Exhibit 99.1

ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        FINANCIAL STATEMENTS        WITH        REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM        AS OF DECEMBER 31,
2006  AND  FOR THE YEAR THEN ENDED

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders
Advanced Chip Engineering Technology Inc.

We
have audited the accompanying balance sheet of Advanced Chip Engineering Technology Inc. (the "Company") as of December 31, 2006, and the related statements of income,
changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Chip Engineering Technology Inc., as of
December 31, 2006, and the results of its operations and its cash flows for the year then ended, in conformity with the "Business Entity Accounting Law" and accounting principles generally
accepted in the Republic of China.

As
more fully described in Note 10, the Company restated its financial statements.

The
"Business Entity Accounting Law" and accounting principles generally accepted in the Republic of China vary in certain significant respects from accounting principles generally
accepted in the United States. A narrative discussion of the significant differences is presented in Note 11 to the financial statements.

Ernst &
Young
CERTIFIED PUBLIC ACCOUNTANTS
Taipei, Taiwan
Republic of China
January 4, 2008

2

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ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        BALANCE SHEETS

|                              |                                       |                         |                                    | As of December 31, |             
|----------------------------- | ------------------------------------- | ----------------------- | ---------------------------------- | ------------------ | ------------
|
|
|Current assets                |                                       |                         |                                    |                    |             
|                              | Cash and cash equivalents             |                         | 2,4.(1)                            |                    | 537,221,671 
|                              | Notes receivable (Net)                |                         | 2,4.(2)                            |                    | 152,250     
|                              | Accounts receivable (Net)             |                         | 2,4.(3)                            |                    | 3,661,296   
|                              | Other receivablesfinancing to others |                         | 4.(19)                             |                    |            
|                              | Other financial assets                |                         | 2,4.(4),5                          |                    | 7,515,259   
|                              | Inventories (Net)                     |                         | 2,4.(5)                            |                    | 15,225,905  
|                              | Restricted depositscurrent           |                         | 6                                  |                    | 3,669,688   
|                              | Other current assets                  |                         |                                    |                    | 18,658,661  
|                              |                                       |                         |                                    |                    |             
|                              |                                       | Total current assets    |                                    |                    |             
|                              |                                       |                         |                                    |                    |             
|Property, plant and equipment |                                       | 2,3,4.(6),              |                                    |                    |             
|                              | Land                                  |                         | 4.(18),6,10                        |                    | 116,668,319 
|                              | Buildings and facilities              |                         |                                    |                    | 358,808,026 
|                              | Machinery and equipment               |                         |                                    |                    | 628,929,591 
|                              | Transportation equipment              |                         |                                    |                    | 960,567     
|                              | Office furniture                      |                         |                                    |                    | 16,058,807  
|                              | Other equipment                       |                         |                                    |                    | 2,826,799   
|                              |                                       |                         |                                    |                    |             
|                              |                                       | Total cost              |                                    |                    |             
|                              | Less: Accumulated depreciation        |                         |                                    |                    | (410,572,762
|                              | Less: Accumulated impairment          |                         |                                    |                    | (24,946,734 
|                              | Plus: Prepayment for equipment        |                         |                                    |                    | 24,145,853  
|                              |                                       |                         |                                    |                    |             
|                              |                                       |                         | Property, plant and equipment, net |                    |             
|                              |                                       |                         |                                    |                    |             
|Intangible assets             |                                       | 2                       |                                    |                    |             
|                              | Trademarks                            |                         |                                    |                    | 70,035      
|                              | Patents                               |                         |                                    |                    | 2,386,869   
|                              | Computer Software                     |                         |                                    |                    | 4,035,639   
|                              | Technology know-how                   |                         |                                    |                    | 2,167,019   
|                              |                                       |                         |                                    |                    |             
|                              |                                       | Total intangible assets |                                    |                    |             
|                              |                                       |                         |                                    |                    |             
|Other assets                  |                                       |                         |                                    |                    |             
|                              | Leased assets                         |                         | 2,4.(7),6                          |                    | 72,065,369  
|                              | Refundable deposits                   |                         |                                    |                    | 198,000     
|                              | Deferred assets                       |                         | 2                                  |                    | 1,066,852   
|                              |                                       |                         |                                    |                    |             
|                              |                                       | Total other assets      |                                    |                    |             
|                              |                                       |                         |                                    |                    |             
|Total Assets                  |                                       |                         |                                    | 1,380,972,979      |             
|                              |                                       |                         |                                    |                    |             

The
accompanying notes are an integral part of the financial statements.

3

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ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        BALANCE SHEETS (Continued)

|                                           |                                                |                            |           | As of December 31, |            
|------------------------------------------ | ---------------------------------------------- | -------------------------- | --------- | ------------------ | -----------
|
|
|Current liabilities                        |                                                |                            |           |                    |            
|                                           | Short-term loans                               |                            | 4.(8),6,7 |                    |           
|                                           | Accounts payable                               |                            |           |                    | 8,919,218  
|                                           | Payables on equipment                          |                            |           |                    | 33,577,801 
|                                           | Current portion of long-term loans             |                            | 4.(9),6,7 |                    | 81,771,745 
|                                           | Accrued expenses and other current liabilities |                            | 5         |                    | 70,132,455 
|                                           |                                                |                            |           |                    |            
|                                           |                                                | Total current liabilities  |           |                    |            
|                                           |                                                |                            |           |                    |            
|Long-term Liabilities                      |                                                |                            |           |                    |            
|                                           | Long-term loans                                |                            | 4.(9),6,7 |                    | 278,219,988
|                                           |                                                |                            |           |                    |            
|Other Liabilities                          |                                                |                            |           |                    |            
|                                           | Deposits received                              |                            |           |                    | 2,022,381  
|                                           |                                                |                            |           |                    |            
|Total Liabilities                          |                                                |                            |           | 474,643,588        |            
|                                           |                                                |                            |           |                    |            
|Stockholders' Equity                       |                                                |                            |           |                    |            
|                                           | Capital                                        |                            | 4.(10)    |                    |            
|                                           |                                                | Common stock               |           |                    |            
|                                           | Capital surplus                                |                            | 4.(11)    |                    |            
|                                           |                                                | Additional Paid-in capital |           |                    |            
|                                           | Retained earnings                              |                            |           |                    |            
|                                           |                                                | Accumulated deficits       |           | 4.(12),10          |            
|                                           | Treasury stock                                 |                            | 2,4.(13)  |                    | (6,795,053 
|                                           |                                                |                            |           |                    |            
|Total Stockholders' Equity                 |                                                |                            |           | 906,329,391        |            
|                                           |                                                |                            |           |                    |            
|Total Liabilities and Stockholders' Equity |                                                |                            |           | 1,380,972,979      |            
|                                           |                                                |                            |           |                    |            

The
accompanying notes are an integral part of the financial statements.

4

---





ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        STATEMENTS OF INCOME

|                         |                                                               |                              |                | For the years ended December 31, |            
|------------------------ | ------------------------------------------------------------- | ---------------------------- | -------------- | -------------------------------- | -----------
|
|
|Operating Revenues       |                                                               |                              |                |                                  |            
|                         | Net operating revenues                                        |                              | 2,4.(14),5     |                                  | 17,545,967 
|Cost of goods sold       |                                                               | 4.(15),5                     |                | (249,820,129                     | )          
|                         |                                                               |                              |                |                                  |            
|Gross Loss               |                                                               |                              |                | (232,274,162                     | )          
|                         |                                                               |                              |                |                                  |            
|Operating Expenses       |                                                               | 4.(15),5                     |                |                                  |            
|                         | Selling expenses                                              |                              |                |                                  | (2,475,027 
|                         | Administrative expenses                                       |                              |                |                                  | (43,993,027
|                         | Research and development expenses                             |                              |                |                                  | (86,224,683
|                         |                                                               |                              |                |                                  |            
|                         |                                                               | Total operating expenses     |                |                                  |            
|                         |                                                               |                              |                |                                  |            
|Operating Loss           |                                                               |                              |                | (364,966,899                     | )          
|                         |                                                               |                              |                |                                  |            
|Non-operating Income     |                                                               |                              |                |                                  |            
|                         | Interest revenue                                              |                              | 4.(19)         |                                  | 4,132,881  
|                         | Gain on disposal of investments                               |                              | 2              |                                  | 5,201      
|                         | Gain on physical inventory                                    |                              |                |                                  |           
|                         | Foreign exchange gain                                         |                              | 2              |                                  | 505,833    
|                         | Rent revenue                                                  |                              | 5              |                                  | 31,705,360 
|                         | Gain on recovery of market value of inventories               |                              | 2,4.(5)        |                                  |           
|                         | Other incomes                                                 |                              |                |                                  | 31,445,823 
|                         |                                                               |                              |                |                                  |            
|                         |                                                               | Total non-operating income   |                |                                  |            
|                         |                                                               |                              |                |                                  |            
|Non-operating Expenses   |                                                               |                              |                |                                  |            
|                         | Interest expense                                              |                              |                |                                  | (12,167,954
|                         | Loss on disposal of property, plant and equipment             |                              | 2              |                                  | (20,775    
|                         | Loss on decline in market value and obsolescence of inventory |                              | 2,4.(5)        |                                  | (59,233    
|                         | Asset impairment                                              |                              | 2,3,4.(18),10  |                                  | (1,827,734 
|                         | Other losses                                                  |                              | 2,4.(7),4.(15) |                                  | (22,747,948
|                         |                                                               |                              |                |                                  |            
|                         |                                                               | Total non-operating expenses |                |                                  |            
|                         |                                                               |                              |                |                                  |            
|Loss Before Income Taxes |                                                               |                              |                | (333,995,445                     | )          
|Income Tax Expense       |                                                               | 2,4.(17)                     |                |                                 |            
|                         |                                                               |                              |                |                                  |            
|Net Loss                 |                                                               |                              |                | (333,995,445                     | )          
|                         |                                                               |                              |                |                                  |            

The
accompanying notes are an integral part of the financial statements.

5

---





ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

|                                                                 |  | Common Stock  |   | Additional Paid-
in Capital |   | Accumulated
Deficits |   | Treasury Stock |   | Total         |  
|---------------------------------------------------------------- |  | ------------- | - | --------------------------- | - | -------------------- | - | -------------- | - | ------------- | -
|
|Balance as of January 1, 2004 (Unaudited)                        |  | 1,200,000,000 |   | 20,000,000                  |   | (883,410,576         | ) |               |   | 336,589,424   |  
|Capital surplus transferred to offset accumulated deficits       |  |              |   | (20,000,000                 | ) | 20,000,000           |   |               |   |              |  
|Common stock transferred to offset accumulated deficits          |  | (863,410,570  | ) |                            |   | 863,410,570          |   |               |   |              |  
|Issue of common stock                                            |  | 833,333,330   |   | 166,666,666                 |   |                     |   |               |   | 999,999,996   |  
|Treasury stock repurchased                                       |  |              |   |                            |   |                     |   | (12,341,604    | ) | (12,341,604   | )
|Net loss for the year ended December 31, 2004                    |  |              |   |                            |   | (305,605,029         | ) |               |   | (305,605,029  | )
|                                                                 |  |               |   |                             |   |                      |   |                |   |               |  
|Balance as of December 31, 2004 (Unaudited)                      |  | 1,169,922,760 |   | 166,666,666                 |   | (305,605,035         | ) | (12,341,604    | ) | 1,018,642,787 |  
|Net loss for the year ended December 31, 2005                    |  |              |   |                            |   | (378,317,951         | ) |               |   | (378,317,951  | )
|                                                                 |  |               |   |                             |   |                      |   |                |   |               |  
|Balance as of December 31, 2005 (Unaudited) Restatedsee Note 10 |  | 1,169,922,760 |   | 166,666,666                 |   | (683,922,986         | ) | (12,341,604    | ) | 640,324,836   |  
|Capital surplus transferred to offset accumulated deficits       |  |              |   | (166,666,666                | ) | 166,666,666          |   |               |   |              |  
|Common stock transferred to offset accumulated deficits          |  | (525,785,630  | ) |                            |   | 520,239,079          |   | 5,546,551      |   |              |  
|Issue of common stock                                            |  | 600,000,000   |   |                            |   |                     |   |               |   | 600,000,000   |  
|Net loss for the year ended December 31, 2006                    |  |              |   |                            |   | (333,995,445         | ) |               |   | (333,995,445  | )
|                                                                 |  |               |   |                             |   |                      |   |                |   |               |  
|Balance as of December 31, 2006 Restatedsee Note 10             |  | 1,244,137,130 |   |                            |   | (331,012,686         | ) | (6,795,053     | ) | 906,329,391   |  
|                                                                 |  |               |   |                             |   |                      |   |                |   |               |  

The
accompanying notes are an integral part of the financial statements.

6

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ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        STATEMENTS OF CASH FLOWS

|                                                                           |                                                                                   | For the years ended December 31,      |            
|-------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | -----------
|
|
|Cash flows from operating activities:                                      |                                                                                   |                                       |            
|Net loss                                                                   |                                                                                   | (333,995,445                          | )          
|Adjustments to reconcile net loss to net cash used in operating activities |                                                                                   |                                       |            
|                                                                           | Depreciation                                                                      |                                       | 118,446,344
|                                                                           | Amortization                                                                      |                                       | 10,408,402 
|                                                                           | Bad debt expenses                                                                 |                                       |           
|                                                                           | Loss (gain) on decline (recovery) in market value and obsolescence of inventories |                                       | 59,233     
|                                                                           | Increase in allowance for sale discounts                                          |                                       | 3,387,226  
|                                                                           | Loss on disposal of property, plant and equipment                                 |                                       | 20,775     
|                                                                           | Asset impairment                                                                  |                                       | 1,827,734  
|                                                                           | Loss on disposal of deferred assets                                               |                                       |           
|                                                                           | Compensatory payment                                                              |                                       |           
|                                                                           | Decrease in other liabilities                                                     |                                       |           
|                                                                           | (Increase) Decrease in notes receivable                                           |                                       | (47,250    
|                                                                           | (Increase) Decrease in accounts receivable                                        |                                       | (5,132,499 
|                                                                           | (Increase) Decrease in receivables from related parties                           |                                       |           
|                                                                           | (Increase) Decrease in other financial assets                                     |                                       | (1,034,097 
|                                                                           | (Increase) Decrease in inventories                                                |                                       | (12,049,365
|                                                                           | Increase in other current assets                                                  |                                       | (7,737,679 
|                                                                           | Increase (Decrease) in accounts payable                                           |                                       | 4,533,661  
|                                                                           | Increase (Decrease) in payables to related parties                                |                                       |           
|                                                                           | Increase in accrued expenses and other current liabilities                        |                                       | 374,308    
|                                                                           |                                                                                   |                                       |            
|                                                                           |                                                                                   | Net cash used in operating activities |            
|                                                                           |                                                                                   |                                       |            
|Cash flows from investing activities:                                      |                                                                                   |                                       |            
|                                                                           | (Increase) Decrease in restricted deposits                                        |                                       | 33,002,312 
|                                                                           | (Increase) Decrease in other receivables- financing to others                     |                                       | 50,000,000 
|                                                                           | Acquisition of property, plant and equipment                                      |                                       | (87,529,574
|                                                                           | Proceeds from disposal of property, plant and equipment                           |                                       |           
|                                                                           | (Increase) decrease in refundable deposits                                        |                                       |            
|                                                                           | Increase in deferred assets                                                       |                                       | (992,000   
|                                                                           | Decrease in other liabilitiesother                                               |                                       |           
|                                                                           |                                                                                   |                                       |            
|                                                                           |                                                                                   | Net cash used in investing activities |            
|                                                                           |                                                                                   |                                       |            

7

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ADVANCED CHIP ENGINEERING TECHNOLOGY INC.        STATEMENTS OF CASH FLOWS (Continued)

|                                                                 |                                                                             | For the years ended December 31,                       |            
|---------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------ | -----------
|
|
|Cash flows from financing activities:                            |                                                                             |                                                        |            
|                                                                 | Decrease in short-term loans                                                |                                                        | (7,646,480 
|                                                                 | Decrease in long-term loans                                                 |                                                        | (5,770,146 
|                                                                 | Decrease in long-term lease payable                                         |                                                        |           
|                                                                 | Decrease in deposits received                                               |                                                        | (1,302,000 
|                                                                 | Issue of common stock                                                       |                                                        | 600,000,000
|                                                                 | Treasury stock repurchased                                                  |                                                        |           
|                                                                 |                                                                             |                                                        |            
|                                                                 |                                                                             | Net cash provided by (used in) financing activities    |            
|                                                                 |                                                                             |                                                        |            
|Increase (Decrease) in cash and cash equivalents                 |                                                                             | 358,823,460                                            |            
|Cash and cash equivalents, beginning of period                   |                                                                             | 178,398,211                                            |            
|                                                                 |                                                                             |                                                        |            
|Cash and cash equivalents, end of period                         |                                                                             | 537,221,671                                            |            
|                                                                 |                                                                             |                                                        |            
|Supplemental disclosures of cash flows information:              |                                                                             |                                                        |            
|                                                                 | Income tax paid during the period                                           |                                                        |           
|                                                                 |                                                                             |                                                        |            
|                                                                 | Interest paid during the period                                             |                                                        | 11,562,660 
|                                                                 |                                                                             |                                                        |            
|Investing and Financing activities partially affected cash flows |                                                                             |                                                        |            
|                                                                 |                                                                             | Acquisition of property, plant and equipment           |            
|                                                                 |                                                                             | (Increase) Decrease in payables to equipment suppliers |            
|                                                                 |                                                                             |                                                        |            
|                                                                 |                                                                             | Cash paid for acquiring property, plant and equipment  |            
|                                                                 |                                                                             |                                                        |            
|Investing and Financing activities not affected cash flows       |                                                                             |                                                        |            
|                                                                 | Current portion of long-term loans                                          |                                                        | 81,771,745 
|                                                                 |                                                                             |                                                        |            
|                                                                 | Common stock and capital surplus transferred to offset accumulated deficits |                                                        | 686,905,745
|                                                                 |                                                                             |                                                        |            

The
accompanying notes are an integral part of the financial statements.

8

---



1. History

ADVANCED CHIP ENGINEERING TECHNOLOGY INC. (the "Company") was incorporated under the Company Law of the Republic of China in May 2000. The Company's
major business activity is to engage in the business of testing and assembling service, manufacturing and selling integrated circuit. As of December 31, 2006 and 2005, the Company's employees
totaled 296 and 225, respectively.

2. Summary of Significant Accounting Policies

The Company's financial statements were prepared in accordance with the "Business Entity Accounting Law" and accounting principles generally accepted in the
Republic of China (R.O.C.). Those significant accounting policies are summarized as follows:







9

---





Buildings and facilities

50 yearsMachinery and equipment

5 to 10 yearsTransportation equipment

2 to 5 yearsOffice furniture

2 to 5 yearsOther equipment

3 to 5 yearsLeased assets

3 to 50 years








10

---











11

---







3. Reasons and Effect of Accounting Change

As discussed in Note 4. (18) to the financial statements, effective from January 1, 2005, the Company adopted R.O.C. SFAS No.35, "Accounting
for Asset Impairment." The financial statements of prior years should not be retroactively restated. As a result of the adoption, the Company's total assets was
reduced by NT$23,119,000 as of December 31, 2005 (restatedsee Note 10), and net loss increased by NT$23,119,000 in 2005 (restatedsee Note 10).

12

---



4. Contents of Significant Accounts



As of December 31,2006

2005NT$

NT$Cash on hand

57,140

43,682Checking and savings accounts

26,164,531

18,354,529Time deposits

511,000,000

160,000,000Total

537,221,671

178,398,211




As of December 31,2006

2005NT$

NT$Notes receivable

152,250

105,000Less: Allowance for doubtful accounts



Net

152,250

105,000




As of December 31,2006

2005NT$

NT$Accounts receivable

7,846,971

2,714,472Less: Allowance for doubtful accounts

(798,449
)
(798,449
)Allowance for sale discounts

(3,387,226
)
Net

3,661,296

1,916,023




As of December 31,2006

2005NT$

NT$Tax refund

753,518

736,034Interest receivable

309,949

159,886Other receivablesrelated parties(Note 5)

6,332,005

3,993,000Other receivablesother

119,787

1,592,242Net

7,515,259

6,481,162


13

---





As of December 31,2006

2005NT$

NT$Raw materials and supplies

13,973,681

5,790,368Work in process

943,247

956,533Finished goods

2,723,814

910,948Total

17,640,742

7,657,849Less: Allowance for inventory obsolescence

(2,414,837
)
(4,422,076
)Net

15,225,905

3,235,773






As of December 31,2006

2005NT$

NT$Land

19,515,081

31,621,785Buildings and facilities

44,347,211

78,011,818Machinery and equipment

133,658,940

126,363,107Office furniture

3,900

3,900Total

197,525,132

236,000,610Less: Accumulated depreciation

(125,459,763
)
(106,903,211
)Net

72,065,369

129,097,399




As of December 31,2006

2005NT$

NT$Letter of credit



7,646,480Interest rates



0.8635% - 3.03%




14

---





|                                                                                                                                   |     | As of December 31, | 
|---------------------------------------------------------------------------------------------------------------------------------- | --- | ------------------ | 
|
|
|
|
|Long-term loan from Taiwan Business Bank Payable in 90 monthly installments beginning January 2004 with interest due monthly       |     | 3.270              | 
|Long-term loan from Taiwan Business Bank Payable in 18 quarterly installments beginning July 2004 with interest due monthly        |     | 3.325              | 
|Long-term loan from Taiwan Business Bank Payable in 20 quarterly installments beginning July 2007 with interest due monthly        |     | 1.000              | 
|Long-term loan from Hsinchu International Bank Payable in 60 monthly installments beginning January 2005 with interest due monthly |     | 3.151              | 
|                                                                                                                                   |     |                    | 
|Total long-term loans                                                                                                              |     |                    | 
|Less: Current portion                                                                                                              |     |                    | 
|                                                                                                                                   |     |                    | 
|                                                                                                                                   | Net |                    | 
|                                                                                                                                   |     |                    | 

Please
refer to Note 6 for assets pledged for long-term loans.





15

---









As of December 31,2006

2005NT$

NT$Additional paid-in capital in excess of par-common stock



166,666,666




16

---





For the years ended
December 31

Beginning

Increase

Decrease

Ending2006 (restatedsee Note 10)

1,121,964



(504,232
)
617,732Note A2005

1,121,964





1,121,9642004



1,121,964



1,121,964




For the years ended December 31,2006

2005

2004NT$

NT$

NT$Revenue from processing

18,684,086

6,079,818

20,758,913Other operating revenues

4,679,754

808,169

745,552Total

23,363,840

6,887,987

21,504,465Less: sales discounts or allowances

(5,817,873
)
(187,857
)
(191,177
)Net operating revenues

17,545,967

6,700,130

21,313,288


17

---





|                           |  | For the years ended December 31,
|-------------------------- |  | --------------------------------
|
|
|
|Personnel Expenses:        |  |                                 
|Salaries and wages         |  | 79,987,803                      
|Labor and health insurance |  | 6,095,869                       
|Pension expense            |  | 4,613,896                       
|Others                     |  | 3,546,315                       
|                           |  |                                 
|Total                      |  | 94,243,883                      
|                           |  |                                 
|Depreciation               |  | 92,072,855                      
|                           |  |                                 
|Amortization               |  | 365,418                         
|                           |  |                                 

For the year ended December 31,2004Included in
cost of goods
sold

Included in
operating
expenses

TotalNT$

NT$

NT$Personnel Expenses:Salaries and wages

68,412,013

40,003,284

108,415,297Labor and health insurance

4,363,401

2,265,416

6,628,817Pension expense

929,784

584,065

1,513,849Others

2,818,225

1,088,525

3,906,750Total

76,523,423

43,941,290

120,464,713Depreciation

104,540,176

6,236,042

110,776,218Amortization

24,144,597

224,460

24,369,057








18

---





Recorded year

Unused Balances

Expiration YearsNT$2003

2,745,403

20072004

10,350,348

20082005

20,026,123

20092006

25,627,408

2010Total

58,749,282




Year when the losses
were recorded

Total net operating
losses incurred

Unused Balances

Expiration YearsNT$

NT$2002

249,765,016

249,765,016

20072003

425,581,419

425,581,419

20082004

282,706,776

282,706,776

20092005

356,310,536

356,310,536

20102006

352,836,283

352,836,283

2011Total

1,667,200,030

1,667,200,030




Year incurred

Unused Balances

Expiration YearsNT$2002

37,960,383

20062003

2,745,403

20072004

8,958,912

20082005

4,170,445

2009Total

53,835,143




Year when the losses
were incurred

Total net operating
losses incurred

Unused Balances

Expiration YearsNT$

NT$2001

119,135,593

119,135,593

20062002

249,765,016

249,765,016

20072003

425,581,419

425,581,419

20082004

313,693,912

313,693,912

20092005

360,732,527

360,732,527

2010Total

1,468,908,467

1,468,908,467


19

---





As of December 31,2006

2005NT$

NT$Total deferred tax liabilities



Total deferred tax assets

488,453,057

438,190,791Valuation allowance against deferred tax assets

488,453,057

438,190,791


|Temporary differences that generated deferred tax assets: |  | Amount        |  | Tax Effect  |  | Amount        |  | Tax Effect 
|--------------------------------------------------------- |  | ------------- |  | ----------- |  | ------------- |  | -----------
|
|Unrealized inventory obsolescence loss                    |  | 1,769,847     |  | 442,462     |  | 2,363,623     |  | 590,906    
|                                                          |  |               |  |             |  |               |  |            
|Unrealized inventory provision                            |  | 2,414,837     |  | 603,709     |  | 4,422,076     |  | 1,105,519  
|                                                          |  |               |  |             |  |               |  |            
|Unrealized bonus expenses                                 |  | 4,036,000     |  | 1,009,000   |  | 24,012,001    |  | 6,003,000  
|                                                          |  |               |  |             |  |               |  |            
|Bad debt expense                                          |  | 718,457       |  | 179,614     |  | 770,254       |  | 192,564    
|                                                          |  |               |  |             |  |               |  |            
|Unrealized asset impairment                               |  | 24,946,734    |  | 6,236,684   |  | 23,119,000    |  | 5,779,750  
|                                                          |  |               |  |             |  |               |  |            
|Unrealized foreign exchange loss                          |  | 47,524        |  | 8,233       |  | 32,930        |  | 8,232      
|                                                          |  |               |  |             |  |               |  |            
|Other unrealized expenses                                 |  | 5,112,870     |  | 1,278,218   |  |              |  |           
|                                                          |  |               |  |             |  |               |  |            
|Unrealized sale discounts                                 |  | 3,387,226     |  | 846,807     |  |              |  |           
|                                                          |  |               |  |             |  |               |  |            
|Unrealized capitalized interest                           |  | 9,196,160     |  | 2,299,040   |  | 13,794,238    |  | 3,448,560  
|                                                          |  |               |  |             |  |               |  |            
|Loss carry-forwards                                       |  | 1,667,200,030 |  | 416,800,008 |  | 1,468,908,467 |  | 367,227,117
|                                                          |  |               |  |             |  |               |  |            
|Income tax credits                                        |  |               |  | 58,749,282  |  |               |  | 53,835,143 
|                                                          |  |               |  |             |  |               |  |            

As of December 31,2006

2005NT$

NT$b. Deferred tax assetscurrent

70,704,220

76,794,022Valuation allowance for deferred tax assetscurrent

(70,704,220
)
(76,794,022
)Net deferred tax assetscurrent



Deferred tax liabilitiescurrent



Net amount






20

---





As of December 31,2006

2005NT$

NT$c. Deferred tax assetsnoncurrent

417,748,837

361,396,769Valuation allowance for deferred tax assetsnoncurrent

(417,748,837
)
(361,396,769
)Net deferred tax assets-noncurrent



Deferred tax liabilities-noncurrent



Net amount








For the years ended December 31, 2006

 2005

 2004NT$

NT$

NT$Income taxes payable from continuing operation





10% surtax on undistributed earnings generated after year 1997





Net effect of deferred income tax





Income tax expense










As of December 31,2006

2005NT$

NT$Imputation credit account balance






For the years ended December 31,2006

2005

2004Creditable ratio applied on earnings distributed to resident stockholders










As of December 31,2006 (restatedsee Note 10)

2005 (restatedsee Note 10)NT$

NT$Prior to 1998



After 1998 (inclusive)

(331,012,686
)
(683,922,986
)Total

(331,012,686
)
(683,922,986
)


21

---







For the years ended December 31,2006 (restatedsee
Note 10)

2005 (restatedsee
Note 10)NT$

NT$Accumulated impairment of property, plant and equipmentopening balance

23,119,000

Increase in loss of asset impairment

1,827,734

23,119,000Accumulated impairment of property, plant and equipmentending balance

24,946,734

23,119,000




|Borrower                      |  | Period |  | The maximum
balance
during the
period |  | Ending
balance |  | Interest
range |  | Interest income
|----------------------------- |  | ------ |  | ------------------------------------- |  | -------------- |  | -------------- |  | ---------------
|
|Title Max Technology Co., LTD |  | 2006   |  | 50,000,000                            |  |               |  | 2.00           |  | 238,099        
|                              |  | 2005   |  | 50,000,000                            |  | 50,000,000     |  | 2.00           |  | 714,285        

5. Related Party Transactions



Name of related party

Relationship with the CompanyKING YUAN ELECTRONICS CO., LTD. ("KYEC")

The chairman of the Company is KYEC's vice-chairmanSILICON STORAGE TECHNOLOGY, INC. ("SST")

A shareholder of the CompanySST INTERNATIONAL LIMITED

A subsidiary of SSTSST TAIWAN

A subsidiary of SST INTERNATIONAL LIMITEDK.C. Huang

The supervisor of the Company




For the years ended December 31,2006

2005

2004Name of
related partyAmount

%

Amount

%

Amount

%NT$



NT$



NT$KYEC

13,000

0.07





13,000

0.07




22

---





|     |  |                                                                           |  | For the years ended December 31,
|---- |  | ------------------------------------------------------------------------- |  | --------------------------------
|
|
|
|KYEC |  | Fee for borrowing machines, provision of technical support and processing |  | 5,581,510                       
|     |  |                                                                           |  |                                 



For the years ended December 31,Name of related party2006

2005

2004NT$

NT$

NT$KYEC

22,750,000

10,460,000






For the years ended December 31,Name of related party2006

2005

2004NT$

NT$

NT$KYEC

3,000,000








As of December 31,Name of related party2006

2005NT$

NT$Receivables from related partyKYEC

3,583,650

3,993,000SST

2,736,146

SST TAIWAN

12,209

Total

6,332,005

3,993,000Payables to related partyKYEC

5,115,075






For the year ended 2004Name of related party

The maximum
balance
during the period

Ending
balance

Interest
expense

Interest
rateNT$

NT$

NT$

%K.C. Huang

20,000,000



133,151

3.00


23

---



6. Assets Pledged As Collateral

|                                  |       | As of December 31, |             |            
|--------------------------------- | ----- | ------------------ | ----------- | -----------
|
|
|
|Land                              |       | 136,183,400        |             | 136,183,400
|Buildings and facilities          |       | 315,720,931        |             | 326,560,961
|Machinery and equipments          |       | 44,308,705         |             | 131,247,033
|Restricted depositsTime deposits |       |                   |             | 35,000,000 
|Restricted depositsothers        |       | 3,669,688          |             | 1,672,000  
|                                  |       |                    |             |            
|                                  | Total |                    | 499,882,724 |            
|                                  |       |                    |             |            

---

|Note A: |  | The Company applied for a subsidy under a program of the Industrial Development Bureau. The subsidy can not be used until the Bureau examined and approved the related R&D documents.
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7. Commitments and Contingency

As of December 31, 2006, the following commitments and contingencies were not recorded in the Company's financial statements:



8. Significant Disaster Losses

None.

9. Significant Subsequent Event



24

---





10. Restatement of Financial Statements

The Company restated its 2005 financial statements due to an error in the calculation of asset impairment loss which resulted in net loss to increase by
NT$14,578,130. Accumulated impairment and impairment loss of 2005 were both NT$23,119,000 after the restatement.

The
Company also restated its 2006 financial statements due to an error in the application of capital reduction. As a result, treasury stock was reduced by NT$5,546,551 and accumulated
deficit was increased by NT$5,546,551.

11. Material Differences between US GAAP and ROC GAAP

The Company's financial statements have been prepared in conformity with "Business Entity Accounting Law" and accounting principles generally accepted in the
Republic of China ("ROC GAAP"), which differ in certain material respects from generally accepted accounting principles in the United States ("US GAAP"). A narrative discussion on certain significant
differences between ROC GAAP and US GAAP that are applicable to the Company are summarized below:







25

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26

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