 21.42  |  |  |  |  | 23.83  |  | 
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 
|Nasdaq Composite Index             |  |  |                         | 100.00 |  |      |  |  | 100.28 |  |  |      |  | 72.88 |      |  |  |      | 108.37 |  |  |  |  | 108.64 |  |  |  |  | 127.14 |  | 
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 
|PHLX Semiconductor Sector          |  |  |                         | 100.00 |  |      |  |  | 109.21 |  |  |      |  | 54.36 |      |  |  |      | 89.37  |  |  |  |  | 76.51  |  |  |  |  | 91.67  |  | 
|                                   |  |  |                         |        |  |      |  |  |        |  |  |      |  |       |      |  |  |      |        |  |  |  |  |        | 

47



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|         |                                                                   
|-------- | ------------------------------------------------------------------
|ITEM 12. | Security Ownership of Certain Beneficial Owners and
    Management



|                                                                            |                                     |                   |            |  |          |  |       |   | 
|--------------------------------------------------------------------------- | ----------------------------------- | ----------------- | ---------- |  | -------- |  | ----- | - | 
|                                                                            |                                     | Amount and Nature |            |  |         
|                                                                            |                                     | of Beneficial     |            |  | Percent  | 
|Name and Address of Beneficial Owner(1)                                     |                                     | Ownership(2)(3)   |            |  | of Class | 
|                                                                            |                                     |                   |            |  |          | 
|Schneider Capital Management Corporation(4)                                 |                                     |                   | 3,646,468  |  |          |  | 10.24 | %
|                                                                            | 460 E. Swedesford Road, Suite 1080  |                   |            |  |          |  |       |   | 
|                                                                            | Wayne, PA 19087                     |                   |            |  |          |  |       |   | 
|Dimensional Fund Advisors(5)                                                |                                     |                   | 2,971,614  |  |          |  | 8.35  | %
|                                                                            | 1299 Ocean Avenue, 11th Floor       |                   |            |  |          |  |       |   | 
|                                                                            | Santa Monica, CA 90401              |                   |            |  |          |  |       |   | 
|Bryant R. Riley(6)                                                          |                                     |                   | 2,465,752  |  |          |  | 6.93  | %
|                                                                            | 11100 Santa Monica Blvd., Suite 800 |                   |            |  |          |  |       |   | 
|                                                                            | Los Angeles, CA 90025               |                   |            |  |          |  |       |   | 
|David J. Greene & Co. LLC(7)                                                |                                     |                   | 2,329,452  |  |          |  | 6.54  | %
|                                                                            | 599 Lexington Avenue                |                   |            |  |          |  |       |   | 
|                                                                            | New York, NY 10022                  |                   |            |  |          |  |       |   | 
|Lloyd Miller III(8)                                                         |                                     |                   | 1,817,388  |  |          |  | 5.10  | %
|                                                                            | 4550 Gordon Drive                   |                   |            |  |          |  |       |   | 
|                                                                            | Naples, FL 34102                    |                   |            |  |          |  |       |   | 
|C.N. Reddy(9)                                                               |                                     |                   | 4,184,250  |  |          |  | 11.75 | %
|Bob DAgostino                                                              |                                     |                   | 34,450     |  |          |  | *     |  
|Alan B. Howe                                                                |                                     |                   | 0          |  |          |  | *     |  
|J. Michael Gullard                                                          |                                     |                   | 0          |  |          |  | *     |  
|N. Damodar Reddy(10)                                                        |                                     |                   | 6,480,350  |  |          |  | 18.20 | %
|Narender Venngopal                                                          |                                     |                   | 0          |  |          |  | *     |  
|Robert Naapa                                                                |                                     |                   | 0          |  |          |  | *     |  
|All Directors and current executive officers as a group
    (8 persons)(11) |                                     |                   | 13,164,802 |  |          |  | 36.98 | %






| |   |              
| | - | -------------
| | * | Less than 1%.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Unless otherwise indicated, the address of each of the named
    individuals is c/o Alliance Semiconductor Corporation, 2575
    Augustine Drive, Santa Clara, California 95054.                                                                                                                                                                                                                                                                                                                                                 
|
| | (2) | Unless otherwise noted, the Company believes that all persons or
    entities named in the table have sole voting and sole investment
    power with respect to all shares of Common Stock shown in the
    table to be beneficially owned by them, subject to community
    property laws where applicable.                                                                                                                                                                                                                     
|
| | (3) | A person is deemed to be the beneficial owner of securities that
    can be acquired by such person within 60 days of
    July 28, 2006 upon the exercise of options, excluding,
    however, options granted pursuant to the Companys 1996
    Employee Stock Purchase Plan. Each stockholders percentage
    ownership is determined by assuming that options that are held
    by such person (but not those held by any other person) and that
    are exercisable within 60 days of July 28, 2006 have
    been exercised.
|
| | (4) | The number of shares is as reported on a Schedule 13G/ A
    filed by Schneider Capital Management Corporation on
    February 10, 2006.                                                                                                                                                                                                                                                                                                                                                                                         

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Dimensional Fund Advisors, Inc. (Dimensional)
    is the beneficial owner of Common Stock as a result of providing
    investment advice to four investment companies registered under
    the Investment Company Act of 1940 and serving as an investment
    manager to certain other commingled group trusts and separate
    accounts. Dimensional disclaims beneficial ownership of any
    shares reported above. The number of shares is as reported on a
    Schedule 13G/ A filed by Dimensional on February 6,
    2006.                                                                                                     
|
| | (6) | The number of shares is as reported on a Schedule 13D/A
    filed by Bryant R. Riley on October 18, 2005.
    Mr. Riley directly or indirectly has sole voting and
    dispositive power over securities held by B. Riley &
    Co., Inc., B. Riley & Co. Holdings, LLC and Riley
    Investment Management LLC, the investment advisor to and general
    partner of SACC Partners LP. Additionally Mr. Riley is a
    Trustee of the B. Riley & Co. Retirement Trust.
    Through his relationships with these entities, Mr. Riley
    may be deemed to beneficially own a total of
    2,465,752 shares of the Companys Common Stock.
|
| | (7) | The number of shares is as reported on Schedule 13G filed
    by David J. Green & Co. LLC on
    February 10, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (8) | The number of shares is as reported on Schedule 13G filed
    by Lloyd Miller III on April 27, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (9) | Includes 677,500 shares held of record by C.N. Reddy
    Investments, Inc., of which C.N. Reddy is the sole stockholder.
    Includes 80,000 shares subject to options exercisable
    within 60 days of July 28, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                  



|     |                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 345,000 shares held of record by N.D.R.
    Investments, Inc., of which N. Damodar Reddy is the sole
    stockholder.
|    
|(11) | Includes 200,000 shares subject to options exercisable
    within 60 days of July 28, 2006.                                   






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | Certain Relationships and Related Transactions









49



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start-up start-up




50



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e-commerce,











|         |                                       
|-------- | --------------------------------------
|ITEM 14. | Principal Accountant Fees and Services

10-Q/


|                      |  |      |         | 
|--------------------- |  | ---- | ------- | 
|                      |  | 2006 |        
|                      |  |      |        
|Audit Fees(a)         |  | $    | 600,000 | 
|Audit Related Fees(b) |  | $    | 75,000  | 
|Tax Fees(c)           |  |      |        | 
|All Other Fees        |  |      |        | 



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Audit fees represent fees for professional services provided in
    connection with the audit of the Companys financial
    statements, review of the Companys quarterly financial
    statements and audit services provided in connection with other
    statutory or regulatory filings, and includes fees for consents.
    The increase in audit fees for fiscal 2005 was primarily due to
    costs incurred in connection with the audit of managements
    assessment of internal control over financial reporting, as
    required by Section 404 of the Sarbanes-Oxley Act of 2002.

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|    |  |                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------
|(b) |  | Audit related fees represent fees for accounting consultations
    related to potential transactions.                     
|   
|(c) |  | Tax fees principally include fees for tax planning advice. All
    such services were pre-approved by the Audit Committee.



|              |  |      |         |  |      |   |           | 
|------------- |  | ---- | ------- |  | ---- | - | --------- | 
|              |  | 2006 |         |  | 2005 |  
|              |  |      |         |  |      |  
|Audit Fees(a) |  | $    | 392,750 |  |      | $ | 1,065,000 | 



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Audit fees represent fees for professional services provided in
    connection with the audit of the Companys financial
    statements, review of the Companys quarterly financial
    statements and audit services provided in connection with other
    statutory or regulatory filings, and includes fees for consents.
    The decrease in audit fees for fiscal 2006 was primarily due to
    PwCs resignation on December 6, 2005, which limited
    their work during fiscal 2006 to review of the first and second
    quarters of the fiscal year.






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | Exhibits and Financial Statement Schedules

The following documents are filed as part of this
report:




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Financial Statements. Please see the
    accompanying Index to Consolidated Financial Statements, which
    appears on page F-1 of the report. The Report of Independent
    Registered Public Accounting Firm, the Consolidated Financial
    Statements and the Notes to Consolidated Financial Statements
    listed in the Index to Consolidated Financial Statements, which
    appear beginning on page
    F-2 of this report, are
    incorporated by reference into Item 8 above.
|
| | (2) Financial Statement Schedules. Financial
    Statement Schedules have been omitted because the information
    required to be set forth therein is either not applicable or is
    included in the Consolidated Financial Statements or the notes
    thereto.                                                                                                                                                                                                                            
|
| | (3) Exhibits. See Items 15(b) below.                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Exhibits. 10-K.


Financial Statement Schedules.


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SIGNATURES






| |                                   
| | ----------------------------------
| | ALLIANCE SEMICONDUCTOR CORPORATION



| |     |                      
| | --- | ---------------------
| | By: | /s/ Melvin L. Keating

| |                                      
| | -------------------------------------
| |                                      
| | Melvin L. Keating                    
| | President and Chief Executive Officer
| | (Principal Executive Officer)        





| |     |                    
| | --- | -------------------
| | By: | /s/ Karl H. Moeller

| |                                             
| | --------------------------------------------
| |                                             
| | Karl H. Moeller, Jr.                        
| | Interim Chief Financial Officer             
| | (Principal Financial and Accounting Officer)



POWER OF ATTORNEY


attorneys-in 10-K, attorneys-in attorneys-in


10-K


|                                             |  |          |  |                |  | 
|-------------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                    |  | Title    |  | Date          
|                                             |  |          |  |               
|                                            
|/s/ J. Michael GullardJ.
    Michael Gullard |  | Director |  | August 2, 2006

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|                                     |  |          |  |                |  | 
|------------------------------------ |  | -------- |  | -------------- |  | 
|Signature                            |  | Title    |  | Date          
|                                     |  |          |  |               
|                                    
|/s/ Alan HoweAlan
    Howe           |  | Director |  | August 2, 2006
|                                    
|/s/ Bob DAgostinoBob
    DAgostino |  | Director |  | August 2, 2006
|                                    
|/s/ C. N. ReddyC.
    N. Reddy       |  | Director |  | August 2, 2006

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ALLIANCE SEMICONDUCTOR CORPORATION


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                            |                                                                                                           |       |     |      | 
|----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ----- | --- | ---- | 
|                                                            |                                                                                                           | Pages |    
|                                                            |                                                                                                           |       |    
|Report of Independent Registered Public
    Accounting Firm |                                                                                                           |       | F-2 |     
|Consolidated Financial Statements:                          |                                                                                                           |       |     |     
|                                                            | Consolidated Balance Sheets as of
    March 31, 2006 and 2005                                             |       |     | F-5  | 
|                                                            | Consolidated Statements of Operations for
    the years ended March 31, 2006, 2005 and 2004               |       |     | F-6  | 
|                                                            | Consolidated Statements of
    Stockholders Equity for the years ended March 31,
    2006, 2005 and 2004 |       |     | F-7  | 
|                                                            | Consolidated Statements of Cash Flows for
    the years ended March 31, 2006, 2005 and 2004               |       |     | F-8  | 
|                                                            | Notes to Consolidated Financial
    Statements                                                            |       |     | F-9  | 
|Financial Statement Schedule:                               |                                                                                                           |       |     |     
|                                                            | Schedule II  Valuation and
    Qualifying Accounts                                                       |       |     | F-45 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Managements Report on Internal Control
Over Financial Reporting, Internal
Control  Integrated Framework












F-2



---



##### Table of Contents













Internal Control 
Integrated Framework internal control  Integrated Framework


Plan for Remediation of
Material Weaknesses








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








F-3



---



##### Table of Contents













F-4



---



##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION





CONSOLIDATED BALANCE SHEETS


|                                                                                                                                             |  |                       |         |   |           |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ------- | - | --------- | - | ------- | -
|                                                                                                                                             |  | March 31,             |         |   | March 31, |  
|                                                                                                                                             |  | 2006                  |         |   | 2005      |  
|                                                                                                                                             |  |                       |         |   |           |  
|                                                                                                                                             |  | (In thousands, except |        
|                                                                                                                                             |  | per share amounts)    |        
|ASSETS                                                                                                                                      
|Current assets:                                                                                                                              |  |                       |         |   |           |   |         |  
|Cash and cash equivalents                                                                                                                    |  | $                     | 49,718  |   |           | $ | 2,397   |  
|Short-term investments                                                                                                                       |  |                       | 7,792   |   |           |   | 82,444  |  
|Accounts receivable, net                                                                                                                     |  |                       | 2,653   |   |           |   | 1,677   |  
|Inventory                                                                                                                                    |  |                       |        |   |           |   | 7,320   |  
|Receivable from sale of securities                                                                                                           |  |                       | 759     |   |           |   |        |  
|Related party receivables                                                                                                                    |  |                       |        |   |           |   | 344     |  
|Other current assets                                                                                                                         |  |                       | 1,138   |   |           |   | 5,830   |  
|Deferred tax assets                                                                                                                          |  |                       | 2,121   |   |           |   |        |  
|Assets held for sale                                                                                                                         |  |                       | 12,286  |   |           |   |        |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total current assets                                                                                                                         |  |                       | 76,467  |   |           |   | 100,012 |  
|Property and equipment, net                                                                                                                  |  |                       | 33      |   |           |   | 4,316   |  
|Investment in Tower Semiconductor (excluding short-term portion)                                                                             |  |                       | 9,228   |   |           |   | 8,780   |  
|Alliance Ventures and other investments                                                                                                      |  |                       | 23,147  |   |           |   | 24,865  |  
|Deferred tax assets                                                                                                                          |  |                       |        |   |           |   | 19,736  |  
|Other assets                                                                                                                                 |  |                       | 786     |   |           |   | 542     |  
|Intangible assets                                                                                                                            |  |                       |        |   |           |   | 1,290   |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total assets                                                                                                                                 |  | $                     | 109,661 |   |           | $ | 159,541 |  
|                                                                                                                                             |  |                       |         |   |           |  
|                                                                                                                                            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                        
|Current liabilities:                                                                                                                         |  |                       |         |   |           |   |         |  
|Accounts payable                                                                                                                             |  | $                     | 3,525   |   |           | $ | 5,275   |  
|Accrued liabilities                                                                                                                          |  |                       | 4,546   |   |           |   | 1,768   |  
|Income tax payable                                                                                                                           |  |                       | 34,528  |   |           |   | 34,855  |  
|Deferred income tax liabilities                                                                                                              |  |                       |        |   |           |   | 19,736  |  
|Deferred tax on assets held for sale                                                                                                         |  |                       | 2,717   |   |           |   |         |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total current liabilities                                                                                                                    |  |                       | 45,316  |   |           |   | 61,634  |  
|                                                                                                                                             |  |                       |         |   |           |  
|Deferred Tax Liabilities                                                                                                                     |  |                       | 2,121   |   |           |   |         |  
|Other liabilities                                                                                                                            |  |                       | 45      |   |           |   | 45      |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total liabilities                                                                                                                            |  |                       | 47,482  |   |           |   | 61,679  |  
|                                                                                                                                             |  |                       |         |   |           |  
|Commitments and contingencies (Notes 10 and 14)                                                                                              |  |                       |         |   |           |   |         |  
|Minority interest in subsidiary companies                                                                                                    |  |                       | 295     |   |           |   | 441     |  
|                                                                                                                                             |  |                       |         |   |           |  
|Stockholders equity:                                                                                                                        |  |                       |         |   |           |   |         |  
|Common stock (43,755 shares and 43,723 shares issued
    and 35,584 and 35,568 shares outstanding March 31,
    2006 and 2005, respectively) |  |                       | 438     |   |           |   | 438     |  
|Additional paid-in capital                                                                                                                   |  |                       | 201,622 |   |           |   | 201,551 |  
|Treasury stock (8,171 shares and 8,155 shares at cost
    at March 31, 2006 and 2005, respectively)                                          |  |                       | (68,576 | ) |           |   | (68,524 | )
|Accumulated deficit                                                                                                                          |  |                       | (70,286 | ) |           |   | (43,712 | )
|Accumulated other comprehensive income/(loss)                                                                                                |  |                       | (1,314  | ) |           |   | 7,668   |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total stockholders equity                                                                                                                   |  |                       | 61,884  |   |           |   | 97,421  |  
|                                                                                                                                             |  |                       |         |   |           |  
|Total liabilities and stockholders equity                                                                                                   |  | $                     | 109,661 |   |           | $ | 159,541 |  
|                                                                                                                                             |  |                       |         |   |           |  



F-5



---



##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |       |       |         |         |       |       |  
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------- | -------- | ------- | ----- | ----- | ------- | ------- | ----- | ----- | ------- | ------- | ----- | ----- | -
|                                                           |                                                                                                         | Years Ended March 31,           |         
|                                                           |                                                                                                         |                                 |         
|                                                           |                                                                                                         | 2006                            |          |         | 2005  |       |         | 2004    |      
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           |                                                                                                         | (In thousands, except per share |         
|                                                           |                                                                                                         | amounts)                        |         
|Gain on investments                                        |                                                                                                         | $                               | 23,319   |         |       | $     | 7,712   |         |       | $     | 29,287  |        
|Writedown of marketable securities and venture investments |                                                                                                         |                                 | (1,129   | )       |       |       | (16,652 | )       |       |       | (652    | )      
|Equity in loss of investees                                |                                                                                                         |                                 | (14,634  | )       |       |       | (20,095 | )       |       |       | (20,490 | )      
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           | Revenue from continuing operations                                                                      |                                 |          | 7,556   |       |       |         | (29,035 | )     |       |         | 8,145   |      
|Research and development                                   |                                                                                                         |                                 |         |         |       |       |        |         |       |       | 2,413   |        
|General and administrative expense                         |                                                                                                         |                                 | 8,979    |         |       |       | 4,726   |         |       |       | 7,362   |        
|Other (income) expense, net                                |                                                                                                         |                                 | (356     | )       |       |       | 1,631   |         |       |       | 7,893   |        
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           | Expenses of continuing operations                                                                       |                                 |          | 8,623   |       |       |         | 6,357   |       |       |         | 17,668  |      
|Provision for (Benefit from) income tax                    |                                                                                                         |                                 | 4,603    |         |       |       | (25,883 | )       |       |       | (21,845 | )      
|Minority interest in consolidated subsidiaries             |                                                                                                         |                                 | (142     | )       |       |       | 284     |         |       |       | 697     |        
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           | Loss from continuing operations                                                                         |                                 |          | (5,812  | )     |       |         | (9,225  | )     |       |         | 13,019  |      
|Discontinued operations                                    |                                                                                                         |                                 |          |         |       |       |         |         |       |       |         |        
|                                                           | Memory products, net of $515, $3,775 and $2,199 income tax for
    2006, 2005 and 2004 respectively     |                                 |          | (9,139  | )     |       |         | (16,699 | )     |       |         | (9,186  | )    
|                                                           | Non-memory products, net of $655, $5,400 and $5,563 income tax
    for 2006, 2005 and 2004 respectively |                                 |          | (11,623 | )     |       |         | (23,887 | )     |       |         | (23,244 | )    
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|Loss from discontinued operations                          |                                                                                                         |                                 | (20,762  | )       |       |       | (40,586 | )       |       |       | (32,430 | )      
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           | Net loss                                                                                                |                                 | $        | (26,574 | )     |       | $       | (49,811 | )     |       | $       | (19,411 | )    
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      
|                                                           | Net loss per share  Basic and Diluted:                                                                 |                                 |          |         |       |       |         |         |       |       |         |         |      
|                                                           |                                                                                                         | Continuing operations           |          | $       | (0.16 | )     |         | $       | (0.26 | )     |         | $       | 0.37  |      
|                                                           |                                                                                                         | Discontinued operations         |          | $       | (0.59 | )     |         | $       | (1.15 | )     |         | $       | (0.92 | )    
|                                                           |                                                                                                         |                                 | Net Loss |         | $     | (0.75 | )       |         | $     | (1.41 | )       |         | $     | (0.55 | )
|                                                           | Weighted average number of common shares                                                                |                                 |          |         |       |       |         |         |       |       |         |         |      
|                                                           | Basic and Diluted                                                                                       |                                 |          | 35,587  |       |       |         | 35,402  |       |       |         | 35,093  |      
|                                                           |                                                                                                         |                                 |          |         |       |       |         |         |      



F-6



---



##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   |         |  
|---------------------------------------- |  | ---------------------------------------- | ------ |  | ---------- | - | --- | -------- |  | ------------- | ------- |  | -------- | -------- | ------- | ----- | ------------- | - | ------- | ------ |  | - | ------- | - |  | - | ------- | -
|                                         |  |                                          |        |  |            |   |     |          |  | Accumulated   |         |  |          |          |        
|                                         |  |                                          |        |  |            |   |     | Other    |  |               |         |  |         
|                                         |  | Common Stock                             |        |  | Additional |   |     |          |  | Comprehensive |         |  | Retained |          |         | Total |              
|                                         |  |                                          |        |  | Paid-In    |   |     | Treasury |  |               | Income  |  |          | Earnings |         |       | Stockholders |  
|                                         |  | Shares                                   |        |  | Amount     |   |     | Capital  |  |               | Stock   |  |          | (Loss)   |         |       | (Deficit)     |   |         | Equity | 
|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        | 
|                                         |  | (In thousands, except per share amounts) |       
|Balances at March 31, 2003               |  |                                          | 43,132 |  |            | $ | 432 |          |  |               | 199,699 |  |          |          | (68,524 | )     |               |   | 2,103   |        |  |   | 25,510  |   |  | $ | 159,220 |  
|Issuance of common stock under ESPP      |  |                                          | 277    |  |            |   | 3   |          |  |               | 971     |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | 974     |  
|Unrealized gain on investments, net      |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   | 33,939  |        |  |   |         |   |  |   |         |  
|Net loss                                 |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   | (19,411 | ) |  |   |         |  
|Total comprehensive income               |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | 14,528  |  
|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        | 
|Balances at March 31, 2004               |  |                                          | 43,409 |  |            | $ | 435 |          |  |               | 200,670 |  |          |          | (68,524 | )     |               |   | 36,042  |        |  |   | 6,099   |   |  | $ | 174,722 |  
|Issuance of common stock under ESPP      |  |                                          | 314    |  |            |   | 3   |          |  |               | 881     |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | 884     |  
|Unrealized loss on investments, net      |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   | (28,374 | )      |  |   |         |   |  |   |         |  
|Net loss                                 |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   | (49,811 | ) |  |   |         |  
|Total comprehensive loss                 |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | (78,185 | )
|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        | 
|Balances at March 31, 2005               |  |                                          | 43,723 |  |            | $ | 438 |          |  | $             | 201,551 |  |          |          | (68,524 | )     |               | $ | 7,668   |        |  |   | (43,712 | ) |  | $ | 97,421  |  
|Issuance of common stock under ESPP      |  |                                          | 32     |  |            |   |     |          |  |               | 71      |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | 71      |  
|Unrealized loss on investments, net      |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   | (8,982  | )      |  |   |         |   |  |   |         |  
|Stock received from cancellation of loan |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          | (52     | )     |               |   |         |        |  |   |         |   |  |   | (52     | )
|Net loss                                 |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   | (26,574 | ) |  |   |         |  
|Total comprehensive loss                 |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        |  |   |         |   |  |   | (35,556 | )
|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        | 
|Balances at March 31, 2006               |  |                                          | 43,755 |  |            | $ | 438 |          |  | $             | 201,622 |  |          | $        | (68,576 | )     |               | $ | (1,314  | )      |  | $ | (70,286 | ) |  | $ | 61,884  |  
|                                         |  |                                          |        |  |            |   |     |          |  |               |         |  |          |          |         |       |               |   |         |        | 






|    |                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | At March 31, 2004, 2005 and 2006, the Company held 8,155,
    8155, and 8,171 shares in treasury at each fiscal year end,
    respectively, which have not been retired. After taking into
    account these treasury shares, the net outstanding shares at
    March 31, 2004, 2005, and 2006 were 35,254 shares,
    35,569 shares, and 35,584 shares, respectively.



F-7



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                |                                                               |                                                     |         |         |         |   |         |         |         |   |         |         |         |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                                                |                                                               | Years Ended March 31,                               |        
|                                                                                |                                                               |                                                     |        
|                                                                                |                                                               | 2006                                                |         |         | 2005    |   |         | 2004    |        
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|                                                                                |                                                               | (In thousands)                                      |        
|Cash flows from operating activities:                                           |                                                               |                                                     |         |         |         |   |         |         |         |   |         |        
|Net loss                                                                        |                                                               | $                                                   | (26,574 | )       |         | $ | (49,811 | )       |         | $ | (19,411 | )      
|Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                               |                                                     |         |         |         |   |         |         |         |   |         |        
|                                                                                | Depreciation and amortization                                 |                                                     |         | 2,830   |         |   |         | 5,461   |         |   |         | 6,737   |        
|                                                                                | Minority interest in subsidiary companies, net of tax         |                                                     |         | (142    | )       |   |         | (284    | )       |   |         | (697    | )      
|                                                                                | Equity in loss of investees                                   |                                                     |         | 14,633  |         |   |         | 20,095  |         |   |         | 20,490  |        
|                                                                                | Gain on investments                                           |                                                     |         | (23,319 | )       |   |         | (7,712  | )       |   |         | (29,287 | )      
|                                                                                | Other                                                         |                                                     |         | 100     |         |   |         | 345     |         |   |         | 1,162   |        
|                                                                                | Write-down of marketable securities and venture investments   |                                                     |         | 1,129   |         |   |         | 16,652  |         |   |         | 652     |        
|                                                                                | Provision for income tax                                      |                                                     |         |        |         |   |         |        |         |   |         |        |        
|                                                                                | Inventory write-down                                          |                                                     |         |        |         |   |         | 9,314   |         |   |         | 2,876   |        
|                                                                                | Write-down of goodwill                                        |                                                     |         |        |         |   |         | 1,538   |         |   |         |        |        
|                                                                                | Deferred income tax                                           |                                                     |         |        |         |   |         | (17,895 | )       |   |         | (8,942  | )      
|Changes in assets and liabilities:                                              |                                                               |                                                     |         |         |         |   |         |         |         |   |         |        
|                                                                                | Accounts receivable                                           |                                                     |         | (976    | )       |   |         | 2,404   |         |   |         | (2,023  | )      
|                                                                                | Inventory                                                     |                                                     |         | 910     |         |   |         | (5,025  | )       |   |         | (11,623 | )      
|                                                                                | Related party receivables                                     |                                                     |         | 325     |         |   |         | (80     | )       |   |         | 1,018   |        
|                                                                                | Receivable from sale of securities                            |                                                     |         | (759    | )       |   |         |        |         |   |         |        |        
|                                                                                | Assets held for sale                                          |                                                     |         |        |         |   |         |         |         |   |         |         |        
|                                                                                | Other assets                                                  |                                                     |         | 587     |         |   |         | 1,782   |         |   |         | (2,155  | )      
|                                                                                | Accounts payable                                              |                                                     |         | (1,750  | )       |   |         | (4,131  | )       |   |         | 5,108   |        
|                                                                                | Accrued liabilities and other long-term obligations           |                                                     |         | 2,778   |         |   |         | (1,309  | )       |   |         | (754    | )      
|                                                                                | Income tax payable                                            |                                                     |         | 5,773   |         |   |         | 1,089   |         |   |         | 29,246  |        
|                                                                                | Income tax on assets held for sale                            |                                                     |         |        |         |   |         |         |         |   |         |         |        
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|                                                                                |                                                               | Net cash used in operating activities               |         |         | (24,455 | ) |         |         | (27,567 | ) |         |         | (7,603  | )
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|Cash flows from investing activities:                                           |                                                               |                                                     |         |         |         |   |         |         |         |   |         |        
|                                                                                | Purchase of property and equipment                            |                                                     |         | (345    | )       |   |         | (764    | )       |   |         | (1,226  | )      
|                                                                                | Purchase of technology license                                |                                                     |         |        |         |   |         | (650    | )       |   |         | (430    | )      
|                                                                                | Proceeds from sale of available-for-sale securities           |                                                     |         | 83,205  |         |   |         | 33,297  |         |   |         | 80,523  |        
|                                                                                | Investment in Tower Semiconductor Ltd.                        |                                                     |         | (3,311  | )       |   |         |        |         |   |         | (11,001 | )      
|                                                                                | Purchase of Alliance Ventures and other investments           |                                                     |         | (14,255 | )       |   |         | (8,877  | )       |   |         | (20,031 | )      
|                                                                                | Proceeds from sale of Alliance Ventures and other investments |                                                     |         | 6,655   |         |   |         |        |         |   |         | 1,350   |        
|                                                                                | Other assets                                                  |                                                     |         | (244    | )       |   |         |         |         |   |         |         |        
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|                                                                                |                                                               | Net cash provided by investing activities           |         |         | 71,705  |   |         |         | 23,006  |   |         |         | 49,185  |  
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|Cash flows from financing activities:                                           |                                                               |                                                     |         |         |         |   |         |         |         |   |         |        
|                                                                                | Net proceeds from issuance of common stock                    |                                                     |         | 71      |         |   |         | 884     |         |   |         | 974     |        
|                                                                                | Principal payments on lease obligations                       |                                                     |         |        |         |   |         | (33     | )       |   |         | (247    | )      
|Repurchase of common stock                                                      |                                                               |                                                     |        |         |         |   |        |         |         |   |        |        
|Repayments of short-term borrowings                                             |                                                               |                                                     |        |         |         |   |        |         |         |   | (43,560 | )      
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|                                                                                |                                                               | Net cash provided by (used in) financing activities |         |         | 71      |   |         |         | 851     |   |         |         | (42,833 | )
|Net increase/(decrease) in cash and cash equivalents                            |                                                               |                                                     | 47,321  |         |         |   | (3,710  | )       |         |   | (1,251  | )      
|Cash and cash equivalents at beginning of the period                            |                                                               |                                                     | 2,397   |         |         |   | 6,107   |         |         |   | 7,358   |        
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        
|Cash and cash equivalents at end of the period                                  |                                                               | $                                                   | 49,718  |         |         | $ | 2,397   |         |         | $ | 6,107   |        
|                                                                                |                                                               |                                                     |         |         |         |   |         |         |        



F-8



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|        |                                                                   
|------- | ------------------------------------------------------------------
|Note 1. | Alliance Semiconductor and our Significant Accounting
    Policies

chip-to tm




| |                                
| | -------------------------------
| | (a) Principles of Consolidation







| |                     
| | --------------------
| | (b) Use of Estimates





| |                          
| | -------------------------
| | (c) Basis of Presentation





| |                                                                 
| | ----------------------------------------------------------------
| | (d) Assets Held for Sale and Loss on Discontinued
    Operations



F-9



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                              
| | -----------------------------
| | (e) Cash and Cash Equivalents





| |                           
| | --------------------------
| | (f) Short-Term Investments







| |              
| | -------------
| | (g) Inventory

first-in,




| |                                                 
| | ------------------------------------------------
| | (h) Investments in Non-Publicly-Traded Companies





| |                           
| | --------------------------
| | (i) Property and Equipment



F-10



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | (j) Long-Lived Assets





| |                        
| | -----------------------
| | (k) Revenue Recognition











| |                                   
| | ----------------------------------
| | (l) Research and Development Costs





| |                                   
| | ----------------------------------
| | (m) Goodwill and Intangible Assets







F-11



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                 
| | ----------------
| | (n) Income Taxes





| |                           
| | --------------------------
| | (o) Concentration of Risks







non-U.S.




F-12



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                             
| | ----------------------------
| | (p) Stock-Based Compensation



|                                                                                                                                                    |                                 |                      |         |       |         |   |         |       |         |   |         |       |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------------------- | ------- | ----- | ------- | - | ------- | ----- | ------- | - | ------- | ----- | ------- | -
|                                                                                                                                                    |                                 | Year Ended March 31, |        
|                                                                                                                                                    |                                 |                      |        
|                                                                                                                                                    |                                 | 2006                 |         |       | 2005    |   |         | 2004  |        
|                                                                                                                                                    |                                 |                      |         |       |         |   |         |       |        
|Net loss, as reported                                                                                                                               |                                 | $                    | (26,574 | )     |         | $ | (49,811 | )     |         | $ | (19,411 | )    
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                                 |                      | (1,610  | )     |         |   | (3,046  | )     |         |   | (3,050  | )    
|                                                                                                                                                    |                                 |                      |         |       |         |   |         |       |        
|                                                                                                                                                    |                                 | Pro forma net loss:  |         | $     | (28,184 | ) |         | $     | (52,857 | ) |         | $     | (22,461 | )
|                                                                                                                                                    |                                 |                      |         |       |         |   |         |       |        
|Loss per share:                                                                                                                                     |                                 |                      |         |       |         |   |         |       |         |   |         |      
|                                                                                                                                                    | Basic and diluted  as reported |                      |         | (0.75 | )       |   |         | (1.41 | )       |   |         | (0.55 | )      
|                                                                                                                                                    | Basic and diluted  pro forma   |                      |         | (0.79 | )       |   |         | (1.49 | )       |   |         | (0.64 | )      





| |                       
| | ----------------------
| | (q) Net Loss Per Share



F-13



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                           |                   |      |         |        |      |   |         |        |   |   |         |        |  
|------------------------------------------ | ----------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                           |                   | 2006 |         |        | 2005 |   |         | 2004   |  
|                                           |                   |      |         |        |      |   |         |        |  
|Net loss available to common stockholders  |                   | $    | (26,574 | )      |      | $ | (49,811 | )      |   | $ | (19,411 | )     
|                                           |                   |      |         |        |      |   |         |        |  
|Weighted average common shares outstanding |                   |      |         |        |      |   |         |        |   |   |         |       
|                                           | Basic and diluted |      |         | 35,587 |      |   |         | 35,402 |   |   |         | 35,093 |  
|                                           |                   |      |         |        |      |   |         |        |  
|Net loss per share:                        |                   |      |         |        |      |   |         |        |   |   |         |       
|                                           | Basic and diluted |      | $       | (0.75  | )    |   | $       | (1.41  | ) |   | $       | (0.55  | )
|                                           |                   |      |         |        |      |   |         |        |  



| |                     
| | --------------------
| | Comprehensive Income





| |                                         
| | ----------------------------------------
| | (r) Recently Issued Accounting Standards

03-1, 03-1 03-1 03-1 03-1 03-1 03-1.






F-14



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|        |                        
|------- | -----------------------
|Note 2. | Discontinued Operations



F-15



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|        |                         
|------- | ------------------------
|Note 3. | Balance Sheet Components



| |                       
| | ----------------------
| | Short-Term Investments



|                                    |       |        |       |          |       |   |       |              |          |   |        |       |  |       |         |  |              |   |        |        |  |   |        |        | 
|----------------------------------- | ----- | ------ | ----- | -------- | ----- | - | ----- | ------------ | -------- | - | ------ | ----- |  | ----- | ------- |  | ------------ | - | ------ | ------ |  | - | ------ | ------ | 
|                                    |       | 2006   |       |          | 2005  |  
|                                    |       |        |       |          |       |  
|                                    |       |        |       | Adj Cost |       |   |       |              | Adj Cost |   |        |      
|Company                             |       | Shares |       |          | Basis |   |       | Market Value |          |   | Shares |       |  | Basis |         |  | Market Value |  
|                                    |       |        |       |          |       |   |       |              |          |   |        |       |  |       |         |  |              |  
|United Microelectronics Corporation |       |        |       |          |       |   |       |              |          |   |        |       |  |       | 128,146 |  |              | $ | 64,661 |        |  | $ | 77,505 |       
|Tower Semiconductor Debentures(1)   |       |        |       |          |       | $ | 3,852 |              |          | $ | 3,852  |       |  |       |         |  |              |   |        |        |  |   |        |       
|Tower Semiconductor                 |       |        | 3,078 |          |       |   | 3,940 |              |          |   | 3,940  |       |  |       | 3,207   |  |              |   | 4,939  |        |  |   | 4,939  |       
|                                    |       |        |       |          |       |   |       |              |          |   |        |       |  |       |         |  |              |  
|                                    | Total |        |       |          |       |   | $     | 7,792        |          |   | $      | 7,792 |  |       |         |  |              |   | $      | 69,600 |  |   | $      | 82,444 | 
|                                    |       |        |       |          |       |   |       |              |          |   |        |       |  |       |         |  |              |  






|    |                            
|--- | ---------------------------
|(1) | Convertible to 3,009 shares



| |                      
| | ---------------------
| | Long-Term Investments



|                                         |       |                |       |  |                |  |        |           |  |  |            |  |  |  |        |        | 
|---------------------------------------- | ----- | -------------- | ----- |  | -------------- |  | ------ | --------- |  |  | ---------- |  |  |  | ------ | ------ | 
|                                         |       | March 31, 2006 |       |  | March 31, 2005 | 
|                                         |       |                |       |  |                | 
|                                         |       | Number of      |       |  | Adjusted       |  |        | Number of |  |  | Adjusted   | 
|                                         |       | Shares         |       |  | Cost Basis     |  |        | Shares    |  |  | Cost Basis | 
|                                         |       |                |       |  |                |  |        |           |  |  |            | 
|Tower Semiconductor Ltd. Shares          |       |                | 7,209 |  |                |  | 9,228  |           |  |  | 5,701      |  |  |  | 8,780  |       
|Tower Semiconductor Ltd. Debentures      |       |                |      |  |                |  |       |           |  |  |           |  |  |  |       |       
|Alliance Ventures investments           |       |                |      |  |                |  | 22,079 |           |  |  |           |  |  |  | 23,256 |       
|Solar Venture Partners, LPs investments |       |                |      |  |                |  | 1,068  |           |  |  |           |  |  |  | 1,609  |       
|                                         |       |                |       |  |                |  |        |           |  |  |            | 
|                                         | Total |                |       |  |                |  | $      | 32,375    |  |  |            |  |  |  | $      | 33,645 | 
|                                         |       |                |       |  |                |  |        |           |  |  |            | 



| |                    
| | -------------------
| | Accounts Receivable



|                                                 |     |                |        |       |                |   |        |       | 
|------------------------------------------------ | --- | -------------- | ------ | ----- | -------------- | - | ------ | ----- | 
|                                                 |     | March 31, 2006 |        |       | March 31, 2005 |  
|                                                 |     |                |        |       |                |  
|Trade Receivables                                |     | $              | 3,768  |       |                | $ | 2,974  |      
|Less allowance for doubtful accounts and returns |     |                | (1,115 | )     |                |   | (1,297 | )    
|                                                 |     |                |        |       |                |  
|                                                 | Net |                | $      | 2,653 |                |   | $      | 1,677 | 
|                                                 |     |                |        |       |                |  

F-16



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                     
| | --------------------
| | Assets Held for Sale



|                      |                             |                                    |   |       |        | 
|--------------------- | --------------------------- | ---------------------------------- | - | ----- | ------ | 
|                      |                             | March 31, 2006                     |  
|                      |                             |                                    |  
|Assets held for sale: |                             |                                    |   |      
|                      | Inventory                   |                                    | $ | 6,410 |       
|                      | Related party receivables   |                                    |   | 71    |       
|                      | Deferred tax assets         |                                    |   | 2,717 |       
|                      | Property and equipment, net |                                    |   | 2,709 |       
|                      | Intangible assets           |                                    |   | 379   |       
|                      |                             |                                    |  
|                      |                             | Total current assets held for sale |   | $     | 12,286 | 
|                      |                             |                                    |  



| |          
| | ---------
| | Inventory



|                |       |                |       |       |                |   |       |       | 
|--------------- | ----- | -------------- | ----- | ----- | -------------- | - | ----- | ----- | 
|                |       | March 31, 2006 |       |       | March 31, 2005 |  
|                |       |                |       |       |                |  
|Work in process |       | $              | 3,974 |       |                | $ | 2,146 |      
|Finished goods  |       |                | 2,436 |       |                |   | 5,174 |      
|                |       |                |       |       |                |  
|                | Total |                | $     | 6,410 |                |   | $     | 7,320 | 
|                |       |                |       |       |                |  



| |                       
| | ----------------------
| | Property and Equipment



|                     |                                |                  |   |      |      |  |   |         |        | 
|-------------------- | ------------------------------ | ---------------- | - | ---- | ---- |  | - | ------- | ------ | 
|                     |                                | 2006             |   |      | 2005 | 
|                     |                                |                  |   |      |      | 
|Property & Equipment |                                |                  |   |      |      |  |   |        
|                     | Engineering and test equipment |                  | $ | 2    |      |  | $ | 18,631  |       
|                     | Computers and software         |                  |   | 430  |      |  |   | 15,314  |       
|                     | Furniture and office equipment |                  |   | 15   |      |  |   | 949     |       
|                     | Leasehold improvements         |                  |   | 3    |      |  |   | 1,544   |       
|                     | Land                           |                  |   |      |      |  |   | 274     |       
|                     | Automobiles                    |                  |   |      |      |  |   | 14      |       
|                     |                                |                  |   |      |      | 
|                     |                                | Gross book value |   |      | 450  |  |   |         | 36,726 | 
|                     | Less: Accumulated depreciation |                  |   | (417 | )    |  |   | (32,410 | )     
|                     |                                |                  |   |      |      | 
|                     |                                | Net book value   |   | $    | 33   |  |   | $       | 4,316  | 
|                     |                                |                  |   |      |      | 





F-17



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | Goodwill and Intangible Assets



|                     |  |      |        |             |              |     |            |        |  |   |     | 
|-------------------- |  | ---- | ------ | ----------- | ------------ | --- | ---------- | ------ |  | - | --- | 
|                     |  |      |        |             |              | Net |           
|                     |  |      |        | Accumulated |              |     | Intangible |       
|                     |  | Cost |        |             | Amortization |     |            | Assets | 
|                     |  |      |        |             |              |     |            |        | 
|Developed technology |  | $    | 1,592  |             |              | $   | (1,592     | )      |  | $ |    | 
|Technology license   |  |      | 4,230  |             |              |     | (3,851     | )      |  |   | 379 | 
|Acquired workforce   |  |      | 2,746  |             |              |     | (2,746     | )      |  |   |    | 
|Trade name           |  |      | 109    |             |              |     | (109       | )      |  |   |    | 
|Patents              |  |      | 1,403  |             |              |     | (1,403     | )      |  |   |    | 
|                     |  |      |        |             |              |     |            |        | 
|                     |  | $    | 10,080 |             |              | $   | (9,701     | )      |  | $ | 379 | 
|                     |  |      |        |             |              |     |            |        | 



|               |                      |      |        |             |              |     |            |        |   |   |       |       | 
|-------------- | -------------------- | ---- | ------ | ----------- | ------------ | --- | ---------- | ------ | - | - | ----- | ----- | 
|               |                      |      |        |             |              | Net |           
|               |                      |      |        | Accumulated |              |     | Intangible |       
|               |                      | Cost |        |             | Amortization |     |            | Assets |  
|               |                      |      |        |             |              |     |            |        |  
|March 31, 2005 |                      |      |        |             |              |     |            |        |   |   |       |      
|               | Developed technology |      | $      | 1,592       |              |     | $          | (1,592 | ) |   | $     |      | 
|               | Technology license   |      |        | 4,230       |              |     |            | (3,229 | ) |   |       | 1,001 | 
|               | Acquired workforce   |      |        | 2,746       |              |     |            | (2,746 | ) |   |       |      | 
|               | Trade name           |      |        | 109         |              |     |            | (109   | ) |   |       |      | 
|               | Patents              |      |        | 1,403       |              |     |            | (1,114 | ) |   |       | 289   | 
|               |                      |      |        |             |              |     |            |        |  
|               |                      | $    | 10,080 |             |              | $   | (8,790     | )      |   | $ | 1,290 |      
|               |                      |      |        |             |              |     |            |        |  





|                     |                            |      |     |     |      |   |       |       |  |   |       |       | 
|-------------------- | -------------------------- | ---- | --- | --- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                     |                            | 2006 |     |     | 2005 |   |       | 2004  | 
|                     |                            |      |     |     |      |   |       |       | 
|Developed technology |                            | $    |     |     |      | $ | 420   |       |  | $ | 531   |      
|Technology license   |                            |      | 622 |     |      |   | 1,295 |       |  |   | 1,146 |      
|Acquired workforce   |                            |      |     |     |      |   | 1,011 |       |  |   | 1,488 |      
|Tradename            |                            |      |     |     |      |   | 28    |       |  |   | 36    |      
|Patents              |                            |      | 289 |     |      |   | 443   |       |  |   | 468   |      
|                     |                            |      |     |     |      |   |       |       | 
|                     | Total amortization expense |      | $   | 911 |      |   | $     | 3,197 |  |   | $     | 3,669 | 
|                     |                            |      |     |     |      |   |       |       | 

F-18



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                                   |  |     |     | 
|---- | --------------------------------- |  | --- | --- | 
|2007 |                                   |  | 264 |    
|2008 |                                   |  | 115 |    
|     |                                   |  |    
|     | Total future amortization expense |  | $   | 379 | 
|     |                                   |  |    



| |                              
| | -----------------------------
| | Accrued and Other Liabilities



|                         |                           |           |       |       |           |   |     |       | 
|------------------------ | ------------------------- | --------- | ----- | ----- | --------- | - | --- | ----- | 
|                         |                           | March 31, |       |       | March 31, |  
|                         |                           | 2006      |       |       | 2005      |  
|                         |                           |           |       |       |           |  
|Accrued Compensation     |                           | $         | 306   |       |           | $ | 889 |      
|Accrued legal settlement |                           |           | 3,500 |       |           |   |     |      
|Other                    |                           |           | 740   |       |           |   | 879 |      
|                         |                           |           |       |       |           |  
|                         | Total Accrued Liabilities |           | $     | 4,546 |           |   | $   | 1,768 | 
|                         |                           |           |       |       |           |  



| |                                       
| | --------------------------------------
| | Accumulated Other Comprehensive Income



|                                         |  |             |        |   |            |   |                |             |  |   |        |  
|---------------------------------------- |  | ----------- | ------ | - | ---------- | - | -------------- | ----------- |  | - | ------ | -
|                                         |  | Unrealized  |        |   |            |   | Net Unrealized |            
|                                         |  | Gain/(Loss) |        |   | Tax Effect |   |                | Gain/(Loss) | 
|                                         |  |             |        |   |            |   |                |             | 
|Tower Semiconductor Ltd. Ordinary Shares |  |             | (2,742 | ) |            |   | 1,105          |             |  |   | (1,637 | )
|Tower Semiconductor Ltd. Debentures      |  |             | 541    |   |            |   | (218           | )           |  |   | 323    |  
|                                         |  |             |        |   |            |   |                |             | 
|                                         |  | $           | (2,201 | ) |            | $ | 887            |             |  | $ | (1,314 | )
|                                         |  |             |        |   |            |   |                |             | 



|                                    |  |             |        |  |            |     |            |             |  |   |       | 
|----------------------------------- |  | ----------- | ------ |  | ---------- | --- | ---------- | ----------- |  | - | ----- | 
|                                    |  |             |        |  |            | Net |           
|                                    |  | Unrealized  |        |  |            |     | Unrealized |            
|                                    |  | Gain/(Loss) |        |  | Tax Effect |     |            | Gain/(Loss) | 
|                                    |  |             |        |  |            |     |            |             | 
|United Microelectronics Corporation |  | $           | 12,844 |  |            | $   | (5,176     | )           |  | $ | 7,668 | 
|                                    |  |             |        |  |            |     |            |             | 



|        |                                                                
|------- | ---------------------------------------------------------------
|Note 4. | Write-Down of Marketable Securities and Venture
    Investments





F-19



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |                                                                        |      |        |        |      |   |         |         |   |   |        |        |  
|----------------------------------- | ---------------------------------------------------------------------- | ---- | ------ | ------ | ---- | - | ------- | ------- | - | - | ------ | ------ | -
|                                    |                                                                        | 2006 |        |        | 2005 |   |         | 2004    |  
|                                    |                                                                        |      |        |        |      |   |         |         |  
|Tower ordinary shares               |                                                                        | $    | (2,944 | )      |      | $ | (16,652 | )       |   | $ |       |       
|Alliance Ventures investments      |                                                                        |      | (1,129 | )      |      |   | (2,686  | )       |   |   | (5,487 | )     
|Solar Venture Partners investments |                                                                        |      |       |        |      |   | (473    | )       |   |   | (300   | )     
|                                    |                                                                        |      |        |        |      |   |         |         |  
|                                    | Total write-downs of marketable securities and venture
    investments |      | $      | (4,073 | )    |   | $       | (19,811 | ) |   | $      | (5,787 | )
|                                    |                                                                        |      |        |        |      |   |         |         |  



| |                                                            
| | -----------------------------------------------------------
| | Loss in Investees Accounted for Under the Equity
    Method





|        |                           
|------- | --------------------------
|Note 5. | Gain/(Loss) on Investments



|                                    |                           |      |        |        |      |   |       |       |  |   |        |        | 
|----------------------------------- | ------------------------- | ---- | ------ | ------ | ---- | - | ----- | ----- |  | - | ------ | ------ | 
|                                    |                           | 2006 |        |        | 2005 |   |       | 2004  | 
|                                    |                           |      |        |        |      |   |       |       | 
|Sale of UMC shares                  |                           | $    | 16,714 |        |      | $ | 7,995 |       |  | $ | 29,473 |       
|Sale of Tower Shares, net           |                           |      | (50    | )      |      |   |       |       |  |   |        |       
|Alliance Venture Management         |                           |      | 5,811  |        |      |   |       |       |  |   |        |       
|Net realized gain on Solar investee |                           |      | 844    |        |      |   |       |       |  |   |        |       
|Sale of Adaptec shares              |                           |      |        |        |      |   | (541  | )     |  |   | 1,098  |       
|Sale of Vitesse shares              |                           |      |        |        |      |   | 258   |       |  |   |        |       
|Write-down of restricted cash       |                           |      |        |        |      |   |       |       |  |   | (1,284 | )     
|                                    |                           |      |        |        |      |   |       |       | 
|                                    | Total Gain on investments |      | $      | 23,319 |      |   | $     | 7,712 |  |   | $      | 29,287 | 
|                                    |                           |      |        |        |      |   |       |       | 







| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | $16.7 million gain on the sale of 139.3 million shares
    of UMC       
|
| |  | $50,000 loss on the sale of 1.2 million shares of Tower                 
|
| |  | $5.8 million gain on the sale of Athena, an AVM investee
    company    
|
| |  | $0.1 million loss on the sale of JP Mobile, a Solar
    investee company
|
| |  | $0.9 million gain on the sale of Netscaler, a Solar
    investee company





| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | $8.0 million gain on the sale of 45.4 million shares
    of UMC
|
| |  | $258,000 gain on the sale of 95,417 shares of Vitesse          
|
| |  | $544,000 loss on the sale of 154,444 shares of Adaptec         

F-20



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | $29.5 million gain on the sale of 93.0 million common
    shares of UMC                                     
|
| |  | $1.3 million write-down of restricted cash related to our
    investment in Platys being acquired by Adaptec
|
| |  | $1.1 million gain on the sale of 362,173 common shares of
    Adaptec                                       



|        |                                    
|------- | -----------------------------------
|Note 6. | Investment in Marketable Securities



| |                                    
| | -----------------------------------
| | United Microelectronics Corporation









| |                                  
| | ---------------------------------
| | Vitesse Semiconductor Corporation







| |              
| | -------------
| | Adaptec, Inc.







|        |                                       
|------- | --------------------------------------
|Note 7. | Investment in Tower Semiconductor Ltd.



F-21



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Up to 1.2 million of the initial 3.9 million Tower
    shares acquired by us, together with all shares we acquired in
    excess of 5.4 million shares in exchange for payments made
    in accordance with the original Share Purchase Agreement, are
    available for sale, subject to the requirements of Rule 144
    or another applicable exemption from the Securities Act of 1933,
    as amended;
|
| |  | All shares acquired as a result of Towers rights offering
    in September 2002 and shares which may be acquired upon exchange
    of certain wafer credits are unrestricted and
    available-for-sale; and                                                                                                                                                                                              
|
| |  | For the remaining Tower shares acquired by us, we may not
    transfer, during the period between January 2006 and January
    2008, more than 6% of our total shares in any quarter on a
    cumulative basis and no more than 48% of our total shares by the
    end of this period.                                                                                                                     











F-22



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |       |     |  |   |      |      | 
|----------- | ----- | ----------- | --------- | ---------- | ----- | - | ---------- | ---------- |  | -------- | ------- | ---- | ----- | ---------- | ----- | --- |  | - | ---- | ---- | 
|            |       |             |           |            |       |   |            | Investment |  |          |        
|            |       |             |           | Share      |       |   | Investment |            |  | in Wafer |         |      | Total |           
|            |       | # of Shares |           |            | Price |   |            | in Shares  |  |          | Credits |      |       | Investment |      
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      
|FY 2001     |       |             | 1,233,241 |            |       | $ | 13.24      |            |  | $        | 16.3    |      |       | $          | 14.7  |     |  | $ | 31.0 |     
|FQ1 2002    |       |             | 366,690   |            |       |   | 12.50      |            |  | $        | 4.6     |      |       | $          | 6.4   |     |  |   | 11.0 |     
|FQ2 2002(a) |       |             | 1,255,848 |            |       |   | 12.75      |            |  | $        | 16.0    |      |       | $          | (16.0 | )   |  |   |     |     
|FQ1 2003    |       |             | 1,071,497 |            |       |   | 6.16       |            |  | $        | 6.6     |      |       | $          | 4.4   |     |  |   | 11.0 |     
|FQ3 2003    |       |             | 1,344,829 |            |       |   | 4.91       |            |  | $        | 6.6     |      |       | $          | 4.4   |     |  |   | 11.0 |     
|FQ3 2003(b) |       |             | 794,995   |            |       |   | 5.03       |            |  | $        | 4.0     |      |       |            |       |     |  |   | 4.0  |     
|FQ1 2004    |       |             | 1,206,839 |            |       |   | 2.98       |            |  | $        | 3.6     |      |       |            |       |     |  |   | 3.6  |     
|FQ2 2004    |       |             | 228,546   |            |       |   | 2.98       |            |  | $        | 0.7     |      |       |            |       |     |  |   | 0.7  |     
|FQ3 2004    |       |             | 777,295   |            |       |   | 2.98       |            |  | $        | 2.3     |      |       |            |       |     |  |   | 2.3  |     
|FQ4 2004    |       |             | 628,611   |            |       |   | 7.00       |            |  | $        | 4.4     |      |       |            |       |     |  |   | 4.4  |     
|FQ2 2006(a) |       |             | 62,849    |            |       |   | 1.20       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ3 2006(a) |       |             | 39,199    |            |       |   | 1.58       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ4 2006(a) |       |             | 63,793    |            |       |   | 1.38       |            |  | $        | 0.1     |      |       | $          | (0.1  | )   |  |   |     |     
|FQ4 2006(a) |       |             | 2,455,905 |            |       |   | 1.58       |            |  | $        | 3.9     |      |       | $          | (3.9  | )   |  |   |     |     
|FQ4 2006(b) |       |             | 3,009,818 |            |       |   | 1.10       |            |  | $        | 3.3     |      |       |            |       |     |  |   | 3.3  |     
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      
|            | Total |             |           | 14,539,955 |       |   |            |            |  |          | $       | 72.6 |       |            | $     | 9.7 |  |   | $    | 82.3 | 
|            |       |             |           |            |       |   |            |            |  |          |         |      |       |            |      






|    |                                               
|--- | ----------------------------------------------
|(a) | Conversion of wafer credits to ordinary shares
|   
|(b) | Tower rights offering                         



|        |                           
|------- | --------------------------
|Note 8. | Private Equity Investments



| |                                 
| | --------------------------------
| | Alliance Venture Management, LLC



F-23



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-24



---



##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


start-up start-up












F-25



---



##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                         
| | ----------------------------------------
| | Investment in Solar Venture Partners, LP

e-commerce,










| |                          
| | -------------------------
| | Equity Method Investments



F-26



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Summary Financial Data


|                 |                         |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |         |        |  
|---------------- | ----------------------- | --------------------------------- | - | ------- | ------- | - | - | ------- | ------- | - | ----- | ------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------ | - | ---- | ------- | ------- | ----- | - | ------- | ------- | - | - | ------- | ------ | - | - | ------- | ------ | -
|                 |                         | 2006                              |   |         | 2005    |   |   | 2004    |        
|                 |                         |                                   |   |         |         |   |   |         |        
|                 |                         | Total                             |   |         | <20%    |   |   | >=20%   |         |   | Total |         |        | <20% |   |         | >=20%   |   |   | Total   |        |   | <20% |         |         | >=20% |  
|                 |                         |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |  
|Income Statement |                         |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |        
|                 | Revenue                 |                                   | $ | 88,527  |         |   | $ | 73,075  |         |   | $     | 15,452  |        |      | $ | 42,335  |         |   | $ | 29,725  |        |   | $    | 12,610  |         |       | $ | 32,556  |         |   | $ | 16,097  |        |   | $ | 16,459  |       
|                 | Gross profit            |                                   | $ | 42,721  |         |   | $ | 30,293  |         |   | $     | 12,428  |        |      | $ | 23,416  |         |   | $ | 15,687  |        |   | $    | 7,729   |         |       | $ | 16,985  |         |   | $ | 9,020   |        |   | $ | 7,965   |       
|                 | Net loss                |                                   | $ | (50,163 | )       |   | $ | (36,492 | )       |   | $     | (13,671 | )      |      | $ | (77,796 | )       |   | $ | (41,331 | )      |   | $    | (36,465 | )       |       | $ | (78,265 | )       |   | $ | (56,808 | )      |   | $ | (21,457 | )     
|Balance Sheet    |                         |                                   |   |         |         |   |   |         |         |   |       |         |        |      |   |         |         |   |   |         |        |   |      |         |         |       |   |         |         |   |   |         |        |   |   |        
|                 | Current assets          |                                   | $ | 70,012  |         |   | $ | 48,619  |         |   | $     | 21,393  |        |      | $ | 80,534  |         |   | $ | 44,498  |        |   | $    | 36,036  |         |       | $ | 89,818  |         |   | $ | 53,670  |        |   | $ | 36,148  |       
|                 | Non-current assets      |                                   | $ | 69,240  |         |   | $ | 63,531  |         |   | $     | 5,709   |        |      | $ | 16,486  |         |   | $ | 6,409   |        |   | $    | 10,077  |         |       | $ | 9,528   |         |   | $ | 2,633   |        |   | $ | 6,895   |       
|                 |                         | Total assets                      |   | $       | 139,252 |   |   | $       | 112,150 |   |       | $       | 27,102 |      |   | $       | 97,020  |   |   | $       | 50,907 |   |      | $       | 46,113  |       |   | $       | 99,346  |   |   | $       | 56,303 |   |   | $       | 43,043 |  
|                 | Current liabilities     |                                   | $ | 100,106 |         |   | $ | 89,365  |         |   | $     | 10,741  |        |      | $ | 29,056  |         |   | $ | 17,561  |        |   | $    | 11,495  |         |       | $ | 20,116  |         |   | $ | 8,814   |        |   | $ | 11,302  |       
|                 | Non-current Liabilities |                                   | $ | 4,796   |         |   | $ | 1,448   |         |   | $     | 3,348   |        |      | $ | 4,217   |         |   | $ | 1,874   |        |   | $    | 2,343   |         |       | $ | 1,940   |         |   | $ | 604     |        |   | $ | 1,336   |       
|                 |                         | Total liabilities                 |   | $       | 104,902 |   |   | $       | 90,813  |   |       | $       | 14,089 |      |   | $       | 33,273  |   |   | $       | 19,435 |   |      | $       | 13,838  |       |   | $       | 22,056  |   |   | $       | 9,418  |   |   | $       | 12,638 |  
|                 | Preferred stock         |                                   | $ | 313,893 |         |   | $ | 245,100 |         |   | $     | 68,793  |        |      | $ | 358,641 |         |   | $ | 224,594 |        |   | $    | 134,047 |         |       | $ | 264,649 |         |   | $ | 184,569 |        |   | $ | 80,080  |       
|                 |                         | Total equity in loss of investees |   | $       | (14,652 | ) |   | $       | (6,418  | ) |       | $       | (8,234 | )    |   | $       | (16,936 | ) |   | $       | (5,595 | ) |      | $       | (11,341 | )     |   | $       | (15,355 | ) |   | $       | (8,990 | ) |   | $       | (6,365 | )
|                 | Number of companies     |                                   |   | 15      |         |   |   | 8       |         |   |       | 7       |        |      |   | 15      |         |   |   | 6       |        |   |      | 9       |         |       |   | 14      |         |   |   | 6       |        |   |   | 8       |       

|                        |  |          |                   |  |      |  |      |      |  |  |      |  
|----------------------- |  | -------- | ----------------- |  | ---- |  | ---- | ---- |  |  | ---- | -
|2006 Investee Companies |  | Industry |                   |  | 2006 |  |      | 2005 | 
|                        |  |          |                   |  |      |  |      |      | 
|Aperto Networks         |  |          | Networking        |  |      |  | 13.0 | %    |  |  | 14.5 | %
|Active Optical Networks |  |          | Networking        |  |      |  | 74.7 | %    |  |  | 33.6 | %
|Alta Analog             |  |          | Semiconductor     |  |      |  | 30.2 | %    |  |  | 32.4 | %
|Apollo Biotechnology    |  |          | Semiconductor     |  |      |  | 15.3 | %    |  |  | 15.3 | %
|Athena Semiconductor    |  |          | Semiconductor     |  |      |  |     |      |  |  | 41.4 | %
|BMI/ Bay Microsystems   |  |          | Semiconductor     |  |      |  | 3.1  | %    |  |  |     |  
|Cavium Networks         |  |          | Semiconductor     |  |      |  | 14.4 | %    |  |  | 15.4 | %
|Jazio                   |  |          | Semiconductor     |  |      |  |     |      |  |  | 5.1  | %
|Maranti Networks        |  |          | Networking        |  |      |  |     |      |  |  | 9.0  | %
|Minerva                 |  |          | Semiconductor     |  |      |  | 3.3  | %    |  |  |     |  
|Nazomi Communications   |  |          | Semiconductor     |  |      |  | 22.7 | %    |  |  | 23.6 | %
|Nethra Imaging          |  |          | Semiconductor     |  |      |  | 22.4 | %    |  |  | 25.0 | %
|SiNett Corporation      |  |          | Semiconductor     |  |      |  | 20.2 | %    |  |  | 21.6 | %
|Tharas Systems          |  |          | Design Automation |  |      |  | 13.5 | %    |  |  | 15.1 | %
|Selby Venture Partners  |  |          | Venture Investing |  |      |  | 14.3 | %    |  |  |     |  
|Vianeta Communications  |  |          | Software          |  |      |  | 39.7 | %    |  |  | 40.0 | %
|Xalted Networks         |  |          | Networking        |  |      |  | 19.2 | %    |  |  | 22.8 | %
|Xceive Corporation      |  |          | Semiconductor     |  |      |  | 28.7 | %    |  |  | 38.1 | %



F-27



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|        |                                              
|------- | ---------------------------------------------
|Note 9. | Derivative Instruments and Hedging Activities











F-28



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                                      
|-------- | -------------------------------------
|Note 10. | Leases, Commitments and Contingencies



| |                 
| | ----------------
| | Operating Leases





|               |  |   |     | 
|-------------- |  | - | --- | 
|Fiscal Year    |  |  
|               |  |  
|2007           |  | $ | 779 | 
|2008           |  |   | 134 | 
|               |  |   |    
|Total payments |  | $ | 913 | 
|               |  |   |    





| |               
| | --------------
| | Capital Leases





| |                               
| | ------------------------------
| | Investment Company Act of 1940







F-29



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














| |                  
| | -----------------
| | Alliance Ventures



F-30



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Indemnification Obligations







| |                   
| | ------------------
| | Product Warranties





|                       |                                                     |      |     |      |      |   |       |      |   |   |       |      |  
|---------------------- | --------------------------------------------------- | ---- | --- | ---- | ---- | - | ----- | ---- | - | - | ----- | ---- | -
|                       |                                                     | 2006 |     |      | 2005 |   |       | 2004 |  
|                       |                                                     |      |     |      |      |   |       |      |  
|Beginning Balance      |                                                     | $    | 948 |      |      | $ | 1,292 |      |   | $ | 1,253 |     
|                       | Accruals for warranties issued during the year      |      |     | 659  |      |   |       | 86   |   |   |       | 415  |  
|                       | Settlements on warranty claims made during the year |      |     | (869 | )    |   |       | (430 | ) |   |       | (376 | )
|                       |                                                     |      |     |      |      |   |       |      |  
|Balance at end of year |                                                     | $    | 738 |      |      | $ | 948   |      |   | $ | 1,292 |     
|                       |                                                     |      |     |      |      |   |       |      |  

F-31



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                         
|-------- | ------------------------
|Note 11. | Benefit for Income Taxes



|         |                     |                     |   |         |       |  |   |         |         |   |   |         |         |  
|-------- | ------------------- | ------------------- | - | ------- | ----- |  | - | ------- | ------- | - | - | ------- | ------- | -
|         |                     | 2006                |   |         | 2005  |  |   | 2004    |        
|         |                     |                     |   |         |       |  |   |         |        
|Current  |                     |                     |   |         |       |  |   |         |         |   |   |        
|         | Federal             |                     | $ | 195     |       |  |   |         |         |   | $ | (3,475  | )      
|         | State               |                     |   | 3       |       |  |   | 4       |         |   |   | 4       |        
|         | Foreign             |                     |   | 1,045   |       |  |   |         |         |   |   |         |        
|         |                     |                     |   |         |       |  |   |         |        
|         |                     | Total Current       |   | $       | 1,243 |  |   | $       | 4       |   |   | $       | (3,471  | )
|         |                     |                     |   |         |       |  |   |         |        
|Deferred |                     |                     |   |         |       |  |   |         |         |   |   |        
|         | Federal             |                     | $ | (13,674 | )     |  | $ | (24,170 | )       |   | $ | (14,202 | )      
|         | State               |                     |   | (1,250  | )     |  |   | (5,669  | )       |   |   | (2,543  | )      
|         | Valuation allowance |                     |   | 18,316  |       |  |   | 3,952   |         |   |   | (1,629  | )      
|         |                     |                     |   |         |       |  |   |         |        
|         |                     | Total Deferred      |   | $       | 3,392 |  |   | $       | (25,887 | ) |   | $       | (18,374 | )
|         |                     |                     |   |         |       |  |   |         |        
|         |                     | Total Tax (Benefit) |   | $       | 4,635 |  |   | $       | (25,883 | ) |   | $       | (21,845 | )
|         |                     |                     |   |         |       |  |   |         |        





|                       |                   |                           |   |        |        |  |   |         |        | 
|---------------------- | ----------------- | ------------------------- | - | ------ | ------ |  | - | ------- | ------ | 
|                       |                   | 2006                      |   |        | 2005   | 
|                       |                   |                           |   |        |        | 
|Deferred Tax Inventory |                   |                           |   |        |        |  |   |        
|                       | NOL               |                           | $ | 2,884  |        |  | $ | 8,991   |       
|                       | Tax Credits       |                           |   | 2,466  |        |  |   | 1,226   |       
|                       | Alliance Ventures |                           |   | 35,302 |        |  |   | 34,499  |       
|                       | L/ T Tower        |                           |   | 18,793 |        |  |   | 20,706  |       
|                       | UMC               |                           |   |        |        |  |   | (24,293 | )     
|                       |                   |                           |   |        |        | 
|                       |                   | Gross deferred tax assets |   | $      | 59,445 |  |   | $       | 41,129 | 
|                       |                   |                           |   |        |        | 



|                        |                                          |       |   |         |       |  |   |         |         |   |   |         |         |  
|----------------------- | ---------------------------------------- | ----- | - | ------- | ----- |  | - | ------- | ------- | - | - | ------- | ------- | -
|                        |                                          | 2006  |   |         | 2005  |  |   | 2004    |        
|                        |                                          |       |   |         |       |  |   |         |        
|Tax rate reconciliation |                                          |       |   |         |       |  |   |         |         |   |   |        
|                        | Federal statutory rate                   |       |   | 35      | %     |  |   | 35      | %       |   |   | 35      | %      
|                        | Tax at federal statutory rate            |       | $ | (1,598  | )     |  | $ | (12,487 | )       |   | $ | (3,577  | )      
|                        | State taxes, net of federal benefit      |       |   | (1,248  | )     |  |   | (5,669  | )       |   |   | (2,542  | )      
|                        | Tax benefit from discontinued operations |       |   | (10,207 | )     |  |   | (12,404 | )       |   |   | (11,726 | )      
|                        | Change in valuation allowance            |       |   | 18,315  |       |  |   | 3,952   |         |   |   | (1,629  | )      
|                        | Other, net                               |       |   | (627    | )     |  |   | 725     |         |   |   | (2,371  | )      
|                        |                                          | Total |   | $       | 4,635 |  |   | $       | (25,883 | ) |   | $       | (21,845 | )
|                        |                                          |       |   |         |       |  |   |         |        



F-32



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|         |                   
|-------- | ------------------
|Note 12. | Stock Option Plans



| |                       
| | ----------------------
| | 1992 Stock Option Plan







| |                             
| | ----------------------------
| | Directors Stock Option Plan



F-33



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                            |                   |               |           |                     |        |  |           |            |   |   |      |      | 
|--------------------------- | ----------------- | ------------- | --------- | ------------------- | ------ |  | --------- | ---------- | - | - | ---- | ---- | 
|                            |                   |               |           | Options Outstanding |       
|                            |                   |               |           |                     |       
|                            |                   | Options       |           |                     |        |  | Weighted  |           
|                            |                   | Available for |           |                     |        |  | Average   |           
|                            |                   | Grant         |           |                     | Shares |  |           | Prices     |  
|                            |                   |               |           |                     |        |  |           |            |  
|Activity  All option plans |                   |               |           |                     |        |  |           |            |   |   |      |     
|Balance at March 31, 2003   |                   |               | 4,283,877 |                     |        |  | 2,597,262 |            |   | $ | 9.18 |     
|                            | Options granted   |               |           | (1,643,900          | )      |  |           | 1,643,900  |   |   | $    | 5.94 | 
|                            | Options canceled  |               |           | 588,450             |        |  |           | (588,450   | ) |   | $    | 9.77 | 
|                            | Options exercised |               |           |                     |        |  |           | (152,230   | ) |   | $    | 3.08 | 
|                            |                   |               |           |                     |        |  |           |            |  
|Balance at March 31, 2004   |                   |               | 3,228,427 |                     |        |  | 3,500,482 |            |   | $ | 7.82 |     
|                            | Options granted   |               |           | (849,500            | )      |  |           | 849,500    |   |   | $    | 3.94 | 
|                            | Options canceled  |               |           | 824,583             |        |  |           | (824,583   | ) |   | $    | 7.05 | 
|                            | Options exercised |               |           |                     |        |  |           | (130,249   | ) |   | $    | 2.83 | 
|                            |                   |               |           |                     |        |  |           |            |  
|Balance at March 31, 2005   |                   |               | 3,203,510 |                     |        |  | 3,395,150 |            |   | $ | 7.23 |     
|                            | Options granted   |               |           | (442,000            | )      |  |           | 442,000    |   |   | $    | 2.70 | 
|                            | Options canceled  |               |           | 1,382,025           |        |  |           | (1,382,025 | ) |   | $    | 7.33 | 
|                            |                   |               |           |                     |        |  |           |            |  
|Balance at March 31, 2006   |                   |               | 4,143,535 |                     |        |  | 2,455,125 |            |   | $ | 6.00 |     
|                            |                   |               |           |                     |        |  |           |            |  





F-34



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Outstanding and Exercisable by Price Range


As of March 31, 2006


|                         |  |             |           |          |               |  |          |          |  |           |             |  |          |          |         |  |  |   |       | 
|------------------------ |  | ----------- | --------- | -------- | ------------- |  | -------- | -------- |  | --------- | ----------- |  | -------- | -------- | ------- |  |  | - | ----- | 
|                         |  |             |           | Weighted |               |  |          |          |  |           |            
|                         |  |             |           | Average  |               |  | Weighted |          |  | Number of |             |  | Weighted |         
|                         |  | Number of   |           |          | Remaining     |  |          | Average  |  |           | Vested and  |  |          | Average  |        
|                         |  | Options     |           |          | Contractual   |  |          | Exercise |  |           | Exercisable |  |          | Exercise |        
|Range of Exercise Prices |  | Outstanding |           |          | Life in Years |  |          | Price    |  |           | Options     |  |          | Price    |        
|                         |  |             |           |          |               |  |          |          |  |           |             |  |          |          |        
|$ 1.57 - $ 1.78          |  |             | 3,000     |          |               |  | 9.10     |          |  | $         | 1.66        |  |          |          |        |  |  | $ |      | 
|$ 2.60 - $ 3.06          |  |             | 553,100   |          |               |  | 7.67     |          |  | $         | 2.79        |  |          |          | 32,800  |  |  | $ | 3.04  | 
|$ 3.26 - $ 4.99          |  |             | 539,500   |          |               |  | 5.36     |          |  | $         | 3.93        |  |          |          | 246,505 |  |  | $ | 4.06  | 
|$ 4.99 - $ 7.38          |  |             | 170,175   |          |               |  | 4.24     |          |  | $         | 6.67        |  |          |          | 77,850  |  |  | $ | 6.69  | 
|$ 7.57 - $11.32          |  |             | 223,600   |          |               |  | 3.09     |          |  | $         | 8.50        |  |          |          | 147,025 |  |  | $ | 8.48  | 
|$11.44 - $17.00          |  |             | 296,750   |          |               |  | 1.03     |          |  | $         | 12.92       |  |          |          | 264,750 |  |  | $ | 12.97 | 
|$18.62 - $27.25          |  |             | 10,000    |          |               |  | 0.27     |          |  | $         | 24.25       |  |          |          | 10,000  |  |  | $ | 24.25 | 
|                         |  |             |           |          |               |  |          |          |  |           |             |  |          |          |        
|$ 1.57 - $27.25          |  |             | 1,796,125 |          |               |  | 4.94     |          |  | $         | 6.00        |  |          |          | 778,930 |  |  | $ | 8.40  | 
|                         |  |             |           |          |               |  |          |          |  |           |             |  |          |          |        



|                        |  |      |             |  |      |  |             |      |  |  |             | 
|----------------------- |  | ---- | ----------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|Fair Value Assumptions  |  | 2006 |             |  | 2005 |  |             | 2004 | 
|                        |  |      |             |  |      |  |             |      | 
|Expected life           |  |      | 5.2 years   |  |      |  | 5 years     |      |  |  | 5 years     | 
|Risk-free interest rate |  |      | 4.4% - 4.7% |  |      |  | 3.4% - 4.3% |      |  |  | 2.4% - 3.2% | 
|Volatility              |  |      | 57.92%      |  |      |  | 88% - 91%   |      |  |  | 92% - 94%   | 
|Dividend yield          |  |      | 0.00%       |  |      |  | 0.00%       |      |  |  | 0.00%       | 



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

12-month 6-month 6-month




F-35



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                           |  |      |     |  |      |  |               |      |  |  |               | 
|-------------------------- |  | ---- | --- |  | ---- |  | ------------- | ---- |  |  | ------------- | 
|                           |  | 2006 |     |  | 2005 |  |               | 2004 | 
|                           |  |      |     |  |      |  |               |      | 
|Expected life(1)           |  |      | N/A |  |      |  | 6 - 12 months |      |  |  | 6 - 12 months | 
|Risk-free interest rate(1) |  |      | N/A |  |      |  | 1.1% - 2.5%   |      |  |  | 1.1% - 1.7%   | 
|Volatility(1)              |  |      | N/A |  |      |  | 62% - 65%     |      |  |  | 64% - 67%     | 
|Dividend yield             |  |      | N/A |  |      |  | 0.0%          |      |  |  | 0.0%          | 





|         |                           
|-------- | --------------------------
|Note 13. | 401(k) Salary Savings Plan





|         |              
|-------- | -------------
|Note 14. | Legal Matters



| |             
| | ------------
| | Balla Matter







F-36



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                   
| | ------------------
| | SegTec Ltd. Matter





| |                                      
| | -------------------------------------
| | Tower Semiconductor Ltd. Class Action

14a-9


F-37



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                
| | ---------------
| | Patrizio Matter





| |                             
| | ----------------------------
| | Accrual for Potential Losses





|         |                           
|-------- | --------------------------
|Note 15. | Related Party Transactions





F-38



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












start-up


F-39



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


start-up








e-commerce,








|         |                                   
|-------- | ----------------------------------
|Note 16. | Segment and Geographic Information



F-40



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|                                         |                     |        |        |        |            |   |         |        |  |   |         |        | 
|---------------------------------------- | ------------------- | ------ | ------ | ------ | ---------- | - | ------- | ------ |  | - | ------- | ------ | 
|Fiscal Year 2006                         |                     | Memory |        |        | Non Memory |   |         | Total  | 
|                                         |                     |        |        |        |            |   |         |        | 
|Revenue                                  |                     | $      | 8,350  |        |            | $ | 16,184  |        |  | $ | 24,534  |       
|Cost of revenue                          |                     |        | 10,963 |        |            |   | 9,835   |        |  |   | 20,798  |       
|                                         |                     |        |        |        |            |   |         |        | 
|                                         | Gross Profit (loss) |        |        | (2,613 | )          |   |         | 6,349  |  |   |         | 3,736  | 
|                                         |                     |        |        |        |            |   |         |        | 
|R&D expense                              |                     |        | 4,868  |        |            |   | 13,048  |        |  |   | 17,916  |       
|SG&A expense                             |                     |        | 1,143  |        |            |   | 4,269   |        |  |   | 5,412   |       
|                                         |                     |        |        |        |            |   |         |        | 
|                                         | Operating Expense   |        |        | 6,011  |            |   |         | 17,317 |  |   |         | 23,328 | 
|                                         |                     |        |        |        |            |   |         |        | 
|Pretax Loss from discontinued operations |                     | $      | (8,624 | )      |            | $ | (10,968 | )      |  | $ | (19,592 | )     
|                                         |                     |        |        |        |            |   |         |        | 

F-41



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                         |                     |        |         |        |            |   |         |        |  |   |         |        |  
|---------------------------------------- | ------------------- | ------ | ------- | ------ | ---------- | - | ------- | ------ |  | - | ------- | ------ | -
|Fiscal Year 2005                         |                     | Memory |         |        | Non Memory |   |         | Total  | 
|                                         |                     |        |         |        |            |   |         |        | 
|Revenue                                  |                     | $      | 11,787  |        |            | $ | 11,812  |        |  | $ | 23,599  |       
|Cost of revenue                          |                     |        | 17,973  |        |            |   | 8,201   |        |  |   | 26,174  |       
|                                         |                     |        |         |        |            |   |         |        | 
|                                         | Gross Profit (loss) |        |         | (6,186 | )          |   |         | 3,611  |  |   |         | (2,575 | )
|                                         |                     |        |         |        |            |   |         |        | 
|R&D expense                              |                     |        | 4,156   |        |            |   | 15,413  |        |  |   | 19,569  |       
|SG&A expense                             |                     |        | 2,582   |        |            |   | 5,147   |        |  |   | 7,729   |       
|Write off of goodwill                    |                     |        |         |        |            |   | 1,538   |        |  |   | 1,538   |       
|                                         |                     |        |         |        |            |   |         |        | 
|                                         | Operating Expense   |        |         | 6,738  |            |   |         | 22,098 |  |   |         | 28,836 |  
|                                         |                     |        |         |        |            |   |         |        | 
|Pretax Loss from discontinued operations |                     | $      | (12,924 | )      |            | $ | (18,487 | )      |  | $ | (31,411 | )     
|                                         |                     |        |         |        |            |   |         |        | 

|                                         |                     |        |        |       |            |   |         |        |  |   |         |        | 
|---------------------------------------- | ------------------- | ------ | ------ | ----- | ---------- | - | ------- | ------ |  | - | ------- | ------ | 
|Fiscal Year 2004                         |                     | Memory |        |       | Non Memory |   |         | Total  | 
|                                         |                     |        |        |       |            |   |         |        | 
|Revenue                                  |                     | $      | 17,860 |       |            | $ | 8,811   |        |  | $ | 26,671  |       
|Cost of revenue                          |                     |        | 15,804 |       |            |   | 5,036   |        |  |   | 20,840  |       
|                                         |                     |        |        |       |            |   |         |        | 
|                                         | Gross Profit (loss) |        |        | 2,056 |            |   |         | 3,775  |  |   |         | 5,831  | 
|                                         |                     |        |        |       |            |   |         |        | 
|R&D expense                              |                     |        | 6,035  |       |            |   | 16,205  |        |  |   | 22,240  |       
|SG&A expense                             |                     |        | 3,008  |       |            |   | 5,251   |        |  |   | 8,259   |       
|                                         |                     |        |        |       |            |   |         |        | 
|                                         | Operating Expense   |        |        | 9,043 |            |   |         | 21,456 |  |   |         | 30,499 | 
|                                         |                     |        |        |       |            |   |         |        | 
|Pretax Loss from discontinued operations |                     | $      | (6,987 | )     |            | $ | (17,681 | )      |  | $ | (24,668 | )     
|                                         |                     |        |        |       |            |   |         |        | 



|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |     |     |   
|------------------- | ----------------------- | -------------------------- | ------ | -------- | ------- |  | --- | --------- | -------- | - | ------------ | ------ | ------ | ------------ | --- | -- | ---------- | - | ------ | ---------- | ------ |  | ------ | -- | -- | - | - | --- | --- | -- | --- | --- | --- | --
|                    |                         | Years Ended March 31,      |        |          |         |  |    
|                    |                         |                            |        |          |         |  |    
|                    |                         |                            |        |          |         |  |     | March 31, |          |   | March 31,    |       
|                    |                         | 2006                       |        |          | 2005    |  |     | 2004      |          |   | 2006 vs 2005 |        |        | 2005 vs 2004 |    
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |    
|                    |                         |                            |        | % of Net |         |  |     |           | % of Net |   |              |        |        | % of Net     |     |    | Percentage |   |        | Percentage |       
|                    |                         | Amount                     |        |          | Revenue |  |     | Amount    |          |   | Revenue      |        |        | Amount       |     |    | Revenue    |   |        | Change     |        |  | Change |   
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|Memory segment:     |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    | SRAM                    |                            | $      | 8,302    |         |  |     | 34        | %        |   | $            | 10,211 |        |              |     | 43 | %          |   | $      | 11,603     |        |  |        | 44 | %  |   |   | (19 | )%  |    |     | (12 | )% 
|                    | DRAM                    |                            | $      | 48       |         |  |     | 0         | %        |   | $            | 1,576  |        |              |     | 7  | %          |   | $      | 6,257      |        |  |        | 23 | %  |   |   | (97 | )%  |    |     | (75 | )% 
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|                    |                         | Memory segment revenue     |        |          | 8,350   |  |     |           | 34       | % |              |        | 11,787 |              |     |    | 50         | % |        |            | 17,860 |  |        |    | 67 | % |   |     | (29 | )% |     |     | (34 | )%
|Non-memory segment: |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    | Analog and Mixed Signal |                            | $      | 10,833   |         |  |     | 44        | %        |   | $            | 7,337  |        |              |     | 31 | %          |   | $      | 4,316      |        |  |        | 16 | %  |   |   | 48  | %   |    |     | 70  | %  
|                    | System Solutions        |                            | $      | 5,351    |         |  |     | 22        | %        |   | $            | 4,475  |        |              |     | 19 | %          |   | $      | 4,495      |        |  |        | 17 | %  |   |   | 20  | %   |    |     | 0   | %  
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|                    |                         | Non-memory segment revenue |        |          | 16,184  |  |     |           | 66       | % |              |        | 11,812 |              |     |    | 50         | % |        |            | 8,811  |  |        |    | 33 | % |   |     | 37  | %  |     |     | 34  | % 
|Other               |                         |                            |       |          |         |  |     |           |          |   |             |        |        |              |     |    |            |   |        |            |        |  |        |    |    |   |   |     |     |    |     |    
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   
|Net revenue         |                         | $                          | 24,534 |          |         |  | 100 | %         |          | $ | 23,599       |        |        |              | 100 | %  |            | $ | 26,671 |            |        |  | 100    | %  |    |   | 4 | %   |     |    | (12 | )% 
|                    |                         |                            |        |          |         |  |     |           |          |   |              |        |        |              |     |    |            |   |        |            |        |  |        |   

F-42



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##### Table of Contents



ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                       |        |  |      |   |        |      |  |   |        | 
|-------------------------------------------- |  | --------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                             |  | Years Ended March 31, |       
|                                             |  |                       |       
|                                             |  | 2006                  |        |  | 2005 |   |        | 2004 | 
|                                             |  |                       |        |  |      |   |        |      | 
|US                                           |  | $                     | 6,623  |  |      | $ | 8,160  |      |  | $ | 8,789  | 
|Canada and Central America                   |  |                       | 958    |  |      |   | 625    |      |  |   | 476    | 
|Taiwan                                       |  |                       | 4,424  |  |      |   | 3,047  |      |  |   | 3,245  | 
|Japan                                        |  |                       | 2,711  |  |      |   | 2,406  |      |  |   | 2,934  | 
|Hong Kong                                    |  |                       | 2,897  |  |      |   | 3,132  |      |  |   | 2,041  | 
|Asia (excluding Taiwan, Japan and Hong Kong) |  |                       | 4,438  |  |      |   | 2,971  |      |  |   | 2,617  | 
|United Kingdom                               |  |                       | 1,085  |  |      |   | 1,834  |      |  |   | 2,652  | 
|Europe (excluding United Kingdom)            |  |                       | 1,189  |  |      |   | 1,350  |      |  |   | 3,864  | 
|Rest of world                                |  |                       | 209    |  |      |   | 74     |      |  |   | 53     | 
|                                             |  |                       |        |  |      |   |        |      | 
|Net revenue                                  |  | $                     | 24,534 |  |      | $ | 23,599 |      |  | $ | 26,671 | 
|                                             |  |                       |        |  |      |   |        |      | 



|              |       |      |       |       |      |   |       |       | 
|------------- | ----- | ---- | ----- | ----- | ---- | - | ----- | ----- | 
|              |       | 2006 |       |       | 2005 |  
|              |       |      |       |       |      |  
|North America |       | $    | 1,530 |       |      | $ | 2,795 |      
|India         |       |      | 1,086 |       |      |   | 1,314 |      
|Taiwan        |       |      | 122   |       |      |   | 199   |      
|Rest of world |       |      | 4     |       |      |   | 8     |      
|              |       |      |       |       |      |  
|              | Total |      | $     | 2,742 |      |   | $     | 4,316 | 
|              |       |      |       |       |      |  



|         |                  
|-------- | -----------------
|Note 17. | Subsequent Events





F-43



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ALLIANCE SEMICONDUCTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-44



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ALLIANCE SEMICONDUCTOR CORPORATION





SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS


|                          |                                 |                |   |     |           |  |   |            |            |  |        |    |   |  |   |     | 
|------------------------- | ------------------------------- | -------------- | - | --- | --------- |  | - | ---------- | ---------- |  | ------ | -- | - |  | - | --- | 
|                          |                                 | Balance at     |   |     |           |  |   |            | Balance at | 
|                          |                                 | Beginning      |   |     |           |  |   |            | End of     | 
|Description               |                                 | of Period      |   |     | Additions |  |   | Reductions |            |  | Period |   
|                          |                                 |                |   |     |           |  |   |            |            |  |        |   
|                          |                                 | (In thousands) |  
|Year ended March 31, 2006 |                                 |                |   |     |           |  |   |            |            |  |        |    |   |  |   |    
|                          | Allowance for doubtful accounts |                | $ | 118 |           |  | $ | 48         |            |  | $      | 36 |   |  | $ | 130 | 
|Year ended March 31, 2005 |                                 |                |   |     |           |  |   |            |            |  |        |    |   |  |   |    
|                          | Allowance for doubtful accounts |                | $ | 125 |           |  | $ |            |            |  | $      | (7 | ) |  | $ | 118 | 
|Year ended March 31, 2004 |                                 |                |   |     |           |  |   |            |            |  |        |    |   |  |   |    
|                          | Allowance for doubtful accounts |                | $ | 99  |           |  | $ | 26         |            |  | $      |    |   |  | $ | 125 | 

F-45



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##### Table of Contents






EXHIBIT INDEX


|        |    |                      |  |                                                                                                                                                                                                                                                                                                                           
|------- | -- | -------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                     
|Number  |    | Document Description
|        |    |                     
|        | 2  | .01(A)               |  | Asset Purchase Agreement dated May 1, 2006 by and among
    Alliance Semiconductor Corporation, PulseCore Holdings (Cayman)
    Inc. and PulseCore Semiconductor Corporation                                                                                                                                              
|       
|        | 2  | .02(B)               |  | Asset Purchase Agreement dated April 18, 2006 by and among
    Alliance Semiconductor Corporation, Chip Engines (India) Private
    Limited, Tundra Semiconductor Corporation, Tundra Acquisition
    Corporation, Inc. and Tundra Semiconductor Corporation on behalf
    of Tundra Semiconductor (India) Private Limited
|       
|        | 3  | .01(C)               |  | Registrants Certificate of Incorporation                                                                                                                                                                                                                                                                                 
|       
|        | 3  | .02(C)               |  | Registrants Certificate of Elimination of Series A
    Preferred Stock                                                                                                                                                                                                                                                   
|       
|        | 3  | .03(G)               |  | Registrants Certificate of Amendment of Certificate of
    Incorporation                                                                                                                                                                                                                                                 
|       
|        | 3  | .04(C)               |  | Registrants Bylaws                                                                                                                                                                                                                                                                                                       
|       
|        | 4  | .01(C)               |  | Specimen of Common Stock Certificate of Registrant                                                                                                                                                                                                                                                                        
|       
|        | 10 | .01                  |  | Registrants Stock Option Plan adopted by Registrant on
    April 7, 1992 and amended through September 19, 1996,
    and related documents (superseded by Exhibit 10.44)                                                                                                                                                 
|       
|        | 10 | .02(C)              |  | Form of Indemnity Agreement used between Registrant and certain
    of its officers and directors                                                                                                                                                                                                                         
|       
|        | 10 | .03(L)              |  | Form of Indemnity Agreement used between the Registrant and
    certain of its officers                                                                                                                                                                                                                                   
|       
|        | 10 | .04*(J)              |  | Subscription Agreement dated February 17, 1995, by and
    among Registrant, Singapore Technology Pte. Ltd. and Chartered
    Semiconductor Manufacturing Pte. Ltd.                                                                                                                                                       
|       
|        | 10 | .05*(J)              |  | Manufacturing Agreement dated February 17, 1995, between
    Registrant and Chartered Semiconductor Manufacturing Pte. Ltd.                                                                                                                                                                                               
|       
|        | 10 | .06(E)               |  | Supplemental Subscription Agreement dated March 15, 1995,
    by and among Registrant, Singapore Technology Pte. Ltd. and
    Chartered Semiconductor Manufacturing Pte. Ltd.                                                                                                                                             
|       
|        | 10 | .07*(E)              |  | Supplemental Manufacturing Agreement dated March 15, 1995,
    between Registrant and Chartered Semiconductor Manufacturing
    Pte. Ltd.                                                                                                                                                                                 
|       
|        | 10 | .08*(F)              |  | Foundry Venture Agreement dated July 8, 1995, by and among
    Registrant, S3 Incorporated and United Microelectronics
    Corporation                                                                                                                                                                                    
|       
|        | 10 | .09*(F)              |  | Foundry Capacity Agreement dated July 8, 1995, by and among
    Registrant, Fabco, S3 Incorporated and United Microelectronics
    Corporation                                                                                                                                                                            
|       
|        | 10 | .10*(G)              |  | Foundry Venture Agreement dated September 29, 1995, between
    Registrant and United Microelectronics Corporation                                                                                                                                                                                                        
|       
|        | 10 | .11*(G)              |  | Foundry Capacity Agreement dated September 29, 1995, by and
    among Registrant, FabVen and United Microelectronics Corporation                                                                                                                                                                                          
|       
|        | 10 | .12*(G)              |  | Written Assurances Re: Foundry Venture Agreement dated
    September 29, 1995 by and among Registrant, FabVen and
    United Microelectronics Corporation                                                                                                                                                                 
|       
|        | 10 | .13*(H)              |  | Letter Agreement dated June 26, 1996 by and among
    Registrant, S3 Incorporated and United Microelectronics
    Corporation                                                                                                                                                                                             
|       
|        | 10 | .14(I)               |  | Stock Purchase Agreement dated as of June 30, 1996 by and
    among Registrant, S3 Incorporated, United Microelectronics
    Corporation and United Semiconductor Corporation                                                                                                                                             
|       
|        | 10 | .15*(I)              |  | Amendment to Fabco Foundry Capacity Agreement dated as of
    July 3, 1996 by and among Registrant, S3 Incorporated,
    United Microelectronics Corporation and United Semiconductor
    Corporation                                                                                                                     
|       
|        | 10 | .16(I)               |  | Side Letter dated July 11, 1996 by and among Registrant, S3
    Incorporated, United Microelectronics Corporation and United
    Semiconductor Corporation                                                                                                                                                                
|       
|        | 10 | .17(J)              |  | 1996 Employee Stock Purchase Plan                                                                                                                                                                                                                                                                                         
|       
|        | 10 | .18(K)               |  | Letter Agreement dated December 23, 1996 by and among
    Registrant, S3 Incorporated, United Microelectronics Corporation
    and United Semiconductor Corporation                                                                                                                                                       
|       
|        | 10 | .19(L)               |  | Trademark License Agreement dated as of October 17, 1996
    between Registrant and Alliance Semiconductor International
    Corporation, a Delaware corporation, as amended through
    May 31, 1997                                                                                                                     



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##### Table of Contents



|        |    |                      |  |                                                                                                                                                                                                                                                              
|------- | -- | -------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                     
|Number  |    | Document Description
|        |    |                     
|       
|        | 10 | .20(L)               |  | Restated Amendment to FabCo Foundry Venture Agreement dated as
    of February 28, 1997 by and among Registrant, S3
    Incorporated, United Microelectronics Corporation and United
    Semiconductor Corporation                                           
|       
|        | 10 | .21(L)               |  | Letter Agreement dated April 25, 1997 by and among
    Registrant, S3 Incorporated, United Microelectronics Corporation
    and United Semiconductor Corporation                                                                                             
|       
|        | 10 | .22*(L)              |  | Restated DRAM Agreement dated as of February 28, 1996
    between Registrant and United Microelectronics Corporation                                                                                                                                         
|       
|        | 10 | .23*(L)              |  | First Amendment to Restated DRAM Agreement dated as of
    March 26, 1996 between Registrant and United
    Microelectronics Corporation                                                                                                                     
|       
|        | 10 | .24*(L)              |  | Second Amendment to Restated DRAM Agreement dated as of
    July 10, 1996 between Registrant and United
    Microelectronics Corporation                                                                                                                     
|       
|        | 10 | .26*(M)              |  | Sale and Transfer Agreement dated as of March 4, 1998                                                                                                                                                                                                        
|       
|        | 10 | .27(N)               |  | Alliance Venture Management, LLC Limited Liability Company
    Operating Agreement dated October 15, 1999                                                                                                                                                    
|       
|        | 10 | .28(N)               |  | Alliance Venture Management, LLC Amended Limited Liability
    Company Operating Agreement dated February 28, 2000                                                                                                                                           
|       
|        | 10 | .29(N)               |  | Alliance Ventures I, LP Agreement of Limited Partnership
    dated November 12, 1999                                                                                                                                                                         
|       
|        | 10 | .30(N)               |  | Alliance Ventures II, LP Agreement of Limited Partnership
    dated November 12, 1999                                                                                                                                                                        
|       
|        | 10 | .31(N)               |  | Alliance Ventures III, LP Agreement of Limited Partnership
    dated February 28, 2000                                                                                                                                                                       
|       
|        | 10 | .32(O)               |  | Share Purchase Agreement, dated as of July 4, 2000, by and
    between SanDisk Corporation and Tower Semiconductor Ltd.                                                                                                                                      
|       
|        | 10 | .33(O)               |  | Additional Purchase Obligation Agreement, dated as of
    July 4, 2000, by and between SanDisk Corporation and Tower
    Semiconductor Ltd.                                                                                                                  
|       
|        | 10 | .34(O)               |  | Registration Rights Agreement, dated as of January 18,
    2001, by and between Tower Semiconductor Ltd., SanDisk
    Corporation, The Israel Corporation, Registrant, Macronix
    International Co., Ltd. and QuickLogic Corporation.                      
|       
|        | 10 | .35(O)               |  | Consolidated Shareholders Agreement, dated as of
    January 18, 2001 by and among SanDisk Corporation, The
    Israel Corporation, Registrant and Macronix International Co.,
    Ltd.                                                                      
|       
|        | 10 | .36(O)               |  | Alliance/Tower Joinder Agreement, dated August 29, 2000, by
    and between Registrant and Tower Semiconductor Ltd.                                                                                                                                          
|       
|        | 10 | .37(O)               |  | Alliance/TIC Joinder Agreement, dated August 29, 2000, by
    and between Registrant and The Israel Corporation                                                                                                                                              
|       
|        | 10 | .38(P)               |  | Alliance Venture Management, LLC Amended Limited Liability
    Company Operating Agreement dated January 23, 2001                                                                                                                                            
|       
|        | 10 | .39(P)               |  | Alliance Ventures IV, LP Agreement of Limited Partnership dated
    January 23, 2001                                                                                                                                                                         
|       
|        | 10 | .40(P)               |  | Alliance Ventures V, LP Agreement of Limited Partnership
    dated January 23, 2001                                                                                                                                                                          
|       
|        | 10 | .41(P)               |  | Loan Agreement dated May 17, 2001, by and between
    Registrant and Citibank, N.A.                                                                                                                                                                          
|       
|        | 10 | .42(P)               |  | Share Pledge Agreement dated May 17, 2001, by and between
    Registrant and Citibank, N.A.                                                                                                                                                                  
|       
|        | 10 | .43(Q)               |  | Asset Purchase Agreement dated January 17, 2002 by and
    between Registrant and PulseCore, Inc.                                                                                                                                                            
|       
|        | 10 | .44(R)               |  | Registrants 2002 Stock Option Plan                                                                                                                                                                                                                          
|       
|        | 10 | .45(S)               |  | Tower Semiconductor Agreement; Amendment No. 3 to payment
    schedule of Series A-5 additional purchase obligations,
    waiver of Series A-5 conditions, conversion of
    Series A-4 wafer credits and other provisions, dated as of
    November 11, 2003
|       
|        | 10 | .46(T)               |  | Form of Stock Option Agreement under Registrants 2002
    Stock Option Plan                                                                                                                                                                                 
|       
|        | 10 | .47(U)               |  | Agreement dated June 8, 2006 by and among Alliance
    Semiconductor (India) Private Limited, Megasri Constructions
    Limited and Vibha Agrotech Limited (each, a company registered
    under the Companies Act, 1956 (India))                            



---



##### Table of Contents



|        |    |                      |  |                                                                                                                                                                                                                         
|------- | -- | -------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                     
|Number  |    | Document Description
|        |    |                     
|       
|        | 10 | .48(V)               |  | Settlement Agreement by and among Alliance Semiconductor
    Corporation and the other signatories listed therein dated as of
    October 17, 2005, incorporated by reference to the
    Form 8-K filed October 21, 2005
|       
|        | 10 | .49(V)               |  | Form of Amendment to Indemnity Agreement approved by the Board
    of Directors on October 17, 2005, incorporated by reference
    to the Form 8-K filed October 21, 2005                                               
|       
|        | 10 | .50H(W)              |  | Employment Agreement with Melvin L. Keating dated
    December 1, 2005                                                                                                                                                  
|       
|        | 10 | .51H(W)              |  | Stock Option Agreement with Melvin L. Keating dated
    December 1, 2005                                                                                                                                                
|       
|        | 10 | .52(X)              |  | Notice of Grant of Stock Options and Option Agreement between
    the Company and Melvin L. Keating dated March 28, 2006                                                                                                
|       
|        | 14 | .01(Y)               |  | Code of Ethics                                                                                                                                                                                                          
|       
|        | 16 | .01(Z)               |  | Letter from PricewaterhouseCoopers LLP (San Jose,
    California) regarding change in certifying accountant                                                                                                             
|       
|        | 21 | .01                  |  | Subsidiaries of Registrant                                                                                                                                                                                              
|       
|        | 23 | .01                  |  | Consent of PricewaterhouseCoopers LLP (San Jose, California)                                                                                                                                                            
|       
|        | 23 | .02                  |  | Consent of Mark Bailey & Company Ltd.                                                                                                                                                                                   
|       
|        | 24 | .01                  |  | Power of Attorney (see page 53)                                                                                                                                                                                         
|       
|        | 31 | .01                  |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of our Chief Executive Officer                                                                                                              
|       
|        | 31 | .02                  |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 of our Chief Financial Officer                                                                                                              
|       
|        | 32 | .01                  |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 of our Chief Executive Officer                                                           
|       
|        | 32 | .02                  |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002 of our Chief Financial Officer                                                           






|    |  |                                                                                                                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  | Management contract or compensatory plan or arrangement required
    to be filed as an Exhibit to this
    Form 10-K.                                                                                               
|   
|*   |  | Confidential treatment has been granted with respect to certain
    portions of this document.                                                                                                                      
|   
|(A) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on May 1, 2006.                                                     
|   
|(B) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on April 19, 2006.                                                  
|   
|(C) |  | The document referred to is hereby incorporated by reference
    from Registrants Registration Statement on
    Form SB-2 (File
    No. 33-69956-LA)
    declared effective by the Commission on November 30, 1993.
|   
|(D) |  | The document referred to is hereby incorporated by reference
    from Registrants Registration Statement on
    Form SB-2 (File
    No. 33-90346-LA)
    declared effective by the Commission on March 28, 1995.   
|   
|(E) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on April 28, 1995.                                                  
|   
|(F) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on July 24, 1995.                                                   
|   
|(G) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on October 23, 1995.                                                
|   
|(H) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on August 13, 1996.                                              
|   
|(I) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on November 12, 1996.                                            
|   
|(J) |  | The document referred to is hereby incorporated by reference
    from Registrants Registration Statement on
    Form S-8 (File
    No. 333-13461)
    filed with the Commission on October 4, 1996.                
|   
|(K) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on February 11, 1997.                                            



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|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(L) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on June 27, 1997.             
|   
|(M) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on March 19, 1998.            
|   
|(N) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on June 30, 2000.             
|   
|(O) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on February 13, 2001.      
|   
|(P) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on June 29, 2001.             
|   
|(Q) |  | The document referred to is filed hereby incorporated by
    reference from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on February 12, 2002.
|   
|(R) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on July 15, 2002.             
|   
|(S) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed
    with the Commission on February 10, 2004.      
|   
|(T) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on June 23, 2005.             
|   
|(U) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed
    with the Commission on June 14, 2006.             
|   
|(V) |  | The document referred to is hereby incorporated by reference
    from Registrants Quarterly Report on
    Form 10-Q filed on
    November 23, 2005.                          
|   
|(W) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed on
    December 5, 2005.                              
|   
|(X) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K filed on
    April 3, 2006.                                 
|   
|(Y) |  | The document referred to is hereby incorporated by reference
    from Registrants Annual Report on
    Form 10-K filed
    with the Commission on June 10, 2004.             
|   
|(Z) |  | The document referred to is hereby incorporated by reference
    from Registrants Current Report on
    Form 8-K/A filed
    on December 15, 2005.