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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


Special Financial Report pursuant to
Rule 15d-2 of the
Securities Exchange Act of 1934


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended August 26, 2005                                                   
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission file
number 333-127442


SMART MODULAR TECHNOLOGIES (WWH), INC.


(Exact Name of Registrant as Specified in Its Charter)


|                                                                   |  |                                                              |  |                                            
|------------------------------------------------------------------ |  | ------------------------------------------------------------ |  | -------------------------------------------
|Cayman Islands                                                     |  | 3674                                                         |  | 20-2509518                                 
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (Primary Standard Industrial
    Classification Code Number) |  | (I.R.S. Employer
    Identification Number)

4211 Starboard Drive


Fremont, CA 94538


(Address of Principal Executive Offices)


(510) 623-1231


(Registrants telephone number)


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


None


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


None


well-known o þ


o þ


þ o


12b-2 o þ


Regulation S-K Form 10-K Form 10-K. þ


Rule 12b-2 o þ




DOCUMENTS INCORPORATED BY REFERENCE




Rule 15d-2 Rule 15d-2.










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##### 










SMART MODULAR TECHNOLOGIES (WWH), INC.


SPECIAL FINANCIAL REPORT


FOR THE FISCAL YEAR ENDED AUGUST 31, 2005


TABLE OF CONTENTS


|                  |                                                         |  |    |   | 
|----------------- | ------------------------------------------------------- |  | -- | - | 
|INTRODUCTORY NOTE |                                                         |  | 1  |  
|                  | Item 8. Financial Statements and
    Supplementary Data |  |    | 1 | 
|                  | Item 9A. Controls and Procedures                        |  |    | 1 | 
|PART IV           |                                                         |  | 1  |  
|                  | Item 15. Exhibits, Financial Statement
    Schedules    |  |    | 1 | 
|SIGNATURES        |                                                         |  | 56 |  
|EXHIBIT 31.1     
|EXHIBIT 31.2     
|EXHIBIT 32       



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INTRODUCTORY NOTE


Form S-4 No. 333-127442)


Rule 15d-2


Form S-4 Rule 15d-2; Rule 15d-2, Form 10-K.







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








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

Evaluation of Disclosure Controls and
Procedures. Rules 13a-15(e) 15d-15(e)) Rules 13a-15 15d-15.


Changes in Internal Control Over Financial
Reporting. Rules 13a-15 15d-15





PART IV







|         |                                         
|-------- | ----------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements




|                                                                                                                     |  |      |    | 
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                     |  | Page |   
|                                                                                                                     |  |      |   
|Audited Financial Statements:                                                                                        |  |      |    | 
|Report of Independent Registered Public
    Accounting Firm                                                          |  |      | 3  | 
|Consolidated Balance Sheets                                                                                          |  |      | 4  | 
|Consolidated and Combined Statements of
    Operations                                                               |  |      | 5  | 
|Consolidated and Combined Statements of
    Business/ Shareholders Equity and Other Comprehensive
    Income (Loss) |  |      | 6  | 
|Consolidated and Combined Statements of
    Cash Flows                                                               |  |      | 7  | 
|Notes to Consolidated and Combined
    Financial Statements                                                          |  |      | 8  | 
|Audited Financial Statements of a Material Subsidiary:                                                               |  |      |    | 
|Independent Auditors Report                                                                                         |  |      | 34 | 
|Balance Sheets                                                                                                       |  |      | 35 | 
|Income Statements                                                                                                    |  |      | 36 | 
|Statements of Changes in Shareholders
    Equity                                                                    |  |      | 37 | 
|Cash Flow Statements                                                                                                 |  |      | 38 | 
|Notes to the Financial Statements                                                                                    |  |      | 39 | 

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(a)(2) Financial Statement Schedules




|                                                |  |  |    | 
|----------------------------------------------- |  |  | -- | 
|Schedule II  Valuation and Qualifying Accounts |  |  | 55 | 

(b) Exhibits




|        |    |               |  |                                                                                                                                                                                                  
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|No.     |    | Exhibit Title
|        |    |              
|        | 31 | .1            |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002
|       
|        | 31 | .2            |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002
|       
|        | 32 |               |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002            

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


AUGUST 31, 2005 AND 2004


|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         |  |        |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------- | ------- |  | ------ | ------- | ------- | 
|                                     |                                                                                                                                                                                                                                       | Successor Business                         |        
|                                     |                                                                                                                                                                                                                                       |                                            |        
|                                     |                                                                                                                                                                                                                                       | 2005                                       |         |         | 2004    | 
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | (In thousands, except                      |        
|                                     |                                                                                                                                                                                                                                       | share data)                                |        
|ASSETS                              
|Current assets:                      |                                                                                                                                                                                                                                       |                                            |         |         |         |  |        |        
|                                     | Cash and cash equivalents                                                                                                                                                                                                             |                                            | $       | 75,970  |         |  | $      | 36,747  |        
|                                     | Short term investments                                                                                                                                                                                                                |                                            |         | 5,071   |         |  |        |        |        
|                                     | Accounts receivable, net of allowance of $2,629 and $3,267 in
    2005 and 2004, respectively                                                                                                                                         |                                            |         | 144,760 |         |  |        | 170,415 |        
|                                     | Inventories                                                                                                                                                                                                                           |                                            |         | 53,122  |         |  |        | 47,405  |        
|                                     | Prepaid expenses and other                                                                                                                                                                                                            |                                            |         | 9,459   |         |  |        | 2,310   |        
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total current assets                       |         |         | 288,382 |  |        |         | 256,877 | 
|Property and equipment, net          |                                                                                                                                                                                                                                       |                                            | 11,309  |         |         |  | 12,630 |        
|Goodwill                             |                                                                                                                                                                                                                                       |                                            | 2,248   |         |         |  |       |        
|Intangible assets                    |                                                                                                                                                                                                                                       |                                            | 9,142   |         |         |  | 16,990 |        
|Other non-current assets             |                                                                                                                                                                                                                                       |                                            | 9,980   |         |         |  | 1,543  |        
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total assets                               |         | $       | 321,061 |  |        | $       | 288,040 | 
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                                                                                                       |                                            |         |         |         |  |        |        
|                                     | Accounts payable                                                                                                                                                                                                                      |                                            | $       | 125,305 |         |  | $      | 129,597 |        
|                                     | Accrued expenses                                                                                                                                                                                                                      |                                            |         | 29,912  |         |  |        | 20,155  |        
|                                     | Advance from customer                                                                                                                                                                                                                 |                                            |         | 1,000   |         |  |        | 5,000   |        
|                                     | Revolving line of credit                                                                                                                                                                                                              |                                            |         |        |         |  |        | 52,444  |        
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total current liabilities                  |         |         | 156,217 |  |        |         | 207,196 | 
|Long-term debt                       |                                                                                                                                                                                                                                       |                                            | 125,000 |         |         |  |       |        
|Other long-term liabilities          |                                                                                                                                                                                                                                       |                                            | 961     |         |         |  | 4,250  |        
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total liabilities                          |         |         | 282,178 |  |        |         | 211,446 | 
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|Commitments and contingencies        |                                                                                                                                                                                                                                       |                                            |         |         |         |  |        |        
|Shareholders equity:                |                                                                                                                                                                                                                                       |                                            |         |         |         |  |        |        
|                                     | Series A redeemable preferred shares, $0.001 par
    value; 10,000,000 shares authorized; zero and
    1,024,700 shares issued and outstanding as of
    August 31, 2005 and 2004; liquidation preference
    aggregating $65,140,000 |                                            |         |        |         |  |        | 65,140  |        
|                                     | Ordinary shares, $0.00016667 par value;
    600,000,000 shares authorized; 48,872,340 shares
    issued and outstanding as of August 31, 2005 and 2004                                                                                |                                            |         | 8       |         |  |        | 8       |        
|                                     | Additional paid-in capital                                                                                                                                                                                                            |                                            |         | 9,490   |         |  |        | 8,137   |        
|                                     | Deferred stock-based compensation                                                                                                                                                                                                     |                                            |         | (1,126  | )       |  |        |        |        
|                                     | Accumulated other comprehensive income (loss)                                                                                                                                                                                         |                                            |         | 900     |         |  |        | (106    | )      
|                                     | Retained earnings                                                                                                                                                                                                                     |                                            |         | 29,611  |         |  |        | 3,415   |        
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total shareholders equity                 |         |         | 38,883  |  |        |         | 76,594  | 
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 
|                                     |                                                                                                                                                                                                                                       | Total liabilities and shareholders equity |         | $       | 321,061 |  |        | $       | 288,040 | 
|                                     |                                                                                                                                                                                                                                       |                                            |         |         |         | 



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS


|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |        |         |   |         |        |         |  
|-------------------------------------------------------------- | ------------------------------------ | ------------------------------------------------ | ------- | ------ | --------------- | -------------------- | ------- | ------ | -------------- | - |  | --------------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                                               |                                      | Successor Business                               |         |        |                 | Predecessor Business |        
|                                                               |                                      |                                                  |         |        |                 |                      |        
|                                                               |                                      | Year Ended                                       |         |        | Period Ended    |                      |         |        | Period Ended   |   |  | Year Ended      |       
|                                                               |                                      | August 31, 2005                                  |         |        | August 31, 2004 |                      |         |        | April 16, 2004 |   |  | August 31, 2003 |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | (Dollars in thousands, except per share amounts) |        
|Net sales                                                      |                                      |                                                  | 607,299 |        |                 |                      | 233,677 |        |                |   |  | 659,171         |        |         |   | 828,381 |       
|Cost of sales                                                  |                                      |                                                  | 505,983 |        |                 |                      | 203,720 |        |                |   |  | 602,098         |        |         |   | 751,534 |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Gross profit                                     |         |        | 101,316         |                      |         |        | 29,957         |   |  |                 |        | 57,073  |   |         |        | 76,847  |  
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Operating expenses:                                            |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |        |         |   |         |       
|                                                               | Research and development             |                                                  |         | 9,697  |                 |                      |         | 4,447  |                |   |  |                 | 9,012  |         |   |         | 12,512 |        
|                                                               | Selling, general, and administrative |                                                  |         | 49,224 |                 |                      |         | 19,064 |                |   |  |                 | 29,454 |         |   |         | 46,447 |        
|                                                               | Impairment of goodwill               |                                                  |         |       |                 |                      |         |       |                |   |  |                 | 43,302 |         |   |         |       |        
|                                                               | Restructuring and impairment costs   |                                                  |         | 880    |                 |                      |         | 1,300  |                |   |  |                 | 6,224  |         |   |         | 8,221  |        
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Total operating expenses                         |         |        | 59,801          |                      |         |        | 24,811         |   |  |                 |        | 87,992  |   |         |        | 67,180  |  
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Income (loss) from operations                    |         |        | 41,515          |                      |         |        | 5,146          |   |  |                 |        | (30,919 | ) |         |        | 9,667   |  
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Interest (expense) income, net                                 |                                      |                                                  | (6,998  | )      |                 |                      | (927    | )      |                |   |  | 170             |        |         |   | 7,685   |       
|Other income (expense), net                                    |                                      |                                                  | 481     |        |                 |                      | 451     |        |                |   |  | (148            | )      |         |   | (52     | )     
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Total other (expense) income                     |         |        | (6,517          | )                    |         |        | (476           | ) |  |                 |        | 22      |   |         |        | 7,633   |  
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Income (loss) before provision for income taxes  |         |        | 34,998          |                      |         |        | 4,670          |   |  |                 |        | (30,897 | ) |         |        | 17,300  |  
|Provision for income taxes                                     |                                      |                                                  | 8,802   |        |                 |                      | 1,255   |        |                |   |  | 2,301           |        |         |   | 29,320  |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|                                                               |                                      | Net income (loss)                                |         | $      | 26,196          |                      |         | $      | 3,415          |   |  |                 | $      | (33,198 | ) |         | $      | (12,020 | )
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Net income per ordinary share, basic                           |                                      | $                                                | 0.54    |        |                 | $                    | 0.07    |        |                |   |  |                 |        |         |   |         |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Shares used in computing basic net income per ordinary share   |                                      |                                                  | 48,872  |        |                 |                      | 48,872  |        |                |   |  |                 |        |         |   |         |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Net income per ordinary share, diluted                         |                                      | $                                                | 0.49    |        |                 | $                    | 0.07    |        |                |   |  |                 |        |         |   |         |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       
|Shares used in computing diluted net income per ordinary share |                                      |                                                  | 53,531  |        |                 |                      | 50,745  |        |                |   |  |                 |        |         |   |         |       
|                                                               |                                      |                                                  |         |        |                 |                      |         |        |                |   |  |                 |       



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





CONSOLIDATED AND COMBINED STATEMENTS OF BUSINESS/
SHAREHOLDERS EQUITY AND


OTHER COMPREHENSIVE INCOME (LOSS)


|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |   |          |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | --------------- |  | ------- | ---------- |  | -------- | ----------- | ----------- | ----- | --------------- | - |  | ------------ | --------------- | -------- | ------------- |  | - | ------------- | - |  | ------ | ---- | - | ------------- | - | -------- | - |  | - | -------- | - |  | - | ------- | -
|                                                                                      |  | Repurchase of Series A |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |             
|                                                                                      |  | Redeemable             |            |   | Issuance of     |  |         |            |  |          |             | Accumulated |       |                 |   |  |              |                 |         
|                                                                                      |  | Preferred Shares       |            |   | Ordinary Shares |  |         |            |  | Deferred |             |             | Other |                 |   |  |              | Total Business/ |          |               | 
|                                                                                      |  |                        |            |   |                 |  |         | Additional |  |          | Stock-Based |             |       | Comprehensive   |   |  | Retained     |                 |          | Shareholders |  |   | Comprehensive |  
|                                                                                      |  | Shares                 |            |   | Amount          |  |         | Shares     |  |          | Amount      |             |       | Paid-In Capital |   |  | Compensation |                 |          | Income (Loss) |  |   | Earnings      |   |  | Equity |      |   | Income (Loss) |  
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Predecessor Business                                                                  |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |   |          |   |  |   |          |   |  |   |         |  
|Balances as of August 31, 2002                                                        |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | 214,676  |               |  |   |              |   |  |        | 119  |   |               |   | 232,469  |   |  |   | 447,264  |   |  | $ | (7,744  | )
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Capital contribution                                                                  |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | 2,087    |               |  |   |              |   |  |        |     |   |               |   |         |   |  |   | 2,087    |   |  |   |         |  
|Dividends to Solectron                                                                |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | (11,000  | ) |  |   | (11,000  | ) |  |   |         |  
|Unrealized loss on investments                                                        |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | (117 | ) |               |   |         |   |  |   | (117     | ) |  | $ | (117    | )
|Foreign currency translation                                                          |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | 364  |   |               |   |         |   |  |   | 364      |   |  |   | 364     |  
|Net loss                                                                              |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | (12,020  | ) |  |   | (12,020  | ) |  |   | (12,020 | )
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Balances as of August 31, 2003                                                        |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | 216,763  |               |  |   |              |   |  |        | 366  |   |               |   | 209,449  |   |  |   | 426,578  |   |  | $ | (11,773 | )
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Dividends to Solectron                                                                |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | (31,247  | ) |  |   | (31,247  | ) |  |   |         |  
|Net return of capital to Solectron                                                    |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | (128,439 | )             |  |   |              |   |  |        |     |   |               |   | (145,004 | ) |  |   | (273,443 | ) |  |   |         |  
|Unrealized loss on investments                                                        |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | (2   | ) |               |   |         |   |  |   | (2       | ) |  | $ | (2      | )
|Foreign currency translation                                                          |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | (363 | ) |               |   |         |   |  |   | (363     | ) |  |   | (363    | )
|Net loss                                                                              |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | (33,198  | ) |  |   | (33,198  | ) |  |   | (33,198 | )
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Balances as of April 16, 2004                                                         |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | 88,324   |               |  |   |              |   |  |        | 1    |   |               |   |         |   |  |   | 88,325   |   |  | $ | (33,563 | )
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Successor Business                                                                    |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |   |          |   |  |   |          |   |  |   |         |  
|Balances as of April 17, 2004                                                         |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   |         |   |  |   |         |   |  |   |         |  
|Issuance of ordinary shares                                                           |  |                        |           |   |                 |  |        |            |  |          | 48,872,340  |             |       |                 | 8 |  |              |                 | 8,137    |               |  |   |              |   |  |        |     |   |               |   |         |   |  |   | 8,145    |   |  |   |         |  
|Issuance of series A redeemable preferred shares                                      |  |                        | 1,024,700  |   |                 |  | 65,140  |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   |         |   |  |   | 65,140   |   |  |   |         |  
|Foreign currency translation                                                          |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | (106 | ) |               |   |         |   |  |   | (106     | ) |  |   | (106    | )
|Net income                                                                            |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | 3,415    |   |  |   | 3,415    |   |  |   | 3,415   |  
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Balances as of August 31, 2004                                                        |  |                        | 1,024,700  |   |                 |  | 65,140  |            |  |          | 48,872,340  |             |       |                 | 8 |  |              |                 | 8,137    |               |  |   |              |   |  |        | (106 | ) |               |   | 3,415    |   |  |   | 76,594   |   |  | $ | 3,309   |  
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Repurchase of series A redeemable preferred shares                                    |  |                        | (1,024,700 | ) |                 |  | (65,140 | )          |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |               |   |  |        |     |   |               |   |         |   |  |   | (65,140  | ) |  |   |         |  
|Foreign currency translation                                                          |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |               |   |  |        | 994  |   |               |   |         |   |  |   | 994      |   |  |   | 994     |  
|Deferred stock-based compensation                                                     |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 | 1,353    |               |  |   | (1,353        | ) |  |        |     |   |               |   |         |   |  |   |         |   |  |   |         |  
|Amortization of deferred stock-based compensation                                     |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   | 227           |   |  |        |     |   |               |   |         |   |  |   | 227      |   |  |   |         |  
|Changes in fair value of derivative instruments accounted for as
    cash flow hedges |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        | 12   |   |               |   |         |   |  |   | 12       |   |  |   | 12      |  
|Net income                                                                            |  |                        |           |   |                 |  |        |            |  |          |            |             |       |                 |  |  |              |                 |         |               |  |   |              |   |  |        |     |   |               |   | 26,196   |   |  |   | 26,196   |   |  |   | 26,196  |  
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  
|Balances as of August 31, 2005                                                        |  |                        |           |   |                 |  |        |            |  |          | 48,872,340  |             |       | $               | 8 |  |              | $               | 9,490    |               |  | $ | (1,126        | ) |  | $      | 900  |   |               | $ | 29,611   |   |  | $ | 38,883   |   |  | $ | 27,202  |  
|                                                                                      |  |                        |            |   |                 |  |         |            |  |          |             |             |       |                 |   |  |              |                 |          |               |  |   |               |   |  |        |      |   |               |  



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS


|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |         |        |         |       | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | --------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------- | --------------- | -------------------- | ------ | -------- | -------------- | ------- | ----- | --------------- | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ----- | 
|                                                             |                                                                                                        | Successor Business                                  |                                                |                                                     |                 | Predecessor Business |       
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |       
|                                                             |                                                                                                        | Year Ended                                          |                                                |                                                     | Period Ended    |                      |        |          | Period Ended   |         |       | Year Ended      |        
|                                                             |                                                                                                        | August 31, 2005                                     |                                                |                                                     | August 31, 2004 |                      |        |          | April 16, 2004 |         |       | August 31, 2003 |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|                                                             |                                                                                                        | (Dollars in thousands)                              |                                               
|Cash flows from operating activities:                        |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |        
|                                                             | Net income (loss)                                                                                      |                                                     | $                                              | 26,196                                              |                 |                      | $      | 3,415    |                |         |       | $               | (33,198 | )       |         | $      | (12,020 | )     
|                                                             | Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities: |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |         |       
|                                                             |                                                                                                        | Depreciation and amortization                       |                                                |                                                     | 8,505           |                      |        |          | 3,306          |         |       |                 |         | 5,350   |         |        |         | 11,648 |        
|                                                             |                                                                                                        | Gain on sale of investment                          |                                                |                                                     |                |                      |        |          |               |         |       |                 |         |        |         |        |         | (2,432 | )      
|                                                             |                                                                                                        | Amortization of stock-based compensation            |                                                |                                                     | 227             |                      |        |          |               |         |       |                 |         |        |         |        |         |       |        
|                                                             |                                                                                                        | Impairment of property, equipment and goodwill      |                                                |                                                     | 65              |                      |        |          |               |         |       |                 |         | 48,977  |         |        |         | 5,111  |        
|                                                             |                                                                                                        | Amortization of debt issuance costs                 |                                                |                                                     | 412             |                      |        |          |               |         |       |                 |         |        |         |        |         |       |        
|                                                             |                                                                                                        | Gain on sale of assets                              |                                                |                                                     | (69             | )                    |        |          |               |         |       |                 |         |        |         |        |         |       |        
|                                                             |                                                                                                        | Deferred income tax provision                       |                                                |                                                     | 931             |                      |        |          |               |         |       |                 |         |        |         |        |         | 28,553 |        
|                                                             |                                                                                                        | Changes in operating assets and liabilities:        |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |         |        |        
|                                                             |                                                                                                        |                                                     | Accounts receivable, net of allowance          |                                                     |                 | 24,930               |        |          |                | (18,570 | )     |                 |         |         | (18,052 | )      |         |        | (38,507 | )    
|                                                             |                                                                                                        |                                                     | Receivable from affiliates                     |                                                     |                 |                     |        |          |                |        |       |                 |         |         |        |        |         |        | (7,629  | )    
|                                                             |                                                                                                        |                                                     | Inventories                                    |                                                     |                 | (8,118               | )      |          |                | 28,445  |       |                 |         |         | (13,867 | )      |         |        | (12,233 | )    
|                                                             |                                                                                                        |                                                     | Prepaid expenses and other assets              |                                                     |                 | (2,154               | )      |          |                | 2,927   |       |                 |         |         | (1,214  | )      |         |        | 1,112   |      
|                                                             |                                                                                                        |                                                     | Accounts payable                               |                                                     |                 | (3,372               | )      |          |                | (13,369 | )     |                 |         |         | 23,406  |        |         |        | 38,834  |      
|                                                             |                                                                                                        |                                                     | Payable to affiliates                          |                                                     |                 |                     |        |          |                |        |       |                 |         |         | (8,262  | )      |         |        | (6,756  | )    
|                                                             |                                                                                                        |                                                     | Accrued expenses and other current liabilities |                                                     |                 | 7,921                |        |          |                | (633    | )     |                 |         |         | (9,203  | )      |         |        | (4,060  | )    
|                                                             |                                                                                                        |                                                     | Other non-current liabilities                  |                                                     |                 | 112                  |        |          |                |        |       |                 |         |         |        |        |         |        |        |      
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|                                                             |                                                                                                        |                                                     |                                                | Net cash provided by (used in) operating activities |                 |                      | 55,586 |          |                |         | 5,521 |                 |         |         |         | (6,063 | )       |        |         | 1,621 | 
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|Cash flows from investing activities:                        |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |        
|                                                             | Purchase of predecessor business, net of cash acquired                                                 |                                                     |                                                |                                                    |                 |                      |        | (104,081 | )              |         |       |                 |        |         |         |        |        |       
|                                                             | Cash paid for acquisition of business, net of cash acquired                                            |                                                     |                                                | (2,260                                              | )               |                      |        |         |                |         |       |                 |        |         |         |        |        |       
|                                                             | Purchase of short-term investments                                                                     |                                                     |                                                | (5,071                                              | )               |                      |        |         |                |         |       |                 |        |         |         |        |        |       
|                                                             | Capital expenditures                                                                                   |                                                     |                                                | (6,109                                              | )               |                      |        | (670     | )              |         |       |                 | (2,495  | )       |         |        | (3,320  | )     
|                                                             | Proceeds from sale of property and equipment                                                           |                                                     |                                                | 284                                                 |                 |                      |        | 522      |                |         |       |                 | 2,344   |         |         |        |        |       
|                                                             | Proceeds from sale of investments                                                                      |                                                     |                                                |                                                    |                 |                      |        |         |                |         |       |                 |        |         |         |        | 2,432   |       
|                                                             | Other                                                                                                  |                                                     |                                                | 253                                                 |                 |                      |        | 776      |                |         |       |                 | 301     |         |         |        | 2,035   |       
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|                                                             |                                                                                                        | Net cash (used in) provided by investing activities |                                                |                                                     | (12,903         | )                    |        |          | (103,453       | )       |       |                 |         | 150     |         |        |         | 1,147  |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|Cash flows from financing activities:                        |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |        
|                                                             | Dividends paid                                                                                         |                                                     |                                                |                                                    |                 |                      |        |         |                |         |       |                 | (31,247 | )       |         |        | (11,000 | )     
|                                                             | Proceeds from issuance of long-term debt, net of debt issuance
    costs                               |                                                     |                                                | 120,120                                             |                 |                      |        |         |                |         |       |                 |        |         |         |        |        |       
|                                                             | Advance from customer                                                                                  |                                                     |                                                | (4,000                                              | )               |                      |        |         |                |         |       |                 | 5,000   |         |         |        |        |       
|                                                             | Advances from (payments to) affiliates                                                                 |                                                     |                                                |                                                    |                 |                      |        |         |                |         |       |                 | (3,584  | )       |         |        | 20,619  |       
|                                                             | (Payments) advances on other debt                                                                      |                                                     |                                                | (1,524                                              | )               |                      |        | (10,000  | )              |         |       |                 | 10,000  |         |         |        |        |       
|                                                             | Net (repayments) advances on revolving line of credit                                                  |                                                     |                                                | (53,126                                             | )               |                      |        | 52,444   |                |         |       |                 |        |         |         |        |        |       
|                                                             | Other                                                                                                  |                                                     |                                                |                                                    |                 |                      |        | 1,079    |                |         |       |                 | (989    | )       |         |        | (1,059  | )     
|                                                             | Sale of ordinary shares                                                                                |                                                     |                                                |                                                    |                 |                      |        | 8,145    |                |         |       |                 |        |         |         |        |        |       
|                                                             | (Repurchase) sale of series A redeemable preferred shares                                              |                                                     |                                                | (65,140                                             | )               |                      |        | 65,140   |                |         |       |                 |        |         |         |        |        |       
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|                                                             |                                                                                                        | Net cash (used in) provided by financing activities |                                                |                                                     | (3,670          | )                    |        |          | 116,808        |         |       |                 |         | (20,820 | )       |        |         | 8,560  |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                        |                                                     | 210                                            |                                                     |                 |                      | (16    | )        |                |         |       | (34             | )       |         |         |       |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|                                                             | Net increase (decrease) in cash and cash equivalents                                                   |                                                     |                                                | 39,223                                              |                 |                      |        | 18,860   |                |         |       |                 | (26,767 | )       |         |        | 11,328  |       
|Cash and cash equivalents at beginning of period             |                                                                                                        |                                                     | 36,747                                         |                                                     |                 |                      | 17,887 |          |                |         |       | 44,654          |         |         |         | 33,326 |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|Cash and cash equivalents at end of period                   |                                                                                                        | $                                                   | 75,970                                         |                                                     |                 | $                    | 36,747 |          |                |         | $     | 17,887          |         |         | $       | 44,654 |        
|                                                             |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |        
|Supplemental disclosures of cash flow information:           |                                                                                                        |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |        
|                                                             | Cash paid during the year:                                                                             |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |         |       
|                                                             |                                                                                                        | Interest                                            |                                                | $                                                   | 5,539           |                      |        | $        | 472            |         |       |                 | $       |        |         |        | $       |       |        
|                                                             |                                                                                                        | Taxes                                               |                                                |                                                     | 3,370           |                      |        |          | 346            |         |       |                 |         | 263     |         |        |         | 700    |        
|                                                             | Non-cash financing activity:                                                                           |                                                     |                                                |                                                     |                 |                      |        |          |                |         |       |                 |         |         |         |        |         |       
|                                                             |                                                                                                        | Non-cash dividend/return of capital to Solectron    |                                                |                                                     |                |                      |        |          |               |         |       |                 |         | 273,443 |         |        |         |       |        



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS


August 31, 2005 and 2004




|    |                                           
|--- | ------------------------------------------
|(1) | Summary of Significant Accounting Policies



|    |                                           
|--- | ------------------------------------------
|(a) | Organization and Operations of the Company



(TFT-LCD)










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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                      
|--- | ---------------------
|(b) | Basis of Presentation

Successor Business




Predecessor Business








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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                          
|--- | -------------------------
|(c) | Acquisition of Businesses



|                                       |  |                |         | 
|-------------------------------------- |  | -------------- | ------- | 
|                                       |  | Allocation of  |        
|                                       |  | Purchase Price |        
|                                       |  |                |        
|Current assets                         |  | $              | 260,192 | 
|Property and equipment                 |  |                | 15,026  | 
|Goodwill                               |  |                | 138     | 
|Intangibles                            |  |                | 18,296  | 
|Other assets                           |  |                | 918     | 
|                                       |  |                |        
|Total assets acquired                  |  |                | 294,570 | 
|                                       |  |                |        
|Current liabilities                    |  |                | 168,732 | 
|Deferred tax liabilities  non-current |  |                | 3,870   | 
|                                       |  |                |        
|Total liabilities assumed              |  |                | 172,602 | 
|                                       |  |                |        
|Net assets acquired                    |  | $              | 121,968 | 
|                                       |  |                |        





|    |         
|--- | --------
|(d) | Year-End





|    |                 
|--- | ----------------
|(e) | Use of Estimates





|    |                    
|--- | -------------------
|(f) | Revenue Recognition

Revenue Recognition


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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




Reporting Revenue
Gross as a Principal versus Net as an Agent




|    |                                                             
|--- | ------------------------------------------------------------
|(g) | Cash and Cash Equivalents and
    Short-Term
    Investments

Short-term short-term held-to-maturity




|    |                                
|--- | -------------------------------
|(h) | Allowance for Doubtful Accounts





|    |            
|--- | -----------
|(i) | Inventories

first-in,


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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|    |                       
|--- | ----------------------
|(j) | Property and Equipment



|                                                     |  |                                        
|---------------------------------------------------- |  | ---------------------------------------
|Asset                                                |  | Period                                 
|                                                     |  |                                        
|Buildings                                            |  | 20 to 50 years                         
|Manufacturing equipment                              |  | 3 to 5 years                           
|Office furniture, software, computers, and equipment |  | 2 to 5 years                           
|Leasehold improvements                               |  | Shorter of estimated life or lease term



|    |         
|--- | --------
|(k) | Goodwill









|    |            
|--- | -----------
|(l) | Intangibles



|                         |       |      |   |  |                 |   |        |                 |  |   |        |        | 
|------------------------ | ----- | ---- | - |  | --------------- | - | ------ | --------------- |  | - | ------ | ------ | 
|                         |       | Life |   |  | August 31, 2005 |   |        | August 31, 2004 | 
|                         |       |      |   |  |                 |   |        |                 | 
|Customer relationships   |       |      | 5 |  |                 | $ | 11,797 |                 |  | $ | 11,797 |       
|Technology               |       |      | 3 |  |                 |   | 1,826  |                 |  |   | 1,826  |       
|Trademark                |       |      | 7 |  |                 |   | 4,680  |                 |  |   | 4,673  |       
|                         |       |      |   |  |                 |   |        |                 | 
|                         | Total |      |   |  |                 |   |        | 18,303          |  |   |        | 18,296 | 
|Accumulated amortization |       |      |   |  |                 |   | (3,774 | )               |  |   | (989   | )     
|Other deductions         |       |      |   |  |                 |   | (5,387 | )               |  |   | (317   | )     
|                         |       |      |   |  |                 |   |        |                 | 
|Carrying value           |       |      |   |  |                 | $ | 9,142  |                 |  | $ | 16,990 |       
|                         |       |      |   |  |                 |   |        |                 | 

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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)












|    |                                
|--- | -------------------------------
|(m) | Impairment of Long-Lived Assets

Accounting for the
Impairment or Disposal of Long-Lived Assets,




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



| |                   
| | ------------------
| | Successor Business





| |                     
| | --------------------
| | Predecessor Business



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                             
|--- | ----------------------------
|(o) | Foreign Currency Translation









|    |                
|--- | ---------------
|(p) | Deferred Grants





|    |                         
|--- | ------------------------
|(q) | Stock-Based Compensation



| |                     
| | --------------------
| | Predecessor Business

Accounting for Stock Issued to
Employees, Accounting for Stock-Based
Compensation,


Accounting for Stock-Based
Compensation  Transition and Disclosure.


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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                                   |  |                |         |   |                 |   |         |  
|---------------------------------- |  | -------------- | ------- | - | --------------- | - | ------- | -
|                                   |  | Period Ended   |         |   | Year Ended      |  
|                                   |  | April 16, 2004 |         |   | August 31, 2003 |  
|                                   |  |                |         |   |                 |  
|Net loss, as reported              |  | $              | (33,198 | ) |                 | $ | (12,020 | )
|Pro forma stock-based compensation |  |                | (3,672  | ) |                 |   | (5,272  | )
|                                   |  |                |         |   |                 |  
|Pro forma net loss                 |  | $              | (36,870 | ) |                 | $ | (17,292 | )
|                                   |  |                |         |   |                 |  





|                                |  |                |                |  |                 |  |                | 
|------------------------------- |  | -------------- | -------------- |  | --------------- |  | -------------- | 
|                                |  | Period Ended   |                |  | Year Ended      | 
|                                |  | April 16, 2004 |                |  | August 31, 2003 | 
|                                |  |                |                |  |                 | 
|Stock options:                  |  |                |                |  |                 |  |                | 
|Expected life                   |  |                | 3.9 years      |  |                 |  | 3.9 years      | 
|Volatility                      |  |                | 75%            |  |                 |  | 79%            | 
|Risk-free interest rate         |  |                | 2.30% to 3.06% |  |                 |  | 1.93% to 2.3%  | 
|Dividend yield                  |  |                |               |  |                 |  |               | 
|Employee Stock Purchase Plan:   |  |                |                |  |                 |  |                | 
|Expected life of purchase right |  |                | 6 months       |  |                 |  | 6 months       | 
|Volatility                      |  |                | 75%            |  |                 |  | 79%            | 
|Risk-free interest rate         |  |                | 1.00%          |  |                 |  | 0.99% to 1.51% | 
|Dividend yield                  |  |                |               |  |                 |  |               | 



| |                   
| | ------------------
| | Successor Business





15



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                           |  |                 |        |   |                 |   |       |  
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------ | - | --------------- | - | ----- | -
|                                                                                                                           |  | Year Ended      |        |   | Period Ended    |  
|                                                                                                                           |  | August 31, 2005 |        |   | August 31, 2004 |  
|                                                                                                                           |  |                 |        |   |                 |  
|Net income                                                                                                                 |  | $               | 26,196 |   |                 | $ | 3,415 |  
|Add back stock-based compensation for employee awards included
    in the determination of net income, net of income taxes |  |                 | 227    |   |                 |   |      |  
|Less stock-based compensation for employee awards determined
    under the fair-value method                               |  |                 | (274   | ) |                 |   | (5    | )
|                                                                                                                           |  |                 |        |   |                 |  
|Pro forma net income                                                                                                       |  | $               | 26,149 |   |                 | $ | 3,410 |  
|                                                                                                                           |  |                 |        |   |                 |  



|                        |  |                 |             |   |                 |  |         |  
|----------------------- |  | --------------- | ----------- | - | --------------- |  | ------- | -
|                        |  | Year Ended      |             |   | Period Ended    | 
|                        |  | August 31, 2005 |             |   | August 31, 2004 | 
|                        |  |                 |             |   |                 | 
|Stock options:          |  |                 |             |   |                 |  |         |  
|Expected life           |  |                 | 4 years     |   |                 |  | 4 years |  
|Volatility              |  |                 | 0           | % |                 |  | 0       | %
|Risk-free interest rate |  |                 | 3.16 - 3.99 | % |                 |  | 3.16    | %
|Dividend yield          |  |                 |            |   |                 |  |        |  



|    |                   
|--- | ------------------
|(r) | Loss Contingencies





|    |                            
|--- | ---------------------------
|(s) | Comprehensive Income (Loss)

available-for-sale.




|    |                                                                         
|--- | ------------------------------------------------------------------------
|(t) | Concentration of Credit Risk and Fair Value of Financial
    Instruments



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|    |                     
|--- | --------------------
|(u) | Net Income Per Share

Successor
Business






|                                       |                                |                                |      |            |                 |   |      |            |            | 
|-------------------------------------- | ------------------------------ | ------------------------------ | ---- | ---------- | --------------- | - | ---- | ---------- | ---------- | 
|                                       |                                | Year Ended                     |      |            | Period Ended    |  
|                                       |                                | August 31, 2005                |      |            | August 31, 2004 |  
|                                       |                                |                                |      |            |                 |  
|Numerator:                             |                                |                                |      |            |                 |   |      |           
|                                       | Net income                     |                                | $    | 26,196     |                 |   | $    | 3,415      |           
|Denominator:                           |                                |                                |      |            |                 |   |      |           
|                                       | Weighted average common shares |                                |      | 48,872,340 |                 |   |      | 48,872,340 |           
|                                       |                                |                                |      |            |                 |  
|                                       | Effect of dilutive securities: |                                |      |            |                 |   |      |            |           
|                                       |                                | Stock options                  |      |            | 4,658,228       |   |      |            | 1,872,163  | 
|                                       |                                |                                |      |            |                 |  
|                                       |                                | Total ordinary shares, diluted |      |            | 53,530,568      |   |      |            | 50,744,503 | 
|Net income per ordinary share, basic   |                                | $                              | 0.54 |            |                 | $ | 0.07 |           
|                                       |                                |                                |      |            |                 |  
|Net income per ordinary share, diluted |                                | $                              | 0.49 |            |                 | $ | 0.07 |           
|                                       |                                |                                |      |            |                 |  





|    |                              
|--- | -----------------------------
|(v) | New Accounting Pronouncements

Inventory Costs, an
amendment of ARB No. 43, Chapter 4.


Share-Based


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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






Accounting Changes and Error Corrections, Accounting Changes Reporting Accounting Changes in Interim
Financial Statements.




|    |                          
|--- | -------------------------
|(2) | Related Party Information



|    |                     
|--- | --------------------
|(a) | Predecessor Business



|                         |                |                |        |        |                 |   |        |         |  
|------------------------ | -------------- | -------------- | ------ | ------ | --------------- | - | ------ | ------- | -
|                         |                | Period Ended   |        |        | Years Ended     |  
|                         |                | April 16, 2004 |        |        | August 31, 2003 |  
|                         |                |                |        |        |                 |  
|Affiliates of Solectron: |                |                |        |        |                 |   |        |        
|Sale of product          |                | $              | 80,572 |        |                 | $ | 60,982 |        
|Purchases of:            |                |                |        |        |                 |   |        |        
|                         | Inventory      |                |        | (5,243 | )               |   |        | (49,354 | )
|                         | Insurance      |                |        |       |                 |   |        | (1,608  | )
|                         | Other services |                |        | (1,066 | )               |   |        | (1,408  | )
|Solectron:               |                |                |        |        |                 |   |        |        
|Management fees paid     |                |                |       |        |                 |   | (2,480 | )      
|Interest income          |                |                |       |        |                 |   | 6,977  |        







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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                   
|--- | ------------------
|(b) | Successor Business









|    |            
|--- | -----------
|(3) | Inventories



|                |  |      |        |  |      |   |        | 
|--------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                |  | 2005 |        |  | 2004 |  
|                |  |      |        |  |      |  
|Raw materials   |  | $    | 23,765 |  |      | $ | 21,992 | 
|Work in process |  |      | 5,680  |  |      |   | 3,370  | 
|Finished goods  |  |      | 23,677 |  |      |   | 22,043 | 
|                |  |      |        |  |      |  
|                |  | $    | 53,122 |  |      | $ | 47,405 | 
|                |  |      |        |  |      |  



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                           
|--- | --------------------------
|(4) | Net Property and Equipment



|                                                     |  |      |        |  |      |   |        | 
|---------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                     |  | 2005 |        |  | 2004 |  
|                                                     |  |      |        |  |      |  
|Buildings                                            |  | $    | 585    |  |      | $ |       | 
|Office furniture, software, computers, and equipment |  |      | 4,453  |  |      |   | 1,474  | 
|Manufacturing equipment                              |  |      | 12,149 |  |      |   | 11,059 | 
|Leasehold improvements                               |  |      | 2,926  |  |      |   | 2,414  | 
|                                                     |  |      |        |  |      |  
|                                                     |  |      | 20,113 |  |      |   | 14,947 | 
|Less accumulated depreciation and amortization       |  |      | 8,804  |  |      |   | 2,317  | 
|                                                     |  |      |        |  |      |  
|Net property and equipment                           |  | $    | 11,309 |  |      | $ | 12,630 | 
|                                                     |  |      |        |  |      |  



|    |             
|--- | ------------
|(5) | Income Taxes



|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 |  |  |   |        | 
|--------- |  | ------------------ | ----- |  | --------------- | -------------------- | ----- | - | -------------- |  | - | --------------- |  |  | - | ------ | 
|          |  | Successor Business |       |  |                 | Predecessor Business |      
|          |  |                    |       |  |                 |                      |      
|          |  | Year Ended         |       |  | Period Ended    |                      |       |   | Period Ended   |  |   | Year Ended      | 
|          |  | August 31, 2005    |       |  | August 31, 2004 |                      |       |   | April 16, 2004 |  |   | August 31, 2003 | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 
|Current:  |  |                    |       |  |                 |                      |       |   |                |  |   |                 |  |  |   |        | 
|Federal   |  | $                  | 2,130 |  |                 | $                    | 368   |   |                |  | $ | 114             |  |  | $ | 10     | 
|State     |  |                    | 336   |  |                 |                      | 29    |   |                |  |   | 72              |  |  |   |       | 
|Foreign   |  |                    | 5,405 |  |                 |                      | 1,008 |   |                |  |   | 2,115           |  |  |   | 690    | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 
|          |  |                    | 7,871 |  |                 |                      | 1,405 |   |                |  |   | 2,301           |  |  |   | 700    | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 
|Deferred: |  |                    |       |  |                 |                      |       |   |                |  |   |                 |  |  |   |        | 
|Federal   |  |                    |      |  |                 |                      |      |   |                |  |   |                |  |  |   | 23,143 | 
|Foreign   |  |                    | 931   |  |                 |                      | (150  | ) |                |  |   |                |  |  |   | 5,477  | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 
|          |  |                    | 931   |  |                 |                      | (150  | ) |                |  |   |                |  |  |   | 28,620 | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 
|          |  | $                  | 8,802 |  |                 | $                    | 1,255 |   |                |  | $ | 2,301           |  |  | $ | 29,320 | 
|          |  |                    |       |  |                 |                      |       |   |                |  |   |                 | 



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                    |      |   |                 |                      |       |   |                |  |  |                 |    |  |  |       |  
|-------------------------------------------- |  | ------------------ | ---- | - | --------------- | -------------------- | ----- | - | -------------- |  |  | --------------- | -- |  |  | ----- | -
|                                             |  | Successor Business |      |   |                 | Predecessor Business |      
|                                             |  |                    |      |   |                 |                      |      
|                                             |  | Period Ended       |      |   | Period Ended    |                      |       |   | Period Ended   |  |  | Year Ended      |   
|                                             |  | August 31, 2005    |      |   | August 31, 2004 |                      |       |   | April 16, 2004 |  |  | August 31, 2003 |   
|                                             |  |                    |      |   |                 |                      |       |   |                |  |  |                 |   
|Statutory tax rate                           |  |                    | 35.0 | % |                 |                      | 35.0  | % |                |  |  | (35.0           | )% |  |  | 35.0  | %
|Foreign income taxes at different rates      |  |                    | (7.9 | ) |                 |                      | 18.0  |   |                |  |  | 6.0             |    |  |  | 5.3   |  
|State income tax, net of federal tax benefit |  |                    | 0.6  |   |                 |                      | 0.6   |   |                |  |  | 0.2             |    |  |  |      |  
|Tax holiday  Malaysia                       |  |                    | (8.8 | ) |                 |                      | (29.6 | ) |                |  |  | (10.5           | )  |  |  | (35.3 | )
|Nondeductible goodwill impairment            |  |                    |     |   |                 |                      |      |   |                |  |  | 42.3            |    |  |  |      |  
|Change in valuation allowance                |  |                    | 0.3  |   |                 |                      | 2.0   |   |                |  |  | 4.3             |    |  |  | 164.3 |  
|Deferred tax asset write-off  Malaysia      |  |                    | 3.9  |   |                 |                      |      |   |                |  |  |                |    |  |  |      |  
|Foreign withholding taxes                    |  |                    | 2.7  |   |                 |                      |      |   |                |  |  |                |    |  |  |      |  
|Other                                        |  |                    | (0.6 | ) |                 |                      | 0.9   |   |                |  |  | 0.2             |    |  |  | 0.2   |  
|                                             |  |                    |      |   |                 |                      |       |   |                |  |  |                 |   
|                                             |  |                    | 25.2 | % |                 |                      | 26.9  | % |                |  |  | 7.5             | %  |  |  | 169.5 | %
|                                             |  |                    |      |   |                 |                      |       |   |                |  |  |                 |   



|                         |                                   |                    |       |         |      |  |       |         |  
|------------------------ | --------------------------------- | ------------------ | ----- | ------- | ---- |  | ----- | ------- | -
|                         |                                   | Successor Business |      
|                         |                                   |                    |      
|                         |                                   | 2005               |       |         | 2004 | 
|                         |                                   |                    |       |         |      | 
|Deferred tax assets:     |                                   |                    |       |         |      |  |       |        
|                         | Accruals and allowances           |                    | $     | 6,756   |      |  | $     | 5,967   |  
|                         | Stock-based compensation          |                    |       | 92      |      |  |       |        |  
|                         | Credits carryover                 |                    |       | 482     |      |  |       | 442     |  
|                         | Capital loss carryover            |                    |       | 1,743   |      |  |       |        |  
|                         | Net operating loss carryover      |                    |       | 15,769  |      |  |       | 15,045  |  
|                         |                                   |                    |       |         |      | 
|                         | Deferred tax assets               |                    |       | 24,842  |      |  |       | 21,454  |  
|                         | Valuation allowance               |                    |       | (22,226 | )    |  |       | (19,207 | )
|                         |                                   |                    |       |         |      | 
|Net deferred tax assets: |                                   |                    | 2,616 |         |      |  | 2,247 |        
|                         |                                   |                    |       |         |      | 
|                         | Deferred tax liabilities:         |                    |       |         |      |  |       |         |  
|                         | Property and equipment            |                    |       | (105    | )    |  |       | (276    | )
|                         | Acquired intangibles              |                    |       | (2,563  | )    |  |       | (5,596  | )
|                         |                                   |                    |       |         |      | 
|                         | Deferred tax liabilities          |                    |       | (2,668  | )    |  |       | (5,872  | )
|                         |                                   |                    |       |         |      | 
|                         | Deferred tax assets (liabilities) |                    | $     | (52     | )    |  | $     | (3,625  | )
|                         |                                   |                    |       |         |      | 



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






carry-forwards












|         |  |                    |        |  |              |                      |       |   |              |  |   |            |   |  |   |        | 
|-------- |  | ------------------ | ------ |  | ------------ | -------------------- | ----- | - | ------------ |  | - | ---------- | - |  | - | ------ | 
|         |  | Successor Business |        |  |              | Predecessor Business |      
|         |  |                    |        |  |              |                      |      
|         |  | Year Ended         |        |  | Period Ended |                      |       |   | Period Ended |  |   | Year Ended |  
|         |  | August 31,         |        |  | August 31,   |                      |       |   | April 16,    |  |   | August 31, |  
|         |  | 2005               |        |  | 2004         |                      |       |   | 2004         |  |   | 2003       |  
|         |  |                    |        |  |              |                      |       |   |              |  |   |            |  
|U.S.     |  | $                  | 5,667  |  |              | $                    | (42   | ) |              |  | $ | (40,583    | ) |  | $ | 5,533  | 
|Non-U.S. |  |                    | 29,331 |  |              |                      | 4,712 |   |              |  |   | 9,686      |   |  |   | 11,767 | 
|         |  |                    |        |  |              |                      |       |   |              |  |   |            |  
|Total    |  | $                  | 34,998 |  |              | $                    | 4,670 |   |              |  | $ | (30,897    | ) |  | $ | 17,300 | 
|         |  |                    |        |  |              |                      |       |   |              |  |   |            |  



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |                 
|--- | ----------------
|(6) | Accrued Expenses



|                              |       |                    |        |        |      |   |       |        | 
|----------------------------- | ----- | ------------------ | ------ | ------ | ---- | - | ----- | ------ | 
|                              |       | Successor Business |       
|                              |       |                    |       
|                              |       | 2005               |        |        | 2004 |  
|                              |       |                    |        |        |      |  
|Accrued employee compensation |       | $                  | 9,555  |        |      | $ | 8,952 |       
|Accrued income taxes          |       |                    | 2,524  |        |      |   | 3,438 |       
|Other accrued liabilities     |       |                    | 17,833 |        |      |   | 7,765 |       
|                              |       |                    |        |        |      |  
|                              | Total |                    | $      | 29,912 |      |   | $     | 20,155 | 
|                              |       |                    |        |        |      |  



|    |                      
|--- | ---------------------
|(7) | Advance from Customer





|    |               
|--- | --------------
|(8) | Long-Term Debt



| |                                   
| | ----------------------------------
| | Senior Secured Floating Rate Notes









| |                         
| | ------------------------
| | Revolving Line of Credit



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)












|    |                      
|--- | ---------------------
|(9) | Financial Instruments



| |                       
| | ----------------------
| | Derivative Instruments

3-month






24



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|     |                       
|---- | ----------------------
|(10) | Employee Benefit Plans



|    |                  
|--- | -----------------
|(a) | Stock Option Plan



| |                     
| | --------------------
| | Predecessor Business

4-year 10-year




|                                                  |  |                  |            |   |                  |   |       | 
|------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ----- | 
|                                                  |  | Number of        |            |   | Weighted Average |  
|                                                  |  | Solectron Shares |            |   | Exercise Price   |  
|                                                  |  |                  |            |   |                  |  
|Outstanding, August 31, 2002                      |  |                  | 3,899,131  |   |                  | $ | 17.88 | 
|Granted                                           |  |                  | 978,882    |   |                  |   | 3.78  | 
|Exercised                                         |  |                  | (1,757     | ) |                  |   | 3.46  | 
|Canceled                                          |  |                  | (778,913   | ) |                  |   | 17.20 | 
|                                                  |  |                  |            |   |                  |  
|Outstanding, August 31, 2003                      |  |                  | 4,097,343  |   |                  |   | 14.65 | 
|Granted                                           |  |                  | 392,540    |   |                  |   | 5.58  | 
|Exercised                                         |  |                  | (17,807    | ) |                  |   | 3.84  | 
|Canceled                                          |  |                  | (319,698   | ) |                  |   | 16.87 | 
|                                                  |  |                  |            |   |                  |  
|Outstanding, April 16, 2004                       |  |                  | 4,152,378  |   |                  |   | 13.67 | 
|Cancellation of options upon acquisition by SMART |  |                  | (4,152,378 | ) |                  |   | 13.67 | 
|Outstanding, April 17, 2004                       |  |                  |           |   |                  |   |      | 
|                                                  |  |                  |            |   |                  |  





| |                   
| | ------------------
| | Successor Business

4-year 10-year


25



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##### Table of Contents



SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                             |  |                  |           |                  |                |   |      | 
|---------------------------- |  | ---------------- | --------- | ---------------- | -------------- | - | ---- | 
|                             |  |                  |           | Weighted Average |               
|                             |  | Number of Shares |           |                  | Exercise Price |  
|                             |  |                  |           |                  |                |  
|Outstanding, April 17, 2004  |  |                  |          |                  |                | $ |     | 
|Granted                      |  |                  | 4,960,366 |                  |                |   | 0.17 | 
|                             |  |                  |           |                  |                |  
|Outstanding, August 31, 2004 |  |                  | 4,960,366 |                  |                |   | 0.17 | 
|Granted                      |  |                  | 1,139,591 |                  |                |   | 0.76 | 
|Canceled                     |  |                  | (621,536  | )                |                |   | 0.20 | 
|                             |  |                  |           |                  |                |  
|Outstanding, August 31, 2005 |  |                  | 5,478,421 |                  |                |   | 0.29 | 
|                             |  |                  |           |                  |                |  



|                    |             |             |                |  |           |         |  |  |          |          |  |               |      |          |       |  |           |  |  |   |      | 
|------------------- | ----------- | ----------- | -------------- |  | --------- | ------- |  |  | -------- | -------- |  | ------------- | ---- | -------- | ----- |  | --------- |  |  | - | ---- | 
|Options Outstanding |             |             | Options Vested | 
|                    |             |             |                | 
|                    |             | Weighted    |                |  |           |         | 
|                    |             | Average     |                |  |           |         | 
|                    |             | Remaining   |                |  | Weighted  |         |  |  |          | Weighted | 
|                    |             | Contractual |                |  | Average   |         |  |  |          | Average  | 
|Range of            |             |             | Shares         |  |           | Life    |  |  | Exercise |          |  |               |      | Exercise |      
|Exercise Prices     |             |             | Outstanding    |  |           | (Years) |  |  | Price    |          |  | Shares Vested |      |          | Price | 
|                    |             |             |                |  |           |         |  |  |          |          |  |               |      |          |       | 
|$                   | 0.17        |             |                |  | 4,880,554 |         |  |  | 8.9      |          |  | $             | 0.17 |          |       |  | 1,275,525 |  |  | $ | 0.17 | 
|$                   | 0.98        |             |                |  | 442,017   |         |  |  | 9.4      |          |  | $             | 0.98 |          |       |  |          |  |  | $ |     | 
|$                   | 2.09        |             |                |  | 155,850   |         |  |  | 9.8      |          |  | $             | 2.09 |          |       |  | 833       |  |  | $ | 2.09 | 
|                    |             |             |                |  |           |         |  |  |          |          |  |               |      |          |       | 
|$                   | 0.17 - 2.09 |             |                |  | 5,478,421 |         |  |  | 8.9      |          |  | $             | 0.29 |          |       |  | 1,276,358 |  |  | $ | 0.17 | 
|                    |             |             |                |  |           |         |  |  |          |          |  |               |      |          |       | 



|    |                                               
|--- | ----------------------------------------------
|(b) | Employee Stock Purchase Plan 
    Predecessor







|    |                               
|--- | ------------------------------
|(c) | Savings and Retirement Program



| |                     
| | --------------------
| | Predecessor Business



26



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




| |                   
| | ------------------
| | Successor Business





|     |                              
|---- | -----------------------------
|(11) | Commitments and Contingencies



|    |                
|--- | ---------------
|(a) | Synthetic Lease



| |                     
| | --------------------
| | Predecessor Business





30-day








|    |                               
|--- | ------------------------------
|(b) | Lease Agreement with Solectron



| |                   
| | ------------------
| | Successor Business



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|    |            
|--- | -----------
|(c) | Commitments





|                    |  |             |       | 
|------------------- |  | ----------- | ----- | 
|                    |  | Year Ending |      
|                    |  | August 31   |      
|                    |  |             |      
|2006                |  | $           | 1,241 | 
|2007                |  |             | 885   | 
|2008                |  |             | 720   | 
|2009                |  |             | 378   | 
|2010 and thereafter |  |             |      | 
|                    |  |             |      
|                    |  | $           | 3,224 | 
|                    |  |             |      



|    |                   
|--- | ------------------
|(d) | Product Warranties





|                                |  |                    |       |            |                      |   |           |   |            |  |   |       |   |  |   |        |  
|------------------------------- |  | ------------------ | ----- | ---------- | -------------------- | - | --------- | - | ---------- |  | - | ----- | - |  | - | ------ | -
|                                |  | Successor Business |       |            | Predecessor Business
|                                |  |                    |       |            |                     
|                                |  | Year               |       | Period     |                      |   | Period    |   | Year      
|                                |  | Ended              |       | Ended      |                      |   | Ended     |   | Ended     
|                                |  | August 31,         |       | August 31, |                      |   | April 16, |   | August 31,
|                                |  | 2005               |       | 2004       |                      |   | 2004      |   | 2003      
|                                |  |                    |       |            |                      |   |           |   |           
|Beginning accrued warranty      |  | $                  | 1,098 |            |                      | $ | 1,067     |   |            |  | $ | 960   |   |  | $ | 1,111  |  
|Warranty claims                 |  |                    | (638  | )          |                      |   | (230      | ) |            |  |   | (819  | ) |  |   | (1,049 | )
|Accruals for product warranties |  |                    | 584   |            |                      |   | 261       |   |            |  |   | 926   |   |  |   | 898    |  
|                                |  |                    |       |            |                      |   |           |   |            |  |   |       |   |  |   |        |  
|Ending accrued warranty         |  | $                  | 1,044 |            |                      | $ | 1,098     |   |            |  | $ | 1,067 |   |  | $ | 960    |  
|                                |  |                    |       |            |                      |   |           |   |            |  |   |       |   |  |   |        |  



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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|    |              
|--- | -------------
|(e) | Legal Matters





|     |              
|---- | -------------
|(12) | Restructuring

Accounting for the
Impairment or Disposal of Long-Lived Assets Issue 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity Employers Accounting for Postemployment
Benefits Accounting for Costs
Associated with Exit or Disposal Activities




| |                     
| | --------------------
| | Predecessor Business



|    |                            
|--- | ---------------------------
|(a) | Period Ended April 16, 2004





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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                                     |  |        |        | 
|------------------------------------ |  | ------ | ------ | 
|                                     |  | Amount |       
|                                     |  |        |       
|Impairment of goodwill               |  | $      | 43,302 | 
|Impairment of equipment              |  |        | 5,675  | 
|                                     |  |        |       
|Impairment of goodwill and equipment |  |        | 48,977 | 
|Severance and benefit costs          |  |        | 219    | 
|Loss on leased facilities            |  |        | 80     | 
|Other                                |  |        | 250    | 
|                                     |  |        |       
|                                     |  | $      | 49,526 | 
|                                     |  |        |       



|    |            
|--- | -----------
|(b) | Fiscal 2003







|                                       |  |        |       | 
|-------------------------------------- |  | ------ | ----- | 
|                                       |  | Amount |      
|                                       |  |        |      
|Impairment of equipment                |  | $      | 2,897 | 
|Impairment of facilities               |  |        | 2,214 | 
|                                       |  |        |      
|Impairment of equipment and facilities |  |        | 5,111 | 
|Severance and benefit costs            |  |        | 2,631 | 
|Loss on leased equipment               |  |        | 115   | 
|Loss on leased facilities              |  |        | 364   | 
|                                       |  |        |      
|                                       |  | $      | 8,221 | 
|                                       |  |        |      

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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)




|                              |  |              |        |       |             |   |       |             |  |   |       |   |  |       |      |   |  |   |        |  
|----------------------------- |  | ------------ | ------ | ----- | ----------- | - | ----- | ----------- |  | - | ----- | - |  | ----- | ---- | - |  | - | ------ | -
|                              |  |              |        | Lease |             |   | Lease |             |  |   |       |  
|                              |  | Severance    |        |       | Payments on |   |       | Payments on |  |   |       |   | 
|                              |  | and Benefits |        |       | Facilities  |   |       | Equipment   |  |   | Other |   |  | Total |     
|                              |  |              |        |       |             |   |       |             |  |   |       |   |  |       |     
|Accrual as of August 31, 2002 |  |              |       |       |             |   |      |             |  |   |      |   |  |       |     |   |  |   |       |  
|Provision                     |  |              | 2,631  |       |             |   | 364   |             |  |   | 115   |   |  |       |     |   |  |   | 3,110  |  
|Cash payment                  |  |              | (1,138 | )     |             |   | (325  | )           |  |   |      |   |  |       |     |   |  |   | (1,463 | )
|                              |  |              |        |       |             |   |       |             |  |   |       |   |  |       |     
|Accrual as of August 31, 2003 |  |              | 1,493  |       |             |   | 39    |             |  |   | 115   |   |  |       |     |   |  |   | 1,647  |  
|Provision                     |  |              | 219    |       |             |   | 80    |             |  |   |      |   |  |       | 250  |   |  |   | 549    |  
|Cash payment                  |  |              | (1,586 | )     |             |   | (119  | )           |  |   | (115  | ) |  |       | (250 | ) |  |   | (2,070 | )
|                              |  |              |        |       |             |   |       |             |  |   |       |   |  |       |     
|Accrual as of April 16, 2004  |  | $            | 126    |       |             | $ |      |             |  | $ |      |   |  | $     |     |   |  | $ | 126    |  
|                              |  |              |        |       |             |   |       |             |  |   |       |   |  |       |     





| |                   
| | ------------------
| | Successor Business



|    |                             
|--- | ----------------------------
|(a) | Period Ended August 31, 2004





|                             |  |        |       | 
|---------------------------- |  | ------ | ----- | 
|                             |  | Amount |      
|                             |  |        |      
|Severance and benefits costs |  | $      | 545   | 
|Loss on leased equipment     |  |        | 480   | 
|Other                        |  |        | 275   | 
|                             |  |        |      
|                             |  | $      | 1,300 | 
|                             |  |        |      



|                              |  |              |      |                |                |   |      |       |  |   |       |   |  |   |        |  
|----------------------------- |  | ------------ | ---- | -------------- | -------------- | - | ---- | ----- |  | - | ----- | - |  | - | ------ | -
|                              |  |              |      | Lease Payments |                |   |      |       | 
|                              |  | Severance    |      |                | on Equipment   |   |      |       |  |  
|                              |  | and Benefits |      |                | and Facilities |   |      | Other |  |   | Total |  
|                              |  |              |      |                |                |   |      |       |  |   |       |  
|Accrual as of April 17, 2004  |  | $            | 126  |                |                | $ |     |       |  | $ |      |   |  | $ | 126    |  
|Provision                     |  |              | 545  |                |                |   | 480  |       |  |   | 275   |   |  |   | 1,300  |  
|Cash payment                  |  |              | (123 | )              |                |   | (104 | )     |  |   | (87   | ) |  |   | (314   | )
|                              |  |              |      |                |                |   |      |       |  |   |       |  
|Accrual as of August 31, 2004 |  |              | 548  |                |                |   | 376  |       |  |   | 188   |   |  |   | 1,112  |  
|Provision                     |  |              | 420  |                |                |   | 340  |       |  |   | 55    |   |  |   | 815    |  
|Cash Payment                  |  |              | (869 | )              |                |   | (608 | )     |  |   | (243  | ) |  |   | (1,720 | )
|                              |  |              |      |                |                |   |      |       |  |   |       |  
|Accrual as of August 31, 2005 |  | $            | 99   |                |                | $ | 108  |       |  | $ |      |   |  | $ | 207    |  
|                              |  |              |      |                |                |   |      |       |  |   |       |  

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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|     |                    
|---- | -------------------
|(13) | Segment Information



|                              |  |                    |         |  |            |                      |         |  |           |  |   |            |  |  |   |         | 
|----------------------------- |  | ------------------ | ------- |  | ---------- | -------------------- | ------- |  | --------- |  | - | ---------- |  |  | - | ------- | 
|                              |  | Successor Business |         |  |            | Predecessor Business |        
|                              |  |                    |         |  |            |                      |        
|                              |  | Year               |         |  | Period     |                      |         |  | Period    |  |   | Year       | 
|                              |  | Ended              |         |  | Ended      |                      |         |  | Ended     |  |   | Ended      | 
|                              |  | August 31,         |         |  | August 31, |                      |         |  | April 16, |  |   | August 31, | 
|                              |  | 2005               |         |  | 2004       |                      |         |  | 2004      |  |   | 2003       | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 
|Revenues:                     |  |                    |         |  |            |                      |         |  |           |  |   |            |  |  |   |         | 
|U.S.A.                        |  | $                  | 405,886 |  |            | $                    | 169,815 |  |           |  | $ | 461,086    |  |  | $ | 599,872 | 
|Other North and Latin America |  |                    | 58,733  |  |            |                      | 15,923  |  |           |  |   | 37,040     |  |  |   | 34,294  | 
|Europe                        |  |                    | 52,427  |  |            |                      | 19,889  |  |           |  |   | 89,983     |  |  |   | 103,671 | 
|Asia                          |  |                    | 90,253  |  |            |                      | 28,050  |  |           |  |   | 71,062     |  |  |   | 90,544  | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 
|                              |  | $                  | 607,299 |  |            | $                    | 233,677 |  |           |  | $ | 659,171    |  |  | $ | 828,381 | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 
|                              | 
|                              |  | August 31          |         |  |            |                      |         |  |           |  |  
|                              |  |                    |         |  |            |                      |         |  |          
|                              |  |                    | 2005    |  |            |                      | 2004    |  |           |  |   |            |  |  |   |         | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 
|                              | 
|Long-lived assets:            |  |                    |         |  |            |                      |         |  |           |  |   |            |  |  |   |         | 
|U.S.A.                        |  | $                  | 4,240   |  |            | $                    | 6,761   |  |           |  |   |            |  |  |   |         | 
|Other North and Latin America |  |                    | 2,152   |  |            |                      | 944     |  |           |  |   |            |  |  |   |         | 
|Europe                        |  |                    | 36      |  |            |                      |        |  |           |  |   |            |  |  |   |         | 
|Asia                          |  |                    | 4,881   |  |            |                      | 4,925   |  |           |  |   |            |  |  |   |         | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 
|                              |  | $                  | 11,309  |  |            | $                    | 12,630  |  |           |  |   |            |  |  |   |         | 
|                              |  |                    |         |  |            |                      |         |  |           |  |   |            | 



|     |                
|---- | ---------------
|(14) | Major Customers



|           |  |                    |         |  |                 |                      |     |        |                |   |         |                 |  |  |        |  |  |         |   |         |        |  |  |         |   |  |   |         |  |  |  |    |  
|---------- |  | ------------------ | ------- |  | --------------- | -------------------- | --- | ------ | -------------- | - | ------- | --------------- |  |  | ------ |  |  | ------- | - | ------- | ------ |  |  | ------- | - |  | - | ------- |  |  |  | -- | -
|           |  | Successor Business |         |  |                 | Predecessor Business |    
|           |  |                    |         |  |                 |                      |    
|           |  | Year Ended         |         |  | Period Ended    |                      |     |        | Period Ended   |   |         | Year Ended      | 
|           |  | August 31, 2005    |         |  | August 31, 2004 |                      |     |        | April 16, 2004 |   |         | August 31, 2003 | 
|           |  |                    |         |  |                 |                      |     |        |                |   |         |                 | 
|           |  | Amount             |         |  | Percent         |                      |     | Amount |                |   | Percent |                 |  |  | Amount |  |  | Percent |   |         | Amount |  |  | Percent |  
|           |  |                    |         |  |                 |                      |     |        |                |   |         |                 |  |  |        |  |  |         |   |         |        |  |  |         |  
|Customer A |  | $                  | 278,536 |  |                 |                      | 46% |        |                | $ | 116,224 |                 |  |  | 49%    |  |  |         | $ | 467,744 |        |  |  | 71      | % |  | $ | 606,489 |  |  |  | 73 | %
|Customer B |  | $                  | 107,694 |  |                 |                      | 18% |        |                | $ | 39,420  |                 |  |  | 17%    |  |  |         | $ |        |        |  |  |        |   |  | $ |        |  |  |  |   |  

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SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS  (Continued)






|     |                            
|---- | ---------------------------
|(15) | Other Income (Expense), Net



|                                         |  |                    |     |  |            |                      |     |   |           |  |   |            |   |  |   |        |  
|---------------------------------------- |  | ------------------ | --- |  | ---------- | -------------------- | --- | - | --------- |  | - | ---------- | - |  | - | ------ | -
|                                         |  | Successor Business |     |  |            | Predecessor Business |    
|                                         |  |                    |     |  |            |                      |    
|                                         |  | Year               |     |  | Period     |                      |     |   | Period    |  |   | Year       |  
|                                         |  | Ended              |     |  | Ended      |                      |     |   | Ended     |  |   | Ended      |  
|                                         |  | August 31,         |     |  | August 31, |                      |     |   | April 16, |  |   | August 31, |  
|                                         |  | 2005               |     |  | 2004       |                      |     |   | 2004      |  |   | 2003       |  
|                                         |  |                    |     |  |            |                      |     |   |           |  |   |            |  
|Gain on sale of investment               |  | $                  |    |  |            | $                    |    |   |           |  | $ |           |   |  | $ | 2,432  |  
|Write-off of investment                  |  |                    |    |  |            |                      |    |   |           |  |   |           |   |  |   | (1,891 | )
|Foreign currency realized gains (losses) |  |                    | 293 |  |            |                      | 546 |   |           |  |   | (13        | ) |  |   | (485   | )
|Other                                    |  |                    | 188 |  |            |                      | (95 | ) |           |  |   | (135       | ) |  |   | (108   | )
|                                         |  |                    |     |  |            |                      |     |   |           |  |   |            |  
|Total                                    |  | $                  | 481 |  |            | $                    | 451 |   |           |  | $ | (148       | ) |  | $ | (52    | )
|                                         |  |                    |     |  |            |                      |     |   |           |  |   |            |  



|     |                               
|---- | ------------------------------
|(16) | Interest Income (Expense), Net



|                               |  |                    |        |   |            |                      |      |   |           |  |   |            |   |  |   |       |  
|------------------------------ |  | ------------------ | ------ | - | ---------- | -------------------- | ---- | - | --------- |  | - | ---------- | - |  | - | ----- | -
|                               |  | Successor Business |        |   |            | Predecessor Business |     
|                               |  |                    |        |   |            |                      |     
|                               |  | Years              |        |   | Period     |                      |      |   | Period    |  |   | Year       |  
|                               |  | Ended              |        |   | Ended      |                      |      |   | Ended     |  |   | Ended      |  
|                               |  | August 31,         |        |   | August 31, |                      |      |   | April 16, |  |   | August 31, |  
|                               |  | 2005               |        |   | 2004       |                      |      |   | 2004      |  |   | 2003       |  
|                               |  |                    |        |   |            |                      |      |   |           |  |   |            |  
|Interest income                |  | $                  | 1,005  |   |            | $                    | 69   |   |           |  | $ | 299        |   |  | $ | 7,757 |  
|Interest expense               |  |                    | (8,003 | ) |            |                      | (996 | ) |           |  |   | (129       | ) |  |   | (72   | )
|                               |  |                    |        |   |            |                      |      |   |           |  |   |            |  
|Interest income (expense), net |  | $                  | (6,998 | ) |            | $                    | (927 | ) |           |  | $ | 170        |   |  | $ | 7,685 |  
|                               |  |                    |        |   |            |                      |      |   |           |  |   |            |  



|     |                      
|---- | ---------------------
|(17) | Subsidiary Guarantors



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INDEPENDENT AUDITORS REPORT


(COMPANY NO. 458945-M)




















34



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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO. 458945-M)





BALANCE SHEETS


August 31, 2005 and 2004


|                              |                             |                                             |   |                      |      |  |         |         |         |  |         |         |         | 
|----------------------------- | --------------------------- | ------------------------------------------- | - | -------------------- | ---- |  | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                              |                             | Note                                        |   |                      | 2005 |  |         | 2004    |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              |                             |                                             |   | (Ringgit Malaysia in |     
|                              |                             |                                             |   | thousands)           |     
|Property, plant and equipment |                             |                                             | 3 |                      |      |  | 15,641  |         |         |  | 17,134  |        
|Current assets:               |                             |                                             |   |                      |      |  |         |         |         |  |         |        
|                              | Inventories (at cost)       |                                             |   | 4                    |      |  |         | 56,519  |         |  |         | 49,476  |        
|                              | Trade and other receivables |                                             |   | 5                    |      |  |         | 212,172 |         |  |         | 186,985 |        
|                              | Tax recoverable             |                                             |   |                      |      |  |         | 106     |         |  |         |        |        
|                              | Cash and cash equivalents   |                                             |   | 6                    |      |  |         | 105,482 |         |  |         | 79,232  |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              |                             |                                             |   |                      |      |  | 374,279 |         |         |  | 315,693 |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|Current liabilities:          |                             |                                             |   |                      |      |  |         |         |         |  |         |        
|                              | Trade and other payables    |                                             |   | 7                    |      |  |         | 218,986 |         |  |         | 203,698 |        
|                              | Taxation                    |                                             |   |                      |      |  |         |        |         |  |         | 347     |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              |                             |                                             |   |                      |      |  | 218,986 |         |         |  | 204,045 |        
|Net current assets            |                             |                                             |   |                      |      |  | 155,293 |         |         |  | 111,648 |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              |                             |                                             |   |                      |      |  | 170,934 |         |         |  | 128,782 |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|Financed by:                  |                             |                                             |   |                      |      |  |         |         |         |  |         |        
|                              | Capital and reserves        |                                             |   |                      |      |  |         |         |         |  |         |         |        
|                              |                             | Share capital                               |   |                      | 8    |  |         |         | 11,650  |  |         |         | 11,650  | 
|                              |                             | Reserves                                    |   |                      | 9    |  |         |         | 159,234 |  |         |         | 117,082 | 
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              | Shareholders funds         |                                             |   |                      |      |  |         | 170,884 |         |  |         | 128,732 |        
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              | Long term liability:        |                                             |   |                      |      |  |         |         |         |  |         |         |        
|                              |                             | Non-cumulative redeemable preference shares |   |                      | 10   |  |         |         | 50      |  |         |         | 50      | 
|                              |                             |                                             |   |                      |      |  |         |         |        
|                              |                             |                                             |   |                      |      |  | 170,934 |         |         |  | 128,782 |        
|                              |                             |                                             |   |                      |      |  |         |         |        





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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO. 458945-M)





INCOME STATEMENTS


For the Years Ended August 31, 2005, 2004 and 2003


|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |        |  |  |          |        | 
|------------------------ | --------------------------------- | ---- | -- | ------------------------------- | ---- |  | ---------- | ------ |  |  | ---------- | ------ |  |  | -------- | ------ | 
|                         |                                   | Note |    |                                 | 2005 |  |            | 2004   |  |  | 2003       |       
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       
|                         |                                   |      |    | (Ringgit Malaysia in thousands) |     
|Revenue                  |                                   |      | 11 |                                 |      |  | 1,501,905  |        |  |  | 1,351,560  |        |  |  | 696,673  |       
|Cost of sales            |                                   |      |    |                                 |      |  | (1,413,087 | )      |  |  | (1,251,822 | )      |  |  | (610,749 | )     
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       
|                         | Gross profit                      |      |    |                                 |      |  |            | 88,818 |  |  |            | 99,738 |  |  |          | 85,924 | 
|Distribution costs       |                                   |      |    |                                 |      |  | (10,813    | )      |  |  | (8,164     | )      |  |  | (6,655   | )     
|Administrative expenses  |                                   |      |    |                                 |      |  | (17,831    | )      |  |  | (22,137    | )      |  |  | (16,939  | )     
|Other operating expenses |                                   |      |    |                                 |      |  | (11,656    | )      |  |  | (23,677    | )      |  |  | (19,893  | )     
|Other operating income   |                                   |      |    |                                 |      |  | 1,311      |        |  |  | 700        |        |  |  | 1,068    |       
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       
|                         | Operating profit                  |      |    | 12                              |      |  |            | 49,829 |  |  |            | 46,460 |  |  |          | 43,505 | 
|Financing costs          |                                   |      |    |                                 |      |  | (3         | )      |  |  | (62        | )      |  |  |         |       
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       
|                         | Profit before tax                 |      |    |                                 |      |  |            | 49,826 |  |  |            | 46,398 |  |  |          | 43,505 | 
|Tax expense              |                                   |      | 13 |                                 |      |  | (1,977     | )      |  |  | (196       | )      |  |  | (135     | )     
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       
|                         | Net profit after tax for the year |      |    |                                 |      |  |            | 47,849 |  |  |            | 46,202 |  |  |          | 43,370 | 
|                         |                                   |      |    |                                 |      |  |            |        |  |  |            |       





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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO. 458945-M)





STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY


|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |         |         |   |  |         |         |  
|------------------------------ | ------------------------------------------------------------------------------------------------------------- | ---- |  | ------------------------------- | ------- |  | ------ | ------- | - | -------- | ------- | - |  | ----- | ------- | ------- | - |  | ------- | ------- | -
|                               |                                                                                                               |      |  | Share                           |         |  | Share  |         |   | Retained |         |   | 
|                               |                                                                                                               | Note |  |                                 | capital |  |        | premium |   |          | profits |   |  | Total |        
|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |        
|                               |                                                                                                               |      |  | (Ringgit Malaysia in thousands) |        
|Balances as of August 31, 2002 |                                                                                                               |      |  |                                 |         |  | 300    |         |   |          | 1,190   |   |  |       | 105,727 |         |   |  | 107,217 |        
|                               | Reclassification of share capital on non-cumulative redeemable
    preference shares to long term liabilities |      |  | 10                              |         |  |        | (50     | ) |          |         |  |  |       |         |        |   |  |         | (50     | )
|                               | Net profit for the year                                                                                       |      |  |                                 |         |  |        |        |   |          |         |  |  |       |         | 43,370  |   |  |         | 43,370  |  
|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |        
|Balances as of August 31, 2003 |                                                                                                               |      |  |                                 |         |  | 250    |         |   |          | 1,190   |   |  |       | 149,097 |         |   |  | 150,537 |        
|                               | Issue of shares                                                                                               |      |  |                                 |         |  |        | 11,400  |   |          |         |  |  |       |         |        |   |  |         | 11,400  |  
|                               | Dividends                                                                                                     |      |  | 14                              |         |  |        |        |   |          |         |  |  |       |         | (79,407 | ) |  |         | (79,407 | )
|                               | Net profit for the year                                                                                       |      |  |                                 |         |  |        |        |   |          |         |  |  |       |         | 46,202  |   |  |         | 46,202  |  
|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |        
|Balances as of August 31, 2004 |                                                                                                               |      |  |                                 |         |  | 11,650 |         |   |          | 1,190   |   |  |       | 115,892 |         |   |  | 128,732 |        
|                               | Dividends                                                                                                     |      |  | 14                              |         |  |        |        |   |          |         |  |  |       |         | (5,697  | ) |  |         | (5,697  | )
|                               | Net profit for the year                                                                                       |      |  |                                 |         |  |        |        |   |          |         |  |  |       |         | 47,849  |   |  |         | 47,849  |  
|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |        
|Balances as of August 31, 2005 |                                                                                                               |      |  |                                 |         |  | 11,650 |         |   |          | 1,190   |   |  |       | 158,044 |         |   |  | 170,884 |        
|                               |                                                                                                               |      |  |                                 |         |  |        |         |   |          |         |   |  |       |        





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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO. 458945-M)





CASH FLOW STATEMENTS


August 31, 2005, 2004 and 2003


|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |        |         |         |        |  
|---------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | --------------------------- | -------------------------------------------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------ | ------- | ------- | ------ | -
|                                                                                               |                                                                         | 2005                                                                                              |                             |                                              | 2004   |         |         | 2003    |       
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               |                                                                         | (Ringgit Malaysia in thousands)                                                                   |                            
|Cash flows from operating activities:                                                          |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|                                                                                               | Income before provision for income taxes                                |                                                                                                   |                             | 49,826                                       |        |         |         | 46,398  |        |         |         | 43,505 |        
|                                                                                               | Adjustments for:                                                        |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |        |        
|                                                                                               |                                                                         | Loss on disposal of plant and equipment                                                           |                             |                                              |       |         |         |         | 625    |         |         |        |        |        
|                                                                                               |                                                                         | Depreciation                                                                                      |                             |                                              | 6,457  |         |         |         | 7,642  |         |         |        | 9,536   |        
|                                                                                               |                                                                         | Interest expense                                                                                  |                             |                                              |       |         |         |         | 56     |         |         |        |        |        
|                                                                                               |                                                                         | Interest income                                                                                   |                             |                                              | (1,311 | )       |         |         | (700   | )       |         |        | (923    | )      
|                                                                                               |                                                                         | Impairment loss on plant and equipment                                                            |                             |                                              |       |         |         |         |       |         |         |        | 102     |        
|                                                                                               |                                                                         | Dividend payable on non-cumulative redeemable preference shares
    classified as financing costs |                             |                                              | 3      |         |         |         | 6      |         |         |        |        |        
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               | Operating profit before working capital changes                         |                                                                                                   |                             | 54,975                                       |        |         |         | 54,027  |        |         |         | 52,220 |        
|                                                                                               |                                                                         | Increase in:                                                                                      |                             |                                              |        |         |         |         |        |         |         |        |         |        
|                                                                                               |                                                                         |                                                                                                   | Inventories                 |                                              |        | (7,043  | )       |         |        | (15,281 | )       |        |         | (19,883 | )     
|                                                                                               |                                                                         |                                                                                                   | Trade and other receivables |                                              |        | (25,187 | )       |         |        | (47,033 | )       |        |         | (70,216 | )     
|                                                                                               |                                                                         | Increase in trade and other payables                                                              |                             |                                              | 15,288 |         |         |         | 48,983 |         |         |        | 112,634 |        
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               | Cash generated from operations                                          |                                                                                                   |                             | 38,033                                       |        |         |         | 40,696  |        |         |         | 74,755 |        
|                                                                                               |                                                                         | Income taxes paid                                                                                 |                             |                                              | (2,430 | )       |         |         | (84    | )       |         |        | (333    | )      
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               |                                                                         |                                                                                                   |                             | Net cash generated from operating activities |        |         | 35,603  |         |        |         | 40,612  |        |         |         | 74,422 |  
|Cash flows from investing activities:                                                          |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|                                                                                               | Interest received                                                       |                                                                                                   |                             | 1,311                                        |        |         |         | 700     |        |         |         | 923    |        
|                                                                                               | Purchase of plant and equipment                                         |                                                                                                   |                             | (5,680                                       | )      |         |         | (2,512  | )      |         |         | (8,100 | )      
|                                                                                               | Proceeds from disposal of plant and equipment                           |                                                                                                   |                             | 716                                          |        |         |         | 41      |        |         |         |       |        
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               |                                                                         |                                                                                                   |                             | Net cash used in investing activities        |        |         | (3,653  | )       |        |         | (1,771  | )      |         |         | (7,177 | )
|Cash flows from financing activities:                                                          |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|                                                                                               | Dividends paid  ordinary shares                                        |                                                                                                   |                             | (5,697                                       | )      |         |         | (79,407 | )      |         |         |       |        
|                                                                                               | 
    non-cumulative redeemable preference shares                       |                                                                                                   |                             | (3                                           | )      |         |         | (6      | )      |         |         |       |        
|                                                                                               | Proceeds from issue of shares                                           |                                                                                                   |                             |                                             |        |         |         | 11,400  |        |         |         |       |        
|                                                                                               | Interest paid                                                           |                                                                                                   |                             |                                             |        |         |         | (56     | )      |         |         |       |        
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               |                                                                         |                                                                                                   |                             | Net cash used in financing activities        |        |         | (5,700  | )       |        |         | (68,069 | )      |         |         |       |  
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|Net increase/(decrease) in cash and cash equivalents                                           |                                                                         |                                                                                                   | 26,250                      |                                              |        |         | (29,228 | )       |        |         | 67,245  |       
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|Cash and cash equivalents at beginning of year                                                 |                                                                         |                                                                                                   | 79,032                      |                                              |        |         | 108,260 |         |        |         | 41,015  |       
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|Cash and cash equivalents at end of year                                                       |                                                                         |                                                                                                   | 105,282                     |                                              |        |         | 79,032  |         |        |         | 108,260 |       
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|NOTE                                                                                           |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|Cash and cash equivalents                                                                      |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|Cash and cash equivalents included in cash flow statements
    comprise the following amounts: |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |        |         |         |       
|                                                                                               | Short term deposits with a licensed bank (exclude pledged
    deposits) |                                                                                                   |                             | 68,979                                       |        |         |         | 53,686  |        |         |         | 75,947 |        
|                                                                                               | Cash and bank balances                                                  |                                                                                                   |                             | 36,303                                       |        |         |         | 25,346  |        |         |         | 32,313 |        
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       
|                                                                                               |                                                                         |                                                                                                   | 105,282                     |                                              |        |         | 79,032  |         |        |         | 108,260 |       
|                                                                                               |                                                                         |                                                                                                   |                             |                                              |        |         |         |         |       





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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)





NOTES TO THE FINANCIAL STATEMENTS




|    |                          
|--- | -------------------------
|(1) | Business and organization

251-A,




|    |                                           
|--- | ------------------------------------------
|(2) | Summary of significant accounting policies





|    |                    
|--- | -------------------
|(a) | Basis of accounting





|    |                              
|--- | -----------------------------
|(b) | Property, plant and equipment







| |             
| | ------------
| | Depreciation

expenditure-in






|                                         |  |  |           | 
|---------------------------------------- |  |  | --------- | 
|Leasehold improvement                    |  |  | 2% - 33%  | 
|Plant and machinery                      |  |  | 20% - 50% | 
|Computers                                |  |  | 50%       | 
|Furniture, fittings and office equipment |  |  | 20% - 50% | 





|    |           
|--- | ----------
|(c) | Impairment



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)










|    |            
|--- | -----------
|(d) | Inventories

first-in, work-in




|    |                            
|--- | ---------------------------
|(e) | Trade and other receivables





|    |                          
|--- | -------------------------
|(f) | Cash and cash equivalents





|    |            
|--- | -----------
|(g) | Liabilities





|    |           
|--- | ----------
|(h) | Provisions





|    |              
|--- | -------------
|(i) | Share capital



| |                                                   
| | --------------------------------------------------
| | Non-Cumulative Redeemable Preference Share Capital





|    |                         
|--- | ------------------------
|(j) | Research and development



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)






|    |                              
|--- | -----------------------------
|(k) | Foreign currency transactions







| |               
| | --------------
| | (l) Income tax











|    |                   
|--- | ------------------
|(m) | Income recognition



| |              
| | -------------
| | i) Goods sold





| |                    
| | -------------------
| | ii) Interest income



41



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|    |                
|--- | ---------------
|(n) | Financing costs





|    |                  
|--- | -----------------
|(o) | Employee benefits



| |                                
| | -------------------------------
| | i) Short term employee benefits





| |                               
| | ------------------------------
| | ii) Defined contribution plans





|    |                              
|--- | -----------------------------
|(3) | Property, plant and equipment

|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       |  |       |  |  |  |        |  
|-------------------------------------- |  | ------------------------------- | ------ |  | --------- |  | ------ | --------- | ------------ | ------ | --------- | ------- | ------------ | ----------- | --- |  | ----- |  | ----- |  |  |  | ------ | -
|                                       |  | Long term                       |        |  |           |  |        |           | Furniture,   |        |           |         |              |            
|                                       |  | leasehold                       |        |  |           |  |        |           | fittings and |        |           | Capital |              |             |    
|                                       |  | land and                        |        |  | Plant and |  |        |           |              | office |           |         | expenditure- |             |     | 
|                                       |  | improvement                     |        |  | machinery |  |        | Computers |              |        | equipment |         |              | in-progress |     |  | Total | 
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|                                       |  | (Ringgit Malaysia in thousands) |       
|Cost                                   |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       |  |       |  |  |  |        |  
|At September 1, 2004                   |  |                                 | 11,423 |  |           |  | 66,825 |           |              |        | 2,255     |         |              |             | 644 |  |       |  |      |  |  |  | 81,147 |  
|Additions                              |  |                                 |       |  |           |  | 3,649  |           |              |        | 458       |         |              |             |    |  |       |  | 1,573 |  |  |  | 5,680  |  
|Disposals                              |  |                                 |       |  |           |  | (4,039 | )         |              |        |          |         |              |             |    |  |       |  |      |  |  |  | (4,039 | )
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|At August 31, 2005                     |  |                                 | 11,423 |  |           |  | 66,435 |           |              |        | 2,713     |         |              |             | 644 |  |       |  | 1,573 |  |  |  | 82,788 |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|Accumulated depreciation               |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       |  |       |  |  |  |        |  
|At September 1, 2004                   |  |                                 | 3,532  |  |           |  | 57,768 |           |              |        | 2,233     |         |              |             | 480 |  |       |  |      |  |  |  | 64,013 |  
|Charge for the year                    |  |                                 | 649    |  |           |  | 5,582  |           |              |        | 173       |         |              |             | 53  |  |       |  |      |  |  |  | 6,457  |  
|Disposals                              |  |                                 |       |  |           |  | (3,323 | )         |              |        |          |         |              |             |    |  |       |  |      |  |  |  | (3,323 | )
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|At August 31, 2005                     |  |                                 | 4,181  |  |           |  | 60,027 |           |              |        | 2,406     |         |              |             | 533 |  |       |  |      |  |  |  | 67,147 |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|Net book value                         |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       |  |       |  |  |  |        |  
|At August 31, 2005                     |  |                                 | 7,242  |  |           |  | 6,408  |           |              |        | 307       |         |              |             | 111 |  |       |  | 1,573 |  |  |  | 15,641 |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|At August 31, 2004                     |  |                                 | 7,891  |  |           |  | 9,057  |           |              |        | 22        |         |              |             | 164 |  |       |  |      |  |  |  | 17,134 |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|Depreciation charge for the year ended |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       |  |       |  |  |  |        |  
|August 31, 2004                        |  |                                 | 684    |  |           |  | 6,761  |           |              |        | 139       |         |              |             | 58  |  |       |  |      |  |  |  | 7,642  |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 
|August 31, 2003                        |  |                                 | 864    |  |           |  | 8,297  |           |              |        | 278       |         |              |             | 97  |  |       |  |      |  |  |  | 9,536  |  
|                                       |  |                                 |        |  |           |  |        |           |              |        |           |         |              |             |     |  |       | 

42



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|                                                                                                         |  |                   |       |  |      |  |       | 
|-------------------------------------------------------------------------------------------------------- |  | ----------------- | ----- |  | ---- |  | ----- | 
|                                                                                                         |  | 2005              |       |  | 2004 | 
|                                                                                                         |  |                   |       |  |      | 
|                                                                                                         |  | (Ringgit Malaysia |      
|                                                                                                         |  | in thousands)     |      
|Depreciation expense                                                                                     |  |                   | 3,444 |  |      |  | 4,146 | 
|Research and development (R&D) expenditure
    (being depreciation on equipment used for R&D purposes) |  |                   | 3,013 |  |      |  | 3,496 | 
|                                                                                                         |  |                   |       |  |      | 
|                                                                                                         |  |                   | 6,457 |  |      |  | 7,642 | 
|                                                                                                         |  |                   |       |  |      | 



|    |                     
|--- | --------------------
|(4) | Inventories, at cost

|                         |  |                   |        |  |      |  |        | 
|------------------------ |  | ----------------- | ------ |  | ---- |  | ------ | 
|                         |  | 2005              |        |  | 2004 | 
|                         |  |                   |        |  |      | 
|                         |  | (Ringgit Malaysia |       
|                         |  | in thousands)     |       
|Raw materials            |  |                   | 28,951 |  |      |  | 31,420 | 
|Work-in-progress         |  |                   | 5,256  |  |      |  | 1,691  | 
|Manufactured inventories |  |                   | 12,951 |  |      |  | 5,123  | 
|Trading inventories      |  |                   | 9,361  |  |      |  | 11,242 | 
|                         |  |                   |        |  |      | 
|                         |  |                   | 56,519 |  |      |  | 49,476 | 
|                         |  |                   |        |  |      | 



|    |                            
|--- | ---------------------------
|(5) | Trade and other receivables

|                                            |                        |                      |         |         |      |  |         |         | 
|------------------------------------------- | ---------------------- | -------------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                                            |                        | 2005                 |         |         | 2004 | 
|                                            |                        |                      |         |         |      | 
|                                            |                        | (Ringgit Malaysia in |        
|                                            |                        | thousands)           |        
|Trade receivables                           |                        |                      |         |         |      |  |         |        
|                                            | - Related corporations |                      |         | 28,891  |      |  |         | 19,207  | 
|                                            | - Others               |                      |         | 169,283 |      |  |         | 157,368 | 
|                                            |                        |                      |         |         |      | 
|                                            |                        |                      | 198,174 |         |      |  | 176,575 |        
|Other receivables, deposits and prepayments |                        |                      |         |         |      |  |         |        
|                                            | - Related corporations |                      |         | 1,483   |      |  |         | 8,571   | 
|                                            | - Others               |                      |         | 12,515  |      |  |         | 1,839   | 
|                                            |                        |                      |         |         |      | 
|                                            |                        |                      | 13,998  |         |      |  | 10,410  |        
|                                            |                        |                      |         |         |      | 
|                                            |                        |                      | 212,172 |         |      |  | 186,985 |        
|                                            |                        |                      |         |         |      | 



|    |                          
|--- | -------------------------
|(6) | Cash and cash equivalents

|                                        |  |                      |         |  |      |  |        | 
|--------------------------------------- |  | -------------------- | ------- |  | ---- |  | ------ | 
|                                        |  | 2005                 |         |  | 2004 | 
|                                        |  |                      |         |  |      | 
|                                        |  | (Ringgit Malaysia in |        
|                                        |  | thousands)           |        
|Short term deposits with licensed banks |  |                      | 69,179  |  |      |  | 53,886 | 
|Cash and bank balances                  |  |                      | 36,303  |  |      |  | 25,346 | 
|                                        |  |                      |         |  |      | 
|                                        |  |                      | 105,482 |  |      |  | 79,232 | 
|                                        |  |                      |         |  |      | 



43



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|    |                         
|--- | ------------------------
|(7) | Trade and other payables

|                                    |                                   |                      |         |         |      |  |         |         | 
|----------------------------------- | --------------------------------- | -------------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                                    |                                   | 2005                 |         |         | 2004 | 
|                                    |                                   |                      |         |         |      | 
|                                    |                                   | (Ringgit Malaysia in |        
|                                    |                                   | thousands)           |        
|Trade payables                      |                                   |                      |         |         |      |  |         |        
|                                    | - Related corporations            |                      |         | 3,925   |      |  |         | 9,787   | 
|                                    | - Others                          |                      |         | 173,151 |      |  |         | 160,376 | 
|                                    |                                   |                      |         |         |      | 
|                                    |                                   |                      | 177,076 |         |      |  | 170,163 |        
|Other payables and accrued expenses |                                   |                      |         |         |      |  |         |        
|                                    | - Penultimate holding corporation |                      |         | 1,179   |      |  |         |        | 
|                                    | - Related corporation             |                      |         | 16,656  |      |  |         |        | 
|                                    | - Others                          |                      |         | 24,075  |      |  |         | 33,535  | 
|                                    |                                   |                      |         |         |      | 
|                                    |                                   |                      | 41,910  |         |      |  | 33,535  |        
|                                    |                                   |                      |         |         |      | 
|                                    |                                   |                      | 218,986 |         |      |  | 203,698 |        
|                                    |                                   |                      |         |         |      | 











44



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|    |              
|--- | -------------
|(8) | Share capital

|                       |                             |                                      |  |  |        |  |  |  |        | 
|---------------------- | --------------------------- | ------------------------------------ |  |  | ------ |  |  |  | ------ | 
|                       |                             | 2005                                 |  |  | 2004   | 
|                       |                             |                                      |  |  |        | 
|                       |                             | (Ringgit Malaysia                    | 
|                       |                             | in thousands)                        | 
|Authorized:            |                             |                                      |  |  |        |  |  | 
|                       | Ordinary shares of RM1 each |                                      |  |  |        |  |  |  |       
|                       |                             | At beginning of the year             |  |  | 24,750 |  |  |  | 250    | 
|                       |                             | Addition during the year             |  |  |       |  |  |  | 24,500 | 
|                       |                             |                                      |  |  |        | 
|                       |                             | At end of the year                   |  |  | 24,750 |  |  |  | 24,750 | 
|                       |                             |                                      |  |  |        | 
|Issued and fully paid: |                             |                                      |  |  |        |  |  | 
|                       | Ordinary shares of RM1 each |                                      |  |  |        |  |  |  |       
|                       |                             | At beginning of the year             |  |  | 11,650 |  |  |  | 250    | 
|                       |                             | Issue of ordinary shares of RM1 each |  |  |       |  |  |  | 11,400 | 
|                       |                             |                                      |  |  |        | 
|                       |                             | At end of the year                   |  |  | 11,650 |  |  |  | 11,650 | 
|                       |                             |                                      |  |  |        | 



|    |         
|--- | --------
|(9) | Reserves

|                  |                  |                   |         |         |      |  |         |         | 
|----------------- | ---------------- | ----------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                  |                  | 2005              |         |         | 2004 | 
|                  |                  |                   |         |         |      | 
|                  |                  | (Ringgit Malaysia |        
|                  |                  | in thousands)     |        
|Non-Distributable |                  |                   |         |         |      |  |         |        
|                  | Share premium    |                   |         | 1,190   |      |  |         | 1,190   | 
|Distributable     |                  |                   |         |         |      |  |         |        
|                  | Retained profits |                   |         | 158,044 |      |  |         | 115,892 | 
|                  |                  |                   |         |         |      | 
|                  |                  |                   | 159,234 |         |      |  | 117,082 |        
|                  |                  |                   |         |         |      | 







|     |                                            
|---- | -------------------------------------------
|(10) | Non-cumulative redeemable preference shares

|                                                                        |                                                                         |             |  |     |      |  |  |     | 
|----------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------- |  | --- | ---- |  |  | --- | 
|                                                                        |                                                                         | 2005        |  |     | 2004 | 
|                                                                        |                                                                         |             |  |     |      | 
|                                                                        |                                                                         | (Ringgit    | 
|                                                                        |                                                                         | Malaysia in | 
|                                                                        |                                                                         | thousands)  | 
|Authorized:                                                             |                                                                         |             |  |     |      |  |  |    
|Non-Cumulative Redeemable Preference Shares of RM1 each
    Authorized: |                                                                         |             |  |     |      |  |  |    
|                                                                        |                                                                         |             |  |     |      | 
|                                                                        | At beginning/end of the year                                            |             |  | 250 |      |  |  | 250 | 
|                                                                        |                                                                         |             |  |     |      | 
|Issued and fully paid:                                                  |                                                                         |             |  |     |      |  |  |    
|                                                                        | Non-Cumulative Redeemable Preference Shares of RM1 each
    Authorized: |             |  |     |      |  |  |     | 
|                                                                        |                                                                         |             |  |     |      | 
|                                                                        | At beginning/end of the year                                            |             |  | 50  |      |  |  | 50  | 
|                                                                        |                                                                         |             |  |     |      | 



45



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)








| |    |                                                        
| | -- | -------------------------------------------------------
| | i) | shall be entitled to dividends declared by the Company;



| |     |                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | ii) | shall be ranked in regards to return of capital and dividend in
    priority to the holders of the ordinary shares for the time
    being of the Company;



| |      |                                                                                                                                                                                                                                                                                                                                        
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | iii) | shall not have any right to vote upon any resolution other than
    those pertaining to the winding up of the Company, reduction of
    share capital, amendment of the Memorandum and/or Articles of
    Association of the Company affecting directly or indirectly the
    rights and privileges of the holder of preference shares;



| |     |                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | iv) | shall not be entitled to attend any general meeting unless the
    business of the meeting includes the consideration of a
    resolution upon which the holder of preference shares is
    entitled to vote;



| |    |                                                                                                                                                                                                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | v) | shall have the right to demand redemption of any part of the
    preference shares at par value together with a sum equal to the
    arrears of the preferential dividend declared at any time upon
    passing a resolution by the holders of preference shares and
    upon giving notice of 60 days to the Company; and



| |     |                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | vi) | in the event of winding up of the Company, the holder of
    preference shares shall be entitled in priority to the holder of
    ordinary shares in paying of the capital paid up on the
    preference shares.

46



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|     |        
|---- | -------
|(11) | Revenue





|     |                 
|---- | ----------------
|(12) | Operating profit



|                |                                               |                      |  |        |      |  |  |        |  |  |  |        | 
|--------------- | --------------------------------------------- | -------------------- |  | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                |                                               | 2005                 |  |        | 2004 |  |  | 2003   | 
|                |                                               |                      |  |        |      |  |  |        | 
|                |                                               | (Ringgit Malaysia in | 
|                |                                               | thousands)           | 
|After charging: |                                               |                      |  |        |      |  |  |        |  |  |  |       
|                | Auditors remuneration                        |                      |  | 402    |      |  |  | 25     |  |  |  | 20     | 
|                | Directors emoluments                         |                      |  | 835    |      |  |  | 869    |  |  |  | 933    | 
|                | Depreciation (Note 3)                         |                      |  | 3,444  |      |  |  | 4,146  |  |  |  | 4,568  | 
|                | Allowance for doubtful debts                  |                      |  |       |      |  |  | 4,915  |  |  |  | 1,482  | 
|                | Rental of building                            |                      |  | 672    |      |  |  | 651    |  |  |  | 111    | 
|                | Rental of equipment                           |                      |  | 28     |      |  |  | 116    |  |  |  | 161    | 
|                | Unrealized loss on foreign exchange           |                      |  | 1,067  |      |  |  |       |  |  |  |       | 
|                | Realized loss on foreign exchange             |                      |  |       |      |  |  |       |  |  |  | 22     | 
|                | Staff costs (excluding directors emoluments) |                      |  | 16,350 |      |  |  | 15,643 |  |  |  | 9,689  | 
|                | Research and development expenditure *        |                      |  | 9,686  |      |  |  | 20,929 |  |  |  | 19,778 | 
|                | Impairment loss on plant and equipment        |                      |  |       |      |  |  |       |  |  |  | 102    | 
|                | Plant and equipment written off               |                      |  |       |      |  |  |       |  |  |  | 4      | 
|                | Allowance for inventory obsolescence          |                      |  | 13,301 |      |  |  | 7,882  |  |  |  | 2,942  | 
|                | Loss on disposal of plant and equipment       |                      |  |       |      |  |  | 625    |  |  |  |       | 
|and crediting:  |                                               |                      |  |        |      |  |  |        |  |  |  |       
|                | Interest income                               |                      |  | 1,311  |      |  |  | 700    |  |  |  | 923    | 
|                | Unrealized gain on foreign exchange           |                      |  |       |      |  |  | 8      |  |  |  | 9      | 
|                | Realized gain on foreign exchange             |                      |  | 333    |      |  |  | 162    |  |  |  |       | 
|                | Reversal of allowance for doubtful debts      |                      |  | 797    |      |  |  |       |  |  |  |       | 
|                |                                               |                      |  |        |      |  |  |        | 






| |   |                                                                        
| | - | -----------------------------------------------------------------------
| | * | The following are included in research and development
    expenditure:

|                                              |  |                      |       |  |      |  |       |      |  |  |       | 
|--------------------------------------------- |  | -------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                              |  | 2005                 |       |  | 2004 |  |       | 2003 | 
|                                              |  |                      |       |  |      |  |       |      | 
|                                              |  | (Ringgit Malaysia in |      
|                                              |  | thousands)           |      
|Directors emoluments                         |  |                      | 395   |  |      |  | 420   |      |  |  | 478   | 
|Depreciation (Note 3)                         |  |                      | 3,013 |  |      |  | 3,496 |      |  |  | 4,968 | 
|Rental of building                            |  |                      |      |  |      |  |      |      |  |  | 17    | 
|Rental of equipment                           |  |                      |      |  |      |  |      |      |  |  | 38    | 
|Staff costs (excluding directors emoluments) |  |                      | 2,260 |  |      |  | 2,226 |      |  |  | 2,036 | 
|                                              |  |                      |       |  |      |  |       |      | 





47



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)






|     |            
|---- | -----------
|(13) | Tax expense

|                                |  |                                 |       |   |      |  |     |      |  |  |      |  
|------------------------------- |  | ------------------------------- | ----- | - | ---- |  | --- | ---- |  |  | ---- | -
|                                |  | 2005                            |       |   | 2004 |  |     | 2003 | 
|                                |  |                                 |       |   |      |  |     |      | 
|                                |  | (Ringgit Malaysia in thousands) |      
|Current tax expense             |  |                                 |       |   |      |  |     |      |  |  |      |  
|- Based on results for the year |  |                                 | 2,372 |   |      |  | 196 |      |  |  | 245  |  
|- Prior years                   |  |                                 | (395  | ) |      |  |    |      |  |  |     |  
|                                |  |                                 |       |   |      |  |     |      | 
|                                |  |                                 | 1,977 |   |      |  | 196 |      |  |  | 245  |  
|Deferred tax expense            |  |                                 |       |   |      |  |     |      |  |  |      |  
|- Prior year                    |  |                                 |      |   |      |  |    |      |  |  | (110 | )
|                                |  |                                 |       |   |      |  |     |      | 
|                                |  |                                 | 1,977 |   |      |  | 196 |      |  |  | 135  |  
|                                |  |                                 |       |   |      |  |     |      | 



| |                                        
| | ---------------------------------------
| | Reconciliation of effective tax expense

|                                                         |  |                                 |         |   |      |  |         |      |  |  |         |  
|-------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                                                         |  | 2005                            |         |   | 2004 |  |         | 2003 | 
|                                                         |  |                                 |         |   |      |  |         |      | 
|                                                         |  | (Ringgit Malaysia in thousands) |        
|Profit before tax                                        |  |                                 | 49,826  |   |      |  | 46,398  |      |  |  | 43,505  |  
|                                                         |  |                                 |         |   |      |  |         |      | 
|Income tax using Malaysian tax rate                      |  |                                 | 13,951  |   |      |  | 12,992  |      |  |  | 12,181  |  
|Non-deductible expenses                                  |  |                                 | 316     |   |      |  | 1,259   |      |  |  | 383     |  
|Deferred tax benefits not recognized due to tax holidays |  |                                 | 826     |   |      |  | 2,754   |      |  |  | 1,957   |  
|Tax incentives                                           |  |                                 | (12,740 | ) |      |  | (16,836 | )    |  |  | (14,263 | )
|Others                                                   |  |                                 | 19      |   |      |  | 27      |      |  |  | (13     | )
|                                                         |  |                                 |         |   |      |  |         |      | 
|                                                         |  |                                 | 2,372   |   |      |  | 196     |      |  |  | 245     |  
|Over provision in prior years                            |  |                                 | (395    | ) |      |  |        |      |  |  | (110    | )
|                                                         |  |                                 |         |   |      |  |         |      | 
|                                                         |  |                                 | 1,977   |   |      |  | 196     |      |  |  | 135     |  
|                                                         |  |                                 |         |   |      |  |         |      | 







48



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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|     |          
|---- | ---------
|(14) | Dividends

|                                                 |  |                                 |       |  |      |  |        |      |  |  |   | 
|------------------------------------------------ |  | ------------------------------- | ----- |  | ---- |  | ------ | ---- |  |  | - | 
|                                                 |  | 2005                            |       |  | 2004 |  |        | 2003 | 
|                                                 |  |                                 |       |  |      |  |        |      | 
|                                                 |  | (Ringgit Malaysia in thousands) |      
|Interim dividends on ordinary shares             |  |                                 |       |  |      |  |        |      |  |  |   | 
|- 48.90% tax exempt (2004: 24163.76% tax exempt) |  |                                 | 5,697 |  |      |  | 60,409 |      |  |  |  | 
|- Nil (2004: 163.06% tax exempt)                 |  |                                 |      |  |      |  | 18,998 |      |  |  |  | 
|                                                 |  |                                 |       |  |      |  |        |      | 
|                                                 |  |                                 | 5,697 |  |      |  | 79,407 |      |  |  |  | 
|                                                 |  |                                 |       |  |      |  |        |      | 



|     |             
|---- | ------------
|(15) | Deferred tax



|                                       |                      |                                 |        |       |      |  |        |       |  |  |       |       | 
|-------------------------------------- | -------------------- | ------------------------------- | ------ | ----- | ---- |  | ------ | ----- |  |  | ----- | ----- | 
|                                       |                      | 2005                            |        |       | 2004 |  |        | 2003  | 
|                                       |                      |                                 |        |       |      |  |        |       | 
|                                       |                      | (Ringgit Malaysia in thousands) |       
|Property, plant and equipment          |                      |                                 |        |       |      |  |        |       |  |  |       |      
|                                       | - capital allowances |                                 |        | 6,136 |      |  |        | 6,412 |  |  |       | 3,947 | 
|Other deductible temporary differences |                      |                                 | 14,141 |       |      |  | 10,914 |       |  |  | 4,297 |      
|                                       |                      |                                 |        |       |      |  |        |       | 
|                                       |                      |                                 | 20,277 |       |      |  | 17,326 |       |  |  | 8,244 |      
|                                       |                      |                                 |        |       |      |  |        |       | 







|     |                                       
|---- | --------------------------------------
|(16) | Significant inter-company transactions

|                              |                                              |                                    |  |   |      |  |  |          |  |  |  |         |  | 
|----------------------------- | -------------------------------------------- | ---------------------------------- |  | - | ---- |  |  | -------- |  |  |  | ------- |  | 
|                              |                                              | 2005                               |  |   | 2004 |  |  | 2003     | 
|                              |                                              |                                    |  |   |      |  |  |          | 
|                              |                                              | (Ringgit Malaysia in thousands)    | 
|Ultimate holding corporation  |                                              |                                    |  |   |      |  |  |          |  |  |  |        
|                              |                                              | - Solectron Corporation            |  |   |      |  |  |          |  |  |  |         |  | 
|                              | Purchases                                    |                                    |  |  |      |  |  | *202     |  |  |  |        | 
|                              |                                              |                                    |  |   |      |  |  |          | 
|Immediate Holding Corporation |                                              |                                    |  |   |      |  |  |          |  |  |  |        
|                              |                                              | - SMART Modular Technologies, Inc. |  |   |      |  |  |          |  |  |  |         |  | 
|                              | Sales                                        |                                    |  |  |      |  |  | *80,197  |  |  |  | 95,964  | 
|                              | Purchases                                    |                                    |  |  |      |  |  | *144,614 |  |  |  | 94,211  | 
|                              | Purchase of plant and equipment              |                                    |  |  |      |  |  | *       |  |  |  | 1,475   | 
|                              | Allocation of research and development costs |                                    |  |  |      |  |  | *5,829   |  |  |  | 8,337   | 
|                              | Allocation of management and other expenses  |                                    |  |  |      |  |  | *6,274   |  |  |  | 12,092  | 
|                              |                                              |                                    |  |   |      |  |  |          | 
|Related corporations          |                                              |                                    |  |   |      |  |  |          |  |  |  |        
|                              | Sales                                        |                                    |  |  |      |  |  | *143,130 |  |  |  | 149,881 | 
|                              | Purchases                                    |                                    |  |  |      |  |  | *17,015  |  |  |  | 54,484  | 
|                              | Purchase of plant and equipment              |                                    |  |  |      |  |  | *639     |  |  |  | 1,721   | 
|                              |                                              |                                    |  |   |      |  |  |          | 

49



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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)


|                                             |  |                                 |         |  |      |  |         |      |  |  |   | 
|-------------------------------------------- |  | ------------------------------- | ------- |  | ---- |  | ------- | ---- |  |  | - | 
|                                             |  | 2005                            |         |  | 2004 |  |         | 2003 | 
|                                             |  |                                 |         |  |      |  |         |      | 
|                                             |  | (Ringgit Malaysia in thousands) |        
|Related corporations                         |  |                                 |         |  |      |  |         |      |  |  |   | 
|Sales                                        |  |                                 | 51,002  |  |      |  | #44,318 |      |  |  |  | 
|Purchases                                    |  |                                 | 198,391 |  |      |  | #82,442 |      |  |  |  | 
|Purchase of plant and equipment              |  |                                 |        |  |      |  | #19     |      |  |  |  | 
|Allocation of research and development costs |  |                                 | 3,986   |  |      |  | #3,910  |      |  |  |  | 
|Allocation of management and other expenses  |  |                                 | 12,670  |  |      |  | #3,735  |      |  |  |  | 
|                                             |  |                                 |         |  |      |  |         |      | 






| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| | * | transactions prior to the divestment by Solectron Corporation
    on April 16, 2004



| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| | # | transactions subsequent to the divestment by Solectron
    Corporation on April 16, 2004





|     |                    
|---- | -------------------
|(17) | Capital commitments

|                              |                                                               |             |  |       |      |  |  |   | 
|----------------------------- | ------------------------------------------------------------- | ----------- |  | ----- | ---- |  |  | - | 
|                              |                                                               | 2005        |  |       | 2004 | 
|                              |                                                               |             |  |       |      | 
|                              |                                                               | (Ringgit    | 
|                              |                                                               | Malaysia in | 
|                              |                                                               | thousands)  | 
|Property, plant and equipment |                                                               |             |  |       |      |  |  |  
|                              | - Contracted but not provided for in the financial statements |             |  | 1,409 |      |  |  |  | 
|                              |                                                               |             |  |       |      | 



|     |                     
|---- | --------------------
|(18) | Contingent liability





|     |                      
|---- | ---------------------
|(19) | Financial instruments



| |                                                  
| | -------------------------------------------------
| | Financial risk management objectives and policies





| |            
| | -----------
| | Credit risk







50



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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




| |                      
| | ---------------------
| | Foreign currency risk





| |                                                
| | -----------------------------------------------
| | Effective interest rates and repricing analysis



|                                        |  |           |      |                      |       |  |        |        |  |       |        |  |  |  |   | 
|--------------------------------------- |  | --------- | ---- | -------------------- | ----- |  | ------ | ------ |  | ----- | ------ |  |  |  | - | 
|                                        |  | Effective |      |                      |       |  |        |        | 
|                                        |  | interest  |      |                      |       |  |        |        | 
|                                        |  | rate per  |      |                      |       |  | Within |        |  | 1 - 5 |       
|                                        |  | annum     |      |                      | Total |  |        | 1 year |  |       | years  | 
|                                        |  |           |      |                      |       |  |        |        |  |       |        | 
|                                        |  | %         |      |                      |      
|                                        |  |           |      | (Ringgit Malaysia in |      
|                                        |  |           |      | thousands)           |      
|2005                                    |  |           |      |                      |       |  |        |        |  |       |        |  |  |  |   | 
|Financial asset                         |  |           |      |                      |       |  |        |        |  |       |        |  |  |  |   | 
|Short term deposits with licensed banks |  |           | 2.93 |                      |       |  | 69,179 |        |  |       | 69,179 |  |  |  |  | 
|2004                                    |  |           |      |                      |       |  |        |        |  |       |        |  |  |  |   | 
|Financial asset                         |  |           |      |                      |       |  |        |        |  |       |        |  |  |  |   | 
|Short term deposits with licensed banks |  |           | 2.00 |                      |       |  | 53,886 |        |  |       | 53,886 |  |  |  |  | 



| |            
| | -----------
| | Fair values



| |                                 
| | --------------------------------
| | Recognized financial instruments





|                                                    |  |                                 |    |  |       |  |   |          |  |  |       |  |  |  |   | 
|--------------------------------------------------- |  | ------------------------------- | -- |  | ----- |  | - | -------- |  |  | ----- |  |  |  | - | 
|                                                    |  | 2005                            |    |  | 2004  | 
|                                                    |  |                                 |    |  |       | 
|                                                    |  | Carrying                        |    |  | Fair  |  |   | Carrying |  |  | Fair  | 
|                                                    |  | amount                          |    |  | value |  |   | amount   |  |  | value | 
|                                                    |  |                                 |    |  |       |  |   |          |  |  |       | 
|                                                    |  | (Ringgit Malaysia in thousands) |   
|Non-cumulative redeemable preference shares (NCRPS) |  |                                 | 50 |  |       |  | # |          |  |  | 50    |  |  |  | # | 
|                                                    |  |                                 |    |  |       |  |   |          |  |  |       | 






|  |                                                                                                                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|# | It was not practicable to estimate the fair value of the
    financial liability without incurring excessive time and costs.
    The financial liability is carried at its original cost as
    stated in the balance sheet and the principal terms of the NCRPS
    are disclosed in Note 10 to the financial statements.





|     |                                                       
|---- | ------------------------------------------------------
|(20) | United States generally accepted accounting principles



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SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | (a) Reconciliation of net income



|                                                                                                                                                            |  |  |    |                      |  |  |        |   |  |      |        |   |  |  |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | -------------------- |  |  | ------ | - |  | ---- | ------ | - |  |  | ------ | 
|                                                                                                                                                            |  |  |    | 2005                 |  |  | 2004   |   |  | 2003 |       
|                                                                                                                                                            |  |  |    |                      |  |  |        |   |  |      |       
|                                                                                                                                                            |  |  |    | (Ringgit Malaysia in | 
|                                                                                                                                                            |  |  |    | thousands)           | 
|Net profit after tax as reported under Malaysian GAAP                                                                                                       |  |  |    |                      |  |  | 47,849 |   |  |      | 46,202 |   |  |  | 43,370 | 
|Adjustment to cost of sales arising from the sale of inventories
    previously written up due to acquisition fair market value
    adjustment              |  |  | (i | )                    |  |  |       |   |  |      | (908   | ) |  |  |       | 
|Adjustment to cost of sales for depreciation of property, plant
    and equipment previously written up due to acquisition fair
    market value adjustment |  |  | (i | )                    |  |  | (594   | ) |  |      | (198   | ) |  |  |       | 
|Adjustment to cost of sales for amortization of intangible
    assets previously written up due to acquisition fair market
    value adjustment             |  |  | (i | )                    |  |  | (765   | ) |  |      | (255   | ) |  |  |       | 
|Adjustment to distribution cost for amortization of intangible
    assets previously written up due to acquisition fair market
    value adjustment         |  |  | (i | )                    |  |  | (2,508 | ) |  |      | (836   | ) |  |  |       | 
|                                                                                                                                                            |  |  |    |                      |  |  |        |   |  |      |        |  
|Net profit after tax as reported under U.S. GAAP                                                                                                            |  |  |    |                      |  |  | 43,982 |   |  |      | 44,005 |   |  |  | 43,370 | 
|                                                                                                                                                            |  |  |    |                      |  |  |        |   |  |      |        |  



| |                                             
| | --------------------------------------------
| | i) Acquisition fair market value adjustments

Business Combinations






| |                            
| | ---------------------------
| | ii) Presentation of revenue





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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                                 |           |   |      |  |           |      |  |  |          |  
|-------------------------------------------- |  | ------------------------------- | --------- | - | ---- |  | --------- | ---- |  |  | -------- | -
|                                             |  | 2005                            |           |   | 2004 |  |           | 2003 | 
|                                             |  |                                 |           |   |      |  |           |      | 
|                                             |  | (Ringgit Malaysia in thousands) |          
|Net revenue as reported under Malaysian GAAP |  |                                 | 1,501,905 |   |      |  | 1,351,560 |      |  |  | 696,673  |  
|Cost of sale to be netted against revenue    |  |                                 | (915,269  | ) |      |  | (613,423  | )    |  |  | (181,955 | )
|                                             |  |                                 |           |   |      |  |           |      | 
|Net revenue as reported under U.S. GAAP      |  |                                 | 586,636   |   |      |  | 738,137   |      |  |  | 514,718  |  
|                                             |  |                                 |           |   |      |  |           |      | 



| |                                               
| | ----------------------------------------------
| | (b) Reconciliation of Shareholders
    Equity



|                                                                                                                                                |  |                                 |         |   |      |  |         |      |  |  |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | 
|                                                                                                                                                |  | 2005                            |         |   | 2004 |  |         | 2003 | 
|                                                                                                                                                |  |                                 |         |   |      |  |         |      | 
|                                                                                                                                                |  | (Ringgit Malaysia in thousands) |        
|Shareholders equity as reported under Malaysian GAAP                                                                                           |  |                                 | 170,884 |   |      |  | 128,732 |      |  |  | 150,537 | 
|Adjustment to record the revaluation surplus arising from the
    fair market value adjustment                                                  |  |                                 | 17,534  |   |      |  | 17,534  |      |  |  |        | 
|Adjustment for cost of sales arising from the sale of
    inventories previously written up due to acquisition fair market
    value adjustment |  |                                 | (908    | ) |      |  | (908    | )    |  |  |        | 
|Adjustment for depreciation for property, plant and equipment
    previously written up due to acquisition fair market value
    adjustment     |  |                                 | (792    | ) |      |  | (198    | )    |  |  |        | 
|Adjustment for amortization of intangible assets arising from
    acquisition fair market value adjustment                                      |  |                                 | (4,364  | ) |      |  | (1,091  | )    |  |  |        | 
|                                                                                                                                                |  |                                 |         |   |      |  |         |      | 
|Shareholders equity as reported under U.S. GAAP                                                                                                |  |                                 | 182,354 |   |      |  | 144,069 |      |  |  | 150,537 | 
|                                                                                                                                                |  |                                 |         |   |      |  |         |      | 



| |                                               
| | ----------------------------------------------
| | i) Non-cumulative redeemable preference shares

Financial instruments:
Disclosure and Presentation




| |                  
| | -----------------
| | (c) Balance sheet

|                                                                                                             |  |     |  |                      |         |  |      |  |         | 
|------------------------------------------------------------------------------------------------------------ |  | --- |  | -------------------- | ------- |  | ---- |  | ------- | 
|                                                                                                             |  |     |  | 2005                 |         |  | 2004 | 
|                                                                                                             |  |     |  |                      |         |  |      | 
|                                                                                                             |  |     |  | (Ringgit Malaysia in |        
|                                                                                                             |  |     |  | thousands)           |        
|Total assets as reported under Malaysian GAAP                                                                |  |     |  |                      | 389,920 |  |      |  | 332,827 | 
|Adjustment to record property, plant and equipment at fair
    market value, net of accumulated depreciation |  | (i) |  |                      | 987     |  |      |  | 1,581   | 
|Adjustment to record intangible assets at fair market value, net
    of accumulated amortization             |  | (i) |  |                      | 10,483  |  |      |  | 13,756  | 
|                                                                                                             |  |     |  |                      |         |  |      | 
|Total assets as reported under U.S. GAAP                                                                     |  |     |  |                      | 401,390 |  |      |  | 348,164 | 
|                                                                                                             |  |     |  |                      |         |  |      | 



| |                                             
| | --------------------------------------------
| | i) Acquisition fair market value adjustments



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##### Table of Contents



SMART MODULAR TECHNOLOGIES SDN. BHD.


(COMPANY NO.
458945-M)


NOTES TO THE FINANCIAL
STATEMENTS  (Continued)






| |                               
| | ------------------------------
| | (ii) Cash and cash equivalents





| |                            
| | ---------------------------
| | (d) Statement of cash flows





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##### Table of Contents



CONSOLIDATED AND COMBINED FINANCIAL STATEMENT SCHEDULE


SMART MODULAR TECHNOLOGIES (WWH), INC. AND SUBSIDIARIES


SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                                                    |                                                               |                        |   |           |            |  |   |              |  |            |               |        |   |  |   |       | 
|--------------------------------------------------- | ------------------------------------------------------------- | ---------------------- | - | --------- | ---------- |  | - | ------------ |  | ---------- | ------------- | ------ | - |  | - | ----- | 
|                                                    |                                                               |                        |   | Additions |            |  |  
|                                                    |                                                               | Balance at             |   |           |            |  |   |             
|                                                    |                                                               | Beginning of           |   |           | Charged to |  |   |              |  | Balance at |              
|Description                                         |                                                               | Period                 |   |           | Operations |  |   | (Deductions) |  |            | End of Period |       
|                                                    |                                                               |                        |   |           |            |  |   |              |  |            |               |       
|                                                    |                                                               | (Dollars in thousands) |  
|Year ended August 31, 2005 (Successor Business):    |                                                               |                        |   |           |            |  |   |              |  |            |               |        |   |  |   |      
|                                                    | Allowance for doubtful accounts receivable and credit returns |                        | $ | 3,267     |            |  | $ | 471          |  |            | $             | (1,109 | ) |  | $ | 2,629 | 
|Period ended August 31, 2004 (Successor Business):  |                                                               |                        |   |           |            |  |   |              |  |            |               |        |   |  |   |      
|                                                    | Allowance for doubtful accounts receivable and credit returns |                        | $ | 3,547     |            |  | $ | 501          |  |            | $             | (781   | ) |  | $ | 3,267 | 
|Period ended April 16, 2004 (Predecessor Business): |                                                               |                        |   |           |            |  |   |              |  |            |               |        |   |  |   |      
|                                                    | Allowance for doubtful accounts receivable and credit returns |                        | $ | 2,371     |            |  | $ | 1,524        |  |            | $             | (348   | ) |  | $ | 3,547 | 
|Year ended August 31, 2003 (Predecessor Business):  |                                                               |                        |   |           |            |  |   |              |  |            |               |        |   |  |   |      
|                                                    | Allowance for doubtful accounts receivable and credit returns |                        | $ | 1,164     |            |  | $ | 1,374        |  |            | $             | (167   | ) |  | $ | 2,371 | 

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##### Table of Contents






SIGNATURES






| |                                       
| | --------------------------------------
| | SMART MODULAR TECHNOLOGIES (WWH), INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ Iain MacKenzie

| |                                               
| | ----------------------------------------------
| |                                               
| | Name: Iain MacKenzie                          
| | Title:   Chief Executive Officer and President





|                                                                                        |  |                                                 |  |      |                   |  |  | 
|--------------------------------------------------------------------------------------- |  | ----------------------------------------------- |  | ---- | ----------------- |  |  | 
|Signature                                                                               |  | Title                                           |  | Date |                  
|                                                                                        |  |                                                 |  |      |                  
|                                                                                       
|/s/ Iain MacKenzieIain
    MacKenzie
    (Principal Executive Officer)                  |  | Chief Executive Officer, President and Director |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Jack A. PachecoJack
    A. Pacheco
    (Principal Financial and Accounting Officer) |  | Vice President and Chief Financial Officer      |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Ajay ShahAjay
    Shah                                                              |  | Chairman of the Board of Directors              |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Eugene FrantzEugene
    Frantz                                                      |  | Secretary and Director                          |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Dipanjan DebDipanjan
    Deb                                                        |  | Director                                        |  |      | December 23, 2005 | 
|                                                                                       
|/s/ John MarrenJohn
    Marren                                                          |  | Director                                        |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Chong Sup ParkChong
    Sup Park                                                    |  | Director                                        |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Mukesh PatelMukesh
    Patel                                                        |  | Director                                        |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Ezra PerlmanEzra
    Perlman                                                        |  | Director                                        |  |      | December 23, 2005 | 
|                                                                                       
|/s/ Clifton Thomas
    WeatherfordClifton
    Thomas Weatherford                        |  | Director                                        |  |      | December 23, 2005 | 

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##### Table of Contents



Exhibit Index


|        |    |               |  |                                                                                                                                                                                                  
|------- | -- | ------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |              
|No.     |    | Exhibit Title
|        |    |              
|        | 31 | .1            |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002
|       
|        | 31 | .2            |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002
|       
|        | 32 |               |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002            

57