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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 
 FORM 20-F
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission File Number: 000-30540
 
 GIGAMEDIA LIMITED
 (Exact name of registrant as specified in its charter)
 
 REPUBLIC OF SINGAPORE
(Jurisdiction of incorporation or organization)
 8 TH FLOOR,
207 TIDING BOULEVARD, SECTION 2, TAIPEI 114, TAIWAN, R.O.C.
(Address of principal executive offices)
 Registrants telephone number, including area code
886-2- 2656-8000
 
 Securities registered or to be registered pursuant to Section 12(b) of the Exchange Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares
    
    The NASDAQ Stock Market LLC
 Securities registered or to be registered pursuant to Section 12(g) of the Exchange Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
  54,365,065 ordinary shares
 Yes o No þ
 o þ
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board o
    
    Other o
 o o
 o þ
 o o




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##### 



TABLE OF CONTENTS
 PagePART I
    
    
    2ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    2ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    20ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    44ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    44ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    70ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
    
    
    77ITEM 8. FINANCIAL INFORMATION
    
    
    79ITEM 9. THE OFFER AND LISTING
    
    
    81ITEM 10. ADDITIONAL INFORMATION
    
    
    82ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    91ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    92PART II
    
    
    92ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    92ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    92ITEM 15. CONTROLS AND PROCEDURES
    
    
    92ITEM 16. Reserved
    
    
    93ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    93ITEM 16 B. CODE OF ETHICS
    
    
    94ITEM 16 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    94ITEM 16 D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    95ITEM 16 E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    95ITEM 16 F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANTS
    
    
    95ITEM 16 G. CORPORATE GOVERNANCE
    
    
    95PART III
    
    
    95ITEM 17. FINANCIAL STATEMENTS
    
    
    95ITEM 18. FINANCIAL STATEMENTS
    
    
    96ITEM 19. EXHIBITS
    
    
    96EX-4.4 FOURTH AMENDMENT TO THE END-USER LICENSE AGREEMENT BETWEEN INTERNET MEDIA LICENSING LIMITED AND ULTRA INTERNET MEDIA, S.A., DATED MARCH 1, 2008EX-4.24 AGREEMENT FOR PLEDGE OF SHARES IN JINYOU AMONG YANG ZHUOJUN, TAN YIHUI AND T2 TECHNOLOGY, DATED JUNE 15, 2009EX-4.25 EXCLUSIVE CALL OPTION AGREEMENT REGARDING JINYOU AMONG YANG ZHUOJUN, TAN YIHUI, JINYOU AND T2 TECHNOLOGY, DATED JUNE 15, 2009EX-4.26 PROXY VOTING AGREEMENT REGARDING JINYOU AMONG T2 TECHNOLOGY, JINYOU, YANG ZHUOJUN AND TAN YIHUI, DATED JUNE 15, 2009EX-4.27 EXCLUSIVE BUSINESS CONSULTANCY SERVICE AGREEMENT BETWEEN T2 TECHNOLOGY AND JINYOU, DATED NOVEMBER 26, 2007EX-4.28 EXCLUSIVE TECHNICAL SERVICE AND CONSULTANCY AGREEMENT BETWEEN JINYOU AND T2 TECHNOLOGY, DATED NOVEMBER 26, 2007EX-4.29 SHARE SALE AND PURCHASE AGREEMENT AMONG CHAMPION LIMITED, GIGAMEDIA INTERNATIONAL HOLDINGS LIMITED AND GIGAMEDIA, DATED AUGUST 28, 2008EX-4.30 SHARE SALE AND PURCHASE AGREEMENT BETWEEN CHINA NETWORK SYSTEMS CO., LTD. AND HOSHIN GIGAMEDIA, DATED AUGUST 28, 2008EX-4.31 ASSET SALE AND PURCHASE AGREEMENT AMONG KO YING, HOSHIN GIGAMEDIA AND CHINA NETWORK SYSTEMS CO., LTD., DATED AUGUST 28, 2008EX-4.32 TRANSITIONAL SERVICE AGREEMENT AMONG KO YING, HOSHIN GIGAMEDIA AND KBT, DATED SEPTEMBER 3, 2008EX-4.33 ASSIGNMENT AND ASSUMPTION AGREEMENT BETWEEN HOSHIN GIGAMEDIA AND HOSHIN MULTIMEDIA, DATED SEPTEMBER 3, 2008EX-8.1 LIST OF SUBSIDIARIESEX-12.1 CERTIFICATION BY CEOEX-12.2 CERTIFICATION BY CFOEX-13.1 CERTIFICATION BY CEOEX-13.2 CERTIFICATION BY CFOEX-15.1 CONSENT OF GHP HORWATH, P.C.
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CERTAIN TERMS AND CONVENTSIONS
      DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our business plan and strategies;
 
    
    our future business development and potential financial condition, results of
operations and other projected financial information;
 
    
    our ability to manage current and potential future growth;
 
    
    expected continued acceptance of our revenue model;
 
    
    our plans for strategic partnerships, licenses and alliances;
 
    
    our acquisition and strategic investment strategy, and ability to successfully
integrate any past, current, or future acquisitions into our operations;
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
    
    our ability to protect our intellectual property rights and the security of our
customers information;
 
    
    launch of new online games according to our timetable;
 
    
    expected continued acceptance of our online games and gaming software, including
expected growth of the online games and online gaming industry, and consumer
preferences for our products and services;
 
    
    the in-house development of new online game and gaming software products and our
plans to expand our in-house online game development team;
 
    
    our plans to license additional games from third parties, and the launch of these
new games or gaming software systems, including the timing of any such development,
licenses or launches, in various geographic markets;
 
    
    our ability to maintain and strengthen our position as one of the largest online
MahJong operators in Taiwan;
 
    
    our ability to maintain the well-established online sports game platform in the PRC;
 
    
    potential entry of new competitors in any of our business lines;
 
    
    changes in the global regulatory environment relating to gaming software and
services business;
 
    
    changes or stability in certain regulatory environments relating to our software
licensees operations or gaming licenses;
 
    
    changes in PRC laws and regulations, and future enforcement of those laws and
regulations, including laws and regulations relating to Internet usage, advertising
over the Internet, Internet content providers, foreign investment and ownership in
online business, distribution of dividends and foreign exchange controls;
 
    
    the outcome of ongoing, or any future, litigation or arbitration; and
 
    
    our corporate classification by various governmental entities.
  
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
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ITEM 3. KEY INFORMATION
 Exchange Rates
   A. Selected Financial Data
  For the Years Ended December 31,
 2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$STATEMENT OF OPERATIONS DATA:OPERATING REVENUESGaming software and service revenues
    
    
    11,434
    
    
    
    22,511
    
    
    
    55,019
    
    
    
    118,950
    
    
    
    144,765Online game and service revenues
    
    
    0
    
    
    
    0
    
    
    
    18,692
    
    
    
    32,764
    
    
    
    45,604Other revenues
    
    
    20
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total operating revenues
    
    
    11,454
    
    
    
    22,511
    
    
    
    73,711
    
    
    
    151,714
    
    
    
    190,369OPERATING COSTSCost of gaming software and service revenues
    
    
    (1,592
    )
    
    
    (3,327
    )
    
    
    (7,824
    )
    
    
    (16,201
    )
    
    
    22,770Cost of online game and service revenues
    
    
    0
    
    
    
    0
    
    
    
    (3,667
    )
    
    
    (9,118
    )
    
    
    12,404Cost of other revenues
    
    
    (2
    )
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total operating costs
    
    
    (1,594
    )
    
    
    (3,327
    )
    
    
    (11,491
    )
    
    
    (25,319
    )
    
    
    (35,174
    )GROSS PROFIT
    
    
    9,860
    
    
    
    19,184
    
    
    
    62,220
    
    
    
    126,395
    
    
    
    155,195OPERATING EXPENSESProduct development and engineering expenses
    
    
    (1,408
    )
    
    
    (2,524
    )
    
    
    (5,244
    )
    
    
    (7,338
    )
    
    
    (13,455
    )Selling and marketing expenses
    
    
    (3,444
    )
    
    
    (8,042
    )
    
    
    (27,653
    )
    
    
    (60,106
    )
    
    
    (74,173
    )General and administrative expenses
    
    
    (3,493
    )
    
    
    (6,374
    )
    
    
    (11,096
    )
    
    
    (20,983
    )
    
    
    (25,035
    )Bad debt expenses
    
    
    0
    
    
    
    0
    
    
    
    (448
    )
    
    
    (548
    )
    
    
    (2,905
    )
  3




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2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$Impairment loss on prepaid licensing fees
and intangible assets
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,524
    )Total operating expenses
    
    
    (8,345
    )
    
    
    (16,940
    )
    
    
    (44,441
    )
    
    
    (88,975
    )
    
    
    (117,092
    )Income from operations
    
    
    1,515
    
    
    
    2,244
    
    
    
    17,779
    
    
    
    37,420
    
    
    
    38,103Income from continuing operations
    
    
    299
    
    
    
    3,375
    
    
    
    17,852
    
    
    
    37,802
    
    
    
    34,953Income from discontinued operations
    
    
    1,383
    
    
    
    2,961
    
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435Net income
    
    
    1,682
    
    
    
    6,336
    
    
    
    30,784
    
    
    
    38,890
    
    
    
    44,388Earnings per share (in dollars):Basic:Income from continuing operations
    
    
    0.01
    
    
    
    0.07
    
    
    
    0.35
    
    
    
    0.72
    
    
    
    0.65Income from discontinued operations
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.25
    
    
    
    0.02
    
    
    
    0.17Net income
    
    
    0.03
    
    
    
    0.13
    
    
    
    0.60
    
    
    
    0.74
    
    
    
    0.82Diluted:Income from continuing operations
    
    
    0.01
    
    
    
    0.06
    
    
    
    0.30
    
    
    
    0.63
    
    
    
    0.58Income from discontinued operations
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.16Net income
    
    
    0.03
    
    
    
    0.12
    
    
    
    0.51
    
    
    
    0.65
    
    
    
    0.74
 As of December 31,
 2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$BALANCE SHEET DATA:Total current assets
    
    
    67,726
    
    
    
    70,204
    
    
    
    64,176
    
    
    
    115,417
    
    
    
    128,799Property, plant and equipment-net
    
    
    15,056
    
    
    
    10,747
    
    
    
    10,098
    
    
    
    13,008
    
    
    
    13,468Goodwill
    
    
    29,607
    
    
    
    29,243
    
    
    
    55,817
    
    
    
    85,149
    
    
    
    87,098Intangible assets-net
    
    
    8,372
    
    
    
    2,704
    
    
    
    23,067
    
    
    
    26,060
    
    
    
    28,930Total assets
    
    
    125,977
    
    
    
    113,519
    
    
    
    182,619
    
    
    
    283,865
    
    
    
    316,793Total shareholders equity
    
    
    95,971
    
    
    
    100,648
    
    
    
    134,087
    
    
    
    180,665
    
    
    
    228,456Common shares, no par value, and
additional paid-in capital
    
    
    287,657
    
    
    
    287,920
    
    
    
    289,495
    
    
    
    296,793
    
    
    
    300,021Number of issued shares (in thousands)
    
    
    50,154
    
    
    
    50,344
    
    
    
    51,495
    
    
    
    53,700
    
    
    
    54,365Dividends declared per share (in dollars)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
  B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
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D. Risk Factors
 Risks Related to Our Business and Industries
 The limited operating history of our gaming software and services business and our online
games business may not provide you with an adequate basis upon which to evaluate our business and
prospects
  
    
    respond to technological changes or resolve unexpected service interruptions in a
timely manner;
 
    
    adapt to regulatory changes;
 
    
    retain existing customers or attract new customers;
 
    
    license, develop, or acquire additional online games that are appealing to
consumers;
 
    
    anticipate and adapt to changing consumer preferences;
 
    
    adapt to competitive market conditions;
 
    
    adequately and efficiently operate, upgrade and develop our transaction and service
platforms; and
 
    
    maintain adequate control of our expenses.
  The uncertain global legal and regulatory environment could have a negative impact on our
gaming software and services business and prospects
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In operating our online games business, we may fail to launch new games according to our
timetable, and our new games may not be commercially successful
  .
  We may not be successful in operating and improving our existing online games to satisfy the
changing demands and preferences of players
  
    
    the popularity of existing and new online games operated by us;
 
    
    the introduction of new online games by us or third parties, competing with or
replacing our existing online games;
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
    
    general economic conditions, particularly economic conditions adversely affecting
discretionary consumer spending;
 
    
    changes in our customer demands and preferences;
 
    
    the availability of other forms of entertainment; and
 
    
    critical reviews and public tastes and preferences, all of which change rapidly and
cannot be predicted.
   Our results of operations are subject to significant fluctuations
  
    
    Gaming software and service business: the regulatory restrictions applicable to the
Internet gaming industry; the revenues, expenses and results of operations of UIM, our
largest licensee; global economic conditions and general economic conditions of the
markets where our products target; availability of the Internet infrastructure; and the
technological and other competition from existing and new competitors.
 
    
    Online games business: our ability to retain existing users; attract new users and
maintain user satisfaction; the pace of rollout of new games or update to existing
games by us or our competitors; the amount and timing of operating costs and capital
expenditures relating to our business operations and expansion; seasonal trends in
Internet use; price competition in the industry; regulatory and other risks associated
from our operations in China and Taiwan.
  The gaming software markets and the online games markets are characterized by rapid
technological change, and failure to respond quickly and effectively to new Internet technologies
or standards may have a material adverse effect on our business
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The current global economic slowdown and other adverse economic conditions may negatively
impact our business
  Our business could suffer if we do not successfully manage current growth and potential future
growth
   Our business strategy, which contemplates growth through acquisitions and strategic
investments, exposes us to significant risks
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Our businesses face intense competition, which may adversely affect our revenues,
profitability and planned business expansion
 Competition in the gaming software and service business
    Competition in the online games business
    9




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We expect the marketing costs for our gaming software and services business to continue to be
significant, which could have an adverse effect on our business
  Our gaming software and services business is dependent on UIM, our largest licensee, and any
adverse effect on UIMs business could have an adverse effect on our revenues, results of
operations and financial condition
  Our gaming software and services business will be materially and adversely affected if credit
card companies and other financial institutions cease to accept online gaming transactions
  Our gaming software and services business and online games business depend on the reliability
of our network infrastructure, which is subject to physical, technological, security and other
risks
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Any failure to maintain a stable and efficient distribution and payment network could have a
material and adverse impact on our online games business, financial condition and results of
operations
   We could be liable for breaches of security on our websites and fraudulent transactions by
users of our websites
  Undetected programming errors or defects in our software, services and games and the
proliferation of cheating programs could materially and adversely affect our gaming software and
services and online games businesses, financial condition and results of operations
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Our gaming software and services business is international and therefore faces associated
risks
  Online gaming is a relatively new industry and therefore, we do not know if the market will
continue to grow
  Operation of pirate game servers and the expenses incurred in protecting our online games
operation against unlawful operations through pirate servers may adversely affect our business
  We may be subject to claims of intellectual property right infringement by third parties,
which could subject us to significant liabilities and other costs
  We may need to incur significant expenses to protect our intellectual property rights, and if
we are unable to adequately protect our intellectual property rights, our competitive position
could be harmed
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Our future results of operations or the growth of our business may suffer if we are unable to
maintain a satisfactory relationship with the licensors of our online games
  Failure to maintain effective internal controls could have a material adverse effect on our
business, results of operations and the trading price of our Shares
    We may need additional capital in the future, and it may not be available on acceptable terms
  
    
    fund our operations;
 
    
    enhance and expand the range of products and services we offer; and
 
    
    respond to competitive pressures and perceived opportunities, such as investment,
acquisition and international expansion activities.
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We depend on our key personnel, and our business and growth prospects may be severely
disrupted if we lose their services
   Our results of operations and financial condition are affected by political stability, as well
as the occurrence of natural disasters and epidemics
   Risks Related to Doing Business in Greater China
 PRC laws and regulations restrict foreign ownership and investment in the online game
industry, and substantial uncertainties exist with respect to the application and implementation of
PRC laws and regulations
   14




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The contractual arrangements with T2 Entertainment, T2 Advertisement and Jinyou and their
shareholders may not be as effective in providing operational control as direct ownership
     15




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The laws and regulations governing the online games industry in the PRC are evolving and new
regulations may adversely affect our business
    There are no clear laws or regulations governing virtual asset property rights, in particular,
in Greater China, and therefore, it is not clear what liabilities, if any, online game operators
may have in respect of virtual assets
  Restrictions on virtual currency may adversely affect our revenues from online game operations
in the PRC
   16




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Our business may be adversely affected by government policies and regulation of Internet cafés
in the PRC
  Fluctuations in the exchange rates between the U.S. dollar and other currencies in which we
conduct our business could adversely affect our profitability
  Changes in foreign exchange and foreign investment regulations and limitations on dividend
payment in the PRC may affect our ability to invest in China and the ability of our PRC
subsidiaries to pay dividends and service debts
     17




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There are economic risks associated with doing business in Taiwan, particularly due to the
tense relationship between Taiwan and the PRC
  Risks Related to Ownership of our Shares
 The price of our Shares has been volatile historically and may continue to be volatile, which
may make it difficult for holders to resell our Shares when desired or at attractive prices
  We are controlled by the Koo family, which has significant influence in determining the
outcome of any corporate transaction or other matters submitted to our shareholders for approval,
and their interests may conflict with your interests
  Our transactions with related parties may not benefit us and may harm our Company
  Our online games business in the PRC relies on payments made by our PRC VIEs to T2CN, our
majority-owned subsidiary, pursuant to contractual arrangements to transfer any such revenues to
T2CN. Any restriction on such payments and any increase in the amount of PRC taxes applicable to
such payments may materially and adversely affect our business and our ability to pay dividends to
our shareholders
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The ability of our subsidiaries in Taiwan to distribute dividends to us may be subject to
restrictions under the laws of Taiwan
  Anti-takeover provisions under the Singapore Securities and Futures Act (Chapter 289) and the
Singapore Code on Take-overs and Mergers may delay, deter or prevent a future takeover or change of
control of our Company, which could adversely affect the price of our Shares
  Our shareholders may be subject to Singapore taxes
  We are a Singapore company, and because the rights of shareholders under Singapore law differ
from those under U.S. law, you may have difficulty in protecting your shareholder rights or
enforcing any judgment obtained in the U.S. against us or our affiliates
   We may be classified as a passive foreign investment company for U.S. federal income tax
purposes. As a result, you may be subject to materially adverse tax
consequences with respect to our Shares
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ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of Our Company
     Time
    
    EventApril 2004
    
    We acquired the business and operations of Grand Virtual,
Inc., a privately-held gaming software developer and
application service provider, and its affiliates.April 2004
    
    We entered into an end user license agreement with UIM,
pursuant to which we granted a nonexclusive,
non-transferable worldwide license to UIM to use our
software and certain operational and support services. The
royalties under the agreement were determined based on a
revenue sharing mechanism. The term of the agreement is 10
years.September 2005
    
    We sold all of our ownership interest in the Rose Records
and Tachung Records music store chains with a view to
eliminating the non-core operations.January 2006
    
    We acquired FunTown, an online games business operated in
Taiwan and Hong Kong, to enhance our position in the online
entertainment market.May 2006
    
    We disposed of our ADSL business, which was an operational
line of our Internet access and services business.December 2006
    
    We entered into a strategic alliance with Infocomm Asia, an
operator and distributor of online games in Southeast Asia.
In connection with the strategic alliance, we acquired
preferred shares convertible into the issued ordinary
shares of Infocomm Asia. As of May 31, 2009, we held
preferred shares convertible into 28.43 percent of the
ordinary shares of Infocomm Asia. Upon conversion of the
preferred shares held by us into the ordinary shares of
Infocomm Asia, we expect to become the largest shareholder
of Infocomm Asia.June 2007
    
    We completed the acquisition of the controlling interest in
T2CN, one of the online casual game operators in the PRC.
As of May 31, 2009, we hold 66.29 percent of the total
outstanding voting rights of T2CN.
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21




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B. Business Overview
       22




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Gaming Software and Service Business
  Our Products and Services
  Online Gaming Software for Players
    Online Gaming Management Tools
     23




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Application and Consulting Services
  
    
    Infrastructure Design and Management Services. We provide the architectural design
of various infrastructure elements, including the servers, databases, networks,
routers, firewalls and management tools that are required for Internet gaming
operations. As part of customer support, we also provide round-the-clock monitoring
services to ensure the functionality and security of the infrastructure.
 
    
    Transaction Processing Services. These services include (i) payment consultation
for designing timely collection and distribution systems for payments through a variety
of channels and merchants; (ii) billing consultation for designing real-time and
out-of-band transaction processing and order management; and (iii) risk management
consultation for creating and designing tools and processes for fraud detection,
prevention and management.
 
    
    Customer Support Services. We offer clients a comprehensive round-the-clock
consultation support to resolve infrastructure issues. We also provide platform
technical support during periodic maintenance to update, patch, and fine-tune the
system performance of our software solutions.
 
    
    Custom Gaming Software Development Services. We customize the entertainment modules
and interfaces for the gaming platform to meet specific requests of UIMs affiliates or
partners.
 
    
    Marketing Support Services. We create branded websites and provide marketing
support services to assist UIM in attracting new players.
 Our Technology and Infrastructure
     Relationship with UIM
 License Arrangement with UIM
   24




---



##### Table of Contents



UIM
     Competition
      25




---



##### Table of Contents



Online Games Business
 Our Games
  MahJong
     MMORPGs
   26




---



##### Table of Contents



Commercial
    
    Game
    
    RevenueGame
    
    Description
    
    Launch
    
    Source
    
    Model
    
    MarketHolic Online
    
    Cartoon style adventure
    
    January 2009
    
    Licensed
    
    Item-billing
    
    TaiwanWarhammer Online: Age of Reckoning
    
    War
    
    June 2009
    
    Licensed
    
    Pay-to-play
    
    Taiwan
Hong Kong
Macau
  Game
    
    Description
    
    Status
    
    Game Source
    
    Target MarketLuna Online
    
    Casual fantasy
    
    Close Beta Testing
    
    Licensed
    
    PRCXK Online
    
    Martial arts adventure
    
    Game Development
    
    In-house Developed
    
    PRCHolic Online
    
    Cartoon style adventure
    
    Game Localization
    
    Licensed
    
    PRC
Hong Kong
MacauHellgate: London
    
    Dark fantasy themed action
    
    Game Localization
    
    Licensed
    
    Taiwan
Hong Kong
Macau
   Advanced Casual Games
     27




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##### Table of Contents



Commercial
    
    Game
    
    RevenueGame
    
    Description
    
    Launch
    
    Source
    
    Model
    
    MarketTales Runner
    
    Sports  Obstacle running
    
    June 2006 in Taiwan
August 2006 in Hong Kong
    
    Licensed
    
    Item-billing
    
    Taiwan
Hong KongFreestyle
    
    Sports  Basketball
    
    May 2007
    
    Licensed
    
    Item-billing
    
    PRCNanaimo
    
    Action
    
    December 2007
    
    Licensed
    
    Item-billing
    
    Hong KongPaipaijoy
    
    Sports  Tennis
    
    June 2008
    
    Licensed
    
    Item-billing
    
    PRC
   Card, Chance-Based and Simple Casual Games
    Game Sources
 In-house development of MahJong, Card, Chance-Based and Simple Casual Games
   28




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##### Table of Contents



Sources of MMORPGs and Advanced Casual Games
        Our Primary Platforms and Services
 FunTown
  
    
    Player Clubs. We offer online club services in the FunTown game community. FunTown
players can form their own clubs, invite other players with similar interests or skill
levels to join, and organize online and offline events for club members. Player clubs
complement the strong social features of online games by helping to maintain an online
game community.
 
    
    Tournaments. As one of the key services, FunTown provides various tournaments for
its online MahJong players. After players join a club, they can participate online
in-club tournaments and compete in weekly online inter-club tournaments. On an annual
basis, FunTown organizes large-scale tournaments, in which a large number of players
are invited to the tournament premises and compete online via computers.
 
    
    Avatars. To enhance players overall entertainment experience, FunTown offers many
in-game virtual items which may be purchased by players to customize their online
personal graphic profiles, or avatars. Players use avatars to create their own unique
look while participating in the online community. The virtual items for avatars
include facial expressions, clothes and different accessories. These items are
particularly popular with younger players, who customize their avatars to establish
unique identities and pursue distinct fashions in the online community.
 
    
    Friends and Family Messenger. The FunTown platform has a unique function designed
for players personal contacts, which is similar to the contact list of instant message
programs. This enables players to see when their friends and family members are online
and invite people in their personal network to play games together.
  29




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##### Table of Contents




    
    Social Networking. The FunTown platform provides an online social networking
community called FunTown Village, in which players meet each other through their online
avatars. In FunTown Village, players can interact and communicate, purchase virtual
items, and even get married virtually. We plan to introduce more virtual items within
FunTown Village to address the strong social interests of our players and to help
increase FunTowns overall appeal as a distinct online game community.
 
    
    Game Masters. FunTown delegates game masters to provide various in-game
services for our MMORPG players. Game masters are responsible for organizing in-game
events, troubleshooting and actively and continuously monitoring the online game environment.
 They respond to players inquiries, handle error reporting and removal process, and identify
and deter inappropriate player behaviors. We believe that the provision of game masters is an
important customer service function to maintain customer loyalty and effectively address technical
problems as they arise.
 
    
    Customer Services. FunTown provides support and services to its customers primarily
through walk-in customer service centers in Taipei and Hong Kong and e-mails and online
bulletin boards where players can inquire and receive responses from us and other
players.
 T2CN
  
    
    Membership Management. T2CN utilizes an integrated service platform, namely
T2CN-Passport, to provide one-stop service to customers as well as distributors.
T2CN-Passport is an integrated membership management and payment system, which allows
T2CN to maintain a single customer database containing each customers profile and
transaction history. Customers may log in, pay and use any of the fee-based products
and services. In addition, T2CN-Passport allows our distributors to sell our game
points to Internet cafés. Internet cafés can also use T2CN-Passport to check their
point-balances and make payment on behalf of individual purchasers.
 
    
    Social Networking. T2CNs integrated system also incorporates a variety of online
community features, such as bulletin boards which allow registered users to post notes
or inquiries and respond to other users questions and comments. We believe these
features increase the user stickiness on our site and facilitate player interaction.
T2CN is currently building an online social networking community to further facilitate
access to our online game offering and accommodate different social net working needs
of our users in the PRC.
 
    
    Game Masters. T2CN delegates game masters to provide various in-game services for
our MMORPG players. Game masters are responsible for organizing in-game events,
troubleshooting and actively and continuously monitoring the online game environment.
They respond to players inquiries, handle error reporting and removal process, and
identify and deter inappropriate player behaviors.
 
    
    Customer Services. T2CN focuses on providing quality customer service in order to
retain its existing customers as well as attract new customers. T2CN offers multiple
communication channels, including telephone hotline and customer service email, for the
customers to provide feedback and complaints about our products or services at any
time.
 Non-Computer Based Platforms for Certain Games
   30




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##### Table of Contents



Our Marketing
  In-Game Events and Marketing
  Cross-Marketing
  Open Beta Testing
  Advertisements and Offline Promotions
  Game Magazines
  Direct Marketing
  Our Distribution and Payment Channels
  Offline Physical Distribution Channels
  Internet-Based Distribution Channels
   31




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##### Table of Contents



Telecommunication Network Operators
  Our Operation Architecture
  Technology Infrastructure
     Our Players
   Competition
     32




---



##### Table of Contents



Intellectual Property
   Regulation
 Global Regulatory Environment Relating to Our Gaming Software and Services Business
     U.S. Regulations on Online Gaming
   33




---



##### Table of Contents



Regulatory Environment in Europe
         34




---



##### Table of Contents



Regulations Relating to Online Games in Taiwan
  Rating of Internet Content
 Computer Software Ratings.
 Online Game Contract Template.
 Regulations Relating to Online Games in the PRC
    35




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##### Table of Contents




    
    MIIT (formerly the Ministry of Information Industry);
 
    
    the Ministry of Culture, or MOC;
 
    
    the General Administration of Press and Publication, or GAPP;
 
    
    the Ministry of Public Security;
 
    
    the State Administration of Industry and Commerce, or SAIC;
 
    
    the State Administration for Radio, Film and Television, or SARFT;
 
    
    the State Council Information Office, or SCIO; and
 
    
    the Ministry of Commerce, or MOFCOM.
 Foreign Ownership Restrictions
   Licenses
    36




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##### Table of Contents



Online Games Regulations
   Internet Content and Publishing Regulations
  Import Regulations
  Information Security Regulations
   37




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##### Table of Contents



Internet Café Regulation
  Privacy Protection
   C. Organizational Structure
   
    
    Each of the shareholders of T2 Entertainment has irrevocably granted T2CN
Information Technology (Shanghai) Co., Ltd. (T2 Technology), the wholly-owned
subsidiary of T2CN in the PRC, the power to exercise all of their voting rights of T2
Entertainment pursuant to the relevant voting rights and proxy agreement;
 
    
    Each of the shareholders of T2 Advertisement has irrevocably granted T2 Technology
the power to exercise all of their voting rights of T2 Advertisement pursuant to the
relevant voting rights and proxy agreement;
 
    
    Each of the shareholders of Jinyou has irrevocably granted T2 Technology the power
to exercise all of their voting rights of Jinyou pursuant to the relevant voting rights
and proxy agreement;
 
    
    Our majority-owned subsidiary in China has the power to appoint all directors and
senior management members of the three VIEs;
 
    
    Each of the shareholders of T2 Entertainment has pledged all of their respective
equity interests in T2 Entertainment as security for the full performance of their
respective obligations under all of their agreements with T2 Technology;
  38




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##### Table of Contents




    
    Each of the shareholders of T2 Advertisement has pledged all of their respective
equity interests in T2 Advertisement as security for the full performance of their
respective obligations under all of their agreements with T2 Technology;
 
    
    Each of the shareholders of Jinyou has pledged all of their respective equity
interests in Jinyou as security for the full performance of their respective
obligations under all of their agreements with T2 Technology;
 
    
    Each of the shareholders of T2 Entertainment has granted T2 Technology an
irrevocable option to acquire all or part of the equity interests held by them in T2
Entertainment pursuant to the relevant exclusive call option agreement, to the extent
permitted by then-effective laws and regulations in the PRC;
 
    
    Each of the shareholders of T2 Advertisement has granted T2 Technology an
irrevocable option to acquire all or part of the equity interests held by them in T2
Advertisement pursuant to the relevant exclusive call option agreement, to the extent
permitted by then-effective laws and regulations in the PRC; and
 
    
    Each of the shareholders of Jinyou has granted T2 Technology an irrevocable option
to acquire all or part of the equity interests held by them in Jinyou pursuant to the
relevant exclusive call option agreement, to the extent permitted by then-effective
laws and regulations in the PRC.
   39




---



##### Table of Contents



*
    
    Includes our principal operating subsidiaries only. All subsidiaries are 100% owned unless
otherwise indicated.  40




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##### Table of Contents



OurYear of
    
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesHeld by our CompanyGigaMedia International Holdings Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyHoshin GigaMedia Center Inc.
    
    
    1998
    
    
    Taiwan
    
    
    100%
    
    
    Online gamesHeld by GigaMedia International Holdings LimitedCambridge Entertainment Software Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyFunTown World Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGigaMedia Asia Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGigaMedia Asia Pacific Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGigaMedia Finance International Limited
    
    
    2000
    
    
    Cayman Islands
    
    
    100%
    
    
    Holding companyGigaMedia Global Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    100%
    
    
    Online gamesGigaMedia (HK) Limited
    
    
    2004
    
    
    Hong Kong
    
    
    100%
    
    
    Holding companySkyace Pacific Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyCentermax Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGigaMedia Capital Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGigaMedia Development Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyGiga Slam Dunk Corporation
    
    
    2007
    
    
    Malaysia
    
    
    100%
    
    
    Online gamesGiga Wartime Corporation
    
    
    2007
    
    
    Malaysia
    
    
    100%
    
    
    Online gamesE-Sports International Corporation Limited
    
    
    2008
    
    
    Hong Kong
    
    
    100%
    
    
    Online gamesGigaMedia SuperCup Holdings Limited
    
    
    2008
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding company
  41




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##### Table of Contents



OurYear of
    
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesDragon Mark Holdings Limited
    
    
    2008
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyPremier Vantage Holdings Limited
    
    
    2009
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyHeld by FunTown World LimitedFunTown Hong Kong Limited
    
    
    1999
    
    
    Hong Kong
    
    
    100%
    
    
    Online gamesHeld by FunTown Hong Kong LimitedFunTown Software (Shanghai) Limited
    
    
    2006
    
    
    PRC
    
    
    100%
    
    
    Online gamesHeld by GigaMedia Asia LimitedGigaMedia China Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding companyHeld by Skyace Pacific LimitedDragongate Enterprises Limited
    
    
    2006
    
    
    British Virgin Islands
    
    
    70%
    
    
    Online gamesHeld by Dragongate Enterprises LimitedGigaMedia Dragongate Limited
    
    
    2007
    
    
    Malaysia
    
    
    70%
    
    
    Online gamesHeld by Cambridge Entertainment Software LimitedCambridge Interactive Development Corporation
    
    
    1997
    
    
    U.S.A.
    
    
    100%
    
    
    Software development and 
application servicesCambridge Interactive Development Corporation (Quebec) Inc.
    
    
    2005
    
    
    Canada
    
    
    100%
    
    
    Financial and management servicesCambridge Interactive Development Co., Ltd
    
    
    2008
    
    
    United Kingdom
    
    
    100%
    
    
    Software support servicesInternet Media Licensing Limited
    
    
    2005
    
    
    British Virgin Islands
    
    
    100%
    
    
    Software development and application servicesHeld by Internet Media Licensing LimitedApexstar Pacific Limited
    
    
    2007
    
    
    British Virgin Islands
    
    
    100%
    
    
    Software development and application services
  42




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##### Table of Contents



OurYear of
    
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesHeld by GigaMedia China LimitedT2CN Holding Limited
    
    
    2004
    
    
    British Virgin Islands
    
    
    66.29%
    
    
    Online gamesHeld by T2CN Holding LimitedJ-Town Information Co. (Shanghai), Ltd.
    
    
    2005
    
    
    PRC
    
    
    66.29%
    
    
    Online gamesT2CN Information Technology (Shanghai) Co., Ltd.
    
    
    2004
    
    
    PRC
    
    
    66.29%
    
    
    Online gamesControlled by T2CN Information Technology (Shanghai) Co., Ltd.Shanghai T2 Entertainment Co., Ltd.
    
    
    2004
    
    
    PRC
    
    
    *
    
    
    Online gamesShanghai T2 Advertisement Co., Ltd.
    
    
    2006
    
    
    PRC
    
    
    *
    
    
    AdvertisingShanghai Jinyou Network & Technology Co., Ltd.
    
    
    2007
    
    
    PRC
    
    
    *
    
    
    Online gamesHeld by Dragon Mark Holdings LimitedWolverine Holdings Group Limited
    
    
    2009
    
    
    British Virgin Islands
    
    
    100%
    
    
    Holding company
 
 *
    
    We have entered into a series of contractual arrangements through which we have effective
control over these entities. D. Property, Plant and Equipment
 th th
       43




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##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 A. Operating Results
  Overview
  
    
    Through our gaming software and service business, we develop and license online
poker and casino gaming software solutions and application services, primarily
targeting continental European markets.
 
    
    Our online games business operates a portfolio of online games, primarily targeting
online Greater China markets.
  Gaming Software and Service Business
   44




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##### Table of Contents



Online Games Business.
     Certain Significant Events Affecting Our Results of Operations for 2006, 2007 and 2008
 Divestiture of Our ADSL Business
   45




---



##### Table of Contents



Divestiture of Our Legacy Internet Access and Service Business
       (in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Revenue
    
    $
    20,581
    
    
    $
    15,164
    
    
    $
    9,289Income (loss) from discontinued operations before tax
    
    $
    6,290
    
    
    $
    1,090
    
    
    $
    (593
    )Gain on sale of the discontinued operations before tax
    
    
    7,668
    
    
    
    
    
    
    
    11,014Income tax expenses
    
    
    (1,026
    )
    
    
    (2
    )
    
    
    (986
    )Income from discontinued operations
    
    $
    12,932
    
    
    $
    1,088
    
    
    $
    9,435
  (in US$ thousands)Cash
    
    $
    493Accounts receivable
    
    
    2,325Other current assets
    
    
    1,125Property and equipment
    
    
    4,328Other assets
    
    
    165Total assets
    
    $
    8,436Accounts payable
    
    $
    1,056Other current liabilities
    
    
    759Noncurrent liabilities
    
    
    672Total liabilities
    
    $
    2,487
  46




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##### Table of Contents



Consolidation of UIM, T2 Entertainment, T2 Advertisement, and Jinyou under FIN 46(R)
  (in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Total revenue
    
    $
    55,019
    
    
    $
    118,650
    
    
    $
    144,765Net income (loss)
    
    $
    320
    
    
    $
    348
    
    
    $
    (206
    )
    (in US$ thousands)
    
    2007
    
    
    2008Net assets
    
    $
    178
    
    
    $
    3,258Total assets
    
    $
    11,666
    
    
    $
    17,524Total liabilities
    
    $
    11,488
    
    
    $
    14,265Total revenues
    
    $
    14,973
    
    
    $
    20,312Net income
    
    $
    2,429
    
    
    $
    1,571
   47




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##### Table of Contents



Acquisitions
 FunTown
   T2CN
   2006
  2007
    48




---



##### Table of Contents



2008
     Subsequent Events
  Critical Accounting Policies
   49




---



##### Table of Contents



Consolidation
  Acquisitions
  Revenue Recognition
    Gaming Software and Service Revenues
     50




---



##### Table of Contents



Online Game and Service Revenues
     Discontinued Operations
    Player Account Balances
   51




---



##### Table of Contents



Deferred Revenues
  Operating Costs
  Prepaid Licensing and Royalty Fees
    Fair Value Measurement
     52




---



##### Table of Contents



December 31, 2008Assets
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueMeasurements% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % oftotal assets
    
    
    
    
    
    
    total assets
    
    
    
    
    
    
    total assetsmeasured at
    
    
    
    
    
    
    measured at
    
    
    
    
    
    
    measured atAmount
    
    
    fair value
    
    
    Amount
    
    
    fair value
    
    
    Amount
    
    
    fair value
    
    
    AmountCash equivalents  time deposits
    
    $
    
    
    
    
    
    
    
    $
    12,512
    
    
    
    29.8
    %
    
    $
    
    
    
    
    
    
    
    $
    12,512Marketable securities  current
    
    
    
    
    
    
    
    
    
    
    3,419
    
    
    
    8.2
    %
    
    
    
    
    
    
    
    
    
    
    3,419Marketable securities  noncurrent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,041
    
    
    
    62.0
    %
    
    
    26,041Total
    
    $
    
    
    
    
    
    
    
    $
    15,931
    
    
    
    38.0
    %
    
    $
    26,041
    
    
    
    62.0
    %
    
    $
    41,972
   Fair Value Measurements UsingSignificant Unobservable Inputs(Level 3)Marketable Securities-NoncurrentBeginning Balance
    
    $
    21,018Total gains or losses (realized/unrealized)Included in earnings
    
    
    Included in other comprehensive income
    
    
    Purchases and settlements
    
    
    5,023Transfer in and/or out of Level 3
    
    
    Ending Balance
    
    $
    26,041The amount of total gains or losses for the
period included in earnings attributable to
the change in unrealized gains or losses
relating to assets still held at the
reporting date
        
    None
   53




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##### Table of Contents



Allowance for Doubtful Accounts
   Marketable Securities
   Investments
     54




---



##### Table of Contents



Impairment of Intangible Assets, Goodwill and Long-Lived Assets
    Software Cost
   Advertising
    55




---



##### Table of Contents



Income Taxes
   Minority Interest
    Share-Based Compensation
   56




---



##### Table of Contents



Retirement Plan and Net Periodic Pension Cost
   Foreign Currency Translation
  Taxation
      57




---



##### Table of Contents



Recent Accounting Pronouncements
       58




---



##### Table of Contents



Discussion of Results of Operations
 Factors Affecting Our Performance
  Acquisitions and disposals.
 Development of gaming software and service and online games industries.
 
    
    the development and regulation of these industries generally;
 
    
    our adaptation to technological change;
 
    
    changing consumer preferences;
 
    
    legal development affecting these industries, in particular the gaming software and
service industry; and
 
    
    general economic conditions in the markets where we or our licensees operate.
 Competition.
  59




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##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008Amount in
    
    
    % of
    
    
    Amount
    
    
    % of
    
    
    Amount
    
    
    % ofUS$
    
    
    total
    
    
    in US$
    
    
    total
    
    
    in US$
    
    
    totalthousands
    
    
    revenues
    
    
    thousands
    
    
    revenues
    
    
    thousands
    
    
    revenuesParticularsOPERATING REVENUESGaming software and service revenues
    
    
    55,019
    
    
    
    74.6
    
    
    
    118,950
    
    
    
    78.4
    
    
    
    144,765
    
    
    
    76.0Online game and service revenues
    
    
    18,692
    
    
    
    25.4
    
    
    
    32,764
    
    
    
    21.6
    
    
    
    45,604
    
    
    
    24.0Total operating revenues
    
    
    73,711
    
    
    
    100.0
    
    
    
    151,714
    
    
    
    100.0
    
    
    
    190,369
    
    
    
    100.0OPERATING COSTSCost of gaming software and service
revenues
    
    
    7,824
    
    
    
    10.6
    
    
    
    16,201
    
    
    
    10.7
    
    
    
    22,770
    
    
    
    12.0Cost of online game and service
revenues
    
    
    3,667
    
    
    
    5.0
    
    
    
    9,118
    
    
    
    6.0
    
    
    
    12,404
    
    
    
    6.5Total operating costs
    
    
    11,491
    
    
    
    15.6
    
    
    
    25,319
    
    
    
    16.7
    
    
    
    35,174
    
    
    
    18.5Gross profit
    
    
    62,220
    
    
    
    84.4
    
    
    
    126,395
    
    
    
    83.3
    
    
    
    155,195
    
    
    
    81.5OPERATING EXPENSESProduct development and engineering
expenses
    
    
    5,244
    
    
    
    7.1
    
    
    
    7,338
    
    
    
    4.8
    
    
    
    13,455
    
    
    
    7.1Selling and marketing expenses
    
    
    27,653
    
    
    
    37.5
    
    
    
    60,106
    
    
    
    39.6
    
    
    
    74,173
    
    
    
    39.0General and administrative expenses
    
    
    11,096
    
    
    
    15.1
    
    
    
    20,983
    
    
    
    13.8
    
    
    
    25,035
    
    
    
    13.2Bad debt expense
    
    
    448
    
    
    
    0.6
    
    
    
    548
    
    
    
    0.4
    
    
    
    2,905
    
    
    
    1.5Impairment loss on prepaid
licensing fees and intangible
assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    0.8Total operating expenses
    
    
    44,441
    
    
    
    60.3
    
    
    
    88,975
    
    
    
    58.6
    
    
    
    117,092
    
    
    
    61.5Income from operations
    
    
    17,779
    
    
    
    24.1
    
    
    
    37,420
    
    
    
    24.7
    
    
    
    38,103
    
    
    
    20.0NON-OPERATING INCOME (EXPENSES)
    
    
    917
    
    
    
    1.2
    
    
    
    2,064
    
    
    
    1.4
    
    
    
    (1,324
    )
    
    
    (0.7
    )INCOME TAX EXPENSE
    
    
    (523
    )
    
    
    (0.7
    )
    
    
    (401
    )
    
    
    (0.3
    )
    
    
    (1,069
    )
    
    
    (0.6
    )MINORITY INTEREST
    
    
    (321
    )
    
    
    (0.4
    )
    
    
    (1,281
    )
    
    
    (0.8
    )
    
    
    (757
    )
    
    
    (0.4
    )INCOME FROM CONTINUING OPERATIONS
    
    
    17,852
    
    
    
    24.2
    
    
    
    37,802
    
    
    
    24.9
    
    
    
    34,953
    
    
    
    18.4INCOME FROM DISCONTINUED OPERATIONS
    
    
    12,932
    
    
    
    17.5
    
    
    
    1,088
    
    
    
    0.7
    
    
    
    9,435
    
    
    
    5.0NET INCOME
    
    
    30,784
    
    
    
    41.8
    
    
    
    38,890
    
    
    
    25.6
    
    
    
    44,388
    
    
    
    23.3
  60




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For the Years Ended December 31, 2008 and 2007
 Consolidated Results of Operations
      61




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Business Segment Results
 Gaming Software and Service Business
    62




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Online Games Business
      63




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For the Years Ended December 31, 2007 and 2006
 Consolidated Results of Operations
       64




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Business Segment Results
 Gaming Software and Service Business
      65




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Online Games Business
       B. Liquidity and Capital Resources
   66




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
    
    the rate at which we enter into strategic transactions;
 
    
    the rate at which we expand our operations and employee base;
 
    
    the timing of entry into new markets and new services offered;
 
    
    changes in revenues and cost splits with our business partners;
 
    
    the rate at which we invest in developing and licensing our products and upgrading
and maintaining our network and future technologies; and
 
    
    the rate at which we grow and monetize our customer bases.
        67




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Capital Expenditures
  Indebtedness
     Dividends From Our Subsidiaries
        68




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C. Research, Development, Patents and Licenses, etc.
  D. Trend Information
   E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
 Payment Due by Period (in US dollars)Within 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    >5 years
    
    
    Total1. Operating leases
    
    
    5,255,902
    
    
    
    8,975,000
    
    
    
    5,683,733
    
    
    
    1,747,162
    
    
    
    21,661,7972. License fees
    
    
    1,012,500
    
    
    
    3,300,000
    
    
    
    
    
    
    
    
    
    
    
    4,312,5003. Minimum guarantees against royalties
    
    
    7,815,000
    
    
    
    22,400,000
    
    
    
    5,600,000
    
    
    
    
    
    
    
    35,815,000Total contractual cash obligations
    
    
    14,083,402
    
    
    
    34,675,000
    
    
    
    11,283,733
    
    
    
    1,747,162
    
    
    
    61,789,2974. Other liabilities-accrued pension
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,616
    
    
    
    107,6165. Other long-term obligations
    
    
    
    
    
    
    186,070
    
    
    
    
    
    
    
    
    
    
    
    186,070
   69




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Quantitative and Qualitative Disclosure About Market Risk
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Year Appointed toName
    
    Age
    
    Position
    
    Current PositionDING, Michael Y.J.
    
    
    52
    
    
    Chairman of the Board and Independent Non-Executive Director
    
    
    2009*/2003WANG, Arthur M.
    
    
    48
    
    
    Director and Chief Executive Officer
    
    
    2003HUI, Thomas T.
    
    
    37
    
    
    Director, President and Chief Operating Officer
    
    
    2005/2007BAO, Gilbert
    
    
    45
    
    
    Independent Non-Executive Director
    
    
    2003HSU, Emmet Yu-Jui
    
    
    46
    
    
    Independent Non-Executive Director
    
    
    2003HU ZEE, Nancy Jing-Ying
    
    
    50
    
    
    Independent Non-Executive Director
    
    
    2003LEE, Howe Yong
    
    
    53
    
    
    Independent Non-Executive Director
    
    
    2004LEE, Yichin
    
    
    48
    
    
    Independent Non-Executive Director
    
    
    2003TANG, Quincy
    
    
    46
    
    
    Chief Financial Officer
    
    
    2008WONG, Lester A.
    
    
    42
    
    
    General Counsel
    
    
    2008CAHILL, Robert J.
    
    
    43
    
    
    Head of Gaming software and Services Business
    
    
    2004CHEN, Yautian
    
    
    39
    
    
    Head of Online Games Business in Taiwan and Hong Kong
    
    
    2008WANG, Jim Ji
    
    
    38
    
    
    Head of Online Games Business in the PRC
    
    
    2008
 
 *
    
    Mr. Ding was appointed as chairman of the board of directors of our Company on May 14, 2009
following the resignation of Mr. Daniel Chuen-Tai Wu, the former chairman, on April 29, 2009.  Directors
   70




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Executive Officers
    71




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B. Compensation
 Compensation of Directors and Executive Officers
   Employment of Executive Officers
  C. Board Practices
     72




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D. Employees
   E. Share Ownership
 Share Ownership of Directors and Executive Officers
  Number of
    
    
    Number of SharesCommon
    
    
    Issuable upon exercisePerson
    
    Shares
    
    
    of optionsDING, Michael Y.J.
    
    
    *
    
    
    
    *WANG, Arthur M.
    
    
    *
    
    
    
    2,249,000HUI, Thomas T.
    
    
    *
    
    
    
    1,600,000BAO, Gilbert T.C.
    
    
    *
    
    
    
    *HSU, Emmet Yu-Jui
    
    
    0
    
    
    
    *HU ZEE, Nancy Jing-Ying
    
    
    *
    
    
    
    *LEE, Howe Yong
    
    
    *
    
    
    
    *LEE, Yichin
    
    
    *
    
    
    
    *TANG, Quincy
    
    
    0
    
    
    
    *WONG, Lester A.
    
    
    0
    
    
    
    *CAHILL, Robert J.
    
    
    *
    
    
    
    600,000CHEN, Yautian
    
    
    0
    
    
    
    0WANG, Jim Ji
    
    
    *
    
    
    
    0Directors and Officers as a group
    
    
    *
    
    
    
    5,024,000
 
 *
    
    Less than 1 percent  Employee Share Option Plans and Equity Incentive Plans
 2002 Employee Share Option Plan
   73




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2004 Employee Share Option Plan
      2006 Equity Incentive Plan
    74




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##### Table of Contents



2007 Equity Incentive Plan
      75




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##### Table of Contents



2008 Equity Incentive Plan
     Options
    76




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##### Table of Contents



Employee Share Purchase Plans
   Outstanding Options Granted Under Our Employee Share Option Plans and Equity Incentive Plans
  Ordinary SharesUnderlyingOutstanding
    
    
    Exercise PriceDate of Grant
    
    Options
    
    
    ($/Share)
    
    
    Date of ExpirationAugust 12, 2004
    
    
    3,559,000
    
    
    
    0.79
    
    
    June 29, 2014December 18, 2005
    
    
    400,000
    
    
    
    2.55
    
    
    June 29, 2014August 9, 2007
    
    
    400,000
    
    
    
    10.15
    
    
    August 9, 2017December 1, 2008
    
    
    150,000
    
    
    
    4.24
    
    
    June 29, 2017515,000
    
    
    
    4.24
    
    
    June 19, 2018Total
    
    
    5,024,000
 
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
 A. Major Shareholders
  Percentage ofName of Owner
    
    Shares Owned
    
    
    Shares OwnedBest Method Limited (1)
    
    
    10,799,999
    
    
    
    19.85
    %Criterion Capital Management, LLC
    
    
    7,937,694
    
    
    
    14.59
    %
 
 (1)
    
    Through Best Method Limited, a British Virgin Islands company, Jeffrey Koo, Jr. and Andre Koo
jointly have a beneficial ownership of 10,799,999 common shares of our Company.  77




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B. Related-Party Transactions
    Licensing Contractual Arrangements
  Borrowings
   Stock Transaction
   78




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##### Table of Contents



Stock Option Grants and Employee Share Purchase
  C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
 Financial Statements
  Information on Legal or Arbitration Proceedings
 Class Action
 In re Initial Public Offering Sec Litig In re
GigaMedia Ltd. Initial Public Offering Securities, Litig.
     79




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Patent Litigation
    80




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##### Table of Contents



Dividend Policy
  B. Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
    Common SharesYear Ending December 31
    
    High
    
    
    Low(in US$)2004
    
    $
    2.43
    
    
    $
    0.702005
    
    $
    2.99
    
    
    $
    1.302006
    
    $
    12.38
    
    
    $
    2.902007
    
    $
    24.61
    
    
    $
    9.282008
    
    $
    20.70
    
    
    $
    2.90
 Common SharesYear Ending December 31, 2007
    
    High
    
    
    Low(in US$)First quarter
    
    $
    14.34
    
    
    $
    9.28Second quarter
    
    $
    15.97
    
    
    $
    12.96Third quarter
    
    $
    16.76
    
    
    $
    9.45Fourth quarter
    
    $
    24.61
    
    
    $
    16.43
  81




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##### Table of Contents



Common SharesYear Ending December 31, 2008
    
    High
    
    
    Low(in US$)First quarter
    
    $
    20.70
    
    
    $
    14.24Second quarter
    
    $
    19.26
    
    
    $
    11.93Third quarter
    
    $
    13.32
    
    
    $
    6.83Fourth quarter
    
    $
    7.30
    
    
    $
    2.90
 Common SharesYear Ending December 31, 2009
    
    High
    
    
    Low(in US$)First quarter
    
    $
    7.47
    
    
    $
    4.33Second quarter (through June 25, 2009)
    
    $
    7.02
    
    
    $
    5.29
 Common SharesMonthly Highs and Lows
    
    High
    
    
    Low(in US$)December 2008
    
    $
    6.48
    
    
    $
    4.24January 2009
    
    $
    6.92
    
    
    $
    5.63February 2009
    
    $
    7.47
    
    
    $
    5.85March 2009
    
    $
    6.36
    
    
    $
    4.33April 2009
    
    $
    7.02
    
    
    $
    5.51May 2009
    
    $
    6.70
    
    
    $
    5.79June 2009 (only through June 25, 2009)
    
    $
    6.30
    
    
    $
    5.29
    
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
   82




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B.
    
    Memorandum and Articles of Association
   C. Material Contracts
  Sale of Internet Access and Service Business
 Share Sale and Purchase Agreement among Champion Limited, Gigamedia International Holdings
Limited and GigaMedia, dated August 28, 2008
  Share Sale and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin
GigaMedia, dated August 28, 2008
  Asset Sale and Purchase Agreement among Ko Ying Co., Ltd., Hoshin GigaMedia and China Network
Systems Co., Ltd., dated August 28, 2008
  Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3,
2008
  Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated
September 3, 2008
   83




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##### Table of Contents



T2CN Agreement with Jinyou
  Other Material Contracts
  D. Exchange Controls
    E. Taxation
 Singapore Tax Considerations
 Taxation of Dividends received by Singapore Resident Shareholders
    84




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##### Table of Contents




    
    the dividends are received from a jurisdiction with a maximum tax rate on the trade
or business income of a company of at least 15 percent; and
 
    
    the dividends themselves, or the income from which they are paid, have been subject
to tax in the foreign jurisdiction or have been exempted from tax under an incentive
granted for substantive business activities.
    Gains on Disposal of Shares
  Stamp Duty
    85




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##### Table of Contents



Singapore Estate Duty
     Goods and Services Tax (GST)
    U.S. Tax Considerations
 U.S. Federal Income Tax Considerations for U.S. Holders
  
    
    bank;
 
    
    broker-dealer;
 
    
    financial institution or insurance company;
  86




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##### Table of Contents




    
    tax-exempt entity;
 
    
    person holding Shares as part of a straddle, hedge, conversion or other integrated
investment;
 
    
    a person owning, actually or constructively, 10 percent or more of the combined
voting power of all classes of our stock; or
 
    
    a person whose functional currency is not the U.S. dollar.
   
    
    individual who is a citizen or resident of the United States;
 
    
    corporation, or other entity treated as a corporation, created or organized under
the laws of the United States or any political subdivision thereof;
 
    
    estate, the income of which is subject to U.S. federal income taxation regardless of
its source; or
 
    
    trust if (1) it is subject to the primary supervision of a court within the United
States and one or more U.S. persons have the authority to control all substantial
decisions of the trust, or (2) it has otherwise elected to be treated as a U.S. person
under the Internal Revenue Code.
  3⁄4
 Taxation of Dividends
   87




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Sale or other disposition of Shares.
 Passive Foreign Investment Company Rules
   88




---



##### Table of Contents




    
    excess distribution or gain would be allocated ratably over your holding period for
the Shares;
 
    
    amount allocated to the current taxable year and any taxable year prior to the first
taxable year in which we are classified as a PFIC (a pre-PFIC year) would be taxable
as ordinary income;
 
    
    amount allocated to each prior taxable year, other than the current taxable year or
a pre-PFIC year, would be subject to tax at the highest tax rate in effect applicable
to you for that year; and
 
    
    interest charge generally applicable to underpayments of tax would be imposed on the
tax attributable to each prior taxable year, other than the current taxable year or a
pre-PFIC year.
    Information Reporting and Backup Withholding
   
    
    a U.S. person;
 
    
    a foreign person 50 percent or more of whose gross income is effectively connected
with a U.S. trade or business for a specified three-year period;
  89




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##### Table of Contents




    
    a controlled foreign corporation for U.S. tax purposes; or
 
    
    a foreign partnership, if at any time during its tax year;
 
    
    one or more of its partners are U.S. holders (as defined in U.S. Treasury
regulations) who in the aggregate hold more than 50 percent of the income or capital
interest in the partnership; or
 
    
    such foreign partnership is engaged in a U.S. trade or business;
   F. Dividends and Paying Agents
  G. Statements by Experts
  H. Documents on Display
    I. Subsidiary Information
   90




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##### Table of Contents



ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
     Interest Rate Risk
    91




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##### Table of Contents



Other Market Risks
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Material Modification to the Instruments Defining the Rights of Security Holders
  B. Material Modification to the Rights of Registered Securities by Issuing or Modifying or any
Other Class of Securities
  C. Withdrawal or Substitution of a Material Amount of the Assets Securing any Registered
Securities
  D. Change of Trustees or Paying Agents for any Registered Securities
  E. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   92




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting
    Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control Over Financial Reporting
  
 ITEM 16. Reserved
 
 ITEM16A. AUDIT COMMITTEE FINANCIAL EXPERT
   93




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ITEM 16B. CODE OF ETHICS
    
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Years Ended December 31,2007
    
    
    2008(in US$)
    
    
    (in US$)Audit Fees
    
    
    1,036,738
    
    
    
    1,190,974Audit-Related Fees
    
    
    9,867
    
    
    
    0Tax Fees
    
    
    42,847
    
    
    
    23,004All Other Fees
    
    
    0
    
    
    
    0
 A. Audit Fees
  B. Audit-Related Fees
  C. Tax Fees
  D. All Other Fees
   94




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##### Table of Contents



E. Audit Committee Pre-Approval Policies and Procedures
   
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANTS
  
 ITEM 16G. CORPORATE GOVERNANCE
 Summary of Significant Differences in Corporate Governance Practices
   
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
   95




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ITEM 18. FINANCIAL STATEMENTS
  Page(a) Report of Independent Registered Public Accounting Firm
    
    
    F-13⁄4F-2(b) Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-33⁄4F-4(c) Consolidated Statements of Operations for the years ended December 31, 2006,
2007 and 2008
    
    
    F-5(d) Consolidated Statements of Shareholders Equity for the years ended
December 31, 2006, 2007 and 2008
    
    
    F-6(e) Consolidated Statements of Cash Flows for the years ended December 31, 2006,
2007 and 2008
    
    
    F-73⁄4F-8(f) Notes to the Consolidated Financial Statements
    
    
    F-93⁄4F-89
 
 ITEM 19. EXHIBITS
 EXHIBIT
    
    INDEX1.1
    
    
    Amended Memorandum and Articles of Association of our Company, incorporated by reference to Exhibit
1.3 to our annual report for the year 2006 on Form 20-F filed with the SEC on June 29, 20074.1
    
    
    End-User License Agreement between Internet Media Licensing Limited and Ultra Internet Media, S.A.,
dated April 1, 2004, incorporated by reference to Exhibit 4.41 to our annual report for the year 2004
on Form 20-F filed with the SEC on June 30, 20054.2
    
    
    Second Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2006, incorporated by reference to Exhibit 4.41 to our annual
report for the year 2005 on Form 20-F filed with the SEC on June 28, 20064.3
    
    
    Third Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2007, incorporated by reference to Exhibit 4.50 to our annual
report for the year 2006 on Form 20-F filed with the SEC on June 29, 20074.4
    
    
    Fourth Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2008#4.5
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Entertainment, dated
November 15, 2006, incorporated by reference to Exhibit 4.55 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.6
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Entertainment, dated April 1, 2007, incorporated by reference to Exhibit 4.56 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.7
    
    
    Exclusive Technical Service and Consultancy Agreement between T2 Entertainment and T2 Technology,
dated November 15, 2006, incorporated by reference to Exhibit 4.57 to our annual report for the year
2007 on Form 20-F filed with the SEC on June 30, 20084.8
    
    
    Supplemental Agreement to Exclusive Technical Service and Consultancy Agreement between T2
Entertainment and T2 Technology, dated April 1, 2007, incorporated by reference to Exhibit 4.58 to our
annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.9
    
    
    Agreement for Pledge of Shares in T2 Entertainment between Wang Chi, Lu Ning and T2 Technology, dated
February 9, 2007, incorporated by reference to Exhibit 4.59 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.10
    
    
    Exclusive Call Option Agreement regarding T2 Entertainment between Wang Chi, Lu Ning, T2 Entertainment
and T2 Technology, dated February 9, 2007, incorporated by reference to Exhibit 4.60 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 2008
  96




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EXHIBIT
    
    INDEX4.11
    
    
    Proxy Voting Agreement regarding T2 Entertainment between T2 Technology, T2 Entertainment, Wang Chi
and Lu Ning, dated February 9, 2007, incorporated by reference to Exhibit 4.61 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.12
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Advertisement, dated
November 15, 2006, incorporated by reference to Exhibit 4.62 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.13
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Advertisement, dated January 1, 2007, incorporated by reference to Exhibit 4.63 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.14
    
    
    Agreement for Pledge of Shares in T2 Advertisement between Chi Min, Chang Tao and T2 Technology, dated
March 20, 2008, incorporated by reference to Exhibit 4.64 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.15
    
    
    Exclusive Call Option Agreement regarding T2 Advertisement between Chi Min, Chang Tao, T2
Advertisement and T2 Technology, dated March 20, 2008, incorporated by reference to Exhibit 4.65 to
our annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.16
    
    
    Proxy Voting Agreement regarding T2 Advertisement between T2 Technology, T2 Advertisement, Chi Min and
Chang Tao, dated March 20, 2008, incorporated by reference to Exhibit 4.66 to our annual report for
the year 2007 on Form 20-F filed with the SEC on June 30, 20084.17
    
    
    Share Purchase Agreement between William Zhu and GigaMedia China Limited, dated June 3, 2007,
incorporated by reference to Exhibit 4.67 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.18
    
    
    Share Purchase Agreement between Yu-Chia Lee and GigaMedia China Limited, dated June 6, 2007,
incorporated by reference to Exhibit 4.68 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.19
    
    
    Share Purchase Agreement between Zheng Bin and GigaMedia China Limited, dated June 10, 2007,
incorporated by reference to Exhibit 4.69 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.20
    
    
    Share Purchase Agreement between J&R Music LLC, Ya-Tsen Lin and GigaMedia China Limited, dated July 5,
2007, incorporated by reference to Exhibit 4.70 to our annual report for the year 2007 on Form 20-F
filed with the SEC on June 30, 20084.21
    
    
    Share Purchase Agreement between Kingland Overseas Development Inc. and GigaMedia China Limited, dated
July 6, 2007, incorporated by reference to Exhibit 4.71 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.22
    
    
    Share Purchase Agreement between Jim Ji Wang and GigaMedia China Limited, dated July 6, 2007,
incorporated by reference to Exhibit 4.72 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.23
    
    
    Share Purchase Agreement between Marvel City Investments Limited and GigaMedia China Limited, dated
May 26, 2008, incorporated by reference to Exhibit 4.73 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.24
    
    
    Agreement for Pledge of Shares in Jinyou among Yang Zhuojun, Tan Yihui and T2 Technology, dated June
15, 2009#4.25
    
    
    Exclusive Call Option Agreement regarding Jinyou among Yang Zhuojun, Tan Yihui, Jinyou and T2
Technology, dated June 15, 2009#4.26
    
    
    Proxy Voting Agreement regarding Jinyou among T2 Technology, Jinyou, Yang Zhuojun and Tan Yihui, dated
June 15, 2009#
  97




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##### Table of Contents



EXHIBIT
    
    INDEX4.27
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and Jinyou, dated November 26,
2007#4.28
    
    
    Exclusive Technical Service and Consultancy Agreement between Jinyou and T2 Technology, dated November
26, 2007#4.29
    
    
    Share Sale and Purchase Agreement among Champion Limited, Gigamedia International Holdings Limited
and GigaMedia, dated August 28, 2008#4.30
    
    
    Share Sale and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin GigaMedia, dated
August 28, 2008#4.31
    
    
    Asset Sale and Purchase Agreement among Ko Ying, Hoshin GigaMedia and China Network Systems Co., Ltd.,
dated August 28, 2008#4.32
    
    
    Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3, 2008#4.33
    
    
    Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated September 3,
2008#8.1
    
    
    List of Subsidiaries#12.1
    
    
    Certification by our Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act#12.2
    
    
    Certification by our Chief Financial Officer pursuant to Rule13a-14(b) of the Securities Exchange Act#13.1
    
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#13.2
    
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#15.1
    
    
    Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm#
 
 #
    
    Filed herewith.  98




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##### Table of Contents



SIGNATURE
  GIGAMEDIA LIMITEDBy:
    
    /s/ Arthur M. WangArthur M. WangChief Executive OfficerDate: June 26, 2009
  99




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
    F-1




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##### Table of Contents



Internal ControlIntegrated Framework
  
  F-2




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
December 31, 2007 and 2008
  December 312007
    
    
    2008ASSETSCURRENT ASSETSCash and cash equivalents (Note 9)
    
    $
    68,563
    
    
    $
    95,953Marketable securities-current (Note 10)
    
    
    11,354
    
    
    
    3,419Accounts receivable-net (Note 11)
    
    
    18,291
    
    
    
    15,188Prepaid expenses (Note 1)
    
    
    5,615
    
    
    
    9,907Restricted cash (Note 13)
    
    
    6,247
    
    
    
    Other current assets (Notes 14 and 23)
    
    
    5,347
    
    
    
    4,332Total Current Assets
    
    
    115,417
    
    
    
    128,799Marketable securities-noncurrent (Note 12)
    
    
    21,018
    
    
    
    26,041Investments
    
    
    4,612
    
    
    
    1,905PROPERTY, PLANT AND EQUIPMENTLand and buildings
    
    
    1,853
    
    
    
    1,832Information and communication equipment
    
    
    23,163
    
    
    
    11,601Office furniture and fixtures
    
    
    2,029
    
    
    
    2,575Leasehold improvements
    
    
    2,222
    
    
    
    5,115Other
    
    
    2,020
    
    
    
    25031,287
    
    
    
    21,373Less: Accumulated depreciation
    
    
    (18,279
    )
    
    
    (7,905
    )13,008
    
    
    
    13,468GOODWILL (Notes 5 and 6)
    
    
    85,149
    
    
    
    87,098INTANGIBLE ASSETS-NET (Notes 5 and 7)
    
    
    26,060
    
    
    
    28,930OTHER ASSETSRestricted cash (Note 13)
    
    
    
    
    
    
    2,125Refundable deposits
    
    
    1,528
    
    
    
    7,265Prepaid licensing and royalty fees (Note 24)
    
    
    16,739
    
    
    
    20,540Other (Note 23)
    
    
    334
    
    
    
    622Total Other Assets
    
    
    18,601
    
    
    
    30,552TOTAL ASSETS
    
    $
    283,865
    
    
    $
    316,793
   F-3




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED BALANCE SHEETS(Continued)
December 31, 2007 and 2008
  December 312007
    
    
    2008LIABILITIES & SHAREHOLDERS EQUITYCURRENT LIABILITIESShort-term borrowings (Notes 15 and 24)
    
    $
    33,301
    
    
    $
    15,243Accounts payable
    
    
    1,922
    
    
    
    899Accrued compensation
    
    
    5,750
    
    
    
    3,503Accrued expenses (Note 16)
    
    
    9,151
    
    
    
    11,345Player account balances
    
    
    27,136
    
    
    
    32,827Other current liabilities (Notes 17 and 23)
    
    
    14,652
    
    
    
    12,386Total Current Liabilities
    
    
    91,912
    
    
    
    76,203OTHER LIABILITIESAccrued pension liabilities (Note 19)
    
    
    436
    
    
    
    108Other (Notes 23 and 25)
    
    
    1,042
    
    
    
    3,406Total Other Liabilities
    
    
    1,478
    
    
    
    3,514Total Liabilities
    
    
    93,390
    
    
    
    79,717MINORITY INTERESTS
    
    
    9,810
    
    
    
    8,620COMMITMENTS AND CONTINGENCIES (Notes 25 and 26)
    
    
    
    
    
    
    SHAREHOLDERS EQUITY (Note 20)Common shares, no par value, and additional
paid-in capital; issued and outstanding 53,700
thousand and 54,365 thousand shares on December
31, 2007 and 2008
    
    
    296,793
    
    
    
    300,021Accumulated deficit
    
    
    (89,692
    )
    
    
    (45,304
    )Accumulated other comprehensive loss
    
    
    (26,436
    )
    
    
    (26,261
    )Total Shareholders Equity
    
    
    180,665
    
    
    
    228,456TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    283,865
    
    
    $
    316,793
   F-4




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2006, 2007 and 2008
  2006
    
    
    2007
    
    
    2008OPERATING REVENUESGaming software and service revenues
    
    $
    55,019
    
    
    $
    118,950
    
    
    $
    144,765Online game and service revenues
    
    
    18,692
    
    
    
    32,764
    
    
    
    45,604Total
    
    
    73,711
    
    
    
    151,714
    
    
    
    190,369OPERATING COSTSCost of gaming software and service revenues
    
    
    (7,824
    )
    
    
    (16,201
    )
    
    
    (22,770
    )Cost of online game and service revenues
    
    
    (3,667
    )
    
    
    (9,118
    )
    
    
    (12,404
    )(11,491
    )
    
    
    (25,319
    )
    
    
    (35,174
    )GROSS PROFIT
    
    
    62,220
    
    
    
    126,395
    
    
    
    155,195OPERATING EXPENSESProduct development and engineering expenses
    
    
    (5,244
    )
    
    
    (7,338
    )
    
    
    (13,455
    )Selling and marketing expenses
    
    
    (27,653
    )
    
    
    (60,106
    )
    
    
    (74,173
    )General and administrative expenses
    
    
    (11,096
    )
    
    
    (20,983
    )
    
    
    (25,035
    )Bad debt expenses (Notes 11 and 14)
    
    
    (448
    )
    
    
    (548
    )
    
    
    (2,905
    )Impairment loss on prepaid licensing fees and intangible assets (Note 1)
    
    
    
    
    
    
    
    
    
    
    (1,524
    )(44,441
    )
    
    
    (88,975
    )
    
    
    (117,092
    )INCOME FROM OPERATIONS
    
    
    17,779
    
    
    
    37,420
    
    
    
    38,103NON-OPERATING INCOME (EXPENSES)Interest income
    
    
    716
    
    
    
    1,434
    
    
    
    1,460Gains on sales of marketable securities
    
    
    70
    
    
    
    184
    
    
    
    373Interest expense
    
    
    (428
    )
    
    
    (547
    )
    
    
    (976
    )Foreign exchange gain (loss)
    
    
    (122
    )
    
    
    (679
    )
    
    
    240Loss on disposal of property, plant and equipment
    
    
    (3
    )
    
    
    (102
    )
    
    
    (253
    )Loss on equity method investments (Note 1)
    
    
    
    
    
    
    (369
    )
    
    
    (3,010
    )Other (Note 22)
    
    
    684
    
    
    
    2,143
    
    
    
    842917
    
    
    
    2,064
    
    
    
    (1,324
    )INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST
    
    
    18,696
    
    
    
    39,484
    
    
    
    36,779INCOME TAX EXPENSES (Note 23)
    
    
    (523
    )
    
    
    (401
    )
    
    
    (1,069
    )INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST
    
    
    18,173
    
    
    
    39,083
    
    
    
    35,710MINORITY INTEREST
    
    
    (321
    )
    
    
    (1,281
    )
    
    
    (757
    )INCOME FROM CONTINUING OPERATIONS
    
    
    17,852
    
    
    
    37,802
    
    
    
    34,953INCOME FROM DISCONTINUED OPERATIONS-NET OF TAX (Note 4)
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435NET INCOME
    
    $
    30,784
    
    
    $
    38,890
    
    
    $
    44,388EARNINGS PER SHARE (Note 2)Basic:Income from continuing operations
    
    $
    0.35
    
    
    $
    0.72
    
    
    $
    0.65Income from discontinued operations
    
    
    0.25
    
    
    
    0.02
    
    
    
    0.17Net income
    
    $
    0.60
    
    
    $
    0.74
    
    
    $
    0.82Diluted:Income from continuing operations
    
    $
    0.30
    
    
    $
    0.63
    
    
    $
    0.58Income from discontinued operations
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.16Net income
    
    $
    0.51
    
    
    $
    0.65
    
    
    $
    0.74WEIGHTED AVERAGE SHARES USED TO COMPUTE
EARNINGS PER SHARE (Note 2)Basic
    
    
    50,921
    
    
    
    52,876
    
    
    
    54,110Diluted
    
    
    61,114
    
    
    
    60,022
    
    
    
    60,152
   F-5




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Years Ended December 31, 2006, 2007 and 2008
  Common shares
    
    
    
    
    
    
    Accumulated otherand additional paid-in capital
    
    
    Accumulated
    
    
    comprehensiveShares
    
    
    Amount
    
    
    deficit (Note 20)
    
    
    income (loss)
    
    
    TotalBalance as of January 1, 2006
    
    
    50,344
    
    
    $
    287,920
    
    
    $
    (159,223
    )
    
    $
    (28,049
    )
    
    $
    100,648Issuance of common shares from exercise of stock options
    
    
    1,151
    
    
    
    1,265
    
    
    
    
    
    
    
    
    
    
    
    1,265Stock-based compensation
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    310Adjustment for initial application of FAS 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235Net income
    
    
    
    
    
    
    
    
    
    
    30,784
    
    
    
    
    
    
    
    30,784Components of other comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    335Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    510
    
    
    
    510Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,629Balance as of December 31, 2006
    
    
    51,495
    
    
    
    289,495
    
    
    
    (128,439
    )
    
    
    (26,969
    )
    
    
    134,087Issuance of common shares from exercise of stock options and RSUs
    
    
    1,979
    
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    2,733Issuance of common shares for acquisition (Note 5)
    
    
    226
    
    
    
    2,703
    
    
    
    
    
    
    
    
    
    
    
    2,703Stock-based compensation
    
    
    
    
    
    
    1,862
    
    
    
    
    
    
    
    
    
    
    
    1,862Adjustment for initial application of FIN 48 (Note 23)
    
    
    
    
    
    
    
    
    
    
    (143
    )
    
    
    
    
    
    
    (143
    )Net income
    
    
    
    
    
    
    
    
    
    
    38,890
    
    
    
    
    
    
    
    38,890Components of other comprehensive income:Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    58Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    529Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,423Balance as of December 31, 2007
    
    
    53,700
    
    
    
    296,793
    
    
    
    (89,692
    )
    
    
    (26,436
    )
    
    
    180,665Issuance of common shares from exercise of stock options and RSUs
    
    
    665
    
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    495Stock-based compensation
    
    
    
    
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    2,733Net income
    
    
    
    
    
    
    
    
    
    
    44,388
    
    
    
    
    
    
    
    44,388Components of other comprehensive income:Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    (282
    )Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    95Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    362Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,563Balance as of December 31, 2008
    
    
    54,365
    
    
    $
    300,021
    
    
    $
    (45,304
    )
    
    $
    (26,261
    )
    
    $
    228,456
   F-6




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##### Table of Contents



GIGAMEDIA LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2006, 2007 and 2008
 2006
    
    
    2007
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    30,784
    
    
    $
    38,890
    
    
    $
    44,388Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    3,167
    
    
    
    3,184
    
    
    
    4,031Amortization
    
    
    2,876
    
    
    
    3,214
    
    
    
    4,342Stock-based compensation
    
    
    310
    
    
    
    1,862
    
    
    
    2,780Impairment loss on prepaid licensing fees and intangible assets
    
    
    
    
    
    
    
    
    
    
    1,524Provision for bad debt expenses
    
    
    715
    
    
    
    743
    
    
    
    2,953Gain on divestiture of business
    
    
    (7,668
    )
    
    
    
    
    
    
    (11,014
    )Gain on sales of investment option rights
    
    
    
    
    
    
    (498
    )
    
    
    Gain on cancellation of prefered share call options
    
    
    
    
    
    
    (1,069
    )
    
    
    Loss on disposal of property, plant and equipment
    
    
    37
    
    
    
    134
    
    
    
    282Gain on sale of marketable securities
    
    
    (2,189
    )
    
    
    (205
    )
    
    
    (400
    )Loss on equity method investments
    
    
    
    
    
    
    369
    
    
    
    3,010Interest income from premium of convertible notes
    
    
    (140
    )
    
    
    
    
    
    
    Gain on early redemption of convertible notes
    
    
    (625
    )
    
    
    
    
    
    
    Minority interest
    
    
    321
    
    
    
    1,281
    
    
    
    757Other
    
    
    63
    
    
    
    (86
    )
    
    
    300Net changes in operating assets and liabilities, net of
business acquisitions:Accounts receivable
    
    
    (5,723
    )
    
    
    (3,864
    )
    
    
    465Prepaid expenses
    
    
    (2,422
    )
    
    
    (2,316
    )
    
    
    (4,373
    )Other current assets
    
    
    (438
    )
    
    
    3,673
    
    
    
    (2,304
    )Accounts payable
    
    
    69
    
    
    
    (327
    )
    
    
    33Accrued expenses
    
    
    2,419
    
    
    
    2,893
    
    
    
    2,326Accrued compensation
    
    
    2,264
    
    
    
    1,991
    
    
    
    (2,057
    )Player account balances
    
    
    7,440
    
    
    
    17,609
    
    
    
    5,691Other current liabilities
    
    
    254
    
    
    
    (1,259
    )
    
    
    336Accrued pension liabilities
    
    
    (150
    )
    
    
    (62
    )
    
    
    (167
    )Prepaid licensing and royalty fees
    
    
    (3,374
    )
    
    
    (9,829
    )
    
    
    (4,685
    )Other
    
    
    1,553
    
    
    
    (165
    )
    
    
    2,532Net cash provided by operating activities
    
    
    29,543
    
    
    
    56,163
    
    
    
    50,750CASH FLOWS FROM INVESTING ACTIVITIES:Decrease (increase) in restricted cash
    
    
    (2,697
    )
    
    
    (3,550
    )
    
    
    4,122Proceeds from disposal of marketable securities
    
    
    26,700
    
    
    
    20,151
    
    
    
    25,095Divestiture of business, net of cash transferred
    
    
    3,318
    
    
    
    4,930
    
    
    
    16,471Purchase of property, plant and equipment
    
    
    (2,716
    )
    
    
    (4,900
    )
    
    
    (8,814
    )Proceeds from disposal of property, plant and equipment
    
    
    8
    
    
    
    46
    
    
    
    35Proceeds from sales of investment option rights
    
    
    
    
    
    
    580
    
    
    
    Purchase of marketable securities
    
    
    (42,509
    )
    
    
    (26,552
    )
    
    
    (24,746
    )Purchase of investments
    
    
    
    
    
    
    (1,827
    )
    
    
    (190
    )Purchase of intangible assets
    
    
    (2,583
    )
    
    
    (4,642
    )
    
    
    (7,509
    )Acquisitions, net of cash acquired
    
    
    (26,760
    )
    
    
    (13,983
    )
    
    
    (4,642
    )Increase in loan receivable
    
    
    
    
    
    
    (2,500
    )
    
    
    Increase in refundable deposits
    
    
    (197
    )
    
    
    (610
    )
    
    
    (5,862
    )Decrease in other assets
    
    
    (82
    )
    
    
    
    
    
    
    Other
    
    
    (368
    )
    
    
    (314
    )
    
    
    (380
    )Net cash used in investing activities
    
    
    (47,886
    )
    
    
    (33,171
    )
    
    
    (6,420
    )
   F-7




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)
For the Years Ended December 31, 2006, 2007 and 2008
  2006
    
    
    2007
    
    

2008CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from (repayment of) short-term borrowings
    
    
    12,853
    
    
    
    20,126
    
    
    
    (18,058
    )Capital contribution received from minority shareholders
    
    
    
    
    
    
    30
    
    
    
    Redemption of convertible notes
    
    
    (15,000
    )
    
    
    
    
    
    
    Cash received from the exercise of stock options
    
    
    1,265
    
    
    
    2,733
    
    
    
    495Cash dividend to minority interest shareholders of variable interest entity
    
    
    (100
    )
    
    
    (200
    )
    
    
    (300
    )Other
    
    
    (80
    )
    
    
    (117
    )
    
    
    (13
    )Net cash (used in) provided by financing activities
    
    
    (1,062
    )
    
    
    22,572
    
    
    
    (17,876
    )Exchange difference
    
    
    46
    
    
    
    627
    
    
    
    936NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (19,359
    )
    
    
    46,191
    
    
    
    27,390CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    41,731
    
    
    
    22,372
    
    
    
    68,563CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    22,372
    
    
    $
    68,563
    
    
    $
    95,953SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Interest paid during the year
    
    $
    581
    
    
    $
    621
    
    
    $
    1,008Income tax paid during the year
    
    $
    455
    
    
    $
    827
    
    
    $
    1,412NON-CASH FINANCING AND INVESTING ACTIVITIES:Change in unrealized holding (loss) gain on available-for-sale securities
    
    $
    335
    
    
    $
    58
    
    
    $
    (282
    )Accrual for investing in marketable securities
    
    
    
    
    
    $
    2,204
    
    
    
    Issuance of common shares for acquisition
    
    
    
    
    
    $
    2,703
    
    
    
    Issuance of convertible notes as acquisition consideration
    
    $
    15,000
    
    
    
    
    
    
    
    Adjustment to acquisition purchase price
    
    $
    5,000
    
    
    
    
    
    
    
    Divestiture of business  consideration receivable
    
    $
    4,966
    
    
    
    
    
    
    
    1,006
   F-8




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##### Table of Contents



NOTE 1.
    
    BUSINESS OVERVIEW, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Business Overview
     (b) Basis of Presentation
   F-9




---



##### Table of Contents



Principles of Consolidation
  Foreign Currency Translation
  (c) Summary of significant accounting policies
 Use of Estimates
   F-10




---



##### Table of Contents



Revenue Recognition
 General
   Multiple-Element Arrangements
 Revenue Arrangements with Multiple Deliverables
  Gaming Software and Service Revenues
   F-11




---



##### Table of Contents



Software Revenue Recognition
 Online Game and Service Revenues
    F-12




---



##### Table of Contents



Reporting Revenue Gross as a Principal Versus Net as an Agent
  Discontinued Operations
    F-13




---



##### Table of Contents



Player Account Balances
  Deferred Revenues
  Operating Costs
  Prepaid Licensing and Royalty Fees
   F-14




---



##### Table of Contents



Fair Value Measurement
 Fair
Value Measurements Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes
of Lease Classification or Measurement under Statement 13 Effective Date of FASB Statement No. 157 Determining
the Fair value of a Financial Asset When the Market for That Asset Is Not Active Accounting for Leases
  F-15




---



##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities
  Cash Equivalents
  Marketable Securities
 Accounting for Certain Investments in Debt and Equity Securities
  F-16




---



##### Table of Contents



Investments
 The Equity Method of Accounting for
Investments in Common Stock
    F-17




---



##### Table of Contents



Allowance for Doubtful Accounts
    F-18




---



##### Table of Contents



Property, Plant and Equipment
  Categories
    
    YearsBuildings
    
    
    50Information and communication equipment
    
    
    2 to 5Office furniture and equipment
    
    
    3 to 5Leasehold improvements
    
    
    2 to 5Other
    
    
    5
   AmountYear
    
    (in US$ thousands)2009
    
    $
    432010
    
    
    20
 Acquisitions
 Business Combinations Goodwill and Other Intangible Assets
  F-19




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##### Table of Contents



Intangible Assets and Goodwill
  Impairment of Intangible Assets, Goodwill and Long-Lived Assets
  Accounting for the Impairment or Disposal of Long-Lived Assets
  F-20




---



##### Table of Contents



Software Cost
 Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed
 Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
 Product Development and Engineering
   F-21




---



##### Table of Contents



Advertising
   Leases
  Share-Based Compensation
 Share-Based Payment
  F-22




---



##### Table of Contents



Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or
In Conjunction with Selling Goods or Services
 Retirement Plan and Net Periodic Pension Cost
 Employers
Accounting for Defined Benefit Pension and Other Post-Retirement Plans  An Amendment of FASB
Statements Nos. 87, 88, 106, and 132(R)
  Comprehensive Income (Loss)
   F-23




---



##### Table of Contents



Accounting for Income Taxes
 Accounting for Income Taxes
 Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
  F-24




---



##### Table of Contents



Earnings Per Share
 Earnings Per Share
 Minority Interest
     F-25




---



##### Table of Contents



Reclassification
  Recent Accounting Pronouncements
 Business Combinations (FAS 141(R))
   F-26




---



##### Table of Contents



Determination of the Useful Life of Intangible
Assets
 The Hierarchy of Generally Accepted Accounting
Principles .
  F-27




---



##### Table of Contents



Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entitys Own Stock
 Equity Method Investment Accounting Considerations
  F-28




---



##### Table of Contents



NOTE 2. EARNINGS PER SHARE
 (in US$ thousands, except per share figures)
    
    2006
    
    
    2007
    
    
    2008Weighted average outstanding sharesBasic
    
    
    50,921
    
    
    
    52,876
    
    
    
    54,110Effect of dilutive securitiesEmployee share-based compensation
    
    
    7,509
    
    
    
    7,146
    
    
    
    6,042Convertible notes
    
    
    2,684
    
    
    
    
    
    
    
    Diluted
    
    
    61,114
    
    
    
    60,022
    
    
    
    60,152Earnings Per Share  BasicIncome from continuing operations
    
    $
    17,852
    
    
    $
    37,802
    
    
    $
    34,953Income from discontinued operations,
net of taxes
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435Net income
    
    $
    30,784
    
    
    $
    38,890
    
    
    $
    44,388Earnings per shareContinuing operations
    
    $
    0.35
    
    
    $
    0.72
    
    
    $
    0.65Discontinued operations
    
    
    0.25
    
    
    
    0.02
    
    
    
    0.17$
    0.60
    
    
    $
    0.74
    
    
    $
    0.82Earnings Per Share  DilutedIncome from continuing operations
    
    $
    17,852
    
    
    $
    37,802
    
    
    $
    34,953Interest charges associated with convertible notes
    
    
    288
    
    
    
    
    
    
    
    Income from continuing operations after assumed
conversion of convertible notes
    
    
    18,140
    
    
    
    37,802
    
    
    
    34,953Income from discontinued operations,
net of taxes
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435Net income after assumed conversion of
convertible notes and discontinued operations
    
    $
    31,072
    
    
    $
    38,890
    
    
    $
    44,388Earnings per shareContinuing operations
    
    $
    0.30
    
    
    $
    0.63
    
    
    $
    0.58Discontinued operations
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.16$
    0.51
    
    
    $
    0.65
    
    
    $
    0.74
  F-29




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##### Table of Contents



NOTE 3. VARIABLE-INTEREST ENTITIES
   (in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Total revenue
    
    $
    55,019
    
    
    $
    118,650
    
    
    $
    144,765Net income (loss)
    
    $
    320
    
    
    $
    348
    
    
    $
    (206
    )
   F-30




---



##### Table of Contents



Shareholder Voting Rights Proxy Agreements.
 Exclusive Equity Transfer Call Agreements.
  F-31




---



##### Table of Contents



Exclusive Technical Service and Consultancy Agreement .
 Equity Pledge Agreements .
  (in US$ thousands)
    
    2007
    
    
    2008Net assets
    
    $
    178
    
    
    $
    3,258Total assets
    
    $
    11,666
    
    
    $
    17,524Total liabilities
    
    $
    11,488
    
    
    $
    14,265Total revenues
    
    $
    14,973
    
    
    $
    20,312Net income
    
    $
    2,429
    
    
    $
    1,571
  F-32




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##### Table of Contents



NOTE 4. DIVESTITURES
 Divestiture  ADSL Business
  Divestiture  Internet access and service business
     F-33




---



##### Table of Contents



(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Revenue
    
    $
    20,581
    
    
    $
    15,164
    
    
    $
    9,289Income (loss) from discontinued
operations before tax
    
    $
    6,290
    
    
    $
    1,090
    
    
    $
    (593
    )Gain on sale of the discontinued
operations before tax
    
    
    7,668
    
    
    
    
    
    
    
    11,014Income tax expenses
    
    
    (1,026
    )
    
    
    (2
    )
    
    
    (986
    )Income (loss) from discontinued
operations
    
    $
    12,932
    
    
    $
    1,088
    
    
    $
    9,435
  F-34




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##### Table of Contents



(in US$ thousands)Cash
    
    $
    493Accounts receivable
    
    
    2,325Other current assets
    
    
    1,125Property and equipment
    
    
    4,328Other assets
    
    
    165Total assets
    
    $
    8,436Accounts payable
    
    $
    1,056Other current liabilities
    
    
    759Noncurrent liabilities
    
    
    672Total liabilities
    
    $
    2,487
 NOTE 5. ACQUISITIONS
 Acquisition  T2CN
   2006
   F-35




---



##### Table of Contents



2007
      F-36




---



##### Table of Contents



Amortization life(in US$ thousands)
    
    (in years)
    
    
    AmountCash acquired
    
    
    
    
    
    $
    11,773Marketable securities / Investments
    
    
    
    
    
    
    3,724Other current assets
    
    
    
    
    
    
    5,892Fixed assets / non-current assets
    
    
    
    
    
    
    3,717Intangible assetsCapitalized software cost
    
    
    3.5~5
    
    
    
    2,974Goodwill
    
    
    N/A
    
    
    
    29,354Total assets acquired
    
    
    
    
    
    
    57,434Current liabilities
    
    
    
    
    
    
    11,500Noncurrent liabilities
    
    
    
    
    
    
    1,050Minority interest
    
    
    
    
    
    
    6,171Total liabilities assumed
    
    
    
    
    
    
    18,721Total purchase price
    
    
    
    
    
    $
    38,713
   F-37




---



##### Table of Contents



(in US$ thousands,
    
    Year ended December 31except per share figures)
    
    2006
    
    
    2007Unaudited
    
    
    UnauditedNet revenue
    
    $
    105,629
    
    
    $
    172,473Income from operations
    
    
    4,186
    
    
    
    38,617Net income
    
    
    21,009
    
    
    
    38,980Basic earnings per share
    
    
    0.41
    
    
    
    0.74Diluted earnings per share
    
    
    0.35
    
    
    
    0.65
  2008
      F-38




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##### Table of Contents



Acquisition  FunTown
    F-39




---



##### Table of Contents



Amortization life
    
    
    Original

    
    
    Price
    
    
    Total(in US$ thousands)
    
    (in years)
    
    
    amount
    
    
    adjustment
    
    
    allocationCash acquired
    
    
    
    
    
    $
    463
    
    
    $
    
    
    
    $
    463Accounts receivable
    
    
    
    
    
    
    3,626
    
    
    
    
    
    
    
    3,626Other current assets
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    106Fixed assets / non-current assets
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    628Intangible assetsTrade name and trademark
    
    
    N/A
    
    
    
    10,795
    
    
    
    
    
    
    
    10,795Customer relationships
    
    
    9
    
    
    
    5,546
    
    
    
    
    
    
    
    5,546Completed technology
    
    
    7
    
    
    
    2,301
    
    
    
    
    
    
    
    2,301Self-developed software
    
    
    5
    
    
    
    1,534
    
    
    
    
    
    
    
    1,534Other
    
    
    5
    
    
    
    73
    
    
    
    
    
    
    
    73Goodwill
    
    
    N/A
    
    
    
    21,409
    
    
    
    4,762
    
    
    
    26,171Total assets acquired
    
    
    
    
    
    
    46,481
    
    
    
    4,762
    
    
    
    51,243Current liabilities
    
    
    
    
    
    
    (3,501
    )
    
    
    
    
    
    
    (3,501
    )Noncurrent liabilities
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total liabilities assumed
    
    
    
    
    
    
    (3,502
    )
    
    
    
    
    
    
    (3,502
    )Total purchase price
    
    
    
    
    
    $
    42,979
    
    
    $
    4,762
    
    
    $
    47,741
  F-40




---



##### Table of Contents



NOTE 6 GOODWILL
 Gaming software
    
    
    Online game(in US$ thousands)
    
    and service
    
    
    and service
    
    
    TotalBalance as of December 31, 2006
    
    
    29,243
    
    
    
    26,574
    
    
    $
    55,817Acquisition-T2CN
    
    
    
    
    
    
    29,354
    
    
    
    29,354Post-acquisition adjustment
    
    
    
    
    
    
    (238
    )
    
    
    (238
    )Translation adjustment
    
    
    
    
    
    
    216
    
    
    
    216Balance as of December 31, 2007
    
    
    29,243
    
    
    
    55,906
    
    
    
    85,149Acquisition-T2CN
    
    
    
    
    
    
    1,738
    
    
    
    1,738Other adjustment
    
    
    
    
    
    
    511
    
    
    
    511Translation adjustment
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Balance as of December 31, 2008
    
    $
    29,243
    
    
    $
    57,855
    
    
    $
    87,098
   NOTE 7. INTANGIBLE ASSETS  NET
  December 31, 2007Gross carrying
    
    
    Accumulated(in US$ thousands)
    
    amount
    
    
    amortization
    
    
    NetCompleted technology
    
    $
    3,631
    
    
    $
    (1,966
    )
    
    $
    1,665Trade name, trademark and non-competition agreement
    
    
    11,898
    
    
    
    (423
    )
    
    
    11,475Capitalized software cost
    
    
    12,222
    
    
    
    (3,711
    )
    
    
    8,511Customer relationships
    
    
    5,618
    
    
    
    (1,249
    )
    
    
    4,369Other
    
    
    66
    
    
    
    (26
    )
    
    
    40Total
    
    $
    33,435
    
    
    $
    (7,375
    )
    
    $
    26,060
  F-41




---



##### Table of Contents



December 31, 2008Gross carrying
    
    
    Accumulated(in US$ thousands)
    
    amount
    
    
    amortization
    
    
    NetCompleted technology
    
    $
    3,605
    
    
    $
    (2,288
    )
    
    $
    1,317Trade name, trademark and non-competition agreement
    
    
    11,774
    
    
    
    (539
    )
    
    
    11,235Capitalized software cost
    
    
    19,077
    
    
    
    (6,435
    )
    
    
    12,642Customer relationships
    
    
    5,555
    
    
    
    (1,852
    )
    
    
    3,703Other
    
    
    66
    
    
    
    (33
    )
    
    
    33Total
    
    $
    40,077
    
    
    $
    (11,147
    )
    
    $
    28,930
   Amount(in US$ thousands)2009
    
    $
    5,1472010
    
    
    5,3072011
    
    
    4,2032012
    
    
    1,6672013
    
    
    700$
    17,024
  F-42




---



##### Table of Contents



NOTE 8. FAIR VALUE MEASUREMENTS
     F-43




---



##### Table of Contents



December 31, 2008Fair Value(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    MeasurementsAssetsCash equivalents  time deposits
    
    $
    
    
    
    $
    12,512
    
    
    $
    
    
    
    $
    12,512Marketable securities  current
    
    
    
    
    
    
    3,419
    
    
    
    
    
    
    
    3,419Marketable securities  noncurrent
    
    
    
    
    
    
    
    
    
    
    26,041
    
    
    
    26,041Total
    
    $
    
    
    
    $
    15,931
    
    
    $
    26,041
    
    
    $
    41,972
   F-44




---



##### Table of Contents



Fair Value 
MeasurementsUsing SignificantUnobservable Inputs(Level 3)Marketable Securities -(in US$ thousands)
    
    NoncurrentBeginning Balance
    
    $
    21,018Total gains or losses (realized/unrealized) 

Included in earnings
    
    
    Included in other comprehensive income
    
    
    Purchases and settlements
    
    
    5,023Transfers in and/or out of Level 3
    
    
    Ending Balance
    
    $
    26,041The amount of total gains or losses for the
period included in earnings attributable to
the change in unrealized gains or losses
relating to assets still held at the reporting
date.
    
    None
     F-45




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##### Table of Contents



NOTE 9. CASH AND CASH EQUIVALENTS
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Checking and savings accounts
    
    $
    60,809
    
    
    $
    83,441Time deposits
    
    
    7,754
    
    
    
    12,512Total
    
    $
    68,563
    
    
    $
    95,953
 NOTE 10. MARKETABLE SECURITIES  CURRENT
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Available-for-sale securitiesOpen-end funds
    
    $
    11,354
    
    
    $
    3,419
    F-46




---



##### Table of Contents



NOTE 11. ACCOUNTS RECEIVABLE  NET
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Accounts receivable
    
    $
    19,653
    
    
    $
    15,442Less: Allowance for doubtful accounts
    
    
    (1,362
    )
    
    
    (254
    )Net
    
    $
    18,291
    
    
    $
    15,188
 For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Allowance for doubtful accountsBalance at beginning of year
    
    $
    1,684
    
    
    $
    1,895
    
    
    $
    1,362Business acquisition
    
    
    163
    
    
    
    
    
    
    
    Additions: Provision for bad debt expenses
    
    
    715
    
    
    
    743
    
    
    
    313Less: Write-offs
    
    
    (681
    )
    
    
    (1,279
    )
    
    
    (399
    )Divestiture  Internet access and service business
    
    
    
    
    
    
    
    
    
    
    (1,041
    )Translation adjustment
    
    
    14
    
    
    
    3
    
    
    
    19Balance at end of year
    
    $
    1,895
    
    
    $
    1,362
    
    
    $
    254
  F-47




---



##### Table of Contents



NOTE 12. MARKETABLE SECURITIES  NONCURRENT
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Available-for-sale securitiesDebt securites
    
    $
    21,018
    
    
    $
    26,041
   Accounting for Derivatives Instruments and Hedging
Activities
 Whether an Investor Should Apply the
Equity Method of Accounting to Investment Other Than Common Stock
  F-48




---



##### Table of Contents



NOTE 13. RESTRICTED CASH
  December 31,(in US$ thousands)
    
    2007
    
    
    2008Current assets:Time deposit pledged to banks as guarantees for bank loans
    
    $
    6,247
    
    
    $
    Other assets:Time deposit pledged to a Bank as escrow amount for
divestiture of Internet access and service business (See Note 4,
Divestitures, for additional information)
    
    
    
    
    
    
    2,125Total
    
    $
    6,247
    
    
    $
    2,125
 NOTE 14. OTHER CURRENT ASSETS
  NOTE 15. SHORT-TERM BORROWINGS
   F-49




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##### Table of Contents



NOTE 16. ACCRUED EXPENSES
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Accrued advertising expenses
    
    $
    3,402
    
    
    $
    5,013Accrued professional fees
    
    
    1,832
    
    
    
    2,627Other
    
    
    3,917
    
    
    
    3,705Total
    
    $
    9,151
    
    
    $
    11,345
  F-50




---



##### Table of Contents



NOTE 17. OTHER CURRENT LIABILITIES
 December 31,(in US$ thousands)
    
    2007
    
    
    2008Deferred revenue
    
    $
    7,647
    
    
    $
    7,738Accrual for investing in marketable securities
    
    
    2,204
    
    
    
    Income taxes
    
    
    1,041
    
    
    
    1,431Other
    
    
    3,760
    
    
    
    3,217Total
    
    $
    14,652
    
    
    $
    12,386
 NOTE 18. CONVERTIBLE NOTES
    F-51




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##### Table of Contents



NOTE 19. PENSION BENEFITS
  Defined Benefit Pension Plan
   F-52




---



##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008Change in benefit obligationBenefit obligation at beginning of year
    
    $
    541
    
    
    $
    600Service cost
    
    
    14
    
    
    
    Interest cost
    
    
    15
    
    
    
    11Actuarial gain (loss)
    
    
    27
    
    
    
    (37
    )Curtailment
    
    
    
    
    
    
    (87
    )Divestiture
    
    
    
    
    
    
    (208
    )Translation adjustment
    
    
    3
    
    
    
    6Benefit obligation at end of year
    
    $
    600
    
    
    $
    285Change in plan assetsFair value of plan assets at beginning of year
    
    $
    135
    
    
    $
    204Actual return on plan assets
    
    
    3
    
    
    
    5Employer contribution
    
    
    66
    
    
    
    37Divestiture
    
    
    
    
    
    
    (67
    )Translation adjustment
    
    
    
    
    
    
    (2
    )Fair value of plan assets at end of year
    
    $
    204
    
    
    $
    177Accumulated benefit obligation
    
    $
    (497
    )
    
    $
    (229
    )Funded status
    
    $
    (396
    )
    
    $
    (108
    )
  Pension Benefits(in US$ thousands)
    
    2007
    
    
    2008Accrued benefit cost
    
    $
    (396
    )
    
    $
    (108
    )Accumulated other comprehensive incomeUnrecognized transition obligation
    
    $
    76
    
    
    $
    Unrecognized net gain
    
    
    (257
    )
    
    
    (276
    )Accumulated other comprehensive income
    
    $
    (181
    )
    
    $
    (276
    )
   F-53




---



##### Table of Contents



(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Service cost
    
    $
    12
    
    
    $
    14
    
    
    $
    Interest cost
    
    
    16
    
    
    
    15
    
    
    
    11Expected return on plan assets
    
    
    (4
    )
    
    
    (5
    )
    
    
    (4
    )Amortization of transition obligation
    
    
    4
    
    
    
    4
    
    
    
    Amortization of net gain
    
    
    (47
    )
    
    
    (29
    )
    
    
    (21
    )Net periodic benefit cost
    
    $
    (19
    )
    
    $
    (1
    )
    
    $
    (14
    )Curtailment gain
    
    $
    (42
    )
    
    $
    
    
    
    $
    (87
    )
 Assumptions
  2006
    
    
    2007
    
    
    2008Discount rate
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.50
    %Rate of return on plan assets
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.50
    %Rate of compensation increase
    
    
    1.00
    %
    
    
    1.00
    %
    
    
    1.00
    %
   F-54




---



##### Table of Contents



Defined Contribution Pension Plan
   F-55




---



##### Table of Contents



Taiwan
  North America
   PRC
   F-56




---



##### Table of Contents



Hong Kong
   NOTE 20. SHAREHOLDERS EQUITY
    F-57




---



##### Table of Contents



NOTE 21. SHARE-BASED COMPENSATION
   F-58




---



##### Table of Contents



(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Cost of online game and service revenues
    
    $
    
    
    
    $
    48
    
    
    $
    27Product development & engineering expenses
    
    
    115
    
    
    
    250
    
    
    
    480Selling and marketing expenses
    
    
    56
    
    
    
    142
    
    
    
    244General and administrative expenses
    
    
    54
    
    
    
    1,394
    
    
    
    1,954Pre-tax stock-based compensation expense
    
    
    225
    
    
    
    1,834
    
    
    
    2,705Income tax benefit
    
    
    33
    
    
    
    249
    
    
    
    269Total
stock-based compensation expense reported in continuing operations
    
    $
    192
    
    
    $
    1,585
    
    
    $
    2,436Total stock-based compensation expense
reported in discontinued operations, net
of tax
    
    $
    58
    
    
    $
    28
    
    
    $
    63
   F-59




---



##### Table of Contents



GigaMedia
 (a) Overview of Stock-Based Compensation Plan
 2002 Employee Share Option Plan
  2004 Employee Share Option Plan
  2006 Equity Incentive Plan
   F-60




---



##### Table of Contents



2007 Equity Incentive Plan
  2008 Equity Incentive Plan
    F-61




---



##### Table of Contents



Stock-Basedcompensation
    
    Granted
    
    
    
    
    Options exercise
    
    RSUs grantplan
    
    awards
    
    
    Vesting schedule
    
    price
    
    date fair value2002 plan
    
    
    3,000,000
    
    
    immediately upon granting
    
    $0.79
    
    2004 plan
    
    
    7,528,185
    
    
    immediately upon granting to three years
    
    $0.79 ~ $2.55
    
    2006 plan
    
    
    999,543
    
    
    immediately upon granting to four years
    
    $10.15 ~ $16.6
    
    $9.81 ~ $16.012007 plan
    
    
    1,980,907
    
    
    one to four years
    
    $4.24 ~ $18.17
    
    $4.24 ~ $15.352008 plan
    
    
    560,000
    
    
    four to six years
    
    $4.24
    
    
  (b) Options
    F-62




---



##### Table of Contents



For the years ended December 31,
    
    2006
    
    
    2007
    
    2008Option term (years)
    
    
    
    
    
    2.77
    
    2.77~4.58Volatility
    
    
    
    
    
    57.41%~58.80%
    
    57.83%~64.58%Weighted-average volatility
    
    
    
    
    
    58.68%
    
    64.01%Risk-free interest rate
    
    
    
    
    
    3.24%~4.56%
    
    1.72%~2.88%Dividend yield
    
    
    
    
    
    0%
    
    0%Weighted-average fair value of
option granted
    
    
    
    
    
    $4.46
    
    $2.36
      F-63




---



##### Table of Contents



2006
    
    
    2007
    
    
    2008WeightedWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    -Average
    
    
    AggregateAvg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    No. of Shares
    
    
    Exercise
    
    
    No. of Shares
    
    
    Exercise
    
    
    No. of Shares
    
    
    Contractual
    
    
    ValuePrice
    
    
    (in thousands)
    
    
    Price
    
    
    (in thousands)
    
    
    Price
    
    
    (in thousands)
    
    
    Term
    
    
    (in thousands)Balance at
January 1,
    
    $
    1.11
    
    
    
    10,000
    
    
    $
    1.11
    
    
    
    8,789
    
    
    $
    2.42
    
    
    
    7,912Options granted
    
    
    
    
    
    
    
    
    
    
    10.78
    
    
    
    1,145
    
    
    
    4.69
    
    
    
    1,341Options exercised
    
    
    1.10
    
    
    
    (1,152
    )
    
    
    1.43
    
    
    
    (1,911
    )
    
    
    0.95
    
    
    
    (518
    )Options
Forfeited/canceled
/expired
    
    
    1.48
    
    
    
    (59
    )
    
    
    2.47
    
    
    
    (111
    )
    
    
    9.97
    
    
    
    (448
    )Balance at
December 31,
    
    $
    1.11
    
    
    
    8,789
    
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287
    
    
    
    6.32
    
    
    $
    30,644Exercisable at
December 31,
    
    $
    1.08
    
    
    
    8,318
    
    
    $
    1.06
    
    
    
    6,692
    
    
    $
    1.33
    
    
    
    6,448
    
    
    
    5.59
    
    
    $
    28,851Vested and expected
to vest at
December 31,
    
    $
    1.11
    
    
    
    8,783
    
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287
    
    
    
    6.32
    
    
    $
    30,644
    F-64




---



##### Table of Contents



Options outstanding
    
    
    Options currently exercisableWeighted averageNo. of Shares
    
    
    remaining
    
    
    
    
    No. of SharesExercise price
    
    (in thousands)
    
    
    contractual life
    
    
    Exercise price
    
    (in thousands)under $1
    
    
    5,431
    
    
    5.50 years
    
    under $1
    
    
    5,431$1~$10
    
    
    2,094
    
    
    7.61 years
    
    $1~$10
    
    
    804$10~$20
    
    
    762
    
    
    8.67 years
    
    $10~$20
    
    
    2138,287
    
    
    
    
    
    
    
    
    
    6,448
 (c) RSUs
  Number of units
    
    
    Weighted-average(in thousands)
    
    
    grant date fair valueNonvested at December 31, 2007
    
    
    238
    
    
    $
    10.25Granted
    
    
    634
    
    
    $
    10.65Vested
    
    
    (132
    )
    
    $
    11.12Forfeited
    
    
    (99
    )
    
    $
    10.63Nonvested at December 31, 2008
    
    
    641
    
    
    $
    10.41
    F-65




---



##### Table of Contents



T2CN
 (a) Overview of Stock-Based Compensation Plan
   (b) Options
   For the years ended December 31,
    
    2006
    
    2007
    
    2008Option term (years)
    
    5.63~6.41
    
    5.44~6.02
    
    3.50~6.26Volatility
    
    47.39%~56.10%
    
    44.64%~46.96%
    
    47.85%~57.41%Weighted-average volatility
    
    53.81%
    
    45.03%
    
    48.19%Risk-free interest rate
    
    4.54%~4.82%
    
    4.31%~4.68%
    
    2.20%~4.54%Dividend yield
    
    0%
    
    0%
    
    0%Weighted-average fair value of
option granted
    
    $0.39
    
    $0.52
    
    $0.38
  F-66




---



##### Table of Contents



2007
    
    
    2008Weighted-AverageRemaining
    
    
    AggregateWeighted Avg.
    
    
    No. of Shares
    
    
    Weighted Avg.
    
    
    No. of Shares
    
    
    Contractual
    
    
    Intrinsic ValueExercise Price
    
    
    (in thousands)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Term
    
    
    (in thousands)Balance at
Beginning of the year
    
    $
    1.30
    
    
    
    2,973
    
    
    $
    1.24
    
    
    
    3,300Options granted
    
    
    1.00
    
    
    
    501
    
    
    $
    1.02
    
    
    
    6,500OptionsForfeited/canceled
/expired
    
    
    1.57
    
    
    
    (174
    )
    
    $
    1.15
    
    
    
    (2,959
    )Balance at
December 31,
    
    $
    1.24
    
    
    
    3,300
    
    
    $
    1.07
    
    
    
    6,841
    
    
    
    5.20
    
    
    $
    3,584Exercisable at
December 31,
    
    $
    1.20
    
    
    
    937
    
    
    $
    1.27
    
    
    
    1,406
    
    
    
    7.76
    
    
    $
    461Vested and expected
to vest at
December 31,
    
    $
    1.24
    
    
    
    3,016
    
    
    $
    1.06
    
    
    
    5,753
    
    
    
    5.20
    
    
    $
    3,070
  F-67




---



##### Table of Contents



Options outstanding
    
    
    Options currently exercisableWeighted averageRange of
    
    No. of Shares
    
    
    remaining
    
    
    Weighted average
    
    
    No. of Sharesexercise price
    
    (in thousands)
    
    
    contractual life
    
    
    exercise price
    
    
    (in thousands)$1.00
    
    
    6,075
    
    
    4.86 years
    
    $
    1.00
    
    
    
    782$1.60
    
    
    766
    
    
    7.94 years
    
    $
    1.60
    
    
    
    6246,841
    
    
    
    
    
    
    
    
    
    
    
    1,406
 NOTE 22. OTHER NON-OPERATING INCOME
 For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Gain on cancellation of preferred share call options
    
    $
    
    
    
    $
    1,069
    
    
    $
    Indemnification from termination of game licensing
    
    
    
    
    
    
    601
    
    
    
    Compensation from termination of investment option rights
    
    
    
    
    
    
    498
    
    
    
    Gain on early redemption of convertible notes
    
    
    625
    
    
    
    
    
    
    
    Subsidy received from tax authority
    
    
    
    
    
    
    
    
    
    
    561Other
    
    
    59
    
    
    
    (25
    )
    
    
    281$
    684
    
    
    $
    2,143
    
    
    $
    842
  F-68




---



##### Table of Contents



NOTE 23. INCOME TAXES
 For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Income from continuing
operations before income
taxes
U.S. operations
    
    $
    865
    
    
    $
    489
    
    
    $
    1,095Non-U.S. operations
    
    
    17,831
    
    
    
    38,995
    
    
    
    35,684Total income from continuing
operations before income taxes
    
    $
    18,696
    
    
    $
    39,484
    
    
    $
    36,779
  For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008U.S. operations
    
    $
    366
    
    
    $
    224
    
    
    $
    620Non-U.S. operations
    
    
    157
    
    
    
    177
    
    
    
    449$
    523
    
    
    $
    401
    
    
    $
    1,069
  For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008U.S. federalCurrent
    
    $
    266
    
    
    $
    281
    
    
    $
    (57
    )Deferred
    
    
    8
    
    
    
    (111
    )
    
    
    528$
    274
    
    
    $
    170
    
    
    $
    471U.S. state and local :Current
    
    $
    90
    
    
    $
    84
    
    
    $
    208Deferred
    
    
    2
    
    
    
    (30
    )
    
    
    (59
    )$
    92
    
    
    $
    54
    
    
    $
    149Non  U.S. :Current
    
    $
    173
    
    
    $
    132
    
    
    $
    976Deferred
    
    
    (16
    )
    
    
    45
    
    
    
    (527
    )$
    157
    
    
    $
    177
    
    
    $
    449Total income tax
provisions
    
    $
    523
    
    
    $
    401
    
    
    $
    1,069
  F-69




---



##### Table of Contents



For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Federal statutory rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %State and local  net of federal tax benefit
    
    
    6.78
    %
    
    
    6.27
    %
    
    
    6.27
    %Foreign tax differential
    
    
    (35.75
    %)
    
    
    (36.16
    %)
    
    
    (31.10
    %)Loss carryforward utilized
    
    
    (5.67
    %)
    
    
    (3.33
    %)
    
    
    (2.89
    %)Reversal of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (4.69
    %)Other
    
    
    3.44
    %
    
    
    0.24
    %
    
    
    1.32
    %Effective rate
    
    
    2.80
    %
    
    
    1.02
    %
    
    
    2.91
    %
   December 31,(in US$ thousands)
    
    2007
    
    
    2008Deferred tax assets:Net operating loss carryforwards
    
    $
    1,128
    
    
    $
    1Deferred revenue
    
    
    451
    
    
    
    472Amortization
    
    
    213
    
    
    
    378Investment credits
    
    
    322
    
    
    
    185Share-based compensation
    
    
    74
    
    
    
    116Allowance for doubtful accounts
    
    
    284
    
    
    
    Pension expense
    
    
    145
    
    
    
    80Depreciation
    
    
    201
    
    
    
    22Others
    
    
    194
    
    
    
    2143,012
    
    
    
    1,468Less: valuation allowance
    
    
    (3,012
    )
    
    
    (106
    )Deferred tax assets  net
    
    $
    
    
    
    $
    1,362
  F-70




---



##### Table of Contents



December 31,(in US$ thousands)
    
    2007
    
    
    2008Deferred tax liabilities:Depreciation and amortization
    
    $
    
    
    
    $
    1,754Others
    
    
    (107
    )
    
    
    (244
    )Deferred tax liabilities  net
    
    $
    (107
    )
    
    $
    1,510
  For the years ended December 31,(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Valuation allowance:Balance at beginning of year
    
    $
    10,396
    
    
    $
    4,032
    
    
    $
    3,012Subsequent reversal/utilization of
valuation allowance
    
    
    (4,160
    )
    
    
    (1,224
    )
    
    
    (2,787
    )Reversal of valuation allowance due to loss
carryforwards expired unused
    
    
    (2,283
    )
    
    
    (990
    )
    
    
    Divestiture
    
    
    
    
    
    
    
    
    
    
    (219
    )Acquisition
    
    
    
    
    
    
    1,197
    
    
    
    Exchange differences
    
    
    79
    
    
    
    (3
    )
    
    
    100Balance at end of year
    
    $
    4,032
    
    
    $
    3,012
    
    
    $
    106
   F-71




---



##### Table of Contents



FIN 48
   F-72




---



##### Table of Contents



(in US$ thousands)Balance at January 1, 2007
    
    $
    209Decrease due to settlement
    
    
    (82
    )Balance at December 31, 2007
    
    
    127Decrease due to settlement
    
    
    (127
    )Balance at December 31, 2008
    
    $
    
      F-73




---



##### Table of Contents



NOTE 24. RELATED-PARTY TRANSACTIONS
    F-74




---



##### Table of Contents



F-75




---



##### Table of Contents



NOTE 25. COMMITMENTS AND CONTINGENCIES
 Commitments
 (a) Operating Leases
  AmountYear
    

(in US$ thousands)2009
    
    $
    5,2562010
    
    
    5,2722011
    
    
    3,7032012
    
    
    3,3022013
    
    
    2,382Thereafter
    
    
    1,747Total
    
    $
    21,662
  (b) Webs-TV Services Related Commitment
   F-76




---



##### Table of Contents



(c) License Agreements
  Minimumguarantees againstLicense fees
    
    
    future royalties
    
    
    TotalMinimum required payments:In 2009
    
    $
    1,013
    
    
    $
    7,815
    
    
    $
    8,828After 2009
    
    
    3,300
    
    
    
    28,000
    
    
    
    31,300$
    4,313
    
    
    $
    35,815
    
    
    $
    40,128
    F-77




---



##### Table of Contents



Contingencies
 (a) T2CN VIE
  (b) Other
   F-78




---



##### Table of Contents



NOTE 26. LITIGATION
 Class Action
      F-79




---



##### Table of Contents



F-80




---



##### Table of Contents



F-81




---



##### Table of Contents



Patent Litigation
      F-82




---



##### Table of Contents



NOTE 27. SEGMENT INFORMATION
 Segment data
  Disclosures about Segments of an Enterprise and Related Information
   F-83




---



##### Table of Contents



Gamingsoftware and
    
    
    Online game(in US$ thousands)
    
    service
    
    
    and service
    
    
    Total2006:Segment profit or loss:Net revenue from external customers
    
    $
    55,019
    
    
    $
    18,692
    
    
    $
    73,711Income from operations
    
    $
    16,772
    
    
    $
    5,618
    
    
    $
    22,390Share-based compensation
    
    $
    82
    
    
    $
    101
    
    
    $
    183Interest income
    
    $
    212
    
    
    $
    20
    
    
    $
    232Interest expense
    
    $
    
    
    
    $
    1
    
    
    $
    1Gains on sales of marketable securities
    
    $
    
    
    
    $
    4
    
    
    $
    4Foreign exchange loss
    
    $
    27
    
    
    $
    1
    
    
    $
    28Depreciation
    
    $
    517
    
    
    $
    250
    
    
    $
    767Amortization, including intangible assets
    
    $
    1,292
    
    
    $
    1,423
    
    
    $
    2,715Income tax expense
    
    $
    415
    
    
    $
    108
    
    
    $
    523Segment assets:Additions to property, plant and equipment
    
    $
    1,701
    
    
    $
    738
    
    
    $
    2,439Additions to intangible assets
    
    $
    1,172
    
    
    $
    21,359
    
    
    $
    22,531Additions to goodwill
    
    $
    
    
    
    $
    26,409
    
    
    $
    26,409Total assets
    
    $
    56,850
    
    
    $
    54,457
    
    
    $
    111,307
   F-84




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##### Table of Contents



Gamingsoftware and
    
    
    Online game(in US$ thousands)
    
    service
    
    
    and service
    
    
    Total2007:Segment profit or loss:Net revenue from external customers
    
    $
    118,950
    
    
    $
    32,764
    
    
    $
    151,714Income from operations
    
    $
    37,703
    
    
    $
    6,844
    
    
    $
    44,547Share-based compensation
    
    $
    548
    
    
    $
    373
    
    
    $
    921Interest income
    
    $
    871
    
    
    $
    194
    
    
    $
    1,065Interest expense
    
    $
    1
    
    
    $
    
    
    
    $
    1Loss on sales of marketable securities
    
    $
    
    
    
    $
    104
    
    
    $
    104Foreign exchange loss
    
    $
    486
    
    
    $
    195
    
    
    $
    681Loss on equity method investments
    
    $
    
    
    
    $
    369
    
    
    $
    369Depreciation
    
    $
    1,060
    
    
    $
    589
    
    
    $
    1,649Amortization, including intangible assets
    
    $
    1,271
    
    
    $
    1,852
    
    
    $
    3,123Income tax expense
    
    $
    229
    
    
    $
    172
    
    
    $
    401Segment assets:Equity method investments
    
    $
    
    
    
    $
    2,762
    
    
    $
    2,762Additions to property, plant and equipment
    
    $
    2,280
    
    
    $
    2,575
    
    
    $
    4,855Additions to intangible assets
    
    $
    2,070
    
    
    $
    3,575
    
    
    $
    5,645Additions to goodwill
    
    $
    
    
    
    $
    29,354
    
    
    $
    29,354Total assets
    
    $
    93,144
    
    
    $
    92,597
    
    
    $
    185,741
   F-85




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##### Table of Contents



Gamingsoftware and
    
    
    Online game(in US$ thousands)
        


    service
    
    and service
    
    
    Total2008:Segment profit or loss:Net revenue from external customers
    
    $
    144,765
    
    
    $
    45,604
    
    
    $
    190,369Income from operations
    
    $
    36,360
    
    
    $
    7,998
    
    
    $
    44,358Share-based compensation
    
    $
    1,249
    
    
    $
    547
    
    
    $
    1,796Impairment loss on prepaid licensing fees and intangible assets
    
    $
    
    
    
    $
    1,524
    
    
    $
    1,524Interest income
    
    $
    680
    
    
    $
    367
    
    
    $
    1,047Interest expense
    
    $
    7
    
    
    $
    
    
    
    $
    7Gains on sales of marketable securities
    
    $
    
    
    
    $
    4
    
    
    $
    4Foreign exchange gain (loss)
    
    $
    269
    
    
    $
    (124
    )
    
    $
    145Loss on equity method investments
    
    $
    
    
    
    $
    3,010
    
    
    $
    3,010Depreciation
    
    $
    2,064
    
    
    $
    1,080
    
    
    $
    3,144Amortization, including intangible assets
    
    $
    1,704
    
    
    $
    2,549
    
    
    $
    4,253Income tax expense
    
    $
    743
    
    
    $
    326
    
    
    $
    1,069Segment assets:Equity method investments
    
    $
    
    
    
    $
    75
    
    
    $
    75Additions to property, plant and equipment
    
    $
    6,095
    
    
    $
    1,585
    
    
    $
    7,680Additions to intangible assets
    
    $
    3,953
    
    
    $
    3,383
    
    
    $
    7,336Additions to goodwill
    
    $
    
    
    
    $
    2,249
    
    
    $
    2,249Total assets
    
    $
    132,631
    
    
    $
    130,327
    
    
    $
    262,958
   F-86




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##### Table of Contents



(in
US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Income (loss) from operations:Total segments
    
    $
    22,390
    
    
    $
    44,547
    
    
    $
    44,358Adjustment*
    
    
    (4,611
    )
    
    
    (7,127
    )
    
    
    (6,255
    )Total GigaMedia consolidated
    
    $
    17,779
    
    
    $
    37,420
    
    
    $
    38,103Share-based compensationTotal segments
    
    $
    183
    
    
    $
    921
    
    
    $
    1,796Adjustment*
    
    
    42
    
    
    
    913
    
    
    
    909Total GigaMedia consolidated
    
    $
    225
    
    
    $
    1,834
    
    
    $
    2,705Interest income:Total segments
    
    $
    232
    
    
    $
    1,065
    
    
    $
    1,047Adjustment*
    
    
    484
    
    
    
    369
    
    
    
    413Total GigaMedia consolidated
    
    $
    716
    
    
    $
    1,434
    
    
    $
    1,460Interest expense:Total segments
    
    $
    1
    
    
    $
    1
    
    
    $
    7Adjustment*
    
    
    427
    
    
    
    546
    
    
    
    969Total GigaMedia consolidated
    
    $
    428
    
    
    $
    547
    
    
    $
    976Gain (loss) on sales of marketable securities:Total segments
    
    $
    4
    
    
    $
    (104
    )
    
    $
    4Adjustments*
    
    
    66
    
    
    
    288
    
    
    
    369Total GigaMedia consolidated
    
    $
    70
    
    
    $
    184
    
    
    $
    373Foreign exchange gain (loss):Total segments
    
    $
    (28
    )
    
    $
    (681
    )
    
    $
    145Adjustments*
    
    
    (94
    )
    
    
    2
    
    
    
    95Total GigaMedia consolidated
    
    $
    (122
    )
    
    $
    (679
    )
    
    $
    240Depreciation:Total segments
    
    $
    767
    
    
    $
    1,649
    
    
    $
    3,144Adjustments*
    
    
    
    
    
    
    
    
    
    
    177Total GigaMedia consolidated
    
    $
    767
    
    
    $
    1,649
    
    
    $
    3,321Amortization:Total segments
    
    $
    2,715
    
    
    $
    3,123
    
    
    $
    4,253Adjustments*
    
    
    16
    
    
    
    26
    
    
    
    34Total GigaMedia consolidated
    
    $
    2,731
    
    
    $
    3,149
    
    
    $
    4,287Income tax expense:Total segments
    
    $
    523
    
    
    $
    401
    
    
    $
    1,069Adjustments*
    
    
    
    
    
    
    
    
    
    
    Total GigaMedia consolidated
    
    $
    523
    
    
    $
    401
    
    
    $
    1,069
  F-87




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##### Table of Contents



(in US$ thousands)
    
    2006
    
    
    2007
    
    
    2008Equity method investment:Total segments
    
    $
    
    
    
    $
    2,762
    
    
    $
    75Adjustments**
    
    
    
    
    
    
    
    
    
    
    Total GigaMedia consolidated
    
    $
    
    
    
    $
    2,762
    
    
    $
    75Additions to property, plant and
equipment:Total segments
    
    $
    2,439
    
    
    $
    4,855
    
    
    $
    7,680Adjustments**
    
    
    750
    
    
    
    1,392
    
    
    
    1,134Total GigaMedia consolidated
    
    $
    3,189
    
    
    $
    6,247
    
    
    $
    8,814Additions to intangible assets:Total segments
    
    $
    22,531
    
    
    $
    5,645
    
    
    $
    7,336Adjustments**
    
    
    301
    
    
    
    1,088
    
    
    
    309Total GigaMedia consolidated
    
    $
    22,832
    
    
    $
    6,733
    
    
    $
    7,645Additions to goodwill:Total segments
    
    $
    26,409
    
    
    $
    29,354
    
    
    $
    2,249Adjustments**
    
    
    
    
    
    
    
    
    
    
    Total GigaMedia consolidated
    
    $
    26,409
    
    
    $
    29,354
    
    
    $
    2,249Total assets:Total segments
    
    $
    111,307
    
    
    $
    185,741
    
    
    $
    262,958Adjustment**
    
    
    71,312
    
    
    
    98,124
    
    
    
    53,835Total GigaMedia consolidated
    
    $
    182,619
    
    
    $
    283,865
    
    
    $
    316,793
 *
    
    Adjustment items include corporate and certain back-office costs and expenses not attributable to any specific segment.**
    
    Adjustment items include total corporate assets, the Internet access and service business segment and eliminations. Major Customers
   F-88




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##### Table of Contents



Geographic Information
  (in US$ thousands)Geographic region/country
    
    2006
    
    
    2007
    
    
    2008Canada
    
    $
    55,019
    
    
    $
    118,650
    
    
    $
    144,765Taiwan
    
    
    16,854
    
    
    
    18,388
    
    
    
    20,932PRC
    
    
    7
    
    
    
    8,883
    
    
    
    19,652Hong Kong
    
    
    1,831
    
    
    
    5,360
    
    
    
    4,964Others
    
    
    
    
    
    
    433
    
    
    
    56Total
    
    $
    73,711
    
    
    $
    151,714
    
    
    $
    190,369
  (in US$ thousands)
    
    December 31,Geographic region
    
    2006
    
    
    2007
    
    
    2008Taiwan
    
    $
    8,241
    
    
    $
    8,431
    
    
    $
    4,118Canada
    
    
    1,143
    
    
    
    2,053
    
    
    
    2,264PRC
    
    
    51
    
    
    
    1,334
    
    
    
    1,734United States
    
    
    632
    
    
    
    943
    
    
    
    4,642Hong Kong
    
    
    31
    
    
    
    247
    
    
    
    710Total
    
    $
    10,098
    
    
    $
    13,008
    
    
    $
    13,468
 Note 28. SUBSEQUENT EVENTS
   F-89




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##### Table of Contents



EXHIBIT INDEX
 EXHIBITNo.
    
    DESCRIPTION1.1
    
    
    Amended Memorandum and Articles of Association of our Company, incorporated by reference to Exhibit
1.3 to our annual report for the year 2006 on Form 20-F filed with the SEC on June 29, 20074.1
    
    
    End-User License Agreement between Internet Media Licensing Limited and Ultra Internet Media, S.A.,
dated April 1, 2004, incorporated by reference to Exhibit 4.41 to our annual report for the year 2004
on Form 20-F filed with the SEC on June 30, 20054.2
    
    
    Second Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2006, incorporated by reference to Exhibit 4.41 to our annual
report for the year 2005 on Form 20-F filed with the SEC on June 28, 20064.3
    
    
    Third Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2007, incorporated by reference to Exhibit 4.50 to our annual
report for the year 2006 on Form 20-F filed with the SEC on June 29, 20074.4
    
    
    Fourth Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated March 1, 2008#4.5
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Entertainment, dated
November 15, 2006, incorporated by reference to Exhibit 4.55 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.6
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Entertainment, dated April 1, 2007, incorporated by reference to Exhibit 4.56 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.7
    
    
    Exclusive Technical Service and Consultancy Agreement between T2 Entertainment and T2 Technology,
dated November 15, 2006, incorporated by reference to Exhibit 4.57 to our annual report for the year
2007 on Form 20-F filed with the SEC on June 30, 20084.8
    
    
    Supplemental Agreement to Exclusive Technical Service and Consultancy Agreement between T2
Entertainment and T2 Technology, dated April 1, 2007, incorporated by reference to Exhibit 4.58 to our
annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.9
    
    
    Agreement for Pledge of Shares in T2 Entertainment between Wang Chi, Lu Ning and T2 Technology, dated
February 9, 2007, incorporated by reference to Exhibit 4.59 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.10
    
    
    Exclusive Call Option Agreement regarding T2 Entertainment between Wang Chi, Lu Ning, T2 Entertainment
and T2 Technology, dated February 9, 2007, incorporated by reference to Exhibit 4.60 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.11
    
    
    Proxy Voting Agreement regarding T2 Entertainment between T2 Technology, T2 Entertainment, Wang Chi
and Lu Ning, dated February 9, 2007, incorporated by reference to Exhibit 4.61 to our annual report
for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.12
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and T2 Advertisement, dated
November 15, 2006, incorporated by reference to Exhibit 4.62 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.13
    
    
    Supplemental Agreement to Exclusive Business Consultancy Service Agreement between T2 Technology and
T2 Advertisement, dated January 1, 2007, incorporated by reference to Exhibit 4.63 to our annual
report for the year 2007 on Form 20-F filed with the SEC on June 30, 2008




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##### Table of Contents



EXHIBITNo.
    
    DESCRIPTION4.14
    
    
    Agreement for Pledge of Shares in T2 Advertisement between Chi Min, Chang Tao and T2 Technology, dated
March 20, 2008, incorporated by reference to Exhibit 4.64 to our annual report for the year 2007 on
Form 20-F filed with the SEC on June 30, 20084.15
    
    
    Exclusive Call Option Agreement regarding T2 Advertisement between Chi Min, Chang Tao, T2
Advertisement and T2 Technology, dated March 20, 2008, incorporated by reference to Exhibit 4.65 to
our annual report for the year 2007 on Form 20-F filed with the SEC on June 30, 20084.16
    
    
    Proxy Voting Agreement regarding T2 Advertisement between T2 Technology, T2 Advertisement, Chi Min and
Chang Tao, dated March 20, 2008, incorporated by reference to Exhibit 4.66 to our annual report for
the year 2007 on Form 20-F filed with the SEC on June 30, 20084.17
    
    
    Share Purchase Agreement between William Zhu and GigaMedia China Limited, dated June 3, 2007,
incorporated by reference to Exhibit 4.67 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.18
    
    
    Share Purchase Agreement between Yu-Chia Lee and GigaMedia China Limited, dated June 6, 2007,
incorporated by reference to Exhibit 4.68 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.19
    
    
    Share Purchase Agreement between Zheng Bin and GigaMedia China Limited, dated June 10, 2007,
incorporated by reference to Exhibit 4.69 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.20
    
    
    Share Purchase Agreement between J&R Music LLC, Ya-Tsen Lin and GigaMedia China Limited, dated July 5,
2007, incorporated by reference to Exhibit 4.70 to our annual report for the year 2007 on Form 20-F
filed with the SEC on June 30, 20084.21
    
    
    Share Purchase Agreement between Kingland Overseas Development Inc. and GigaMedia China Limited, dated
July 6, 2007, incorporated by reference to Exhibit 4.71 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.22
    
    
    Share Purchase Agreement between Jim Ji Wang and GigaMedia China Limited, dated July 6, 2007,
incorporated by reference to Exhibit 4.72 to our annual report for the year 2007 on Form 20-F filed
with the SEC on June 30, 20084.23
    
    
    Share Purchase Agreement between Marvel City Investments Limited and GigaMedia China Limited, dated
May 26, 2008, incorporated by reference to Exhibit 4.73 to our annual report for the year 2007 on Form
20-F filed with the SEC on June 30, 20084.24
    
    
    Agreement for Pledge of Shares in Jinyou among Yang Zhuojun, Tan Yihui and T2 Technology, dated June
15, 2009#4.25
    
    
    Exclusive Call Option Agreement regarding Jinyou among Yang Zhuojun, Tan Yihui, Jinyou and T2
Technology, dated June 15, 2009#4.26
    
    
    Proxy Voting Agreement regarding Jinyou among T2 Technology, Jinyou, Yang Zhuojun and Tan Yihui, dated
June 15, 2009#4.27
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and Jinyou, dated November 26,
2007#4.28
    
    
    Exclusive Technical Service and Consultancy Agreement between Jinyou and T2 Technology, dated November
26, 2007#4.29
    
    
    Share Sale and Purchase Agreement among Champion Limited, Gigamedia International Holdings Limited
and GigaMedia, dated August 28, 2008#4.30
    
    
    Share Sale and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin GigaMedia, dated
August 28, 2008#4.31
    
    
    Asset Sale and Purchase Agreement among Ko Ying, Hoshin GigaMedia and China Network Systems Co., Ltd.,
dated August 28, 2008#




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##### Table of Contents



EXHIBITNo.
    
    DESCRIPTION4.32
    
    
    Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3, 2008#4.33
    
    
    Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated September 3,
2008#8.1
    
    
    List of Subsidiaries#12.1
    
    
    Certification by our Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act#12.2
    
    
    Certification by our Chief Financial Officer pursuant to Rule13a-14(b) of the Securities Exchange Act#13.1
    
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#13.2
    
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002#15.1
    
    
    Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm#
 
 #
    
    Filed herewith.