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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 20-F
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 Commission File Number: 000-30540
 
 GIGAMEDIA LIMITED
 (Exact name of registrant as specified in its charter)
 REPUBLIC OF SINGAPORE
 (Jurisdiction of incorporation or organization)
8 TH FLOOR, 207 TIDING BOULEVARD, SECTION 2, TAIPEI 114, TAIWAN, R.O.C.
(Address of principal executive offices)
 Yichin LEE, Chief Executive Officer
8 TH FLOOR, 207 TIDING BOULEVARD, SECTION 2, TAIPEI 114, TAIWAN, R.O.C.
Tel: 886-2-2656-8000; Fax: 886-2-2656-8003
 
 Securities registered or to be registered pursuant to Section 12(b) of the Exchange Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares
    
    The NASDAQ Stock Market LLC
 Securities registered or to be registered pursuant to Section 12(g) of the Exchange Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
  56,262,575 ordinary shares
 Yes o No þ
 o þ
  þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board o
    
    Other o
 o o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I
    
    
    2ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    2ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    22ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    56ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    87ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
    
    
    96ITEM 8. FINANCIAL INFORMATION
    
    
    98ITEM 9. THE OFFER AND LISTING
    
    
    105ITEM 10. ADDITIONAL INFORMATION
    
    
    107ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    117ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    118PART II
    
    
    118ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    118ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
    
    
    119ITEM 15. CONTROLS AND PROCEDURES
    
    
    120ITEM 16. RESERVED
    
    
    122ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    122ITEM 16 B. CODE OF ETHICS
    
    
    122ITEM 16 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    122ITEM 16 D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    123ITEM 16 E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
    
    
    123ITEM 16 F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANTS
    
    
    123ITEM 16 G. CORPORATE GOVERNANCE
    
    
    124PART III
    
    
    124ITEM 17. FINANCIAL STATEMENTS
    
    
    124ITEM 18. FINANCIAL STATEMENTS
    
    
    124ITEM 19. EXHIBITS
    
    
    124Exhibit 4.45Exhibit 4.46Exhibit 4.47Exhibit 4.48Exhibit 4.49Exhibit 4.50Exhibit 4.51Exhibit 4.52Exhibit 4.53Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2Exhibit 15.3Exhibit 18.1Exhibit 18.2
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CERTAIN TERMS AND CONVENTSIONS
     DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our business plan and strategies;
 
    
    our future business development and potential financial condition, results of
operations and other projected financial information;
 
    
    our ability to manage current and potential future growth;
 
    
    expected continued acceptance of our revenue model;
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
    
    our plans for strategic partnerships, licenses and alliances;
 
    
    our acquisition and strategic investment strategy, and ability to successfully
integrate any past, current, or future acquisitions into our operations;
 
    
    our ability to protect our intellectual property rights and the security of our
customers information;
 
    
    the launch of new online games according to our timetable;
 
    
    expected continued acceptance of our online games, including expected growth of the
online games industry, and consumer preferences for our products and services;
 
    
    the in-house development of new online games and our plans to expand our in-house
online game development team;
 
    
    the performance of Everest Gaming and developments in the online gaming industry;
 
    
    our plans to license additional games from third parties, and the launch of these
new games or gaming software systems, including the timing of any such development,
licenses or launches, in various geographic markets;
 
    
    our ability to maintain and strengthen our position as one of the largest online
MahJong operators in Taiwan;
 
    
    the potential entry of new competitors in any of our business lines;
 
    
    changes in the global regulatory environment relating to the online gaming business;
 
    
    changes or stability in certain regulatory environments relating to Everest Gamings
operations or gaming licenses;
 
    
    changes in PRC laws and regulations, and future enforcement of those laws and
regulations, including laws and regulations relating to Internet usage, advertising
over the Internet, Internet content providers, foreign investment and ownership in
online business, distribution of dividends and foreign exchange controls;
 
    
    the outcome of ongoing, or any future, litigation or arbitration; and
 
    
    our corporate classification by various governmental entities.
  
 PART I
 
 ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
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ITEM 3.
    
    KEY INFORMATION
 Exchange Rates
  A. Selected Financial Data
  For the Years Ended December 31,
 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$STATEMENT OF OPERATIONS DATA:OPERATING REVENUESGaming software and service revenues
    
    
    55,019
    
    
    
    118,950
    
    
    
    144,765
    
    
    
    112,694
    
    
    
    25,820Asian online game and service revenues
    
    
    18,692
    
    
    
    32,764
    
    
    
    45,604
    
    
    
    46,887
    
    
    
    38,862Total operating revenues
    
    
    73,711
    
    
    
    151,714
    
    
    
    190,369
    
    
    
    159,581
    
    
    
    64,682OPERATING COSTSCost of gaming software and service revenues
    
    
    (7,824
    )
    
    
    (16,201
    )
    
    
    (22,770
    )
    
    
    (20,102
    )
    
    
    (4,010
    )Cost of Asian online game and service revenues
    
    
    (3,667
    )
    
    
    (9,118
    )
    
    
    (12,404
    )
    
    
    (16,785
    )
    
    
    (17,103
    )Total operating costs
    
    
    (11,491
    )
    
    
    (25,319
    )
    
    
    (35,174
    )
    
    
    (36,887
    )
    
    
    (21,113
    )GROSS PROFIT
    
    
    62,220
    
    
    
    126,395
    
    
    
    155,195
    
    
    
    122,694
    
    
    
    43,569OPERATING EXPENSESProduct development and engineering expenses
    
    
    (5,244
    )
    
    
    (7,338
    )
    
    
    (13,455
    )
    
    
    (14,195
    )
    
    
    (7,301
    )Selling and marketing expenses
    
    
    (27,653
    )
    
    
    (60,106
    )
    
    
    (74,173
    )
    
    
    (79,421
    )
    
    
    (21,589
    )General and administrative expenses
    
    
    (11,096
    )
    
    
    (20,983
    )
    
    
    (25,035
    )
    
    
    (29,692
    )
    
    
    (31,780
    )Bad debt expenses
    
    
    (448
    )
    
    
    (548
    )
    
    
    (2,905
    )
    
    
    (1,092
    )
    
    
    (1,639
    )Impairment loss on property, plant, and equipment
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,250
    )
    
    
    (278
    )Impairment loss on goodwill
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (14,103
    )
    
    
    (2,255
    )Impairment loss on prepaid licensing fees and
intangible assets
    
    
    0
    
    
    
    0
    
    
    
    (1,524
    )
    
    
    (23,002
    )
    
    
    (2,200
    )Impairment loss on deconsolidation of T2CN
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (22,234
    )Other
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,989
    )Total operating expenses
    
    
    (44,441
    )
    
    
    (88,975
    )
    
    
    (117,092
    )
    
    
    (162,755
    )
    
    
    (91,265
    )Income (loss) from operations
    
    
    17,779
    
    
    
    37,420
    
    
    
    38,103
    
    
    
    (40,061
    )
    
    
    (47,696
    )Income (loss) from continuing operations
    
    
    18,173
    
    
    
    39,083
    
    
    
    35,710
    
    
    
    (56,102
    )
    
    
    1,408Income (loss) from discontinued operations
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435
    
    
    
    222
    
    
    
    (128
    )Net income (loss)
    
    
    31,105
    
    
    
    40,171
    
    
    
    45,145
    
    
    
    (55,880
    )
    
    
    1,280
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2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$Less: Net (income) loss attributable to the
noncontrolling interest and subsidiary preferred
shares
    
    
    (321
    )
    
    
    (1,281
    )
    
    
    (757
    )
    
    
    6,795
    
    
    
    1,370Net income (loss) attributable to GigaMedia
    
    
    30,784
    
    
    
    38,890
    
    
    
    44,388
    
    
    
    (49,085
    )
    
    
    2,650Earnings (loss) per share (in dollars):Basic:Income (loss) from continuing operations
    
    
    0.35
    
    
    
    0.72
    
    
    
    0.65
    
    
    
    (0.90
    )
    
    
    0.05Income (loss) from discontinued operations
    
    
    0.25
    
    
    
    0.02
    
    
    
    0.17
    
    
    
    0.00
    
    
    
    0.00Net income (loss)
    
    
    0.60
    
    
    
    0.74
    
    
    
    0.82
    
    
    
    (0.90
    )
    
    
    0.05Diluted:Income (loss) from continuing operations
    
    
    0.30
    
    
    
    0.63
    
    
    
    0.58
    
    
    
    (0.90
    )
    
    
    0.04Income (loss) from discontinued operations
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.16
    
    
    
    0.00
    
    
    
    0.00Net income (loss)
    
    
    0.51
    
    
    
    0.65
    
    
    
    0.74
    
    
    
    (0.90
    )
    
    
    0.04
 As of December 31,
 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$BALANCE SHEET DATA:Total current assets
    
    
    64,176
    
    
    
    115,417
    
    
    
    128,799
    
    
    
    104,839
    
    
    
    93,088Property, plant and equipment-net
    
    
    10,098
    
    
    
    13,008
    
    
    
    13,468
    
    
    
    5,989
    
    
    
    5,301Goodwill
    
    
    55,817
    
    
    
    85,149
    
    
    
    87,098
    
    
    
    44,417
    
    
    
    39,493Intangible assets-net
    
    
    23,067
    
    
    
    26,060
    
    
    
    28,930
    
    
    
    18,924
    
    
    
    19,769Total assets
    
    
    182,619
    
    
    
    283,865
    
    
    
    316,793
    
    
    
    260,181
    
    
    
    267,589Total GigaMedias shareholders equity
    
    
    134,087
    
    
    
    180,655
    
    
    
    228,456
    
    
    
    184,745
    
    
    
    217,521Common shares, no par value, and
additional paid-in capital
    
    
    289,495
    
    
    
    296,793
    
    
    
    300,021
    
    
    
    304,379
    
    
    
    309,332Number of issued shares (in thousands)
    
    
    51,495
    
    
    
    53,700
    
    
    
    54,365
    
    
    
    54,995
    
    
    
    56,263Dividends declared per share (in dollars)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
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D. Risk Factors
 Risks Related to Our Business and Industries
 The limited operating history of the Everest Gaming business and our Asian online game and
service business may not provide you with an adequate basis upon which to evaluate our business and
prospects
  
    
    respond to technological changes or resolve unexpected service interruptions in a
timely manner;
 
    
    adapt to regulatory changes;
 
    
    retain existing customers or attract new customers;
 
    
    license, develop, or acquire additional online games that are appealing to
consumers;
 
    
    anticipate and adapt to changing consumer preferences;
 
    
    adapt to competitive market conditions;
 
    
    adequately and efficiently operate, upgrade and develop our transaction and service
platforms; and
 
    
    maintain adequate control of our expenses.
  In operating our Asian online game and service business, we may fail to launch new games
according to our timetable, and our new games may not be commercially successful
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We may not be able to maintain a stable relationship with Blizzard, and we may experience
difficulties in the operation of the online games licensed from Blizzard
 ® ® ® ® ® ® ®
   Due to our ongoing dispute with the former chief executive officer of T2CN, we have lost
effective control over the T2CN Operating Entities and we may not be able to regain effective
control over the T2CN Operating Entities or T2CNs assets
        6




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Failure to maintain effective internal controls could have a material adverse effect on our
business, results of operations and the trading price of our Shares
     We may not be successful in operating and improving our existing online games to satisfy the
changing demands and preferences of players
  
    
    the popularity of existing and new online games operated by us;
 
    
    the introduction of new online games by us or third parties, competing with or
replacing our existing online games;
 
    
    general economic conditions, particularly economic conditions adversely affecting
discretionary consumer spending;
  7




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
    
    changes in our customer demands and preferences;
 
    
    regulatory and other risks associated with our operations in China, Taiwan and
Southeast Asia;
 
    
    the availability of other forms of entertainment; and
 
    
    critical reviews and public tastes and preferences, all of which change rapidly and
cannot be predicted.
   Our results of operations are subject to significant fluctuations
  
    
    Gaming software and service business: the regulatory restrictions applicable to the
Internet gaming industry; global economic conditions and general economic conditions of
the markets where the products of Everest Gaming target; availability of the Internet
infrastructure; and the technological and other competition from existing and new
competitors of Everest Gaming.
 
    
    Asian online game and service business: our ability to retain existing users;
attract new users and maintain user satisfaction; the pace of rolling out new games or
updating existing games by us or our competitors; the amount and timing of operating
costs and capital expenditures relating to our business operations and expansion;
seasonal trends in Internet use; price competition in the industry; regulatory and
other risks associated from our operations in the PRC, Taiwan and Southeast Asia.
  Our business strategy, which contemplates growth through acquisitions and strategic
investments, exposes us to significant risks
    8




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The online games market is characterized by rapid technological change, and failure to respond
quickly and effectively to new Internet technologies or standards may have a material adverse
effect on our business
  Our business could suffer if we do not successfully manage current growth and potential future
growth
  The current global economic slowdown and other adverse economic conditions may negatively
impact our business
   9




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Our Asian online game and service business faces intense competition, which may adversely
affect our revenues, profitability and planned business expansion
     Our Asian online game and service business depends on the reliability of the network
infrastructure and related services provided by ourselves and third parties, which is subject to
physical, technological, security and other risks; the Everest Gaming business also faces similar
risks
     10




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Any failure to maintain a stable and efficient distribution and payment network could have a
material and adverse impact on our Asian online game and service business, financial condition and
results of operations
   We could be liable for breaches of security on our websites and fraudulent transactions by
users of our websites
  Undetected programming errors or defects in our software, services and games and the
proliferation of cheating programs could materially and adversely affect our Asian online game and
service business and the Everest Gaming business, financial condition and results of operations
  Operation of pirate game servers and the expenses incurred in protecting our Asian online game
and service business operation against unlawful operations through pirate servers may adversely
affect our business
  We may be subject to claims of intellectual property right infringement by third parties,
which could subject us to significant liabilities and other costs
   11




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We may need to incur significant expenses to protect our intellectual property rights, and if
we are unable to
   Our future results of operations or the growth of our business may suffer if we are unable to
maintain satisfactory relationships with the licensors of our online games
  We may need additional capital in the future, and it may not be available on acceptable terms
  
    
    fund our operations;
 
    
    enhance and expand the range of products and services we offer; and
 
    
    respond to competitive pressures and perceived opportunities, such as investment,
acquisition and international expansion activities.
  We depend on our key personnel, and our business and growth prospects may be severely
disrupted if we lose their services
   12




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Our results of operations and financial condition are affected by political stability, as well
as the occurrence of natural disasters and epidemics
   In 2010, we recorded operating losses, and we may experience losses in the future
  Risks Related to Our Joint Venture with BetClic
 We do not control the management of our joint venture with BetClic and have no control over
its day-to-day business operations and any significant difficulties encountered by the joint
venture in its operations may have a material and adverse effect on our business and financial
results
      13




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The uncertain global legal and regulatory environment could have a negative impact on the
Everest Gaming business and prospects
    The Everest Gaming business faces intense competition, which may adversely affect our
financial results
  The Everest Gaming business will be materially and adversely affected if credit card companies
and other financial institutions cease to accept online gaming transactions
  The Everest Gaming business is international and therefore faces associated risks
   14




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Risks Related to Doing Business in Greater China
 PRC laws and regulations restrict foreign ownership and investment in the online game
industry, and substantial uncertainties exist with respect to the application and implementation of
PRC laws and regulations
 
     15




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The contractual arrangements with T2 Entertainment, T2 Advertisement, Jinyou and Shanghai JIDI
and their shareholders may not be as effective in providing operational control as direct ownership
and the shareholders of T2 Entertainment, T2 Advertisement, Jinyou and Shanghai JIDI may have
potential conflicts of interest with us
      16




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The laws and regulations governing the online games industry in the PRC are evolving and new
regulations may adversely affect our business
    There are currently no clear laws or regulations governing virtual asset property rights, in
particular, in Greater China, and therefore, it is not clear what liabilities, if any, online game
operators may have in respect of virtual assets
  Restrictions on virtual currency may adversely affect our revenues from online game operations
in the PRC
   17




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Our business may be adversely affected by government policies and regulation of Internet cafés
in the PRC
  Changes in foreign exchange and foreign investment regulations and limitations on dividend
payment in the PRC may affect our ability to invest in China and the ability of our PRC
subsidiaries to pay dividends and service debts
     18




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There are economic risks associated with doing business in Taiwan, particularly due to the
tense relationship between Taiwan and the PRC
  Risks Related to Ownership of our Shares
 The price of our Shares has been volatile historically and may continue to be volatile, which
may make it difficult for holders to resell our Shares when desired or at attractive prices
  We are controlled by the Koo family, which has significant influence in determining the
outcome of any corporate transaction or other matters submitted to our shareholders for approval,
and their interests may conflict with your interests
  Our transactions with related parties may not benefit us and may harm our Company
  Our Asian online game and service business in the PRC relies on revenues transferred from our
PRC VIEs to us pursuant to contractual arrangements. Any restriction on such payments for revenue
transfer and any increase in the amount of PRC taxes applicable to such payments may materially and
adversely affect our business and our ability to pay dividends to our shareholders
    19




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The ability of our subsidiaries in Taiwan to distribute dividends to us may be subject to
restrictions under the laws of Taiwan
  Anti-takeover provisions under the Singapore Securities and Futures Act (Chapter 289) and the
Singapore Code on Take-overs and Mergers may delay, deter or prevent a future takeover or change of
control of our Company, which could adversely affect the price of our Shares
    Our shareholders may be subject to Singapore taxes
  We are a Singapore company, and because the rights of shareholders under Singapore law differ
from those under U.S. law, you may have difficulty in protecting your shareholder rights or
enforcing any judgment obtained in the U.S. against us or our affiliates
    20




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We may be deemed to be an investment company under the United States Investment Company Act of
1940, which could have a significant negative impact on our results of operations
     We may be classified as a passive foreign investment company for U.S. federal income tax
purposes. As a result, you may be subject to materially adverse tax consequences with respect to
Shares
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Fluctuations in the exchange rates between the U.S. dollar and other currencies in which we
conduct our business could adversely affect our profitability
  
 ITEM 4.
    
    INFORMATION ON THE COMPANY
 A. History and Development of Our Company
     Time
    
    EventApril 2004
    
    We acquired the business and operations of Grand Virtual,
Inc., a privately-held gaming software developer and
application service provider, and its affiliates.September 2005
    
    We sold all of our ownership interest in the Rose Records
and Tachung Records music store chains with a view to
eliminating non-core operations.January 2006
    
    We acquired FunTown, an Asian online game and service
business operated in Taiwan and Hong Kong, to enhance our
position in the online entertainment market.May 2006
    
    We disposed of our ADSL business, which was an operational
line of our Internet access and services business.December 2006
    
    We acquired preferred shares in IAHGames, a leading online
game operator, publisher and distributor in Southeast Asia,
which were convertible into a 32.26 percent ordinary share
interest in IAHGames. In 2007, due to IAHGames issuance of
new preferred shares to third parties, the Companys
ownership percentage in IAHGames common equity on an as
converted basis was reduced to 28.43 percent. In July 2010,
we increased our ownership percentage in IAHGames to 80
percent by the acquisition of certain preferred shares from
existing shareholders and the subscription for new
preferred shares.June 2007
    
    We completed the acquisition of the controlling interest in T2CN, one of the online
casual game operators in the PRC.  On August 8 and August 12, 2009, we acquired certain ordinary shares of T2CN from two
existing shareholders respectively. As of May 31, 2011, we held approximately 67.09 percent of the total outstanding
voting rights of T2CN.September 2008
    
    We sold our last remaining non-core business, our consumer
cable modem and corporate ISP business, to China Network
Systems Co., Ltd. and its affiliates. The disposal
effectively completed our business restructuring process
which we began in 2004. For additional information, see
Item 5, Operating and Financial Review and Prospects 
Certain Significant Events affecting Our Results of
Operations for 2007, 2008 and 2009  Divestiture of our
legacy Internet access and service business and Item 10,
Additional Information  C. Material Contracts  Sale of
Internet Access and Service Business in this annual
report.April 2010
    
    We completed the sale of a 60 percent interest in our
online gaming software business to BetClic, a leading
European sports betting and online gaming group. The
strategic alliance with BetClic was structured as a stock
and asset sale to a newly-formed French entity, Everest
Gaming, in which we received a 40 percent stake. As part
of and as a condition to the completion of the transaction,
we purchased the shares of our then-major licensee, UIM,
all of the material assets of which were sold to Everest
Gaming as part of the transaction.April 2010
    
    We entered into several agreements with IAHGames itself and
certain shareholders of IAHGames, to acquire additional
preferred shares of IAHGames. The acquisition of IAHGames
was completed on July 1, 2010. As a result of the
acquisition, we hold preferred shares convertible into 80
percent of common shares of IAHGames. IAHGames
is a leading publisher, operator and distributor based in
Singapore and operates several award-winning titles
including EA SPORTS FIFA Online 2, Granado Espada and
Dragonica and distributes Take Two Interactive products
such as Grand Theft Auto IV and the NBA®2K series.
IAHGames, through its wholly owned subsidiary Monsoon,
entered into various agreements with Blizzard to distribute
selected Blizzard Entertainment® games in Singapore,
Malaysia, Thailand, Indonesia and the Philippines,
including bestselling games from Blizzards Diablo®
action-role-playing-game series, Warcraft® and StarCraft®
real-time strategy-game series, including StarCraft II:Wings of Liberty, and World of Warcraft® and its three
expansion sets, The Burning Crusade®, Wrath of the Lich
King® and Cataclysm.
  22




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##### Table of Contents



http://www.gigamedia.com
   B. Business Overview
     23




---



##### Table of Contents



® ® ® ® ® ® ® ®
  Asian Online Game and Service Business
 Our Operating Entities
 FunTown
  T2CN
   24




---



##### Table of Contents



IAHGames
  ® ® ® ® ® ® ®
    25




---



##### Table of Contents



®
 JIDI
   Our Games
  MahJong
       Card, Chance-Based and Simple Casual Games
   26




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##### Table of Contents



Advanced
Casual Games and Non-RPG MMOs
  
    
    broader range of players, including casual players, due to the casual nature
and relatively short duration; and
 
    
    a greater breadth of tools, engines, middleware and server solutions that can
make development of casual games relatively more cost-effective.
   Commercial
    
    
    
    RevenueGame
    
    Description
    
    Launch
    
    Game Source
    
    Model
    
    MarketTales Runner
    
    Sports  Obstacle
running
    
    June 2006 in Taiwan
August 2006 in Hong Kong
    
    Licensed
    
    Item-billing
    
    Taiwan Hong KongNanaimo
    
    Action
    
    December 2007
    
    Licensed
    
    Item-billing
    
    Hong KongEA Sports FIFA 
Online 2 (Thai)
    
    Online Sports Game
    
    December 11, 2008
    
    Licensed
    
    Item-billing
    
    ThailandEA Sports FIFA 
Online 2
(Vietnamese)
    
    Online Sports Game
    
    January 8, 2009
    
    Licensed
    
    Item-billing
    
    VietnamEA Sports FIFA 
Online 2 (English)
    
    Online Sports Game
    
    January 23, 2009
    
    Licensed
    
    Item-billing
    
    Singapore MalaysiaCHINESE CHARACTER
    
    Casual Web Game
    
    December 23, 2009 in Hong Kong
March 25, 2010 in Taiwan
    
    Licensed
    
    Item-billing
    
    Hong KongStarCraft® II: Wings
of Liberty
    
    Real-time Strategy
Game
    
    July 27, 2010 release of boxed licensed products

November 2010
Commercial launch of licensed game online
    
    Licensed
    
    Buy-to-play or Pay-to-Play
    
    Singapore Malaysia
Thailand Indonesia
Philippines Hong
Kong MacauCounter-Strike Online
    
    First Person
Shooting Game
    
    October 27, 2010
    
    Licensed
    
    Item-billing
    
    Singapore MalaysiaPaperman
    
    First Person
Shooting Game
    
    November 12, 2010
    
    Licensed
    
    Item-billing
    
    ThailandAlliance of Valiant
Arms
    
    Massively
multiplayer First
Person Shooting
Game
    
    November 17, 2010
    
    Licensed
    
    Item-billing
    
    Taiwan
Hong Kong
Macau
  27




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##### Table of Contents



Game
    
    Description
    
    Status
    
    Game Source
    
    Target MarketPaperman
    
    First Person
Shooting Game
    
    Game Localization
    
    Licensed
    
    IndonesiaEA Sports FIFA 
Online 2 (English)
    
    Online Sports Game
    
    Closed Beta Testing
    
    Licensed
    
    Indonesia
  MM RPGs
   Commercial
    
    Game
    
    RevenueGame
    
    Description
    
    Launch
    
    Source
    
    Model
    
    MarketGranado Espada
    
    MMORPG
    
    August 20, 2007
    
    Licensed
    
    Item-billing
    
    Singapore 
Malaysia 
PhilippinesEmil Chronicle Online
    
    MMORPG
    
    September 14, 2007
    
    Licensed
    
    Item-billing
    
    ThailandDragonica (Chinese)
    
    MMORPG
    
    June 4, 2009
    
    Licensed
    
    Item-billing
    
    MalaysiaNan Di Bei Gai 
or NS Master
    
    2D Flash MMORPG
    
    April 25, 2011
    
    Joint Operation
    
    Free-to-Play
    
    PRC
  28




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##### Table of Contents



StartedGame
    
    Description
    
    Distribution
    
    Game Source
    
    MarketWorld of Warcraft®:
Cataclysm
    
    MMORPG
    
    December 7, 2010
    
    Licensed
    
    Singapore, Malaysia
Thailand, Indonesia
PhilippinesWorld of Warcraft®:
Wrath of the Lich
King®
    
    MMORPG
    
    January 12, 2010
    
    Licensed
    
    Singapore, Malaysia
Thailand, Indonesia
PhilippinesWorld of Warcraft®:
The Burning
Crusade®
    
    MMORPG
    
    January 12, 2010
    
    Licensed
    
    Singapore, Malaysia
Thailand, Indonesia
PhilippinesWorld of Warcraft®
    
    MMORPG
    
    January 12, 2010
    
    Licensed
    
    Singapore, Malaysia
Thailand, Indonesia
PhilippinesWorld of Warcraft®
Prepaid Game Cards
    
    MMORPG
    
    January 12, 2010
    
    Licensed
    
    Singapore, Malaysia
Thailand, Indonesia
Philippines
  Game
    
    Description
    
    Status
    
    Game Source
    
    Target MarketArcheAge
    
    Medieval Fantasy Themed Action
Role-Playing Game
    
    Closed Beta Testing
in Korea
    
    Licensed
    
    Taiwan
Hong Kong
Macau4Story
    
    Cartoon Fantasy
Themed Role-Playing
Game
    
    Game Localization
    
    Licensed
    
    Taiwan
Hong Kong
MacauSpongeBob
SquarePants
    
    MMORPG
    
    Under Development
    
    Co-Development
    
    Asia
  29




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##### Table of Contents



®
  PC and Console Games
 ®
 Game
    
    Description
    
    Started Distribution
    
    Game Source
    
    MarketsGrand Theft Auto IV
    
    Action
    
    April 29, 2008
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesBorderlands
    
    First Person Shooter & RPG
    
    October 20, 2009
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia, PhilippinesStarCraft® Battle Chest®
    
    Real-time Strategy
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesWarcraft® Battle Chest®
    
    Real-time Strategy
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesDiablo® Battle Chest®
    
    Action Role Playing
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesDiablo® II
    
    Action Role Playing
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesDiablo® II Expansion Set: Lord
of Destruction®
    
    Action Role Playing
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesWarcraft® III: Reign of Chaos®
    
    Real-time Strategy
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesWarcraft® III: The Frozen Throne®
    
    Real-time Strategy
Game
    
    January 12, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesRed Dead Redemption
    
    Open War Shooter
    
    May 18, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
PhilippinesSid Meiers Civilization V®
    
    Strategy
    
    September 21, 2010
    
    Licensed
    
    Singapore,
Malaysia, Thailand,
Indonesia,
Philippines
  30




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##### Table of Contents



Game Sources
 In-house development of MahJong, Card, Chance-Based and Simple Casual Games
  Sources of MMORPGs, Advanced Casual Games and Non-RPG MMOs
         31




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##### Table of Contents



Our Primary Platforms and Services
 FunTown
  
    
    Player Clubs. FunTown offers online club services in its game community. FunTown
players can form their own clubs, invite other players with similar interests or skill
levels to join, and organize online and offline events for club members. Player clubs
complement the strong social features of online games by helping to maintain an online
game community.
 
    
    Tournaments. FunTown provides various tournaments for its online MahJong players.
After players join a club, they can participate in online in-club tournaments and
compete in weekly online inter-club tournaments. On an annual basis, FunTown organizes
large-scale tournaments, in which a large number of players are invited to the
tournament premises and compete online via computers.
 
    
    Avatars. To enhance players overall entertainment experience, FunTown offers many
in-game virtual items which may be purchased by players to customize their online
personal graphic profiles, or avatars. Players use avatars to create their own unique
look while participating in the online community. The virtual items for avatars
include facial expressions, clothes and different accessories. These items are
particularly popular with younger players, who customize their avatars to establish
unique identities and pursue distinct fashions in the online community.
 
    
    Friends and Family Messenger. The FunTown platform has a unique function designed
for players personal contacts, which is similar to the contact list of instant message
programs. This enables players to see when their friends and family members are online
and invite people in their personal network to play games together.
 
    
    Social Networking. The FunTown platform provides an online social networking
community called FunTown Village, in which players meet each other through their online
avatars. In FunTown Village, players can interact and communicate, purchase virtual
items, and even get married virtually. FunTown plans to introduce more virtual items
within FunTown Village to address the strong social interests of its players and to
help increase FunTowns overall appeal as a distinct online game community.
 
    
    Customer Services. FunTown provides support and services to its customers primarily
through walk-in customer service centers in Taipei and Hong Kong and e-mails and online
bulletin boards where players can inquire and receive responses from FunTown and other
players.
 
    
    Other Platforms. FunTown expects to launch its current online games onto other
platforms, including Android platform and Apples iOS platform and to allow data
synchronization between each of these platforms.
 IAHGames
  
    
    Membership Management. IAHGames utilizes an integrated service platform, namely
IAHGames Passport, to provide one-stop service to customers. IAHGames Passport is an
integrated membership management and payment system, which allows IAHGames to maintain
a single customer database containing each customers profile and transaction history.
Customers may log in, activate the games they wish to play, top up their game accounts
or pay to use any of the fee-based products and services. IAHGames Passport offers a
variety of payment methods including pre-paid cards, online payments, credit card
payment as well as mobile payment. To date, IAHGames Passport can collect payment (with
pre-paid card integration) from Singapore, Thailand, Malaysia, Indonesia, Philippines,
Hong Kong and Taiwan. Players can use IAHGames Passport to purchase game credits for
any game offered by IAHGames in micro transactions. Apart from IAHGames
Passport, IAHGames has an ecosystem of websites, forums and customer relationship
management for any online game IAHGames publishes and operates. IAHGames
Passport offers users single sign-in access to all these services.
 
    
    Tournaments. IAHGames provides various tournaments for its online games players.
IAHGames organizes both online and off-line tournaments for its various games, where
the winners can win prizes and qualify to take part in national or regional
tournaments. On an annual basis, IAHGames organizes large-scale tournaments, where
winners of national tournaments come together to compete in a regional competition.
 
    
    Game Masters. IAHGames delegates game masters to provide various in-game services
for its online game players. Game masters are responsible for organizing in-game events,
troubleshooting and actively and continuously monitoring the online game environment.
They respond to players inquiries, handle error reporting and removal process, and
identify and deter inappropriate player behaviors. IAHGames believes that the provision
of game
masters is an important customer service function to maintain customer loyalty and
effectively address technical problems as they arise.
  32




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##### Table of Contents




    
    Customer Services. IAHGames focuses on providing quality customer service in order
to retain its existing customers as well as attract new customers. IAHGames offers
multiple communication channels, including telephone hotline and customer service
ticketing system, for the customers to provide feedback and complaints about its
products or services at any time.
 JIDI
  
    
    Membership Management. JIDI utilizes an integrated service platform, namely
JIDI-Passport, to provide one-stop service to customers as well as distributors.
JIDI-Passport is an integrated membership management and payment system, which allows
JIDI to maintain a single customer database containing each customers profile and
transaction history. Customers may log in, pay and use any of the fee-based products
and services. In addition, JIDI-Passport allows our distributors to sell our game
points to Internet cafés. Internet cafés can also use JIDI-Passport to check their
point-balances and make payment on behalf of individual purchasers.
 
    
    Virtual Items. To enhance players overall entertainment experience, JIDI offers
many in-game virtual items which may be purchased by players to enhance the player
attacking or defense power, the armor and weapons and to customize their online
personal graphic profiles or avatars. Players are able to enhance their attacking
and/or defense power with an alternative virtual item purchase instead of going through
a certain amount of hours in game mission based practice. Such armor and weapon
virtual items are popular for players in war story line based and Chinese Kung Fu type
online games. Furthermore, players use avatars to create their own unique look while
participating in the online community. The virtual items for avatars include facial
expressions, clothes and different accessories. These items are particularly popular
with younger players, who customize their avatars to establish unique identities and
pursue distinct fashions in the online community.
 
    
    Social Networking. JIDIs integrated system also incorporates a variety of online
community features, such as bulletin boards which allow registered users to post notes
or inquiries and respond to other users questions and comments. JIDI believes these
features increase the user stickiness on our site and facilitate player interaction.
JIDI is currently building an online social networking community to further facilitate
access to its online game offering and accommodate different social net working needs
of its users in the PRC.
 
    
    Customer Services. JIDI focuses on providing quality customer service in order to
retain its existing customers as well as attract new customers. JIDI offers multiple
communication channels, including telephone hotline and customer service email, for the
customers to provide feedback and complaints about its products or services at any
time.
 PC Based Platforms for Certain Games
   33




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Our Marketing
  In-Game Events and Marketing
  Cross-Marketing
  Open Beta Testing
  Advertisements and Offline Promotions
  Game Magazines
  New Media Promotion
   34




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##### Table of Contents



Direct Marketing
  Our Distribution and Payment Channels
  Offline Physical Distribution Channels
  Internet-Based Distribution Channels
  Telecommunication Network Operators
  Payment Aggregators
   Our Operation Architecture
  Technology Infrastructure
    35




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##### Table of Contents



Our Players
    Competition
    Gaming Software and Service Business
  Everest Gaming
    36




---



##### Table of Contents



Terms of our joint venture with BetClic regarding Everest Gaming
       Competition
   37




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##### Table of Contents



Our Gaming Software and Service Business Prior to the Strategic Alliance with BetClic
  CESLs Products and Services
  Online Gaming Software and Management Tools
   Application and Consulting Services
  
    
    Infrastructure Design and Management Services. CESL provided the architectural
design of various infrastructure elements, including the servers, databases, networks,
routers, firewalls and management tools that are required for Internet gaming
operations.
 
    
    Transaction Processing Services. These services included (i) payment consultation
for designing timely collection and distribution systems for payments through a variety
of channels and merchants; (ii) billing consultation for designing real-time and
out-of-band transaction processing and order management; and (iii) risk management
consultation for creating and designing tools and processes for fraud detection,
prevention and management.
 
    
    Customer Support Services. CESL offered UIM a comprehensive round-the-clock
consultation support to resolve infrastructure issues. CESL also provided platform
technical support during periodic maintenance to update, patch, and fine-tune the
system performance of our software solutions.
  38




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##### Table of Contents




    
    Custom Gaming Software Development Services. CESL customized the entertainment
modules and interfaces for the gaming platform to meet specific requests of UIMs
affiliates or partners.
 
    
    Marketing Support Services. CESL created branded websites and provide marketing
support services to assist UIM in attracting new players.
 CESLs Technology and Infrastructure
  Relationship with UIM
 Prior License Arrangement with UIM
  UIM
   Intellectual Property
    39




---



##### Table of Contents



Regulation
 Regulations Relating to Online Games in Taiwan
  Rating of Internet Content
 Computer Software Ratings.
 Online Game Contract Template.
 Personal Data Protection Act.
  40




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##### Table of Contents



Regulations Relating to Online Games in the PRC
    
    
    MIIT (formerly the Ministry of Information Industry);
 
    
    the Ministry of Culture, or MOC;
 
    
    the General Administration of Press and Publication, or GAPP (formerly known as the
State Press and Publications Administration, or SPPA);
 
    
    the Ministry of Public Security;
 
    
    the State Administration of Industry and Commerce, or SAIC;
 
    
    the State Administration for Radio, Film and Television, or SARFT;
 
    
    the State Council Information Office, or SCIO; and
 
    
    the Ministry of Commerce, or MOFCOM.
 Foreign Ownership Restrictions
    41




---



##### Table of Contents



Licenses
   Online Games Regulations
     42




---



##### Table of Contents



43




---



##### Table of Contents



Internet Content and Publishing Regulations
   inter alia
   Import Regulations
  Information Security Regulations
   44




---



##### Table of Contents



Internet Café Regulation
  Privacy Protection
    Global Regulatory Environment Relating to the Everest Gaming Business
   45




---



##### Table of Contents



U.S. Regulations on Online Gaming
        46




---



##### Table of Contents



Regulatory Environment in Europe
            47




---



##### Table of Contents



Regulations Relating to Online Games in Singapore
  
    
    the Broadcasting Act (Chapter 28) of Singapore (the Broadcasting Act) and its
subsidiary legislation, which regulates, inter alia, the operation of Internet
websites;
 
    
    the Telecommunications Act (Chapter 323) of Singapore (the Telecommunications Act)
and its subsidiary legislation, which regulates the operation of telecommunications
systems and the provision of telecommunications services; and
 
    
    the Common Gaming Houses Act (Chapter 49) of Singapore (the CGH Act) and the
Betting Act (Chapter 21) of Singapore (the Betting Act) and subsidiary legislation,
which regulate, inter alia, gaming and lotteries.
 Broadcasting Act
     Telecommunications Act
     48




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##### Table of Contents



CGH Act and Betting Act
    C. Organizational Structure
   
    
    Each of the shareholders of T2 Entertainment has irrevocably granted T2 Technology,
the wholly-owned subsidiary of T2CN in the PRC, the power to exercise all of their
voting rights of T2 Entertainment pursuant to the relevant voting rights and proxy
agreement;
 
    
    Each of the shareholders of T2 Advertisement has irrevocably granted T2 Technology
the power to exercise all of their voting rights of T2 Advertisement pursuant to the
relevant voting rights and proxy agreement;
 
    
    Each of the shareholders of Jinyou has irrevocably granted T2 Technology the power
to exercise all of their voting rights of Jinyou pursuant to the relevant voting rights
and proxy agreement;
  49




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##### Table of Contents




    
    Our majority-owned subsidiary in China has the power to appoint all directors and
senior management members of the three VIEs;
 
    
    Each of the shareholders of T2 Entertainment has pledged all of their respective
equity interests in T2 Entertainment as security for the full performance of their
respective obligations under all of their agreements with T2 Technology;
 
    
    Each of the shareholders of T2 Advertisement has pledged all of their respective
equity interests in T2 Advertisement as security for the full performance of their
respective obligations under all of their agreements with T2 Technology;
 
    
    Each of the shareholders of Jinyou has pledged all of their respective equity
interests in Jinyou as security for the full performance of their respective
obligations under all of their agreements with T2 Technology;
 
    
    Each of the shareholders of T2 Entertainment has granted T2 Technology an
irrevocable option to acquire all or part of the equity interests held by them in T2
Entertainment pursuant to the relevant exclusive call option agreement, to the extent
permitted by then-effective laws and regulations in the PRC;
 
    
    Each of the shareholders of T2 Advertisement has granted T2 Technology an
irrevocable option to acquire all or part of the equity interests held by them in T2
Advertisement pursuant to the relevant exclusive call option agreement, to the extent
permitted by then-effective laws and regulations in the PRC; and
 
    
    Each of the shareholders of Jinyou has granted T2 Technology an irrevocable option
to acquire all or part of the equity interests held by them in Jinyou pursuant to the
relevant exclusive call option agreement, to the extent permitted by then-effective
laws and regulations in the PRC.
  
  
    
    Each of the shareholders of Shanghai JIDI has irrevocably granted JIDI, among other
things, the power to attend shareholders meeting, to exercise voting rights, to
exercise all other rights as shareholder of Shanghai JIDI and to appoint the legal
representative, directors and senior management of Shanghai JIDI pursuant to an
authorization and proxy letter;
 
    
    Each of the shareholders of Shanghai JIDI has entered into an agreement with
GigaMedia (HK) Limited, our wholly owned subsidiary under which each of the
shareholders agrees to accept certain amount of payments provided by GigaMedia (HK)
Limited and agrees to use such amount only for the incorporation of Shanghai JIDI; and
 
    
    Each of the shareholders of Shanghai JIDI has agreed to pledge their respective
shares in Shanghai JIDI on request to secure the payments granted by GigaMedia (HK)
Limited to the shareholders respectively.
 
  50




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51




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    Principal ActivitiesHeld by our CompanyGigaMedia International Holdings Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia (Taiwan) Limited
    
    
    2004
    
    
    Taiwan
    
    
    100
    %
    
    Holding companyHeld by GigaMedia International Holdings LimitedGigaMedia SuperCup Holdings Limited
    
    
    2008
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Global Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesCambridge Entertainment Software Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia (HK) Limited
    
    
    2004
    
    
    Hong Kong
    
    
    100
    %
    
    Holding companyCrestmillion International Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Japan Pte. Ltd.
    
    
    2007
    
    
    Singapore
    
    
    100
    %
    
    Holding companyGigaMedia Finance International Limited
    
    
    2000
    
    
    Cayman Islands
    
    
    100
    %
    
    Holding companyBridgepoint International Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGloryland Asia Limited
    
    
    2008
    
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesGigaMedia Online Entertainment Corp.
    
    
    2009
    
    
    Cayman Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia Online Entertainment Corp.FunTown World Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Asia Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Asia Pacific Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companySkyace Pacific Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    100
    %
    
    Online games
  52




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    Principal ActivitiesCentermax Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Capital Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Development Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesGiga Slam Dunk Corporation
    
    
    2007
    
    
    Labuan
    
    
    100
    %
    
    Online gamesGiga Wartime Corporation
    
    
    2007
    
    
    Labuan
    
    
    100
    %
    
    Online gamesE-Sports International Corporation Limited
    
    
    2008
    
    
    Hong Kong
    
    
    100
    %
    
    Online gamesDragon Mark Holdings Limited
    
    
    2008
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyPremier Vantage Holdings Limited
    
    
    2009
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Freestyle Holdings Limited
    
    
    2009
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companySpring Asia Limited (formally known as New Media Investment Corporation)
    
    
    2009
    
    
    Labuan
    
    
    100
    %
    
    Holding companyAsia Online Games Corporation (formally known as GigaMedia
(Labuan New) Limited)
    
    
    2006
    
    
    Labuan
    
    
    100
    %
    
    Holding companyGigaMedia (Labuan) Limited
    
    
    2005
    
    
    Labuan
    
    
    100
    %
    
    Holding companyMegabiz Limited
    
    
    2010
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyNova Matrix Limited
    
    
    2010
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyPossibility Space Incorporated
    
    
    2005
    
    
    British Virgin Islands
    
    
    49
    %
    
    Holding companyHeld by FunTown World LimitedFunTown Hong Kong Limited
    
    
    1999
    
    
    Hong Kong
    
    
    100
    %
    
    Online gamesHeld by FunTown Hong Kong LimitedFunTown Software (Shanghai) Limited
    
    
    2006
    
    
    PRC
    
    
    100
    %
    
    Online gamesHeld by Skyace Pacific LimitedDragongate Enterprises Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    70
    %
    
    Online games
  53




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    Principal ActivitiesHeld by Dragongate Enterprises LimitedGigaMedia Dragongate Limited
    
    
    2007
    
    
    Labuan
    
    
    100
    %
    
    Online gamesHeld by Cambridge Entertainment Software LimitedCambridge Interactive Development Corporation
    
    
    1997
    
    
    U.S.A.
    
    
    100
    %
    
    Software development and
application servicesCambridge Interactive Development Corporation (Quebec) Inc.
    
    
    2005
    
    
    Canada
    
    
    100
    %
    
    Financial and management servicesInternet Media Licensing Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100
    %
    
    Software development and
application servicesHeld by Internet Media Licensing LimitedGigaMedia Europe Limited S.à.r.l.
    
    
    2010
    
    
    Luxembourg
    
    
    100
    %
    
    Holding company for 40% of Everest
GamingUltra Internet Media S.A.
    
    
    2004
    
    
    Nevis
    
    
    100
    %
    
    Online entertainment operatorHeld by Ultra Internet Media S.A.Everest Games Ltd
    
    
    2008
    
    
    British Virgin Islands
    
    
    100
    %
    
    Online gaming operatorGlobal Interactive Services Inc.
    
    
    2005
    
    
    Canada
    
    
    100
    %
    
    Holding company9218-2146 Quebec Inc.
    
    
    2010
    
    
    Canada
    
    
    100
    %
    
    Holding company9218-2161 Quebec Inc.
    
    
    2010
    
    
    Canada
    
    
    100
    %
    
    Holding company9218-2179 Quebec Inc.
    
    
    2010
    
    
    Cananda
    
    
    100
    %
    
    Holding companyHeld by GigaMedia Europe Limited S.à.r.l.Mangas Everest S.A.S.
    
    
    2010
    
    
    France
    
    
    40
    %
    
    Online gaming operatorHeld by Dragon Mark Holdings LimitedWolverine Holdings Group Limited
    
    
    2009
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding company
  54




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    Principal ActivitiesHeld by GigaMedia (Labuan) LimitedLeisure Alliance Sdn. Bhd.
    
    
    2009
    
    
    Malaysia
    
    
    100
    %
    
    Holding companyHeld by Leisure Alliance Sdn. Bhd.Hoshin GigaMedia Center Inc.
    
    
    1998
    
    
    Taiwan
    
    
    100
    %
    
    Online gamesHeld by Bridgepoint International LimitedImplus International Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia Asia Pacific LimitedSpring Asia Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyInfocomm Asia Holdings Pte. Ltd.
    
    
    2004
    
    
    Singapore
    
    
    80
    %
    
    Online gamesHeld
by Infocomm Asia Holdings Pte. Ltd.Monsoon
Online Pte. Ltd.
    
    
    2009
    
    
    the Republic of Singapore
    
    
    100
    %
    
    Online gamesHeld by GigaMedia Asia LimitedGigaMedia China Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia China LimitedT2CN Holding Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    67.087
    %
    
    Online gamesHeld by T2CN Holding LimitedJ-Town Information (Shanghai) Co., Ltd.
    
    
    2005
    
    
    PRC
    
    
    100
    %
    
    Online gamesT2CN Information Technology (Shanghai) Co., Ltd.
    
    
    2004
    
    
    PRC
    
    
    100
    %
    
    Online gamesControlled by T2CN Information Technology (Shanghai) Co., Ltd.Shanghai T2 Entertainment Co., Ltd.
    
    
    2004
    
    
    PRC
    
    
    *
    
    
    Online gamesShanghai T2 Advertisement Co., Ltd.
    
    
    2006
    
    
    PRC
    
    
    *
    
    
    AdvertisingShanghai Jinyou Network & Technology Co., Ltd.
    
    
    2007
    
    
    PRC
    
    
    *
    
    
    Online gamesHeld by GigaMedia (HK) LimitedJIDI Network Technology (Shanghai) Co., Ltd.
    
    
    2010
    
    
    PRC
    
    
    100
    %
    
    Online gamesControlled by JIDI Network Technology (Shanghai) Co., Ltd.Shanghai JIDI Network Technology Co., Ltd.
    
    
    2010
    
    
    PRC
    
    
    **
    
    
    Online games
 *
    
    We had entered into a series of contractual arrangements through which we had effective control
over these entities until June 30, 2010. Due to the dispute with T2CNs former chief executive
officer, we have effectively lost control over these entities since July 1, 2010.**
    
    We have entered into a series of contractual arrangements through which we have effective
control over this entity.  55




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##### Table of Contents



D. Property, Plant and Equipment
 th th
      
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 A. Operating Results
  Overview
  
    
    Our Asian online game and service business operates a portfolio of online
games, primarily targeting online game players across Asia, including Greater China and
Southeast Asia.
 
    
    Gaming software and service business, of which we retain a 40 percent equity
interest, develops and licenses online poker, casino, and sports betting gaming
software solutions and application services, primarily targeting continental European
markets.
  56




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##### Table of Contents



Asian Online Game and Service Business.
     Gaming Software and Service Business.
  57




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##### Table of Contents



Certain Significant Events Affecting Our Results of Operations for 2008, 2009 and 2010
 Divestiture of Our Legacy Internet Access and Service Business
      (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Revenue
    
    $
    9,289
    
    
    $
    159
    
    
    $
    146Income (loss) from discontinued
operations before tax
    
    $
    (593
    )
    
    $
    222
    
    
    $
    (128
    )Gain on sale of the discontinued
operations before tax
    
    
    11,014
    
    
    
    
    
    
    
    Income tax expenses
    
    
    (986
    )
    
    
    
    
    
    
    Income (loss) from discontinued operations
    
    $
    9,435
    
    
    $
    222
    
    
    $
    (128
    )
  58




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##### Table of Contents



(in US$ thousands)
    
    AmountCash
    
    $
    493Accounts receivable
    
    
    2,325Other current assets
    
    
    1,125Property and equipment
    
    
    4,328Other assets
    
    
    165Total assets
    
    $
    8,436Accounts payable
    
    $
    1,056Other current liabilities
    
    
    759Noncurrent liabilities
    
    
    672Total liabilities
    
    $
    2,487
 Divestiture of Gaming Software and Service Business
   (in US$ thousands)
    
    AmountAssets Held for Sale-CurrentCash
    
    $
    35,015Accounts receivable
    
    
    15,817Prepaid expenses
    
    
    7,609Other current assets
    
    
    632Less: retained ownership
    
    
    (23,629
    )$
    35,444Assets Held for Sale-NoncurrentProperty, plant and equipment
    
    $
    7,358Goodwill
    
    
    29,243Intangible assets
    
    
    11,368Other assets
    
    
    4,199Less: retained ownership
    
    
    (20,867
    )$
    31,301Liabilities Held for Sale-CurrentAccounts payable
    
    $
    11Accrued compensation
    
    
    1,076Accrued expenses
    
    
    6,869Player account balances
    
    
    35,015Other current liabilities
    
    
    1,126Less: retained ownership
    
    
    (17,639
    )$
    26,458Liabilities Held for Sale-NoncurrentOther liabilities
    
    $
    2,266Less: retained ownership
    
    
    (906
    )$
    1,360
   59




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##### Table of Contents



(in US$ thousands)
    
    AmountRetained ownership of gaming software and service businessCurrent assets
    
    $
    23,629Noncurrent assets
    
    
    20,867Current liabilities
    
    
    (17,639
    )Noncurrent liabilities
    
    
    (906
    )$
    25,951
   (in US$ thousands)
    
    AmountThe fair value of any consideration received, including purchase
price adjustments, net of any transaction costs
    
    $
    82,984The fair value of the 40% retained noncontrolling investment in
the gaming software and service business at the date the business
was deconsolidated
    
    
    54,240Less: The carrying amount of the gaming software and service
business at the date of the deconsolidation
    
    
    (58,084
    )Gain on deconsolidation of the gaming software and service business
    
    $
    79,140
 Acquisition of IAHGames
    Accumulated(in US$ thousands)
    
    
    
    
    
    
    
    
    voting interestDate of acquisition
    
    
    Amount
    
    
    Description
    
    at those points in timeDecember, 2006
    
    $
    5,750
    *
    
    Purchased 500,000
convertible voting
preferred shares-Series
B
    
    
    32.26
    %May, 2010
    
    $
    2,192
    **
    
    Purchased 208,881
convertible voting
preferred shares-Series
B
    
    
    40.30
    %July, 2010
    
    $
    4,500
    
    
    Purchased 5,982,230
convertible voting
preferred shares-Series
A
    
    
    57.87
    %July, 2010
    
    $
    10,000
    
    
    Purchased 500,000
convertible voting
preferred shares-Series
B
    
    
    80.00
    %
 *
    
    The original investment amount of $10 million was written down to $5.8 million, resulting from an
impairment charge of $4.2 million recorded in 2009.**
    
    We issued 866,373 common shares, valued at approximately $2.2 million as consideration.  60




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(in US$ thousands)
    
    Amortization Life (in years)
    
    AmountCash acquired
    
    
    
    $
    9,070Accounts receivable
    
    
    
    
    5,715Other current assets
    
    
    
    
    5,129Equity method investments
    
    
    
    
    20,319Fixed assets/ non-current assets
    
    
    
    
    721Non-compete contracts
    
    3
    
    
    387Favorable lease right
    
    13.5
    
    
    2,861Prepaid licensing and royalty fees
    
    1.75 ~ 4
    
    
    1,010Goodwill
    
    N/A
    
    
    12,188Total assets acquired
    
    
    
    
    57,400Current liabilities
    
    
    
    
    23,304Noncurrent liabilities
    
    
    
    
    9,145Total liabilities assumed
    
    
    
    
    32,449Preferred shares (Series A)
    
    
    
    
    (1,317
    )Noncontrolling interest
    
    
    
    
    (1,192
    )Total purchase price
    
    
    
    $
    22,442
  Year Ended December 31(in US$ thousands, except per share figures)
    
    2009
    
    
    2010Unaudited
    
    
    UnauditedNet revenue
    
    $
    165,883
    
    
    $
    69,403Loss from operations
    
    
    (41,812
    )
    
    
    (50,378
    )Net loss
    
    
    (56,226
    )
    
    
    (1,570
    )Net (loss) income attributable to us
    
    
    (49,574
    )
    
    
    255Basic (loss) earnings per share attributable to us
    
    
    (0.89
    )
    
    
    0.00Diluted (loss) earnings per share attributable to us
    
    
    (0.89
    )
    
    
    0.00
  Deconsolidation of T2CN
   61




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##### Table of Contents



Accumulated(in US$ thousands)
    
    
    
    
    
    
    
    voting interestDate of acquisition
    
    Amount
    
    
    Description
    
    at those points in time2006
    
    $
    15,000
    
    
    Purchased 7,500,000 convertible voting
preferred shares
    
    
    19.02
    %2007
    
    $
    23,736
    *
    
    Acquired 31,113,681 common shares (including
convertible voting preferred shares converted
into common shares) in total
    
    
    58.11
    %2008
    
    $
    3,375
    
    
    Purchased 4,500,000 common shares
    
    
    65.68
    %2009
    
    $
    285
    
    
    Purchased 520,000 common shares
    
    
    67.09
    %
 *
    
    The purchase price includes the issuance of 226,385 common shares of us, valued at approximately
$2.7 million.  (in US$ thousands)
    
    AmountCash
    
    $
    12,903Other current assets
    
    
    1,266Fixed assets/ non-current assets
    
    
    1,679Prepaid licensing and royalty
    
    
    5,339Intangible assets
    
    
    1,098Total assets of T2CN
    
    
    22,285Total liabilities of T2CN
    
    
    (12,331
    )Net equity of T2CN
    
    
    9,954Noncontrolling interest
    
    
    (3,276
    )Goodwill acquired
    
    
    17,500Advances to the entities held by T2CN
    
    
    1,405$
    25,583
  Treatment of T2 Entertainment, T2 Advertisement, and Jinyou before Deconsolidation
    62




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##### Table of Contents



(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Total revenue
    
    $
    20,312
    
    
    $
    18,673
    
    
    $
    10,126Net income (loss)
    
    $
    1,571
    
    
    $
    (2,990
    )
    
    $
    834
 Consolidation of UIM
   (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Total revenue
    
    $
    144,765
    
    
    $
    112,694
    
    
    $
    25,820Net income (loss)
    
    $
    (206
    )
    
    $
    (1,226
    )
    
    $
    1,514
  63




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##### Table of Contents



Impairment Loss Related to Underperforming Game Projects in Our Asian Online Game and Service
Business
 2009 Impairment Loss
      2010 Impairment Loss
       64




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##### Table of Contents



Impairment Loss on Marketable Securities and Investments
  2009 Impairment Loss on Marketable Securities and Investments
 1)
    
    In 2006, we acquired voting preferred shares in IAHGames which were convertible into a 32.26%
ordinary share interest in IAHGames at a cost of US$10 million. In 2007, due to IAHGames
issuance of new preferred shares to third parties, the Companys percentage ownership in
IAHGames common equity on an as converted basis was reduced to 28.43%. As a result of
deteriorating earnings by IAHGames during 2009, we determined our investment in IAHGames to be
partially impaired. During the fourth quarter of 2009, we recorded an impairment charge of
US$4.2 million to write down our investment to its fair value of approximately US$5.8 million.
 2)
    
    In 2007, we made an investment in preferred shares of Neostorm of US$5.6 million. During
2009, games developed by Neostorm proved to be unsuccessful, and we wrote off our investment
in Neostorm.
 3)
    
    In 2008, we made an investment in preferred shares of SuperCup of US$2.0 million. SuperCup
ceased operations in 2009, and we wrote off our investment in SuperCup.
 4)
    
    In 2009, we made an investment in common shares of JC Entertainment Corporation of US$7.1
million. We recorded impairment loss of $2.9 million in the fourth quarter of 2009 based on
the excess of its market value derived from listed price as of December 31, 2009 over its
carrying value.
 2010 Impairment Loss on Marketable Securities and Investments
 1)
    
    In 2008, we made an investment in preferred shares of Access China (ACC) of US$3 million.
As a result of deteriorating earnings and inability to meet its projections and forecasts, we
decided to write off our investments in ACC in 2010.
 2)
    
    In 2010, we made an investment in preferred shares of PSI of US$1.5 million, which ceased
operations in December 2010. We fully wrote off this investment in 2010.
 Subsequent Events
 Share Repurchase Program
   65




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##### Table of Contents



Critical Accounting Policies
  Consolidation
  Acquisitions
  Revenue Recognition
     66




---



##### Table of Contents



Gaming Software and Service Revenues
     Asian Online Game and Service Revenues
      67




---



##### Table of Contents



Revenue included within Discontinued Operations
   Deferred Revenues
  Operating Costs
  Prepaid Licensing and Royalty Fees
    Fair Value Measurement
    68




---



##### Table of Contents



Allowance for Doubtful Accounts
   Marketable Securities
   Investments
     69




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##### Table of Contents



Impairment of Intangible Assets, Goodwill and Long-Lived Assets
      Software Cost
    70




---



##### Table of Contents



Advertising
   Income Taxes
   Noncontrolling Interest
  Share-Based Compensation
     71




---



##### Table of Contents



Foreign Currency Translation
  Recent Accounting Pronouncements
       72




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##### Table of Contents



Taxation
       Discussion of Results of Operations
 Factors Affecting Our Performance
  Acquisitions and disposals.
 Development of online games and gaming software and service industries.
 
    
    the development and regulation of these industries;
 
    
    our adaptation to technological change;
 
    
    changing consumer preferences;
 
    
    legal development affecting these industries, in particular the gaming software and
service industry; and
 
    
    general economic conditions in the markets where we or our licensees operate.
  73




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##### Table of Contents



Competition.
 Divestiture of Gaming Software and Service Business
   For the Year Ended December 31,2008
    
    
    2009
    
    
    2010Amount in
    
    
    % of
    
    
    Amount
    
    
    % of
    
    
    Amount
    
    
    % ofUS$
    
    
    total
    
    
    in US$
    
    
    total
    
    
    in US$
    
    
    totalthousands
    
    
    revenues
    
    
    thousands
    
    
    revenues
    
    
    thousands
    
    
    revenuesParticularsOPERATING REVENUESGaming software and service revenues
    
    
    144,765
    
    
    
    76.0
    
    
    
    112,694
    
    
    
    70.6
    
    
    
    25,820
    
    
    
    39.9Asian online game and service
revenues
    
    
    45,604
    
    
    
    24.0
    
    
    
    46,887
    
    
    
    29.4
    
    
    
    38,862
    
    
    
    60.1Total operating revenues
    
    
    190,369
    
    
    
    100.0
    
    
    
    159,581
    
    
    
    100.0
    
    
    
    64,682
    
    
    
    100.0OPERATING COSTSCost of gaming software and service
revenues
    
    
    22,770
    
    
    
    12.0
    
    
    
    20,102
    
    
    
    12.6
    
    
    
    4,010
    
    
    
    6.2Cost of Asian online game and
service revenues
    
    
    12,404
    
    
    
    6.5
    
    
    
    16,785
    
    
    
    10.5
    
    
    
    17,103
    
    
    
    26.4Total operating costs
    
    
    35,174
    
    
    
    18.5
    
    
    
    36,887
    
    
    
    23.1
    
    
    
    21,113
    
    
    
    32.6Gross profit
    
    
    155,195
    
    
    
    81.5
    
    
    
    122,694
    
    
    
    76.9
    
    
    
    43,569
    
    
    
    67.4OPERATING EXPENSESProduct development and engineering
expenses
    
    
    13,455
    
    
    
    7.1
    
    
    
    14,195
    
    
    
    8.9
    
    
    
    7,301
    
    
    
    11.3Selling and marketing expenses
    
    
    74,173
    
    
    
    39.0
    
    
    
    79,421
    
    
    
    49.8
    
    
    
    21,589
    
    
    
    33.4General and administrative expenses
    
    
    25,035
    
    
    
    13.2
    
    
    
    29,692
    
    
    
    18.6
    
    
    
    31,780
    
    
    
    49.1Bad debt expense
    
    
    2,905
    
    
    
    1.5
    
    
    
    1,092
    
    
    
    0.7
    
    
    
    1,639
    
    
    
    2.5Impairment loss on property, plant,
and equipment
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    0.8
    
    
    
    278
    
    
    
    0.4Impairment loss on goodwill
    
    
    
    
    
    
    
    
    
    
    14,103
    
    
    
    8.8
    
    
    
    2,255
    
    
    
    3.5Impairment loss on prepaid
licensing fees and intangible
assets
    
    
    1,524
    
    
    
    0.8
    
    
    
    23,002
    
    
    
    14.4
    
    
    
    2,200
    
    
    
    3.4Impairment loss on deconsolidation
of T2CN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,234
    
    
    
    34.4Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,989
    
    
    
    3.1Total operating expenses
    
    
    117,092
    
    
    
    61.6
    
    
    
    162,755
    
    
    
    102.0
    
    
    
    91,265
    
    
    
    141.1Income (loss) from operations
    
    
    38,103
    
    
    
    19.9
    
    
    
    (40,061
    )
    
    
    (25.1
    )
    
    
    (47,696
    )
    
    
    (73.7
    )
  74




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##### Table of Contents



For the Year Ended December 31,2008
    
    
    2009
    
    
    2010Amount in
    
    
    % of
    
    
    Amount
    
    
    % of
    
    
    Amount
    
    
    % ofUS$
    
    
    total
    
    
    in US$
    
    
    total
    
    
    in US$
    
    
    totalthousands
    
    
    revenues
    
    
    thousands
    
    
    revenues
    
    
    thousands
    
    
    revenuesNON-OPERATING INCOME (EXPENSES)
    
    
    (1,324
    )
    
    
    (0.7
    )
    
    
    (15,524
    )
    
    
    (9.8
    )
    
    
    56,364
    
    
    
    87.1INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
    
    
    36,779
    
    
    
    19.3
    
    
    
    (55,585
    )
    
    
    (34.9
    )
    
    
    8,668
    
    
    
    13.4INCOME TAX EXPENSE
    
    
    (1,069
    )
    
    
    (0.6
    )
    
    
    (517
    )
    
    
    (0.3
    )
    
    
    (7,260
    )
    
    
    (11.2
    )INCOME (LOSS) FROM CONTINUING
OPERATIONS
    
    
    35,710
    
    
    
    18.7
    
    
    
    (56,102
    )
    
    
    (35.2
    )
    
    
    1,408
    
    
    
    2.2INCOME (LOSS) FROM DISCONTINUED
OPERATIONS
    
    
    9,435
    
    
    
    5.0
    
    
    
    222
    
    
    
    0.2
    
    
    
    (128
    )
    
    
    (0.2
    )NET INCOME (LOSS)
    
    
    45,145
    
    
    
    23.7
    
    
    
    (55,880
    )
    
    
    (35.0
    )
    
    
    1,280
    
    
    
    2.0LESS: NET LOSS (INCOME)
ATTRIBUTABLE TO NONCONTROLLING
INTEREST AND SUBSIDIARY PREFERRED
SHARES
    
    
    (757
    )
    
    
    (0.4
    )
    
    
    6,795
    
    
    
    4.2
    
    
    
    1,370
    
    
    
    2.1NET INCOME (LOSS) ATTRIBUTABLE TO
GIGAMEDIA
    
    
    44,388
    
    
    
    23.3
    
    
    
    (49,085
    )
    
    
    (30.8
    )
    
    
    2,650
    
    
    
    4.1
        75




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For the Years Ended December 31, 2010 and 2009
 Consolidated Results of Operations
        76




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Business Segment Results
 Asian Online Game and Service Business
     77




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##### Table of Contents



78




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##### Table of Contents



Gaming Software and Service Business
             79




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For the Years Ended December 31, 2009 and 2008
 Consolidated Results of Operations
            80




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##### Table of Contents



Business Segment Results
 Asian Online Game and Service Business
          81




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Gaming Software and Service Business
         82




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##### Table of Contents



B. Liquidity and Capital Resources
   
    
    the rate at which we enter into strategic transactions;
 
    
    the rate at which we expand our operations and employee base;
 
    
    the timing of entry into new markets and new services offered;
 
    
    changes in revenues and cost splits with our business partners;
 
    
    the rate at which we invest in developing and licensing our products and upgrading
and maintaining our network and future technologies; and
 
    
    the rate at which we grow and monetize our customer bases.
   For the Year Ended December, 31(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Net cash provided by (used in ) operating activities
    
    $
    50,750
    
    
    $
    8,636
    
    
    $
    (8,922
    )Net cash provided by (used in ) investing activities
    
    
    (6,420
    )
    
    
    (22,078
    )
    
    
    50,022Net cash provided by (used in ) financing activities
    
    
    (17,876
    )
    
    
    8,426
    
    
    
    (12,364
    )Exchange difference
    
    
    936
    
    
    
    (356
    )
    
    
    (410
    )Cash balance included in assets held for sale and
retained ownership of gaming software and service
business
    
    
    
    
    
    
    (35,015
    )
    
    
    Deconsolidation of T2CN
    
    
    
    
    
    
    
    
    
    
    (12,903
    )Net increase (decrease) in cash and cash equivalent
    
    
    27,390
    
    
    
    (40,387
    )
    
    
    15,423Cash and cash equivalents at beginning of year
    
    
    68,563
    
    
    
    95,953
    
    
    
    55,566Cash and cash equivalents at end of year
    
    $
    95,953
    
    
    $
    55,566
    
    
    $
    70,989
  83




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##### Table of Contents



Capital Expenditures
   84




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Indebtedness
     Dividends From Our Subsidiaries
     C. Research, Development, Patents and Licenses, etc.
   85




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##### Table of Contents



D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
 Payment Due by Period (in US$ thousand)Within 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    >5 years
    
    
    Total1. Operating leases
    
    
    1,151
    
    
    
    683
    
    
    
    239
    
    
    
    1,236
    
    
    
    3,3092. License fees*
    
    
    741
    
    
    
    500
    
    
    
    500
    
    
    
    
    
    
    
    1,7413. Minimum guarantees against royalties
    
    
    9,633
    
    
    
    5,500
    
    
    
    
    
    
    
    
    
    
    
    15,133Total contractual cash obligations
    
    
    11,525
    
    
    
    6,683
    
    
    
    739
    
    
    
    1,236
    
    
    
    20,1834. Other liabilities-accrued pension
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    44
 *
    
    According to our license contracts, the total license fee payable, assuming all milestones or
conditions under such license contracts were met, is approximately US$6.9 million. Considering game
performance, industry environment and business situation, management determined that certain
license fees will unlikely become payable and such amount have not been included in the above
table.   Quantitative and Qualitative Disclosure About Market Risk
   86




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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Year Appointed toName
    
    Age
    
    Position
    
    Current PositionDING, Michael Y.J.
    
    54
    
    Chairman of the Board, Chairman of the Audit Committee of the Board and Independent Non-Executive Director
    
    
    2009/2003LEE, Yichin
    
    50
    
    Chief Executive Officer and Director
    
    
    2011*/2003HUI, Thomas T.
    
    39
    
    Director, President and Chief Operating Officer
    
    
    2005/2007WANG, Arthur M.
    
    50
    
    Director
    
    
    2003CHIEN, Mo-Na
    
    67
    
    Chairman of the Compensation of the Board and Independent Non-Executive Director
    
    
    2011**/2010LEE, Howe Yong
    
    55
    
    Independent Non-Executive Director
    
    
    2004HUANG, John Ping Chang
    
    59
    
    Independent Non-Executive Director
    
    
    2011
    ***LIU, Nick Chia-En
    
    49
    
    Independent Non-Executive Director
    
    
    2011
    ****TANG, Quincy Li Zhong
    
    48
    
    Chief Financial Officer
    
    
    2008WONG, Lester A.
    
    44
    
    General Counsel
    
    
    2008LEE, John Francis Woon-Jae
    
    40
    
    Chief Strategy Officer and Head of International Business
    
    
    2008
 *
    
    Mr. LEE Yichin was appointed as Chief Executive Officer of our Company following the
resignation of Mr. WANG Arthur M., the former Chief Executive Officer, on March 15, 2011.**
    
    Mr. CHIEN Mo-Na was appointed as Chairman of the Compensation Committee of the Board on
March 15, 2011 following the resignation of Mr. LEE Yichin, the former Chairman of the
Compensation Committee, on March 15, 2011. He was appointed as Independent Non-Executive
Director of the Board on August 2, 2010.***
    
    Mr. HUANG John Ping Chang was appointed as Independent Non-Executive Director of the Board
on January 31, 2011.****
    
    Mr. LIU Nick Chia-En was appointed as Independent Non-Executive Director of the Board on
March 15, 2011.  Directors
     87




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Executive Officers
     88




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B. Compensation
 Compensation of Directors and Executive Officers
   Employment of Executive Officers
  C. Board Practices
     89




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##### Table of Contents



D. Employees
   E. Share Ownership
 Share Ownership of Directors and Executive Officers
  Number of
    
    
    Number of SharesCommon
    
    
    Issuable upon exercisePerson
    
    Shares
    
    
    of optionsDING, Michael Y.J.
    
    
    *
    
    
    
    *WANG, Arthur M.
    
    
    *
    
    
    
    2,409,000HUI, Thomas T.
    
    
    *
    
    
    
    2,300,000HU ZEE, Nancy Jing-Ying
    
    
    *
    
    
    
    *LEE, Howe Yong
    
    
    *
    
    
    
    *LEE, John Francis Woon-Jae
    
    
    0
    
    
    
    *LEE, Yichin
    
    
    *
    
    
    
    1,100,000TANG, Quincy Li Zhong
    
    
    0
    
    
    
    *WONG, Lester A.
    
    
    0
    
    
    
    *CHIEN, Mo-Na
    
    
    0
    
    
    
    *HUANG, John Ping Chang
    
    
    0
    
    
    
    *LIU, Nick Chia-En
    
    
    0
    
    
    
    *Directors and Officers as a group
    
    
    *
    
    
    
    6,924,000
 
 *
    
    Less than 1 percent  Employee Share Option Plans and Equity Incentive Plans
 2002 Employee Share Option Plan
   90




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2004 Employee Share Option Plan
       2006 Equity Incentive Plan
    91




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##### Table of Contents



2007 Equity Incentive Plan
   92




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##### Table of Contents



93




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##### Table of Contents



2008 Equity Incentive Plan
      2009 Equity Incentive Plan
    2010 Equity Incentive Plan
   94




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##### Table of Contents



Options
   Options outstanding
    
    Option currently exercisableWeighted averageNo. of Shares
    
    
    remaining contractual
    
    
    
    No. of SharesExercise price
    
    (in thousands)
    
    
    life
    
    Exercise price
    
    (in thousands)Under $1
    
    
    5,201
    
    
    3.50 years
    
    Under $1
    
    
    5,201$1~$10
    
    
    3,950
    
    
    8.19 years
    
    $1~$10
    
    
    1,452$10~$20
    
    
    629
    
    
    6.65 years
    
    $10~$20
    
    
    5379,780
    
    
    
    
    
    
    
    7,190
  Employee Share Purchase Plans
   95




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##### Table of Contents



Outstanding Options Granted Under Our Employee Share Option Plans and Equity Incentive Plans
  Ordinary SharesUnderlyingOutstanding
    
    
    Exercise PriceDate of Grant
    
    Options
    
    
    ($/Share)
    
    
    Date of ExpirationAugust 12, 2004
    
    
    3,519,000
    
    
    
    0.79
    
    
    June 29, 2014August 9, 2007
    
    
    200,000
    
    
    
    10.15
    
    
    August 9, 2017December 1, 2008
    
    
    400,000
    
    
    
    4.24
    
    
    June 29, 2017495,000
    
    
    
    4.24
    
    
    June 19, 2018May 13, 2010
    
    
    1,250,000
    
    
    
    2.47
    
    
    May 13, 2020March 15, 2011
    
    
    1,000,000
    
    
    
    1.05
    
    
    March 15, 2021May 20, 2011
    
    
    60,000
    
    
    
    1.25
    
    
    May 20, 2021Total
    
    
    6,924,000
 
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
 A. Major Shareholders
  Percentage ofName of Owner
    
    Shares Owned
    
    
    Shares OwnedBest Method Limited (1)
    
    
    10,799,999
    
    
    
    19.19
    %Martin Currie Investment Management Ltd.(2)
    
    
    5,181,665
    
    
    
    9.21
    %
 
 (1)
    
    Through Best Method Limited, a British Virgin Islands company, Jeffrey Koo, Jr. and Andre Koo
jointly have a beneficial ownership of 10,799,999 common shares of our Company.(2)
    
    Martin Currie Investment Management Ltd. owns 901,270 common shares of our Company through
its wholly owned subsidiary Martin Currie China Ltd.   96




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##### Table of Contents



B. Related-Party Transactions
   Borrowings
  Loan Receivables
  Stock Transaction
  Stock Option Grants and Employee Share Purchase
  C. Interests of Experts and Counsel
   97




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##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
 Financial Statements
  Information on Legal or Arbitration Proceedings
  98




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##### Table of Contents



Class Action
           99




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##### Table of Contents



World Series of Poker Litigation
    100




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##### Table of Contents



101




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##### Table of Contents



Dispute with the former head of Our Asian online game and service business in the PRC and
former Chief Executive Officer of T2CN (Wang Ji)
    st nd st nd
  102




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##### Table of Contents



103




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##### Table of Contents



Patent Litigation
     Mgame Arbitration
   104




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##### Table of Contents



ESET Litigation
  Dividend Policy
  B. Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
   105




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##### Table of Contents



Common SharesHigh
    
    
    LowYear Ending December 31
    
    (in US$)2005
    
    $
    2.99
    
    
    $
    1.302006
    
    $
    12.38
    
    
    $
    2.902007
    
    $
    24.61
    
    
    $
    9.282008
    
    $
    20.70
    
    
    $
    2.902009
    
    $
    7.47
    
    
    $
    3.042010
    
    $
    3.32
    
    
    $
    1.40
 Common SharesHigh
    
    
    LowYear Ending December 31, 2010
    
    (in US$)First quarter
    
    $
    3.32
    
    
    $
    2.74Second quarter
    
    $
    3.25
    
    
    $
    2.03Third quarter
    
    $
    2.34
    
    
    $
    1.91Fourth quarter
    
    $
    2.10
    
    
    $
    1.40
 Common SharesHigh
    
    
    LowYear Ending December 31, 2011
    
    (in US$)First quarter
    
    $
    1.56
    
    
    $
    1.03Second quarter (through June 24, 2011)
    
    $
    1.60
    
    
    $
    1.11
 Common SharesHigh
    
    
    LowMonthly Highs and Lows
    
    (in US$)December 2010
    
    $
    1.60
    
    
    $
    1.45January 2011
    
    $
    1.56
    
    
    $
    1.14February 2011
    
    $
    1.28
    
    
    $
    1.13March 2011
    
    $
    1.48
    
    
    $
    1.03April 2011
    
    $
    1.60
    
    
    $
    1.21May 2011
    
    $
    1.47
    
    
    $
    1.22June 2011 (only through June 24, 2011)
    
    $
    1.29
    
    
    $
    1.11
    106




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##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
   C. Material Contracts
  Sale of Internet Access and Service Business
 Share Sales and Purchase Agreement among Champion Limited, Gigamedia International Holdings
Limited and GigaMedia, dated August 28, 2008
  Share Sales and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin
GigaMedia, dated August 28, 2008
  Asset Sale and Purchase Agreement among Ko Ying Co., Ltd., Hoshin GigaMedia and China Network
Systems Co., Ltd., dated August 28, 2008
  Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3,
2008
   107




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##### Table of Contents



Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated
September 3, 2008
  Transactions with IAHGames
 Subscription Agreement between IAHGames and GigaMedia Asia Pacific Limited, dated April 30,
2010
  The Amendment to the Subscription Agreement between IAHGames and GigaMedia Asia Pacific
Limited, June 25, 2010
  Share Purchase Agreement between Infocomm Investments Pte Ltd and GigaMedia Asia Pacific
Limited, dated April 30, 2010
  Share Purchase Agreement between Bodhi Investments LLC and GigaMedia Asia Pacific Limited,
dated April 30, 2010
  Share Purchase Agreement between China Interactive Limited and GigaMedia Asia Pacific Limited,
dated June 30, 2010
   108




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##### Table of Contents



Deed of Guarantee, Undertaking and Indemnity among GigaMedia Asia Pacific Limited, Management
Capital International Ltd and China Interactive Limited, dated April 30, 2010
  Shareholder Loan Agreement between GigaMedia Asia Pacific Limited and IAHGames, dated April
30, 2010
  Loan Assignment Agreement among GigaMedia Asia Pacific Limited, IAHGames and Spring Asia
Limited, dated June 1, 2010
  Loan Agreement between Spring Asia Limited and IAHGames, dated May 20, 2010
  Instrument Constituting Warrants to Subscribe for Shares in IAHGames among IAHGames,
Management Capital International Limited and Mr. Ong Toon Wan, dated April 30, 2010 and Deed of
Amendment, dated May 20, 2010
    109




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##### Table of Contents



Security over Shares Agreement between IAHGames and Blizzard, dated April 30, 2010
  Deed of Undertaking between GigaMedia Asia Pacific Limited and Blizzard, dated April 30, 2010
  Transaction with BetClic
 Stock and Asset Purchase Agreement among BetClic, GigaMedia Limited, UIM and the Other Parties
Named Thereto, dated December 15, 2009 and Amendment No.1 to Stock and Asset Purchase Agreement,
dated March 31, 2010
      110




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##### Table of Contents



Contractual Arrangements among T2 Technology and T2 Entertainment, T2 Advertisement and Jinyou
  Contractual Arrangements in connection with Shanghai JIDI
  Other Material Contracts
  D. Exchange Controls
    E. Taxation
 Singapore Tax Considerations
 Taxation of Dividends Received by Singapore Resident Shareholders
   111




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##### Table of Contents




    
    the dividends are received from a jurisdiction with a maximum tax rate on the trade
or business income of a company of at least 15 percent; and
    
    the dividends themselves, or the income from which they are paid, have been subject
to tax in the foreign jurisdiction or have been exempted from tax under an incentive
granted for substantive business activities.
     Gains on Disposal of Shares
  Stamp Duty
   112




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##### Table of Contents



Singapore Estate Duty
   Goods and Services Tax (GST)
    U.S. Tax Considerations
 U.S. Federal Income Tax Considerations for U.S. Holders
  
    
    bank;
 
    
    broker-dealer;
 
    
    financial institution or insurance company;
 
    
    tax-exempt entity;
  113




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##### Table of Contents




    
    person holding Shares as part of a straddle, hedge, conversion or other integrated
investment;
 
    
    a person owning, actually or constructively, 10 percent or more of the combined
voting power of all classes of our stock; or
 
    
    a person whose functional currency is not the U.S. dollar.
   
    
    individual who is a citizen or resident of the United States;
 
    
    corporation, or other entity treated as a corporation, created or organized under
the laws of the United States or any political subdivision thereof;
 
    
    estate, the income of which is subject to U.S. federal income taxation regardless of
its source; or
 
    
    trust if (1) it is subject to the primary supervision of a court within the United
States and one or more U.S. persons have the authority to control all substantial
decisions of the trust, or (2) it has otherwise elected to be treated as a U.S. person
under the Internal Revenue Code.
   Passive Foreign Investment Company
   114




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##### Table of Contents




 
 
 
     115




---



##### Table of Contents



Taxation of Dividends
    Sale or other disposition of Shares.
 Backup Withholding and Information Reporting
  F. Dividends and Paying Agents
  G. Statements by Experts
   116




---



##### Table of Contents



H. Documents on Display
    I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
   117




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##### Table of Contents



Interest Rate Risk
   Other Market Risks
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
   118




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##### Table of Contents



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Material Modification to the Instruments Defining the Rights of Security Holders
  B. Material Modification to the Rights of Registered Securities by Issuing or Modifying or any
Other Class of Securities
  C. Withdrawal or Substitution of a Material Amount of the Assets Securing any Registered
Securities
  D. Change of Trustees or Paying Agents for any Registered Securities
  E. Use of Proceeds
   119




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##### Table of Contents



ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting
       120




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##### Table of Contents



Remediation of Material Weaknesses
    Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control Over Financial Reporting
   121




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##### Table of Contents



ITEM 16. Reserved
 
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
      
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Years Ended December 31,
    
    2009
    
    
    2010(in US$)
    
    
    (in US$)Audit Fees
    
    
    994,207
    
    
    
    833,796Audit-Related Fees
    
    
    12,746
    
    
    
    43,229Tax Fees
    
    
    23,123
    
    
    
    18,676All Other Fees
    
    
    0
    
    
    
    0
  122




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##### Table of Contents



A. Audit Fees
  B. Audit-Related Fees
  C. Tax Fees
  D. All Other Fees
  E. Audit Committee Pre-Approval Policies and Procedures
   
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANTS
   123




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ITEM 16G. CORPORATE GOVERNANCE
 Summary of Significant Differences in Corporate Governance Practices
   
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  Page(a) Report of Independent Registered Public Accounting Firm
    
    
    F-1F-2(b) Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    
    F-3F-4(c) Consolidated Statements of Operations for the years ended December 31, 2008, 2009 and 2010
    
    
    F-5(d)
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2008, 2009 and 2010
    
    
    F-6(e) Consolidated Statements of Equity for the years ended December 31, 2008, 2009 and 2010
    
    
    F-7(f) Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010
    
    
    F-8F-9(g) Notes to the consolidated financial statements
    
    
    F-10F-101
 
 ITEM 19. EXHIBITS
 EXHIBIT
    
    INDEX1.1
    
    
    Amended Memorandum and Articles of Association of our Company, incorporated by reference to Exhibit
1.3 to our annual report for the year 2006 on Form 20-F filed with the SEC on June 29, 20074.1
    
    
    End-User License Agreement between Internet Media Licensing Limited and Ultra Internet Media, S.A.,
dated April 1, 2004, incorporated by reference to Exhibit 4.41 to our annual report for the year 2004
on Form 20-F filed with the SEC on June 30, 20054.2
    
    
    Second Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2006, incorporated by reference to Exhibit 4.41 to our annual
report for the year 2005 on Form 20-F filed with the SEC on June 28, 20064.3
    
    
    Third Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2007, incorporated by reference to Exhibit 4.50 to our annual
report for the year 2006 on Form 20-F filed with the SEC on June 29, 2007
  124




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EXHIBIT
    
    INDEX4.4
    
    
    Fourth Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2008, incorporated by reference to Exhibit 4.4 to our annual
report for the year 2008 on Form 20-F filed with the SEC on June 26, 20074.5
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Entertainment, dated
November 15, 2006, incorporated by reference to Exhibit 4.55 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.6
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Entertainment, dated April 1, 2007, incorporated by reference to Exhibit 4.56 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.7
    
    
    Exclusive Technical Service and Consultancy Agreement between T2 Entertainment and T2 Technology,
dated November 15, 2006, incorporated by reference to Exhibit 4.57 to our annual report for the year
2007 on Form 20-F filed with the SEC on June 30, 20084.8
    
    
    Supplemental Agreement to Exclusive Technical Service and Consultancy Agreement between T2
Entertainment and T2 Technology, dated April 1, 2007, incorporated by reference to Exhibit 4.58 to our
annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.9
    
    
    Agreement for Pledge of Shares in T2 Entertainment between Wang Chi, Lu Ning and T2 Technology, dated
February 9, 2007, incorporated by reference to Exhibit 4.59 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.10
    
    
    Exclusive Call Option Agreement regarding T2 Entertainment between Wang Chi, Lu Ning, T2 Entertainment
and T2 Technology, dated February 9, 2007, incorporated by reference to Exhibit 4.60 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.11
    
    
    Proxy Voting Agreement regarding T2 Entertainment between T2 Technology, T2 Entertainment, Wang Chi
and Lu Ning, dated February 9, 2007, incorporated by reference to Exhibit 4.61 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.12
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Advertisement, dated
November 15, 2006, incorporated by reference to Exhibit 4.62 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.13
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Advertisement, dated January 1, 2007, incorporated by reference to Exhibit 4.63 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.14
    
    
    Agreement for Pledge of Shares in T2 Advertisement between Chi Min, Chang Tao and T2 Technology, dated
March 20, 2008, incorporated by reference to Exhibit 4.64 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.15
    
    
    Exclusive Call Option Agreement regarding T2 Advertisement between Chi Min, Chang Tao, T2
Advertisement and T2 Technology, dated March 20, 2008, incorporated by reference to Exhibit 4.65 to
our annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.16
    
    
    Proxy Voting Agreement regarding T2 Advertisement between T2 Technology, T2 Advertisement, Chi Min and
Chang Tao, dated March 20, 2008, incorporated by reference to Exhibit 4.66 to our annual report for
the year 2007 on Form 20-F filed with the SEC on June 30, 20084.17
    
    
    Share Purchase Agreement between William Zhu and GigaMedia China Limited, dated June 3, 2007,
incorporated by reference to Exhibit 4.67 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.18
    
    
    Share Purchase Agreement between Yu-Chia Lee and GigaMedia China Limited, dated June 6, 2007,
incorporated by reference to Exhibit 4.68 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 2008
  125




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EXHIBIT
    
    INDEX4.19
    
    
    Share Purchase Agreement between Zheng Bin and GigaMedia China Limited, dated June 10, 2007,
incorporated by reference to Exhibit 4.69 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.20
    
    
    Share Purchase Agreement between J&R Music LLC, Ya-Tsen Lin and GigaMedia China Limited, dated July 5,
2007, incorporated by reference to Exhibit 4.70 to our annual report for the year 2007 on Form 20-F
filed with the SEC on June 30, 20084.21
    
    
    Share Purchase Agreement between Kingland Overseas Development Inc. and GigaMedia China Limited, dated
July 6, 2007, incorporated by reference to Exhibit 4.71 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.22
    
    
    Share Purchase Agreement between Jim Ji Wang and GigaMedia China Limited, dated July 6, 2007,
incorporated by reference to Exhibit 4.72 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.23
    
    
    Share Purchase Agreement between Marvel City Investments Limited and GigaMedia China Limited, dated
May 26, 2008, incorporated by reference to Exhibit 4.73 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.24
    
    
    Agreement for Pledge of Shares in Jinyou among Yang Zhuojun, Tan Yihui and T2 Technology, dated June
15, 2009, incorporated by reference to Exhibit 4.24 to our annual report for the year 2008 on Form
20-F filed with the SEC on June 26, 20094.25
    
    
    Exclusive Call Option Agreement regarding Jinyou among Yang Zhuojun, Tan Yihui, Jinyou and T2
Technology, dated June 15, 2009, incorporated by reference to Exhibit 4.25 to our annual report for
the year 2008 on Form 20-F filed with the SEC on June 26, 20094.26
    
    
    Proxy Voting Agreement regarding Jinyou among T2 Technology, Jinyou, Yang Zhuojun and Tan Yihui, dated
June 15, 2009, incorporated by reference to Exhibit 4.26 to our annual report for the year 2008 on
Form 20-F filed with the SEC on June 26, 20094.27
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and Jinyou, dated November 26,
2007, incorporated by reference to Exhibit 4.27 to our annual report for the year 2008 on Form 20-F
filed with the SEC on June 26, 20094.28
    
    
    Exclusive Technical Service and Consultancy Agreement between Jinyou and T2 Technology, dated November
26, 2007, incorporated by reference to Exhibit 4.28 to our annual report for the year 2008 on Form
20-F filed with the SEC on June 26, 20094.29
    
    
    Share Sales and Purchase Agreement among Champion Limited, Gigamedia International Holdings Limited
and GigaMedia, dated August 28, 2008, incorporated by reference to Exhibit 4.29 to our annual report
for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.30
    
    
    Share Sales and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin GigaMedia, dated
August 28, 2008, incorporated by reference to Exhibit 4.30 to our annual report for the year 2008 on
Form 20-F filed with the SEC on June 26, 20094.31
    
    
    Asset Sale and Purchase Agreement among Ko Ying, Hoshin GigaMedia and China Network Systems Co., Ltd.,
dated August 28, 2008, incorporated by reference to Exhibit 4.31 to our annual report for the year
2008 on Form 20-F filed with the SEC on June 26, 20094.32
    
    
    Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3, 2008,
incorporated by reference to Exhibit 4.32 to our annual report for the year 2008 on Form 20-F filed
with the SEC on June 26, 20094.33
    
    
    Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated September 3,
2008, incorporated by reference to Exhibit 4.33 to our annual report for the year 2008 on Form 20-F
filed with the SEC on June 26, 2009
  126




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EXHIBIT
    
    INDEX4.34
    
    
    Subscription Agreement between IAHGames and GigaMedia Asia Pacific Limited, dated April 30, 2010,
incorporated by reference to Exhibit 4.34 to our annual report for the year 2009 on Form 20-F filed
with the SEC on June 30, 20104.35
    
    
    The Amendment to the Subscription Agreement between IAHGames and GigaMedia Asia Pacific Limited, dated
June 25, 2010, incorporated by reference to Exhibit 4.35 to our annual report for the year 2009 on
Form 20-F filed with the SEC on June 30, 20104.36
    
    
    Share Purchase Agreement between Infocomm Investments Pte Ltd and GigaMedia Asia Pacific Limited,
dated April 30, 2010, incorporated by reference to Exhibit 4.36 to our annual report for the year 2009
on Form 20-F filed with the SEC on June 30, 20104.37
    
    
    Share Purchase Agreement between Bodhi Investments LLC and GigaMedia Asia Pacific Limited, dated April
30, 2010, incorporated by reference to Exhibit 4.37 to our annual report for the year 2009 on Form
20-F filed with the SEC on June 30, 20104.38
    
    
    Deed of Guarantee, Undertaking and Indemnity among GigaMedia Asia Pacific Limited, Management Capital
International Ltd and China Interactive Limited, dated April 30, 2010, incorporated by reference to
Exhibit 4.38 to our annual report for the year 2009 on Form 20-F filed with the SEC on June 30, 20104.39
    
    
    Shareholder Loan Agreement between GigaMedia Asia Pacific Limited and IAHGames, dated April 30, 2010,
incorporated by reference to Exhibit 4.39 to our annual report for the year 2009 on Form 20-F filed
with the SEC on June 30, 20104.40
    
    
    Loan Assignment Agreement among GigaMedia Asia Pacific Limited, IAHGames and Spring Asia Limited,
dated June 1, 2010, incorporated by reference to Exhibit 4.40 to our annual report for the year 2009
on Form 20-F filed with the SEC on June 30, 20104.41
    
    
    Loan Agreement between Spring Asia Limited and IAHGames, dated May 20, 2010, incorporated by reference
to Exhibit 4.41 to our annual report for the year 2009 on Form 20-F filed with the SEC on June 30,
20104.42
    
    
    Stock and Asset Purchase Agreement among BetClic, GigaMedia Limited, UIM and the Other Parties Named
Thereto dated December 15, 2009 and Amendment No.1 to Stock and Asset Purchase Agreement, dated March
31, 2010, incorporated by reference to Exhibit 4.42 to our annual report for the year 2009 on Form
20-F filed with the SEC on June 30, 20104.43
    
    
    Fifth Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated April 1, 2009, incorporated by reference to Exhibit 4.43 to our annual
report for the year 2009 on Form 20-F filed with the SEC on June 30, 20104.44
    
    
    Share Purchase Agreement between China Interactive Limited and GigaMedia Asia Pacific Limited, dated
June 30, 2010, incorporated by reference to Exhibit 4.44 to our annual report for the year 2009 on
Form 20-F filed with the SEC on June 30, 20104.45
    
    
    Instrument Constituting Warrants to Subscribe for Shares in IAHGames among IAHGames, Management
Capital International Limited and Mr. Ong Toon Wan, dated April 30, 2010#4.46
    
    
    Deed of Amendment among IAHGames, Management Capital International Limited and Mr. Ong Toon Wan, dated
May 20, 2010#4.47
    
    
    Security over Shares Agreement between IAHGames and Blizzard, dated April 30, 2010#4.48
    
    
    Deed of Undertaking between GigaMedia Asia Pacific Limited and Blizzard, dated April 30, 2010#4.49
    
    
    Prepayment Agreement between GigaMedia (HK) Limited and Mi Saiyu, dated September 18, 2010#4.50
    
    
    Prepayment Agreement between GigaMedia (HK) Limited and Song Yunv, dated October 12, 2010#4.51
    
    
    Authorization and Proxy Letter by Mi Saiyu, dated December 6, 2010#4.52
    
    
    Authorization and Proxy Letter by Song Yunv, dated December 6, 2010#4.53
    
    
    Exclusive Technical Services Agreement between JIDI and Shanghai JIDI, dated January 1, 2011#
  127




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EXHIBIT
    
    INDEX8.1
    
    
    List of Subsidiaries#12.1
    
    
    Certification by our Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act#12.2
    
    
    Certification by our Chief Financial Officer pursuant to Rule13a-14(b) of the Securities Exchange Act#13.1
    
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#13.2
    
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#15.1
    
    
    Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm#15.2
    
    

Consent
of Crowe Horwath First Trust LLP, Independent Auditors15.3
    
    
    Consent of GHP Horwath, P.C., Independent Auditors18.1
    
    

Financial
Statements of Monsoon Online Pte. Ltd. for the financial period from October 22, 2009 (the date of
incorporation) to December 31, 2010 #18.2
    
    
    Consolidated financial statements of Mangas Everest S.A.S. as of and for the nine-months ended December
31, 2010 #
 #
    
    Filed herewith.  128




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SIGNATURE
  GIGAMEDIA LIMITED
 By:
    
    /s/ Yichin LEE

Yichin LEEChief Executive OfficerDate: June 30, 2011
  129




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GIGAMEDIA LIMITED
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DECEMBER 31, 2009 AND 2010 AND
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010




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(CROWE HORWATH LOGO)
    
    GHP Horwath, P.C.
Member Crowe Horwath International

1670 Broadway, Suite 3000
Denver, Colorado 80202
+1 303.831.5000
+1 303.831.5032 Fax
www.GHPHorwath.com
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
    ()
    
    A GHP Financial Group CompanyGHP Horwath, P.C. is an independent member firm of Crowe Horwath International, a Swiss
verein. Each member firm of Crowe Horwath International is a separate and independent legal
entity.
  F-1




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Internal ControlIntegrated Framework
   
  F-2




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED BALANCE SHEETS  December 31, 2009 and 2010
 December 312009
    
    
    2010ASSETSCURRENT ASSETSCash and cash equivalents (Note 11)
    
    $
    55,566
    
    
    $
    70,989Marketable securities-current (Note 12)
    
    
    3,486
    
    
    
    3,553Accounts receivable-net (Note 13)
    
    
    4,228
    
    
    
    9,506Prepaid expenses
    
    
    1,204
    
    
    
    1,996Restricted cash (Note 17)
    
    
    932
    
    
    
    5,000Assets held for sale-current (Note 6)
    
    
    35,444
    
    
    
    Other current assets (Notes 14 and 25)
    
    
    3,979
    
    
    
    2,044Total Current Assets
    
    
    104,839
    
    
    
    93,088Marketable securities-noncurrent (Note 15)
    
    
    18,356
    
    
    
    33,389Investments (Note 16)
    
    
    3,477
    
    
    
    66,774Retained ownership of gaming software and service business (Note 6)
    
    
    25,951
    
    
    
    PROPERTY, PLANT AND EQUIPMENTLand and buildings
    
    
    1,171
    
    
    
    1,286Information and communication equipment
    
    
    6,928
    
    
    
    5,892Office furniture and fixtures
    
    
    915
    
    
    
    907Leasehold improvements
    
    
    2,643
    
    
    
    2,133Other
    
    
    148
    
    
    
    1,07311,805
    
    
    
    11,291Less: Accumulated depreciation
    
    
    ( 5,816
    )
    
    
    ( 5,990
    )5,989
    
    
    
    5,301GOODWILL (Note 7)
    
    
    44,417
    
    
    
    39,493INTANGIBLE ASSETS-NET (Note 8)
    
    
    18,924
    
    
    
    19,769ASSETS HELD FOR SALE-NONCURRENT (Note 6)
    
    
    31,301
    
    
    
    OTHER ASSETSRefundable deposits
    
    
    1,079
    
    
    
    2,163Prepaid licensing and royalty fees (Notes 9 and 27)
    
    
    5,557
    
    
    
    4,214Other (Note 25 and 26)
    
    
    291
    
    
    
    3,398Total Other Assets
    
    
    6,927
    
    
    
    9,775TOTAL ASSETS
    
    $
    260,181
    
    
    $
    267,589
   F-3




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GIGAMEDIA LIMITED  CONSOLIDATED BALANCE SHEETS-(Continued)  December 31, 2009 and 2010
 December 312009
    
    
    2010LIABILITIES & EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    591
    
    
    $
    4,305Accrued compensation
    
    
    2,814
    
    
    
    4,239Accrued expenses (Note 18)
    
    
    6,719
    
    
    
    10,986Short-term borrowings (Notes 17 and 26)
    
    
    22,503
    
    
    
    12,413Liabilities held for sale-current (Note 6)
    
    
    26,458
    
    
    
    Other current liabilities (Notes 19 and 25)
    
    
    13,244
    
    
    
    11,350Total Current Liabilities
    
    
    72,329
    
    
    
    43,293OTHER LIABILITIESAccrued pension liabilities (Note 20)
    
    
    83
    
    
    
    44Liabilities held for sale-noncurrent (Note 6)
    
    
    1,360
    
    
    
    Other (Note 21 and 25)
    
    
    49
    
    
    
    7,686Total Other Liabilities
    
    
    1,492
    
    
    
    7,730Total Liabilities
    
    
    73,821
    
    
    
    51,023COMMITMENTS AND CONTINGENCIES (Notes 27 and 28)
    
    
    
    
    
    
    SUBSIDIARY PREFERRED SHARES (Note 22)Par value $1, redeemable; convertible; issued and outstanding
2,018 thousand shares on December 31, 2010
    
    
    
    
    
    
    1,465EQUITY (Note 23)GigaMedia Shareholders Equity:Common shares, no par value, and additional paid-in capital;
issued and outstanding 54,995 thousand and 56,263 thousand
shares on December 31, 2009 and 2010
    
    
    304,379
    
    
    
    309,332Accumulated deficit
    
    
    (94,389
    )
    
    
    (91,739
    )Accumulated other comprehensive loss
    
    
    (25,245
    )
    
    
    (72
    )Total GigaMedia shareholders equity
    
    
    184,745
    
    
    
    217,521Noncontrolling interest
    
    
    1,615
    
    
    
    (2,420
    )Total Equity
    
    
    186,360
    
    
    
    215,101TOTAL LIABILITIES AND EQUITY
    
    $
    260,181
    
    
    $
    267,589
   F-4




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF OPERATIONS  For the Years Ended December 31, 2008, 2009 and 2010
 2008
    
    
    2009
    
    
    2010OPERATING REVENUESGaming software and service revenues
    
    $
    144,765
    
    
    $
    112,694
    
    
    $
    25,820Asian online game and service revenues
    
    
    45,604
    
    
    
    46,887
    
    
    
    38,862Total
    
    
    190,369
    
    
    
    159,581
    
    
    
    64,682OPERATING COSTSCost of gaming software and service revenues
    
    
    (22,770
    )
    
    
    (20,102
    )
    
    
    (4,010
    )Cost of Asian online game and service revenues
    
    
    (12,404
    )
    
    
    (16,785
    )
    
    
    (17,103
    )(35,174
    )
    
    
    (36,887
    )
    
    
    (21,113
    )GROSS PROFIT
    
    
    155,195
    
    
    
    122,694
    
    
    
    43,569OPERATING EXPENSESProduct development and engineering expenses
    
    
    (13,455
    )
    
    
    (14,195
    )
    
    
    (7,301
    )Selling and marketing expenses
    
    
    (74,173
    )
    
    
    (79,421
    )
    
    
    (21,589
    )General and administrative expenses
    
    
    (25,035
    )
    
    
    (29,692
    )
    
    
    (31,780
    )Bad debt expenses (Notes 13 and 14)
    
    
    (2,905
    )
    
    
    (1,092
    )
    
    
    (1,639
    )Impairment loss on property, plant and equipment (Note 10)
    
    
    
    
    
    
    (1,250
    )
    
    
    (278
    )Impairment loss on goodwill (Note 10)
    
    
    
    
    
    
    (14,103
    )
    
    
    (2,255
    )Impairment loss on prepaid licensing fees and intangible assets (Note 10)
    
    
    (1,524
    )
    
    
    (23,002
    )
    
    
    (2,200
    )Impairment loss on deconsolidation of T2CN (Note 5 and 10)
    
    
    
    
    
    
    
    
    
    
    (22,234
    )Other
    
    
    
    
    
    
    
    
    
    
    (1,989
    )(117,092
    )
    
    
    (162,755
    )
    
    
    (91,265
    )INCOME (LOSS) FROM OPERATIONS
    
    
    38,103
    
    
    
    (40,061
    )
    
    
    (47,696
    )NON-OPERATING INCOME (EXPENSES)Interest income
    
    
    1,460
    
    
    
    432
    
    
    
    956Gain on sales of marketable securities
    
    
    373
    
    
    
    
    
    
    
    Interest expense
    
    
    (976
    )
    
    
    (390
    )
    
    
    (370
    )Foreign exchange (loss) gain
    
    
    240
    
    
    
    168
    
    
    
    (606
    )Loss on disposal of property, plant and equipment
    
    
    (253
    )
    
    
    (31
    )
    
    
    (125
    )Loss on equity method investments  net
    
    
    (3,010
    )
    
    
    (87
    )
    
    
    (20,770
    )Impairment loss on marketable securities and investments (Note 10)
    
    
    
    
    
    
    (15,743
    )
    
    
    (4,677
    )Gain on deconsolidation of the gaming software and service business (Note 6)
    
    
    
    
    
    
    
    
    
    
    79,140Gain on fair value changes of warrant derivative (Note 10)
    
    
    
    
    
    
    
    
    
    
    2,595Other
    
    
    842
    
    
    
    127
    
    
    
    221(1,324
    )
    
    
    (15,524
    )
    
    
    56,364INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    36,779
    
    
    
    (55,585
    )
    
    
    8,668INCOME TAX EXPENSE (Note 25)
    
    
    (1,069
    )
    
    
    (517
    )
    
    
    (7,260
    )INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    35,710
    
    
    
    (56,102
    )
    
    
    1,408INCOME (LOSS) FROM DISCONTINUED OPERATIONS  NET OF TAX (Note 6)
    
    
    9,435
    
    
    
    222
    
    
    
    (128
    )NET INCOME (LOSS)
    
    
    45,145
    
    
    
    (55,880
    )
    
    
    1,280LESS: NET (INCOME) LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST
AND SUBSIDIARY PREFERRED SHARES
    
    
    (757
    )
    
    
    6,795
    
    
    
    1,370NET INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA
    
    $
    44,388
    
    
    $
    (49,085
    )
    
    $
    2,650NET INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA:Income (loss) from continuing operations  net of tax
    
    $
    34,953
    
    
    $
    (49,307
    )
    
    $
    2,778Income (loss) from discontinued operations  net of tax
    
    
    9,435
    
    
    
    222
    
    
    
    (128
    )$
    44,388
    
    
    $
    (49,085
    )
    
    $
    2,650EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO GIGAMEDIABasic:Income (loss) from continuing operations
    
    $
    0.65
    
    
    $
    (0.90
    )
    
    $
    0.05Income from discontinued operations
    
    
    0.17
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.82
    
    
    $
    (0.90
    )
    
    $
    0.05Diluted:Income (loss) from continuing operations
    
    $
    0.58
    
    
    $
    (0.90
    )
    
    $
    0.04Income from discontinued operations
    
    
    0.16
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.74
    
    
    $
    (0.90
    )
    
    $
    0.04WEIGHTED AVERAGE SHARES USED TO COMPUTE
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO GIGAMEDIA (Note 2)Basic
    
    
    54,110
    
    
    
    54,524
    
    
    
    55,834Diluted
    
    
    60,152
    
    
    
    54,524
    
    
    
    59,291
   F-5




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  For the Years Ended December 31, 2008, 2009 and 2010
 2008
    
    
    2009
    
    
    2010NET INCOME (LOSS)
    
    $
    45,145
    
    
    $
    (55,880
    )
    
    $
    1,280OTHER COMPREHENSIVE INCOME-NET OF TAX:Unrealized gain (loss) on marketable securities
    
    
    (282
    )
    
    
    67
    
    
    
    21,789Defined benefit pension plan adjustment
    
    
    95
    
    
    
    (68
    )
    
    
    31Foreign currency translation adjustments
    
    
    893
    
    
    
    1,003
    
    
    
    4,756Deconsolidation of T2CN
    
    
    
    
    
    
    
    
    
    
    (1,311
    )706
    
    
    
    1,002
    
    
    
    25,265COMPREHENSIVE INCOME (LOSS)
    
    
    45,851
    
    
    
    (54,878
    )
    
    
    26,545COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO
THE NONCONTROLLING INTEREST AND SUBSIDIARY
PREFERRED SHARES
    
    
    (1,288
    )
    
    
    6,809
    
    
    
    1,278COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA
    
    $
    44,563
    
    
    $
    (48,069
    )
    
    $
    27,823
   F-6




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF EQUITY  For the Years Ended December 31, 2008, 2009 and 2010
 GIGAMEDIA SHAREHOLDERSCommon shares
    
    
    
    
    
    
    Accumulated otherand additional paid-in capital
    
    
    Accumulated
    
    
    comprehensive
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    deficit (Note 23)
    
    
    income (loss)
    
    
    interest
    
    
    TotalBalance as of January 1, 2008
    
    
    53,700
    
    
    $
    296,793
    
    
    $
    (89,692
    )
    
    $
    (26,436
    )
    
    $
    9,810
    
    
    $
    190,475Issuance of common shares from exercise of stock options and RSUs
    
    
    665
    
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    495Stock-based compensation
    
    
    
    
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    2,812Purchase of T2CN common shares from noncontrolling interest and
T2CN buy back and cancellation of its common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,257
    )
    
    
    (2,257
    )Cash dividend to noncontrolling interest shareholders of
variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Net income
    
    
    
    
    
    
    
    
    
    
    44,388
    
    
    
    
    
    
    
    757
    
    
    
    45,145Components of other comprehensive income (loss):Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    531
    
    
    
    893Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,851Balance as of December 31, 2008
    
    
    54,365
    
    
    
    300,021
    
    
    
    (45,304
    )
    
    
    (26,261
    )
    
    
    8,620
    
    
    
    237,076Issuance of common shares from exercise of stock options and RSUs
    
    
    630
    
    
    
    1,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,320Stock-based compensation
    
    
    
    
    
    
    3,150
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    3,277Purchase of T2CN common shares from noncontrolling interest
    
    
    
    
    
    
    (112
    )
    
    
    
    
    
    
    
    
    
    
    (173
    )
    
    
    (285
    )Cash dividend to noncontrolling interest shareholders of
variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (49,085
    )
    
    
    
    
    
    
    (6,795
    )
    
    
    (55,880
    )Components of other comprehensive income (loss):Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    67Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (68
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,017
    
    
    
    (14
    )
    
    
    1,003Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,878
    )Balance as of December 31, 2009
    
    
    54,995
    
    
    
    304,379
    
    
    
    (94,389
    )
    
    
    (25,245
    )
    
    
    1,615
    
    
    
    186,360Issuance of common shares from exercise of stock options and RSUs
    
    
    402
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Stock-based compensation
    
    
    
    
    
    
    2,961
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    3,014Acquisition of IAHGames (Note 4)
    
    
    866
    
    
    
    2,192
    
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    3,384Acquisition of UIM (Note 3)
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    (578
    )
    
    
    (400
    )Deconsolidation of T2CN (Note 5)
    
    
    
    
    
    
    (552
    )
    
    
    
    
    
    
    
    
    
    
    (3,276
    )
    
    
    (3,828
    )Cumulative dividend to subsidiary preferred shares (Note 22)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )
    
    
    (148
    )Net income
    
    
    
    
    
    
    
    
    
    
    2,650
    
    
    
    
    
    
    
    (1,370
    )
    
    
    1,280Components of other comprehensive income (loss):Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,789
    
    
    
    
    
    
    
    21,789Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    31Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,744
    
    
    
    12
    
    
    
    4,756Deconsolidation of T2CN (Note 5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,391
    )
    
    
    80
    
    
    
    (1,311
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,545Balance as of December 31, 2010
    
    
    56,263
    
    
    $
    309,332
    
    
    $
    (91,739
    )
    
    $
    (72
    )
    
    $
    (2,420
    )
    
    $
    215,101
   F-7




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF CASH FLOWS  For the Years Ended December 31, 2008, 2009 and 2010
 2008
    
    
    2009
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    45,145
    
    
    $
    (55,880
    )
    
    $
    1,280Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:Depreciation
    
    
    4,031
    
    
    
    4,358
    
    
    
    2,092Amortization
    
    
    4,342
    
    
    
    5,219
    
    
    
    2,779Stock-based compensation
    
    
    2,780
    
    
    
    3,277
    
    
    
    3,014Gain on deconsolidation of gaming software and service business
    
    
    
    
    
    
    
    
    
    
    (79,140
    )Impairment loss on property, plant and equipment
    
    
    
    
    
    
    1,250
    
    
    
    278Impairment loss on goodwill
    
    
    
    
    
    
    14,103
    
    
    
    2,255Impairment loss on prepaid licensing fees and intangible assets
    
    
    1,524
    
    
    
    23,002
    
    
    
    2,200Provision for bad debt expenses
    
    
    2,953
    
    
    
    1,092
    
    
    
    1,639Gain on divestiture of business
    
    
    (11,014
    )
    
    
    
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    282
    
    
    
    31
    
    
    
    125Gain on sale of marketable securities
    
    
    (400
    )
    
    
    
    
    
    
    Loss on equity method investments
    
    
    3,010
    
    
    
    87
    
    
    
    20,770Impairment loss on marketable securities and investments
    
    
    
    
    
    
    15,743
    
    
    
    4,677Impairment loss on deconsolidation of T2CN
    
    
    
    
    
    
    
    
    
    
    22,234Gain on fair value changes of warrant derivative
    
    
    
    
    
    
    
    
    
    
    (2,595
    )Other
    
    
    300
    
    
    
    25
    
    
    
    (125
    )Net changes in operating assets and liabilities, net of
business acquisitions and divestitures:Accounts receivable
    
    
    465
    
    
    
    (5,015
    )
    
    
    3,263Prepaid expenses
    
    
    (4,373
    )
    
    
    1,061
    
    
    
    (2,992
    )Other current assets
    
    
    (2,304
    )
    
    
    (553
    )
    
    
    2,215Accounts payable
    
    
    33
    
    
    
    (298
    )
    
    
    1,867Accrued expenses
    
    
    2,326
    
    
    
    2,243
    
    
    
    3,519Accrued compensation
    
    
    (2,057
    )
    
    
    386
    
    
    
    1,667Player account balances
    
    
    5,691
    
    
    
    2,187
    
    
    
    229Other current liabilities
    
    
    336
    
    
    
    1,500
    
    
    
    4,568Accrued pension liabilities
    
    
    (167
    )
    
    
    (25
    )
    
    
    (39
    )Prepaid licensing and royalty fees
    
    
    (4,685
    )
    
    
    (4,216
    )
    
    
    (3,855
    )Other
    
    
    2,532
    
    
    
    (941
    )
    
    
    (847
    )Net cash provided by (used in) operating activities
    
    
    50,750
    
    
    
    8,636
    
    
    
    (8,922
    )CASH FLOWS FROM INVESTING ACTIVITIES:Decrease (increase) in restricted cash
    
    
    4,122
    
    
    
    187
    
    
    
    (4,068
    )Cash dividends received from equity method investees
    
    
    
    
    
    
    
    
    
    
    945Proceeds from disposal of marketable securities
    
    
    25,095
    
    
    
    
    
    
    
    Divestiture of business, net of cash transferred
    
    
    16,471
    
    
    
    1,006
    
    
    
    Purchase of property, plant and equipment
    
    
    (8,814
    )
    
    
    (5,761
    )
    
    
    (3,784
    )Proceeds from disposal of property, plant and equipment
    
    
    35
    
    
    
    17
    
    
    
    119Prodeeds from disposal of gaming software and service business,
net of transaction costs
    
    
    
    
    
    
    
    
    
    
    85,669Purchase of marketable securities
    
    
    (24,746
    )
    
    
    (7,052
    )
    
    
    (1,500
    )Purchase of investments
    
    
    (190
    )
    
    
    (2,612
    )
    
    
    (5,261
    )Purchase of intangible assets
    
    
    (7,509
    )
    
    
    (8,807
    )
    
    
    (2,317
    )Acquisitions, net of cash acquired
    
    
    (4,642
    )
    
    
    (285
    )
    
    
    (5,831
    )Advances to equity investees
    
    
    
    
    
    
    (637
    )
    
    
    (13,804
    )Decrease (increase) in refundable deposits
    
    
    (5,862
    )
    
    
    1,986
    
    
    
    (146
    )Other
    
    
    (380
    )
    
    
    (120
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (6,420
    )
    
    
    (22,078
    )
    
    
    50,022
   F-8




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GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)  For the Years Ended December 31, 2008, 2009 and 2010
 2008
    
    
    2009
    
    
    2010CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from (repayment of) short-term borrowings
    
    
    (18,058
    )
    
    
    7,261
    
    
    
    (12,543
    )Cash received from the exercise of stock options
    
    
    495
    
    
    
    1,320
    
    
    
    174Cash dividend to noncontrolling shareholders of variable interest entity
    
    
    (300
    )
    
    
    (150
    )
    
    
    Other
    
    
    (13
    )
    
    
    (5
    )
    
    
    5Net cash (used in) provided by financing activities
    
    
    (17,876
    )
    
    
    8,426
    
    
    
    (12,364
    )Exchange difference
    
    
    936
    
    
    
    (356
    )
    
    
    (410
    )Cash balance included in assets held for sale and retained ownership of
gaming software and service business
    
    
    
    
    
    
    (35,015
    )
    
    
    Deconsolidation of T2CN
    
    
    
    
    
    
    
    
    
    
    (12,903
    )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    27,390
    
    
    
    (40,387
    )
    
    
    15,423CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR
    
    
    68,563
    
    
    
    95,953
    
    
    
    55,566CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    95,953
    
    
    $
    55,566
    
    
    $
    70,989SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:Interest paid during the year
    
    $
    1,008
    
    
    $
    388
    
    
    $
    313Income tax paid during the year
    
    $
    1,412
    
    
    $
    1,230
    
    
    $
    3,799NON-CASH FINANCING AND INVESTING ACTIVITIES:Change in unrealized holding gain (loss) on available-for-sale securities
    
    $
    (282
    )
    
    $
    67
    
    
    $
    21,789Issuance of common shares for acquisition
    
    $
    
    
    
    $
    
    
    
    $
    2,192Divestiture of business  consideration receivable
    
    $
    1,006
    
    
    $
    
    
    
    $
    
   F-9




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NOTE 1.
    
    BUSINESS OVERVIEW,
BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 (a) Business Overview
     (b) Basis of Presentation
   F-10




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Principles of Consolidation
  Foreign Currency Translation
   F-11




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(c) Summary of significant accounting policies
 Use of Estimates
  Revenue Recognition
 General
   Multiple-Element Arrangements
    F-12




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Gaming Software and Service Revenues
    Asian Online Game and Service Revenues
   F-13




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F-14




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Revenue Included within Discontinued Operations
   Player Account Balances
  Deferred Revenues
  Operating Costs
   F-15




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Prepaid
Licensing and Royalty Fees
    Fair Value Measurements
  Cash Equivalents
   F-16




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Marketable Securities
   Investments
   F-17




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Allowance for Doubtful Accounts
    F-18




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Property, Plant and Equipment
  Categories
    
    YearsBuildings
    
    50Information and communication equipment
    
    2 to 5Office furniture and equipment
    
    3 to 5Leasehold improvements
    
    3 to 5
   Acquisitions
   F-19




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Intangible Assets and Goodwill
  Impairment of Intangible Assets, Goodwill and Long-Lived Assets
     F-20




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Software Cost
   Product Development and Engineering
  Advertising
   F-21




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Leases
    F-22




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Share-Based Compensation
   Retirement Plan and Net Periodic Pension Cost
   Comprehensive Income (Loss)
   F-23




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Accounting for Income Taxes
   Earnings Per Share
   F-24




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Noncontrolling Interest
  Recent Accounting Pronouncements
   F-25




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F-26




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NOTE 2. EARNINGS PER SHARE
  (in thousand shares)
    
    2008
    
    
    2009
    
    
    2010Weighted average number of
outstanding sharesBasic
    
    
    54,110
    
    
    
    54,524
    
    
    
    55,834Effect of dilutive securitiesEmployee share-based compensation
    
    
    6,042
    
    
    
    
    
    
    
    3,457Diluted
    
    
    60,152
    
    
    
    54,524
    
    
    
    59,291
   F-27




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NOTE 3. VARIABLE-INTEREST ENTITIES
 UIM
   (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Total revenue
    
    $
    144,765
    
    
    $
    112,694
    
    
    $
    25,820Net (loss) income
    
    $
    (206
    )
    
    $
    (1,226
    )
    
    $
    1,514
  F-28




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T2CN Holding Limited (T2CN)
     F-29




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(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Total revenues
    
    $
    20,312
    
    
    $
    18,673
    
    
    $
    10,126Net income (loss)
    
    $
    1,571
    
    
    $
    (2,990
    )
    
    $
    834
 NOTE 4. ACQUISITIONS
   F-30




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Accumulated votinginterest at thoseDate of acquisition
    
    Amount
    
    
    Description
    
    points in timeDecember 2006
    
    $
    5,750
    *
    
    Purchased 500,000 convertible voting preferred shares-Series B
    
    
    32.26
    %May 2010
    
    $
    2,192
    **
    
    Purchased 208,881 convertible voting preferred shares-Series B
    
    
    40.30
    %July 2010
    
    $
    4,500
    
    
    Purchased 5,982,230 convertible voting preferred shares-Series A
    
    
    57.87
    %July 2010
    
    $
    10,000
    
    
    Purchased 500,000 convertible voting preferred shares-Series B
    
    
    80.00
    %
 *
    
    The original investment amount of $10 million was written down to $5.8 million, resulting
from an impairment charge of $4.2 million recorded in 2009.**
    
    GigaMedia issued 866,373 common shares, valued at approximately $2.2 million as consideration.   F-31




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Amortization life(in US$ thousands)
    
    (in years)
    
    AmountCash acquired
    
    
    
    $
    9,070Accounts receivable
    
    
    
    
    5,715Other current assets
    
    
    
    
    5,129Equity method investments
    
    
    
    
    20,319Fixed assets / non-current assets
    
    
    
    
    721Non-Compete Contracts
    
    3
    
    
    387Favorable lease right
    
    13.5
    
    
    2,861Prepaid licensing and royalty fees
    
    1.75 ~ 4
    
    
    1,010Goodwill
    
    N/A
    
    
    12,188Total assets acquired
    
    
    
    
    57,400Current liabilities
    
    
    
    
    23,304Noncurrent liabilities
    
    
    
    
    9,145Total liabilities assumed
    
    
    
    
    32,449Preferred shares (Series A)
    
    
    
    
    (1,317
    )Noncontrolling interest
    
    
    
    
    (1,192
    )Total purchase price
    
    
    
    $
    22,442
   F-32




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(in US$ thousands,
    
    Year ended December 31except per share figures)
    
    2009
    
    
    2010Unaudited
    
    
    UnauditedNet revenue
    
    $
    165,883
    
    
    $
    69,403Loss from operations
    
    
    (41,812
    )
    
    
    (50,378
    )Net loss
    
    
    (56,226
    )
    
    
    (1,570
    )Net (loss) income attributable to GigaMedia
    
    
    (49,574
    )
    
    
    255Basic (loss) earnings per share
attributable to GigaMedia
    
    
    (0.89
    )
    
    
    0.00Diluted (loss) earnings per share
attributable to GigaMedia
    
    
    (0.89
    )
    
    
    0.00
  NOTE 5 DECONSOLIDATION
   F-33




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Accumulated votingDate of
    
    
    
    
    
    
    
    interest at thoseacquisition
    
    Purchase Price
    
    
    Description
    
    points in time2006
    
    $
    15,000
    
    
    Purchased 7,500,000 convertible voting preferred shares
    
    
    19.02
    %2007
    
    $
    23,736
    *
    
    Acquired 31,113,681 common shares (including convertible voting preferred shares converted into common shares) in total.
    
    
    58.11
    %2008
    
    $
    3,375
    
    
    Purchased 4,500,000 common shares
    
    
    65.68
    %2009
    
    $
    285
    
    
    Purchased 520,000 common shares
    
    
    67.09
    %
 *
    
    The purchase price includes the issuance of 226,385 common shares of GigaMedia, valued at
approximately $2.7 million.  F-34




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(in US$ thousands)
    
    AmountCash
    
    $
    12,903Other current assets
    
    
    1,266Fixed assets / non-current assets
    
    
    1,679Prepaid licensing and royalty
    
    
    5,339Intangible assets
    
    
    1,098Total assets of T2CN
    
    
    22,285Total liabilities of T2CN
    
    
    (12,331
    )Net equity of T2CN
    
    
    9,954Noncontrolling interest
    
    
    (3,276
    )Goodwill acquired
    
    
    17,500Advances to the entities held by T2CN
    
    
    1,405$
    25,583
  NOTE 6. DIVESTITURES
 (a) Internet Access and Service Business
   F-35




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(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Revenue
    
    $
    9,289
    
    
    $
    159
    
    
    $
    146(Loss) income from discontinued
operations before tax
    
    $
    (593
    )
    
    $
    222
    
    
    $
    (128
    )Gain on sale of the discontinued
operations before tax
    
    
    11,014
    
    
    
    
    
    
    
    Income tax expense
    
    
    (986
    )
    
    
    
    
    
    
    Income (loss) from discontinued operations
    
    $
    9,435
    
    
    $
    222
    
    
    $
    (128
    )
  F-36




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##### Table of Contents



(b) Gaming Software and Service Business
   F-37




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##### Table of Contents



(in US$ thousands)
    
    AmountAssets Held for Sale-CurrentCash
    
    $
    35,015Accounts receivable
    
    
    15,817Prepaid expenses
    
    
    7,609Other current assets
    
    
    632Less: retained ownership
    
    
    (23,629
    )$
    35,444Assets Held for Sale-NoncurrentProperty, plant and equipment
    
    $
    7,358Goodwill
    
    
    29,243Intangible assets
    
    
    11,368Other assets
    
    
    4,199Less: retained ownership
    
    
    (20,867
    )$
    31,301Liabilities Held for Sale-CurrentAccounts payable
    
    $
    11Accrued compensation
    
    
    1,076Accrued expenses
    
    
    6,869Player account balances
    
    
    35,015Other current liabilities
    
    
    1,126Less: retained ownership
    
    
    (17,639
    )$
    26,458Liabilities Held for Sale-NoncurrentOther liabilities
    
    $
    2,266Less: retained ownership
    
    
    (906
    )$
    1,360
   F-38




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(in US$ thousands)Retained ownership of gaming software and service business:Current assets
    
    $
    23,629Noncurrent assets
    
    
    20,867Current liabilities
    
    
    (17,639
    )Noncurrent liabilities
    
    
    (906
    )$
    25,951
   (In US$ thousands)
    
    AmountThe fair value of any consideration received, including purchase price adjustments, net of any transaction costs
    
    $
    82,984The fair value of the 40% retained noncontrolling investment in the gaming software and service business at the
date the business was deconsolidated
    
    
    54,240Less : The carrying amount of the gaming software and service business at the date of the deconsolidation
    
    
    (58,084
    )Gain on deconsolidation of the gaming software and services business
    
    $
    79,140
  F-39




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NOTE 7 GOODWILL
  Gaming 
software
    
    
    Asian online
 game(In US$ thousands)
    
    and service
    
    
    and service
    
    
    TotalBalance as of December 31, 2008
    
    $
    29,243
    
    
    $
    57,855
    
    
    $
    87,098Impairment charge  T2CN (Note 10)
    
    
    
    
    
    
    (14,103
    )
    
    
    (14,103
    )Goodwill included in assets held for sale
and retained ownership of gaming software
and service business (Note 6)
    
    
    (29,243
    )
    
    
    
    
    
    
    (29,243
    )Translation adjustment
    
    
    
    
    
    
    665
    
    
    
    665Balance as of December 31, 2009
    
    
    
    
    
    
    44,417
    
    
    
    44,417Acquisition  IAHGames (Note 4)
    
    
    
    
    
    
    12,188
    
    
    
    12,188Impairment charge  T2CN (Note 5)
    
    
    
    
    
    
    (17,500
    )
    
    
    (17,500
    )Impairment charge  IAHGames (Note 10)
    
    
    
    
    
    
    (2,255
    )
    
    
    (2,255
    )Translation adjustment
    
    
    
    
    
    
    2,643
    
    
    
    2,643Balance as of December 31, 2010
    
    $
    
    
    
    $
    39,493
    
    
    $
    39,493
  F-40




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##### Table of Contents



NOTE 8. INTANGIBLE ASSETS  NET
  December 31, 2010Gross carrying
    
    
    Accumulated(In US$ thousands)
    
    amount
    
    
    amortization
    
    
    NetCompleted technology
    
    $
    2,595
    
    
    $
    (1,854
    )
    
    $
    741Trade name, trademark
and non-competition
agreements
    
    
    12,248
    
    
    
    (40
    )
    
    
    12,208Capitalized software cost
    
    
    6,599
    
    
    
    (5,388
    )
    
    
    1,211Customer relationships
    
    
    6,255
    
    
    
    (3,475
    )
    
    
    2,780Favorable lease right
    
    
    2,861
    
    
    
    (106
    )
    
    
    2,755Other
    
    
    126
    
    
    
    (52
    )
    
    
    74Total
    
    $
    30,684
    
    
    $
    (10,915
    )
    
    $
    19,769
 December 31, 2009Gross carrying
    
    
    Accumulated(In US$ thousands)
    
    amount
    
    
    amortization
    
    
    NetCompleted technology
    
    $
    2,363
    
    
    $
    (1,350
    )
    
    $
    1,013Trade name, trademark
and non-competition
agreements
    
    
    11,160
    
    
    
    (15
    )
    
    
    11,145Capitalized software cost
    
    
    8,633
    
    
    
    (5,137
    )
    
    
    3,496Customer relationships
    
    
    5,695
    
    
    
    (2,531
    )
    
    
    3,164Other
    
    
    115
    
    
    
    (9
    )
    
    
    106Total
    
    $
    27,966
    
    
    $
    (9,042
    )
    
    $
    18,924
   F-41




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(In US$ thousands)
    
    Amount2011
    
    $
    1,7702012
    
    
    1,7172013
    
    
    1,2952014
    
    
    9072015
    
    
    212Total
    
    $
    5,901
 NOTE 9 PREPAID LICENSING AND ROYALTY FEES
  (in US$ thousands)
    
    2009
    
    
    2010Beginning balance
    
    $
    20,540
    
    
    $
    5,557Additions
    
    
    5,484
    
    
    
    3,987Acqusition  IAHGames (Note 4)
    
    
    
    
    
    
    1,010Amortization of licensing and royalty costs
    
    
    (2,146
    )
    
    
    (573
    )Deconsolidation  T2CN (Note 5)
    
    
    
    
    
    
    (5,339
    )Impairment charges (Note 10)
    
    
    (18,301
    )
    
    
    (870
    )Translation adjustment
    
    
    (20
    )
    
    
    442Balance as of December 31
    
    $
    5,557
    
    
    $
    4,214
  F-42




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NOTE 10. FAIR VALUE MEASUREMENTS
  Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
   F-43




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Year EndedFair Value Measurement Using
    
    
    December(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    31, 2010AssetsCash equivalents  time deposits
    
    $
    
    
    
    $
    1,012
    
    
    $
    
    
    
    $
    1,012Marketable securities  currentOpen-end fund
    
    
    
    
    
    
    3,553
    
    
    
    
    
    
    
    3,553Marketable securities  noncurrentDebt securities
    
    
    
    
    
    
    
    
    
    
    5,454
    
    
    
    5,454Equity securities
    
    
    25,553
    
    
    
    2,382
    
    
    
    
    
    
    
    27,935Subtotal
    
    
    25,553
    
    
    
    6,947
    
    
    
    5,454
    
    
    
    37,954LiabiltiesOther liabilities  other
Warrant derivative
    
    
    
    
    
    
    
    
    
    
    (665
    )
    
    
    (665
    )Total
    
    $
    25,553
    
    
    $
    6,947
    
    
    $
    4,789
    
    
    $
    37,289
 Year EndedFair Value Measurement Using
    
    
    December(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    31, 2009AssetsMarketable securities  current
    
    $
    
    
    
    $
    3,486
    
    
    $
    
    
    
    $
    3,486Open-end fundMarketable securities  noncurrentDebt securities
    
    
    
    
    
    
    
    
    
    
    14,204
    
    
    
    14,204Equity securities
    
    
    4,152
    
    
    
    
    
    
    
    
    
    
    
    4,152Total
    
    $
    4,152
    
    
    $
    3,486
    
    
    $
    14,204
    
    
    $
    21,842
 Level 1 and 2 measurements:
   F-44




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Level 3 measurements:
  Fair Value MeasurementsUsing Significant UnobservableInputsMarketable Securities - DebtSecurities(in US$ thousands)
    
    2009
    
    
    2010Beginning balance
    
    $
    26,041
    
    
    $
    14,204Total gains or losses (realized/unrealized)included in earnings
    
    
    (11,837
    )
    
    
    (4,500
    )included in other comprehensive income
    
    
    
    
    
    
    Purchase and settlements
    
    
    
    
    
    
    1,500Transfers in and/or out of Level 3
    
    
    
    
    
    
    (5,750
    )Ending balance
    
    $
    14,204
    
    
    $
    5,454The amount of total gains or losses for
the period included in earnings
attributable to the change in unrealized
gains or losses relating to assets still
held at the reporting date
    
    None
    
    None
  F-45




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F-46




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Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)Other liabilities - WarrantDerivative(in US$ thousands)
    
    2010Beginning balance
    
    $
    Total (gains) or losses (realized/unrealized)included in earnings
    
    
    (2,595
    )included in other comprehensive income
    
    
    Purchase and settlements
    
    
    3,260Transfers in and/or out of Level 3
    
    
    Ending balance
    
    $
    665The amount of total (gains) or losses for the period included in earnings
attributable to the change in unrealized gains
or losses relating to liabilities still held at the reporting date
    
    $
    (2,595
    )
   F-47




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##### Table of Contents



Financial instruments
  Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
   F-48




---



##### Table of Contents



Year Ended
    
    
    TotalFair Value measurement Using
    
    
    December
    
    
    Impairment(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    31, 2010
    
    
    LossesAssets(a) Investment  Equity method
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    177(b) Property, plant and equipment
- Information and
communication equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    278(c) Goodwill  Resulting from
acquisition of IAH
    
    
    
    
    
    
    
    
    
    
    9,933
    
    
    
    9,933
    
    
    
    2,255(d) Intangible assets  Capitalized
software cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,007(d) Intangible assets -
Non-Compete Contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    323(e) Prepaid licensing and royalty
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    200
    
    
    
    870(f) Investment in T2CN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,234Total
    
    $
    
    
    
    $
    
    
    
    $
    10,133
    
    
    $
    10,133
    
    
    $
    27,144
 Year Ended
    
    
    TotalFair Value measurement Using
    
    
    December
    
    
    Impairment(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    31, 2009
    
    
    LossesAssets(a) Investment  Cost method
    
    $
    
    
    
    $
    
    
    
    $
    700
    
    
    $
    700
    
    
    $
    1,005(b) Property, plant and equipment
- Land and Building
    
    
    
    
    
    
    1,171
    
    
    
    
    
    
    
    1,171
    
    
    
    473(b) Property, plant and equipment
- Information and
communication equipment
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    79
    
    
    
    777(c) Goodwill  Resulting from
acquisition of T2CN
    
    
    
    
    
    
    
    
    
    
    17,500
    
    
    
    17,500
    
    
    
    14,103(d) Intangible assets  Capitalized
software cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,701(e) Prepaid licensing and royalty
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,301Total
    
    $
    
    
    
    $
    1,171
    
    
    $
    18,279
    
    
    $
    19,450
    
    
    $
    39,360
 (a)
    
    Impairment losses on certain cost method and equity method investments which were
determined to be impaired:   F-49




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F-50




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##### Table of Contents



F-51




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##### Table of Contents



F-52




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##### Table of Contents



NOTE 11. CASH AND CASH EQUIVALENTS
  December 31(in US$ thousands)
    
    2009
    
    
    2010Cash and checking and savings accounts
    
    $
    55,566
    
    
    $
    69,977Time deposits
    
    
    
    
    
    
    1,012Total
    
    $
    55,566
    
    
    $
    70,989
 NOTE 12. MARKETABLE SECURITIES  CURRENT
  December 31(in US$ thousands)
    
    2009
    
    
    2010Available-for-sale securities:Open-end funds
    
    $
    3,486
    
    
    $
    3,553
  F-53




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##### Table of Contents



NOTE 13. ACCOUNTS RECEIVABLE  NET
  December 31(in US$ thousands)
    
    2009
    
    
    2010Accounts receivable
    
    $
    4,428
    
    
    $
    10,348Less: Allowance for doubful accounts
    
    
    (200
    )
    
    
    (842
    )Net
    
    $
    4,228
    
    
    $
    9,506
  (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Balance at beginning of year
    
    $
    1,362
    
    
    $
    254
    
    
    $
    200Additions: Provision for bad debt
expense
    
    
    313
    
    
    
    158
    
    
    
    156Less: Write-offs
    
    
    (399
    )
    
    
    (216
    )
    
    
    (219
    )Acquisiton  IAHGames
    
    
    
    
    
    
    
    
    
    
    691Divestiture  Internet access and
service business
    
    
    (1,041
    )
    
    
    
    
    
    
    Translation adjustment
    
    
    19
    
    
    
    4
    
    
    
    14Balance at end of year
    
    $
    254
    
    
    $
    200
    
    
    $
    842
  F-54




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##### Table of Contents



NOTE 14. OTHER CURRENT ASSETS
  December 31(in US$ thousands)
    
    2009
    
    
    2010Loans receivable  current
    
    $
    4,074
    
    
    $
    5,761Less: Allowance for loans receivable  current
    
    
    (3,574
    )
    
    
    (5,057
    )Deferred income tax assets  current, net (Note 25)
    
    
    1,116
    
    
    
    581Other
    
    
    2,363
    
    
    
    759Total
    
    $
    3,979
    
    
    $
    2,044
  (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Balance at beginning of year
    
    $
    
    
    
    $
    2,640
    
    
    $
    3,574Additions:
Provision for bad debt expenses
    
    
    2,640
    
    
    
    934
    
    
    
    1,483Balance at end of year
    
    $
    2,640
    
    
    $
    3,574
    
    
    $
    5,057
    F-55




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F-56




---



##### Table of Contents



NOTE 15. MARKETABLE SECURITIES  NONCURRENT
  December 31(in US$ thousands)
    
    2009
    
    
    2010Available-for-sale securitiesDebt securities
    
    $
    14,204
    
    
    $
    5,454Equity securities
    
    
    4,152
    
    
    
    27,935Total
    
    $
    18,356
    
    
    $
    33,389
      F-57




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##### Table of Contents



NOTE 16. INVESTMENTS
  December 312009
    
    
    2010Amount
    
    
    AmountInvestments accounted for under the equity method
    
    $
    222
    
    
    $
    65,395Investments accounted for under the cost method
    
    
    3,255
    
    
    
    1,379$
    3,477
    
    
    $
    66,774
   F-58




---



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F-59




---



##### Table of Contents



NOTE 17. SHORT-TERM BORROWINGS
      F-60




---



##### Table of Contents



NOTE 18. ACCRUED EXPENSES
  December 31(in US$ thousands)
    
    2009
    
    
    2010Accrued advertising expenses
    
    $
    2,382
    
    
    $
    770Accrued royalties
    
    
    52
    
    
    
    1,499Accrued professional fees
    
    
    1,160
    
    
    
    3,676Purchase price adjustment accrual to
BetClic
    
    
    
    
    
    
    2,326Other
    
    
    3,125
    
    
    
    2,715$
    6,719
    
    
    $
    10,986
 NOTE 19. OTHER CURRENT LIABILITIES
  December 31(in US$ thousands)
    
    2009
    
    
    2010Deferred revenue
    
    $
    8,295
    
    
    $
    5,249Income taxes payable
    
    
    1,222
    
    
    
    4,980Other
    
    
    3,727
    
    
    
    1,121Total
    
    $
    13,244
    
    
    $
    11,350
  F-61




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##### Table of Contents



NOTE 20. PENSION BENEFITS
  Defined Benefit Pension Plan
    F-62




---



##### Table of Contents



Defined Contribution Pension Plans
  Taiwan
  PRC
   F-63




---



##### Table of Contents



Hong Kong
  Singapore
    F-64




---



##### Table of Contents



NOTE 21. OTHER LIABILITIES  OTHER
  December 31(in US$ thousands)
    
    2009
    
    
    2010Contingent
payment of minimum guarantee under licensing agreement
    
    $
    
    
    
    $
    5,885Warrant derivative (Note 10)
    
    
    
    
    
    
    665Other
    
    
    49
    
    
    
    1,136Total
    
    $
    49
    
    
    $
    7,686
 NOTE 22. SUBSIDIARY PREFERRED SHARES
   F-65




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##### Table of Contents



NOTE 23. EQUITY
      F-66




---



##### Table of Contents



NOTE 24. SHARE-BASED COMPENSATION
  (in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Cost of online game and service revenues
    
    $
    27
    
    
    $
    101
    
    
    $
    10Product development & engineering expenses
    
    
    480
    
    
    
    59
    
    
    
    18Selling and marketing expenses
    
    
    244
    
    
    
    231
    
    
    
    64General and administrative expenses
    
    
    1,954
    
    
    
    2,886
    
    
    
    2,922Pre-tax stock-based compensation expense
    
    
    2,705
    
    
    
    3,277
    
    
    
    3,014Income tax benefit
    
    
    (497
    )
    
    
    (382
    )
    
    
    (90
    )Total stock-based compensation expense
reported in continuing operations
    
    $
    2,208
    
    
    $
    2,895
    
    
    $
    2,924Total stock-based compensation expense
reported in discontinued operations, net of tax
    
    $
    63
    
    
    $
    
    
    
    $
    
  (a) Overview of Stock-Based Compensation Plans
 2002 Employee Share Option Plan
   F-67




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##### Table of Contents



2004 Employee Share Option Plan
  2006 Equity Incentive Plan
  2007 Equity Incentive Plan
   F-68




---



##### Table of Contents



2008 Equity Incentive Plan
  2008 Employee Share Purchase Plan
  2009 Equity Incentive Plan
   F-69




---



##### Table of Contents



2009 Employee Share Purchase Plan
  2010 Equity Incentive Plan
  2010 Employee Share Purchase Plan
   F-70




---



##### Table of Contents



Stock-Based
    
    Granted
    
    
    
    
    Options exercise
    
    RSUs grant datecompensation plan
    
    awards
    
    
    Vesting schedule
    
    price
    
    fair value2002 Plan
    
    
    3,000,000
    
    
    immediately upon granting
    
    $0.79
    
    2004 Plan
    
    
    7,703,185
    *
    
    immediately upon granting to four years
    
    $0.79~$2.55
    
    2006 Plan
    
    
    1,117,333
    **
    
    immediately upon granting to four years
    
    $2.47~$16.6
    
    $2.91~$16.012007 Plan
    
    
    2,431,907
    ***
    
    immediately upon granting to four years
    
    $2.47~$18.17
    
    $2.47~15.352008 Plan
    
    
    1,000,000
    
    
    immediately upon granting to six years
    
    $2.47~4.24
    
    2009 Plan
    
    
    1,500,000
    
    
    immediately upon granting to four years
    
    $2.47
    
    
 *
    
    The granted awards, net of forfeited or canceled shares, were within reserved shares of seven
million common shares.**
    
    The granted awards, net of forfeited or canceled shares, were within reserved shares of one
million common shares.***
    
    The granted awards, net of forfeited or canceled shares, were within reserved shares of two
million common shares.   F-71




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##### Table of Contents



(b) Options
   2008
    
    
    2010Option term (years)
    
    
    2.77~4.58
    
    
    
    6.48Volatility
    
    
    58%~65
    %
    
    
    65
    %Weighted-average volatility
    
    
    64
    %
    
    
    65
    %Risk-free interest rate
    
    
    1.72%~2.88
    %
    
    
    2.77
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Weighted-average fair value of option granted
    
    $
    2.36
    
    
    $
    1.55
      F-72




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##### Table of Contents



2008
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    2010Weighted-Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Average
    
    
    AggregateAvg.
    
    
    No.of
    
    
    Avg.
    
    
    No.of
    
    
    Avg.
    
    
    No.of
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Shares
    
    
    Exercise
    
    
    Shares
    
    
    Exercise
    
    
    Shares
    
    
    Contractual
    
    
    ValuePrice
    
    
    (in thousands)
    
    
    Price
    
    
    (in thousands)
    
    
    Price
    
    
    (in thousands)
    
    
    Term
    
    
    (in thousands)Balance at January 31
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287
    
    
    $
    2.36
    
    
    
    7,689Options granted
    
    
    4.69
    
    
    
    1,341
    
    
    
    
    
    
    
    
    
    
    
    2.47
    
    
    
    2,565Options exercised
    
    
    0.95
    
    
    
    (518
    )
    
    
    2.42
    
    
    
    (543
    )
    
    
    0.87
    
    
    
    (201
    )OptionsForfeited /
canceled / expired
    
    
    9.97
    
    
    
    (448
    )
    
    
    17.98
    
    
    
    (55
    )
    
    
    5.66
    
    
    
    (273
    )Balance at
December 31
    
    $
    2.47
    
    
    
    8,287
    
    
    $
    2.36
    
    
    
    7,689
    
    
    $
    2.33
    
    
    
    9,780
    
    
    
    5.60
    
    
    $
    3,591Exercisable at
December 31
    
    $
    1.33
    
    
    
    6,448
    
    
    $
    1.65
    
    
    
    6,420
    
    
    $
    2.04
    
    
    
    7,190
    
    
    
    4.46
    
    
    $
    3,591Vested and expected
to vest at
December 31
    
    $
    2.47
    
    
    
    8,287
    
    
    $
    2.36
    
    
    
    7,689
    
    
    $
    2.33
    
    
    
    9,780
    
    
    
    5.60
    
    
    $
    3,591
    F-73




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##### Table of Contents



Options outstanding
    
    
    Option currently exercisableWeightedaverageNo. of Shares
    
    
    remaining
    
    
    
    
    
    
    No. of SharesExercise price
    
    (in thousands)
    
    
    contractual life
    
    
    Exercise price
    
    
    (in thousands)Under $1
    
    
    5,201
    
    
    3.50 years
    
    Under $1
    
    
    5,201$1~$10
    
    
    3,950
    
    
    8.19 years
    
    $1~$10
    
    
    
    1,452$10~$20
    
    
    629
    
    
    6.65 years
    
    $10~$20
    
    
    
    5379,780
    
    
    
    
    
    
    
    
    
    
    
    7,190
 (c) RSUs
  2009
    
    
    2010Weighted-
    
    
    
    
    
    
    Weighted-Number of
    
    
    average
    
    
    Number of
    
    
    averageunits
    
    
    grant date fair
    
    
    units
    
    
    grant date(in thousands)
    
    
    value
    
    
    (in thousands)
    
    
    fair valueNonvested at January 1
    
    
    641
    
    
    $
    10.41
    
    
    
    640
    
    
    $
    9.83Granted
    
    
    100
    
    
    
    6.01
    
    
    
    119
    
    
    
    2.68Vested
    
    
    (86
    )
    
    
    10.15
    
    
    
    (201
    )
    
    
    4.88Forfeited
    
    
    (15
    )
    
    
    7.19
    
    
    
    (168
    )
    
    
    8.00Nonvested at December 31
    
    
    640
    
    
    $
    9.83
    
    
    
    390
    
    
    $
    10.99
   F-74




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##### Table of Contents



NOTE 25. INCOME TAXES
  For the years ended December 31(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010U.S. operations
    
    $
    1,095
    
    
    $
    1,324
    
    
    $
    5,678Non-U.S. operations
    
    
    35,684
    
    
    
    (56,909
    )
    
    
    2,990$
    36,779
    
    
    $
    (55,585
    )
    
    $
    8,668
  For the years ended December 31(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010U.S. operations
    
    $
    620
    
    
    $
    557
    
    
    $
    4,992Non-U.S. operations
    
    
    449
    
    
    
    (40
    )
    
    
    2,268$
    1,069
    
    
    $
    517
    
    
    $
    7,260
  F-75




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##### Table of Contents



For the years ended December 31(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010U.S. Federal:Current
    
    $
    (57
    )
    
    $
    863
    
    
    $
    4,244Deferred
    
    
    528
    
    
    
    (443
    )
    
    
    20$
    471
    
    
    $
    420
    
    
    $
    4,264U.S. State and Local:Current
    
    $
    208
    
    
    $
    156
    
    
    $
    617Deferred
    
    
    (59
    )
    
    
    (19
    )
    
    
    111$
    149
    
    
    $
    137
    
    
    $
    728Non  U.S.:Current
    
    $
    976
    
    
    $
    967
    
    
    $
    2,032Deferred
    
    
    (527
    )
    
    
    (1,007
    )
    
    
    236$
    449
    
    
    $
    (40
    )
    
    $
    2,268Total income tax provision
    
    $
    1,069
    
    
    $
    517
    
    
    $
    7,260
  For the years ended December 312008
    
    
    2009
    
    
    2010Federal statutory rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %State and local  net of federal tax benefit
    
    
    6.27
    %
    
    
    8.14
    %
    
    
    6.69
    %Foreign tax differential
    
    
    (32.56
    %)
    
    
    (43.53
    %)
    
    
    (88.75
    %)Permanent differences
    
    
    0.76
    %
    
    
    2.18
    %
    
    
    31.58
    %Change in valuation allowance
    
    
    (4.69
    %)
    
    
    (1.73
    %)
    
    
    52.73
    %Tax effect of earnings for equity
method investees and certain
subsidiaries
    
    
    
    
    
    
    
    
    
    
    42.72
    %Other
    
    
    (0.87
    %)
    
    
    0.01
    %
    
    
    4.79
    %Effective rate
    
    
    2.91
    %
    
    
    (0.93
    %)
    
    
    83.76
    %
  F-76




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##### Table of Contents



December 31(in US$ thousands)
    
    2009
    
    
    2010Net operating loss carryforwards
    
    $
    80
    
    
    $
    4,880Deferred revenue
    
    
    540
    
    
    
    9Loss on equity method investment
    
    
    
    
    
    
    2,813Share-based compensation
    
    
    230
    
    
    
    162Impairment charges
    
    
    1,465
    
    
    
    16Pension expense
    
    
    41
    
    
    
    33Depreciation
    
    
    86
    
    
    
    52Other
    
    
    (15
    )
    
    
    182,427
    
    
    
    7,983Less: valuation allowance
    
    
    (1,068
    )
    
    
    (7,402
    )Deferred tax assets  net
    
    $
    1,359
    
    
    $
    581
   F-77




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December 31(in US$ thousands)
    
    2009
    
    
    2010Depreciation and amortization
    
    $
    69
    
    
    $
    117Tax effect on undistributed earnings of
equity method investees
    
    
    
    
    
    
    1,010Other
    
    
    (37
    )
    
    
    Deferred tax liabilities  net
    
    $
    32
    
    
    $
    1,127
   For the years ended December 31,(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Balance at beginning of year
    
    $
    3,012
    
    
    $
    106
    
    
    $
    1,068Subsequent reversal/utilization of
valuation allowance
    
    
    (2,787
    )
    
    
    (45
    )
    
    
    (12
    )Additions to valuation allowance
    
    
    
    
    
    
    1,006
    
    
    
    4,583Divestitures
    
    
    (219
    )
    
    
    
    
    
    
    (874
    )Acquisitions
    
    
    
    
    
    
    
    
    
    
    2,624Exchange differences
    
    
    100
    
    
    
    1
    
    
    
    13Balance at end of year
    
    $
    106
    
    
    $
    1,068
    
    
    $
    7,402
   F-78




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##### Table of Contents



(in US$ thousands)Jurisdiction
    
    Amount
    
    
    Expiring yearSingapore
    
    $
    19,296
    
    
    indefiniteHong Kong
    
    
    4,928
    
    
    indefiniteTaiwan
    
    
    1,871
    
    
    2020Other
    
    
    1,841Total
    
    $
    27,936
  F-79




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##### Table of Contents



Uncertain Tax Positions
  (in US$ thousands)
    
    AmountBalance at January 1, 2008
    
    $
    127Decrease due to settlement
    
    
    (127
    )Balance at December 31, 2008
    
    
    Increase for prior year tax positions
    
    
    220Increase for current year tax positions
    
    
    460Exchange differences
    
    
    22Balance at December 31, 2009
    
    
    702Acqusition of IAHGames
    
    
    535Increase for prior year tax positions
    
    
    194Increase for current year tax positions
    
    
    323Decrease due to settlement
    
    
    (166
    )Exchange differences
    
    
    79Balance at December 31, 2010
    
    $
    1,667
    F-80




---



##### Table of Contents



F-81




---



##### Table of Contents



NOTE 26. RELATED-PARTY TRANSACTIONS
    F-82




---



##### Table of Contents



NOTE 27. COMMITMENTS AND CONTINGENCIES
 Commitments
 (a) Operating Leases
  (in US$ thousands)Year2011
    
    $
    1,1512012
    
    
    5592013
    
    
    1242014
    
    
    1182015
    
    
    1212016 and after
    
    
    1,236Total
    
    $
    3,309
  (b) License Agreements
  Minimumguaranteesagainst future(in US$ thousands)
    
    License fees
    
    
    royalties
    
    
    TotalMinimum required payments:In 2011
    
    $
    741
    
    
    $
    9,633
    
    
    $
    10,374After 2011
    
    
    6,200
    
    
    
    5,500
    
    
    
    11,700$
    6,941
    
    
    $
    15,133
    
    
    $
    22,074
  F-83




---



##### Table of Contents



Contingencies
 (a) World Series of Poker Litigation
  (b) Other
   F-84




---



##### Table of Contents



NOTE 28. LITIGATION
 (a) Class Action
     F-85




---



##### Table of Contents



F-86




---



##### Table of Contents



F-87




---



##### Table of Contents



F-88




---



##### Table of Contents



(b) World Series of Poker Litigation
      F-89




---



##### Table of Contents



F-90




---



##### Table of Contents



(c) Dispute with the former head of GigaMedias online games business in the PRC and former Chief
Executive Officer of T2CN (Wang Ji)
   F-91




---



##### Table of Contents



F-92




---



##### Table of Contents



F-93




---



##### Table of Contents



ex parte ex parte
  NOTE 29 . SEGMENT INFORMATION
 Segment data
   F-94




---



##### Table of Contents



Gaming
    
    
    Asian onlinesoftware and
    
    
    game and(in US$ thousands)
    
    service
    
    
    service
    
    
    Total2008:Segment profit or loss:Net revenue from external customers
    
    $
    144,765
    
    
    $
    45,604
    
    
    $
    190,369Income from operations
    
    $
    36,360
    
    
    $
    7,998
    
    
    $
    44,358Share-based compensation
    
    $
    1,249
    
    
    $
    547
    
    
    $
    1,796Impairment
loss on prepaid licensing fees and intangible assets
    
    $
    
    
    
    $
    1,524
    
    
    $
    1,524Interest income
    
    $
    680
    
    
    $
    367
    
    
    $
    1,047Interest expense
    
    $
    7
    
    
    $
    
    
    
    $
    7Gains on sales of marketable securities
    
    $
    
    
    
    $
    4
    
    
    $
    4Foreign exchange gain (loss)
    
    $
    269
    
    
    $
    (124
    )
    
    $
    145Loss on equity method investments
    
    $
    
    
    
    $
    3,010
    
    
    $
    3,010Depreciation
    
    $
    2,064
    
    
    $
    1,080
    
    
    $
    3,144Amortization, including intangible assets
    
    $
    1,704
    
    
    $
    2,549
    
    
    $
    4,253Income tax expense
    
    $
    743
    
    
    $
    326
    
    
    $
    1,069Segment assets:Equity method investments
    
    $
    
    
    
    $
    75
    
    
    $
    75Additions to property, plant and equipment
    
    $
    6,095
    
    
    $
    1,585
    
    
    $
    7,680Additions to intangible assets
    
    $
    3,953
    
    
    $
    3,383
    
    
    $
    7,336Additions to goodwill
    
    $
    
    
    
    $
    2,249
    
    
    $
    2,249Total assets
    
    $
    132,631
    
    
    $
    130,327
    
    
    $
    262,958
   F-95




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##### Table of Contents



Gaming
    
    
    Asian onlinesoftware and
    
    
    game and(in US$ thousands)
    
    service
    
    
    service
    
    
    Total2009:Segment profit or loss:Net revenue from external customers
    
    $
    112,694
    
    
    $
    46,887
    
    
    $
    159,581Income (loss) from operations
    
    $
    7,472
    
    
    $
    (34,649
    )
    
    $
    (27,177
    )Share-based compensation
    
    $
    501
    
    
    $
    931
    
    
    $
    1,432Impairment
loss on prepaid licensing fees  and intangible assets
    
    $
    212
    
    
    $
    22,787
    
    
    $
    22,999Impairment
loss on property, plant and equipment
    
    $
    
    
    
    $
    777
    
    
    $
    777Impairment loss on goodwill
    
    $
    
    
    
    $
    14,103
    
    
    $
    14,103Interest income
    
    $
    242
    
    
    $
    129
    
    
    $
    371Interest expense
    
    $
    
    
    
    $
    
    
    
    $
    Foreign exchange gain (loss)
    
    $
    521
    
    
    $
    (114
    )
    
    $
    407Loss on equity method investments
    
    $
    
    
    
    $
    87
    
    
    $
    87Impairment
loss on marketable securities and investments
    
    $
    
    
    
    $
    13,719
    
    
    $
    13,719Depreciation
    
    $
    2,279
    
    
    $
    1,500
    
    
    $
    3,779Amortization, including intangible assets
    
    $
    2,027
    
    
    $
    3,120
    
    
    $
    5,147Income tax expense (benefit)
    
    $
    871
    
    
    $
    (101
    )
    
    $
    770Segment assets:Equity method investments
    
    $
    
    
    
    $
    222
    
    
    $
    222Additions to property, plant and equipment
    
    $
    2,731
    
    
    $
    2,929
    
    
    $
    5,660Additions to intangible assets
    
    $
    5,793
    
    
    $
    2,307
    
    
    $
    8,100Additions to goodwill
    
    $
    
    
    
    $
    
    
    
    $
    Total assets
    
    $
    145,776
    
    
    $
    111,354
    
    
    $
    257,130
   F-96




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##### Table of Contents



Gaming
    
    
    Asian onlinesoftware and
    
    
    game and(in US$ thousands)
    
    service
    
    
    service
    
    
    Total2010:Segment profit or loss:Net revenue from external customers
    
    $
    25,820
    
    
    $
    38,862
    
    
    $
    64,682Income (loss) from operations
    
    $
    78
    
    
    $
    (31,554
    )
    
    $
    (31,476
    )Share-based compensation
    
    $
    80
    
    
    $
    342
    
    
    $
    422Impairment
loss on prepaid licensing fees and intangible assets
    
    $
    
    
    
    $
    2,200
    
    
    $
    2,200Impairment
loss on property, plant and equipment
    
    $
    
    
    
    $
    278
    
    
    $
    278Impairment loss on goodwill
    
    $
    
    
    
    $
    2,255
    
    
    $
    2,255Impairment loss on deconsolidation of T2CN
    
    $
    
    
    
    $
    22,234
    
    
    $
    22,234Interest income
    
    $
    83
    
    
    $
    438
    
    
    $
    521Interest expense
    
    $
    1
    
    
    $
    59
    
    
    $
    60Foreign exchange gain (loss)
    
    $
    (29
    )
    
    $
    91
    
    
    $
    62Loss on equity method investments  net
    
    $
    9,768
    
    
    $
    11,002
    
    
    $
    20,770Impairment
loss on marketable securities and investments
    
    $
    
    
    
    $
    4,677
    
    
    $
    4,677Depreciation
    
    $
    
    
    
    $
    1,556
    
    
    $
    1,556Amortization, including intangible assets
    
    $
    
    
    
    $
    2,696
    
    
    $
    2,696Income tax expense
    
    $
    6,445
    
    
    $
    1,118
    
    
    $
    7,563Segment assets:Equity method investments
    
    $
    44,472
    
    
    $
    20,923
    
    
    $
    65,395Additions to property, plant and equipment
    
    $
    1,209
    
    
    $
    1,534
    
    
    $
    2,743Additions to intangible assets
    
    $
    1,198
    
    
    $
    1,114
    
    
    $
    2,312Additions to goodwill
    
    $
    
    
    
    $
    12,188
    
    
    $
    12,188Total assets
    
    $
    168,671
    
    
    $
    76,679
    
    
    $
    245,350
   F-97




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##### Table of Contents



Gaming
    
    
    Asian onlinesoftware and
    
    
    game and(in US$ thousands)
    
    service
    
    
    service
    
    
    TotalDepreciation
    
    $
    
    
    
    $
    1,556
    
    
    $
    1,556Amortization, including intangible assets
    
    $
    
    
    
    $
    2,696
    
    
    $
    2,696Income tax expense
    
    $
    6,445
    
    
    $
    1,118
    
    
    $
    7,563Segment assets:Equity method investments
    
    $
    44,472
    
    
    $
    20,923
    
    
    $
    65,395Additions to property, plant and equipment
    
    $
    1,209
    
    
    $
    1,534
    
    
    $
    2,743Additions to intangible assets
    
    $
    1,198
    
    
    $
    1,114
    
    
    $
    2,312Additions to goodwill
    
    $
    
    
    
    $
    12,188
    
    
    $
    12,188Total assets
    
    $
    168,671
    
    
    $
    76,679
    
    
    $
    245,350
   F-98




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##### Table of Contents



(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Income (loss) from operations:Total segments
    
    $
    44,358
    
    
    $
    (27,177
    )
    
    $
    (31,476
    )Adjustment*
    
    
    (6,255
    )
    
    
    (12,884
    )
    
    
    (16,220
    )Total GigaMedia consolidated
    
    $
    38,103
    
    
    $
    (40,061
    )
    
    $
    (47,696
    )Share-based compensationTotal segments
    
    $
    1,796
    
    
    $
    1,432
    
    
    $
    422Adjustment*
    
    
    909
    
    
    
    1,845
    
    
    
    2,592Total GigaMedia consolidated
    
    $
    2,705
    
    
    $
    3,277
    
    
    $
    3,014Impairment loss on prepaid licensing fees and intangible assets:Total segments
    
    $
    1,524
    
    
    $
    22,999
    
    
    $
    2,200Adjustment*
    
    
    
    
    
    
    3
    
    
    
    Total GigaMedia consolidated
    
    $
    1,524
    
    
    $
    23,002
    
    
    $
    2,200Impairment loss on property, plant and equipment:Total segments
    
    $
    
    
    
    $
    777
    
    
    $
    278Adjustment*
    
    
    
    
    
    
    473
    
    
    
    Total GigaMedia consolidated
    
    $
    
    
    
    $
    1,250
    
    
    $
    278Interest income:Total segments
    
    $
    1,047
    
    
    $
    371
    
    
    $
    521Adjustment*
    
    
    413
    
    
    
    61
    
    
    
    435Total GigaMedia consolidated
    
    $
    1,460
    
    
    $
    432
    
    
    $
    956Interest expense:Total segments
    
    $
    7
    
    
    $
    
    
    
    $
    60Adjustment*
    
    
    969
    
    
    
    390
    
    
    
    310Total GigaMedia consolidated
    
    $
    976
    
    
    $
    390
    
    
    $
    370Gain (loss) on sales of marketable securities:Total segments
    
    $
    4
    
    
    $
    
    
    
    $
    Adjustments*
    
    
    369
    
    
    
    
    
    
    
    Total GigaMedia consolidated
    
    $
    373
    
    
    $
    
    
    
    $
    Foreign exchange gain (loss):Total segments
    
    $
    145
    
    
    $
    407
    
    
    $
    62Adjustments*
    
    
    95
    
    
    
    (239
    )
    
    
    (668
    )Total GigaMedia consolidated
    
    $
    240
    
    
    $
    168
    
    
    $
    (606
    )
  F-98




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##### Table of Contents



(in US$ thousands)
    
    2008
    
    
    2009
    
    
    2010Impairment loss on marketable securities and investments:Total segments
    
    $
    
    
    
    $
    13,719
    
    
    $
    4,677Adjustment*
    
    
    
    
    
    
    2,024
    
    
    
    Total GigaMedia consolidated
    
    $
    
    
    
    $
    15,743
    
    
    $
    4,677Depreciation:Total segments
    
    $
    3,144
    
    
    $
    3,779
    
    
    $
    1,556Adjustments*
    
    
    177
    
    
    
    579
    
    
    
    536Total GigaMedia consolidated
    
    $
    3,321
    
    
    $
    4,358
    
    
    $
    2,092Amortization:Total segments
    
    $
    4,253
    
    
    $
    5,147
    
    
    $
    2,696Adjustments*
    
    
    34
    
    
    
    72
    
    
    
    83Total GigaMedia consolidated
    
    $
    4,287
    
    
    $
    5,219
    
    
    $
    2,779Income tax expense:Total segments
    
    $
    1,069
    
    
    $
    770
    
    
    $
    7,563Adjustments*
    
    
    
    
    
    
    (253
    )
    
    
    (303
    )Total GigaMedia consolidated
    
    $
    1,069
    
    
    $
    517
    
    
    $
    7,260Additions to property, plant and equipment:Total segments
    
    $
    7,680
    
    
    $
    5,660
    
    
    $
    2,743Adjustments**
    
    
    1,134
    
    
    
    101
    
    
    
    1,041Total GigaMedia consolidated
    
    $
    8,814
    
    
    $
    5,761
    
    
    $
    3,784Additions to intangible assets:Total segments
    
    $
    7,336
    
    
    $
    8,100
    
    
    $
    2,312Adjustments**
    
    
    309
    
    
    
    707
    
    
    
    5Total GigaMedia consolidated
    
    $
    7,645
    
    
    $
    8,807
    
    
    $
    2,317Total assets:Total segments
    
    $
    262,958
    
    
    $
    257,130
    
    
    $
    245,350Adjustment**
    
    
    53,835
    
    
    
    3,051
    
    
    
    22,239Total GigaMedia consolidated
    
    $
    316,793
    
    
    $
    260,181
    
    
    $
    267,589
 *
    
    Adjustment items include corporate and certain back-office costs and expenses
not attributable to any specific segment.**
    
    Adjustment items include total corporate assets, the Internet access and
service business segment and eliminations.  F-99




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##### Table of Contents



Major Customers
  Geographic Information
  (in US$ thousands)Geographic region / country
    
    2008
    
    
    2009
    
    
    2010Canada
    
    $
    144,765
    
    
    $
    112,694
    
    
    $
    25,820Taiwan
    
    
    20,932
    
    
    
    24,869
    
    
    
    19,449PRC
    
    
    19,652
    
    
    
    18,318
    
    
    
    9,885Hong Kong
    
    
    4,964
    
    
    
    3,700
    
    
    
    4,026Singapore
    
    
    
    
    
    
    
    
    
    
    3,702Malaysia
    
    
    
    
    
    
    
    
    
    
    1,603Others
    
    
    56
    
    
    
    
    
    
    
    197Total
    
    $
    190,369
    
    
    $
    159,581
    
    
    $
    64,682
  (in US$ thousands)
    
    December 31,Geographic region / country
    
    2008
    
    
    2009
    
    
    2010Taiwan
    
    $
    4,118
    
    
    $
    3,642
    
    
    $
    3,130Canada
    
    
    2,264
    
    
    
    
    
    
    
    PRC
    
    
    1,734
    
    
    
    1,920
    
    
    
    921United States
    
    
    4,642
    
    
    
    
    
    
    
    Hong Kong
    
    
    710
    
    
    
    427
    
    
    
    213Singapore
    
    
    
    
    
    
    
    
    
    
    902Malaysia
    
    
    
    
    
    
    
    
    
    
    20Other
    
    
    
    
    
    
    
    
    
    
    115Total
    
    $
    13,468
    
    
    $
    5,989
    
    
    $
    5,301
  F-100




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##### Table of Contents



NOTE 30 . SUBSEQUENT EVENTS
   F-101