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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, 2009
 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)
Arthur M. Wang, Chief Executive Officer
8 TH FLOOR, 207 TIDING BOULEVARD, SECTION 2, TAIPEI 114, TAIWAN, R.O.C.
Tel: 886-2-2656-8000; Fax: 886-2-2656-8003
 
 Securities registered or to be registered pursuant to Section 12(b) of the Exchange Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares
    
    The NASDAQ Stock Market LLC
 Securities registered or to be registered pursuant to Section 12(g) of the Exchange Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
  54,994,800 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
 Yes
þ No 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
    
    
    2ITEM 4. INFORMATION ON THE COMPANY
    
    
    20ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    47ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    73ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
    
    
    82ITEM 8. FINANCIAL INFORMATION
    
    
    83ITEM 9. THE OFFER AND LISTING
    
    
    87ITEM 10. ADDITIONAL INFORMATION
    
    
    88ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    97ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    98PART II
    
    
    98ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    98ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    99ITEM 15. CONTROLS AND PROCEDURES
    
    
    99ITEM 16. Reserved
    
    
    100ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    100ITEM 16B. CODE OF ETHICS
    
    
    100ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    101ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    102ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    102ITEM 16F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANTS
    
    
    102ITEM 16G. CORPORATE GOVERNANCE
    
    
    102PART III
    
    
    102ITEM 17. FINANCIAL STATEMENTS
    
    
    102ITEM 18. FINANCIAL STATEMENTS
    
    
    103ITEM 19. EXHIBITS
    
    
    103Exhibit 4.34Exhibit 4.35Exhibit 4.36Exhibit 4.37Exhibit 4.38Exhibit 4.39Exhibit 4.40Exhibit 4.41Exhibit 4.42Exhibit 4.43Exhibit 4.44Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1
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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;
 
    
    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, including expected growth of the
online games industry, and consumer preferences for our products and services;
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
    
    the in-house development of new online games and our plans to expand our in-house
online game development team;
 
    
    the performance of Mangas Everest and developments in the online gaming industry;
 
    
    our plans to license additional games from third parties, and the launch of these
new games or gaming software systems, including the timing of any such development,
licenses or launches, in various geographic markets;
 
    
    our ability to maintain and strengthen our position as one of the largest online
MahJong operators in Taiwan;
 
    
    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 the online gaming business;
 
    
    changes or stability in certain regulatory environments relating to Mangas Everests
operations or gaming licenses;
 
    
    changes in PRC laws and regulations, and future enforcement of those laws and
regulations, including laws and regulations relating to Internet usage, advertising
over the Internet, Internet content providers, foreign investment and ownership in
online business, distribution of dividends and foreign exchange controls;
 
    
    the outcome of ongoing, or any future, litigation or arbitration; and
 
    
    our corporate classification by various governmental entities.
  
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 Exchange Rates
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A. Selected Financial Data
  For the Years Ended December 31,
 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$STATEMENT OF OPERATIONS DATA:OPERATING REVENUESGaming software and service revenues
    
    
    22,511
    
    
    
    55,019
    
    
    
    118,950
    
    
    
    144,765
    
    
    
    112,694Online game and service revenues
    
    
    0
    
    
    
    18,692
    
    
    
    32,764
    
    
    
    45,604
    
    
    
    46,887Total operating revenues
    
    
    22,511
    
    
    
    73,711
    
    
    
    151,714
    
    
    
    190,369
    
    
    
    159,581OPERATING COSTSCost of gaming software and service revenues
    
    
    (3,327
    )
    
    
    (7,824
    )
    
    
    (16,201
    )
    
    
    (22,770
    )
    
    
    (20,102
    )Cost of online game and service revenues
    
    
    0
    
    
    
    (3,667
    )
    
    
    (9,118
    )
    
    
    (12,404
    )
    
    
    (16,785
    )Total operating costs
    
    
    (3,327
    )
    
    
    (11,491
    )
    
    
    (25,319
    )
    
    
    (35,174
    )
    
    
    (36,887
    )GROSS PROFIT
    
    
    19,184
    
    
    
    62,220
    
    
    
    126,395
    
    
    
    155,195
    
    
    
    122,694OPERATING EXPENSESProduct development and engineering expenses
    
    
    (2,524
    )
    
    
    (5,244
    )
    
    
    (7,338
    )
    
    
    (13,455
    )
    
    
    (14,195
    )Selling and marketing expenses
    
    
    (8,042
    )
    
    
    (27,653
    )
    
    
    (60,106
    )
    
    
    (74,173
    )
    
    
    (79,421
    )General and administrative expenses
    
    
    (6,374
    )
    
    
    (11,096
    )
    
    
    (20,983
    )
    
    
    (25,035
    )
    
    
    (29,692
    )Bad debt expenses
    
    
    0
    
    
    
    (448
    )
    
    
    (548
    )
    
    
    (2,905
    )
    
    
    (1,092
    )Impairment loss on property, plant, and equipment
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,250
    )Impairment loss on goodwill
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (14,103
    )Impairment loss on prepaid licensing fees and
intangible assets
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (1,524
    )
    
    
    (23,002
    )Total operating expenses
    
    
    (16,940
    )
    
    
    (44,441
    )
    
    
    (88,975
    )
    
    
    (117,092
    )
    
    
    (162,755
    )Income (loss) from operations
    
    
    2,244
    
    
    
    17,779
    
    
    
    37,420
    
    
    
    38,103
    
    
    
    (40,061
    )Income (loss) from continuing operations
    
    
    3,525
    
    
    
    18,173
    
    
    
    39,083
    
    
    
    35,710
    
    
    
    (56,102
    )Income from discontinued operations
    
    
    2,961
    
    
    
    12,932
    
    
    
    1,088
    
    
    
    9,435
    
    
    
    222Net income (loss)
    
    
    6,486
    
    
    
    31,105
    
    
    
    40,171
    
    
    
    45,145
    
    
    
    (55,880
    )Less: Net (income) loss attributable to the
noncontrolling interest
    
    
    (150
    )
    
    
    (321
    )
    
    
    (1,281
    )
    
    
    (757
    )
    
    
    6,795Net income (loss) attributable to GigaMedia
    
    
    6,336
    
    
    
    30,784
    
    
    
    38,890
    
    
    
    44,388
    
    
    
    (49,085
    )Earnings (loss) per share (in dollars):Basic:Income (loss) from continuing operations
    
    
    0.07
    
    
    
    0.35
    
    
    
    0.72
    
    
    
    0.65
    
    
    
    (0.90
    )Income from discontinued operations
    
    
    0.06
    
    
    
    0.25
    
    
    
    0.02
    
    
    
    0.17
    
    
    
    0.00Net income (loss)
    
    
    0.13
    
    
    
    0.60
    
    
    
    0.74
    
    
    
    0.82
    
    
    
    (0.90
    )Diluted:Income (loss) from continuing operations
    
    
    0.06
    
    
    
    0.30
    
    
    
    0.63
    
    
    
    0.58
    
    
    
    (0.90
    )Income from discontinued operations
    
    
    0.06
    
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.16
    
    
    
    0.00Net income (loss)
    
    
    0.12
    
    
    
    0.51
    
    
    
    0.65
    
    
    
    0.74
    
    
    
    (0.90
    )
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As of December 31,
 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$BALANCE SHEET DATA:Total current assets
    
    
    70,204
    
    
    
    64,176
    
    
    
    115,417
    
    
    
    128,799
    
    
    
    104,839Property, plant and equipment-net
    
    
    10,747
    
    
    
    10,098
    
    
    
    13,008
    
    
    
    13,468
    
    
    
    5,989Goodwill
    
    
    29,243
    
    
    
    55,817
    
    
    
    85,149
    
    
    
    87,098
    
    
    
    44,417Intangible assets-net
    
    
    2,704
    
    
    
    23,067
    
    
    
    26,060
    
    
    
    28,930
    
    
    
    18,924Total assets
    
    
    113,519
    
    
    
    182,619
    
    
    
    283,865
    
    
    
    316,793
    
    
    
    260,181Total GigaMedia shareholders equity
    
    
    100,648
    
    
    
    134,087
    
    
    
    180,665
    
    
    
    228,456
    
    
    
    184,745Common shares, no par value, and
additional paid-in capital
    
    
    287,920
    
    
    
    289,495
    
    
    
    296,793
    
    
    
    300,021
    
    
    
    304,379Number of issued shares (in thousands)
    
    
    50,344
    
    
    
    51,495
    
    
    
    53,700
    
    
    
    54,365
    
    
    
    54,995Dividends declared per share (in dollars)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
  B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Related to Our Business and Industries
 The limited operating history of the Mangas Everest 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;
  4




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
    
    license, develop, or acquire additional online games that are appealing to
consumers;
 
    
    anticipate and adapt to changing consumer preferences;
 
    
    adapt to competitive market conditions;
 
    
    adequately and efficiently operate, upgrade and develop our transaction and service
platforms; and
 
    
    maintain adequate control of our expenses.
  In operating our 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;
 
    
    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.
  5




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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 Mangas
Everest, our joint venture with Mangas; 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 rolling out new games or updating existing
games by us or our competitors; the amount and timing of operating costs and capital
expenditures relating to our business operations and expansion; seasonal trends in
Internet use; price competition in the industry; regulatory and other risks associated
from our operations in China and Taiwan.
  The online games market is characterized by rapid technological change, and failure to respond
quickly and effectively to new Internet technologies or standards may have a material adverse
effect on our business
  The current global economic slowdown and other adverse economic conditions may negatively
impact our business
   6




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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
     Our online games business faces intense competition, which may adversely affect our revenues,
profitability and planned business expansion
   7




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Our online games business depends on the reliability of the network infrastructure and related
services provided by ourselves and third parties, which is subject to physical, technological,
security and other risks; the Mangas Everest business also faces similar risks
    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
   8




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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 online games business
and the Mangas Everest business, financial condition and results of operations
  Online
games and online gaming are relatively new industries 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
   9




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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
   Our future results of operations or the growth of our business may suffer if we are unable to
maintain satisfactory relationships with the licensors of our online games
  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
     10




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We may need additional capital in the future, and it may not be available on acceptable terms
  
    
    fund our operations;
 
    
    enhance and expand the range of products and services we offer; and
 
    
    respond to competitive pressures and perceived opportunities, such as investment,
acquisition and international expansion activities.
  We depend on our key personnel, and our business and growth prospects may be severely
disrupted if we lose their services
   Our results of operations and financial condition are affected by political stability, as well
as the occurrence of natural disasters and epidemics
   In 2009, we recorded operating and net losses, and we may experience losses in the future
   11




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Risks Related to Our Joint Venture with Mangas
 We do not control the management of our joint venture with Mangas and have no control over its
business decisions and any significant difficulties encountered by the joint venture in its
operations may have a material and adverse effect on our business and financial results
     The uncertain global legal and regulatory environment could have a negative impact on the
Mangas Everest business and prospects
    12




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The Mangas Everest business faces intense competition, which may adversely affect our
financial results
  The Mangas Everest business will be materially and adversely affected if credit card companies
and other financial institutions cease to accept online gaming transactions
  The Mangas Everest business is international and therefore faces associated risks
   13




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Risks Related to Doing Business in Greater China
 PRC laws and regulations restrict foreign ownership and investment in the online game
industry, and substantial uncertainties exist with respect to the application and implementation of
PRC laws and regulations
       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 and the
shareholders of T2 Entertainment, T2 Advertisement and Jinyou may have potential conflicts of
interest with us
    The laws and regulations governing the online games industry in the PRC are evolving and new
regulations may adversely affect our business
     15




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




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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
    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
   17




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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
  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
     18




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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 incur significant costs and management time to avoid being considered an investment
company under the United States Investment Company Act of 1940, which could have a significant
negative impact on our results of operations
      19




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We may be classified as a passive foreign investment company for U.S. federal income tax
purposes. As a result, you may be subject to materially adverse tax consequences with respect to
Shares
   
 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 was
10 years. The end user license agreement with UIM was
terminated in April 2010 as the part of the transaction
with Mangas.September 2005
    
    We sold all of our ownership interest in the Rose Records
and Tachung Records music store chains with a view to
eliminating non-core operations.
  20




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Time
    
    EventJanuary 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, 2010, 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.
On August 8 and August 12, 2009, we acquired certain
ordinary shares of T2CN from two existing shareholders
respectively. As of May 31, 2010, we held approximately
67.09 percent of the total outstanding voting rights of
T2CN.October 2007
    
    We entered into a strategic alliance with Neostorm Holdings
Limited (Neostorm), a South Korean gaming developer. In
connection with the strategic alliance, we acquired
preferred shares convertible into the common shares of
Neotorm. As of May 31, 2010, we held preferred shares
convertible into approximately 33.33 percent of the common
shares of Neostorm.December 2007
    
    We entered into a strategic alliance with XLGames Inc. (XL
Games), a South Korean online game developer that focuses
on the development of MMORPGs. In connection with the
strategic alliance, we acquired preferred shares
convertible into the common shares of XL Games. As of May
31, 2010, we held preferred shares convertible into 14.55
percent of the common shares of XL Games.January 2008
    
    We entered into a strategic alliance with Access China
Holding Limited (Access China), an online game developer
in the PRC. In connection with the strategic alliance, we
acquired preferred shares convertible into the common
shares of Access China. As of May 31, 2010, we held
preferred shares convertible into approximately 24.74
percent of the common shares of Access China.May 2008
    
    We entered into certain agreements with SuperCup
Entertainment (Holdings) Limited (SuperCup) and its
affiliates, pursuant to which we purchased preferred shares
convertible into the common shares of SuperCup and obtained
worldwide exclusive rights to cooperate with SuperCup in
MahJong and certain Asian card games business. As of May
31, 2010, we held preferred shares convertible into 39.65
percent of the issued share capital of SuperCup. SuperCup
ceased its operation in 2009.September 2008
    
    We sold our last remaining non-core business, our consumer
cable modem and corporate ISP business, to China Network
Systems Co., Ltd. and its affiliates. The disposal
effectively completed our business restructuring process
which we began in 2004. For additional information, see
Item 5, Operating and Financial Review and Prospects 
Certain Significant Events affecting Our Results of
Operations for 2007, 2008 and 2009  Divestiture of our
legacy Internet access and service business and Item 10,
Additional Information  C. Material Contracts  Sale of
Internet Access and Service Business in this annual
report.October 2008
    
    We entered into a software and supply agreement with a
third-party gaming software developer with a view to adding
the flash downloadable Internet casino games in our gaming
platform.December 2008
    
    We entered into a strategic partnership with Victor
Chandler, a renowned sports betting operator. Under the
partnership, we cooperate with Victor Chandler in marketing
its online sports betting on Everest Bets, an affiliate
website utilizing our software solution, with a view to
further enhancing cross-selling across the games on the
Everest-branded platform. On December 16, 2009, we
terminated such strategic partnership with Victor Chandler.
We entered into a strategic alliance with Mangas, a leading
French sports betting and online gaming group. Under the
arrangement, Mangas will provide Mangas Everest with a
sports betting solution in late 2010.
     21




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##### Table of Contents



http://www.gigamedia.com
  22




---



##### Table of Contents



B. Business Overview
      23




---



##### Table of Contents



Online Games Business
 Our Games
  MahJong
      24




---



##### Table of Contents



MMORPGs
   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
    
    TaiwanHong KongMacauLuna Online
    
    Casual fantasy
    
    July 2009
    
    Licensed
    
    Item-billing
    
    PRC
   Game
    
    Description
    
    Status
    
    Game Source
    
    Target MarketXK Online
    
    Martial arts adventure
    
    Game Development
    
    In-house Developed
    
    PRC
    25




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##### Table of Contents



Advanced Casual Games
   
    
    broader range of players, including casual players, due to the casual nature and
relatively short duration; and
 
    
    a greater breadth of tools, engines, middleware and server solutions that can make
development of casual games relatively more cost-effective.
    Commercial
    
    Game
    
    RevenueGame
    
    Description
    
    Launch
    
    Source
    
    Model
    
    MarketTales Runner
    
    Sports  Obstacle running
    
    June 2006 in Taiwan
    
    Licensed
    
    Item-billing
    
    TaiwanAugust 2006 in Hong
Kong
    
    
    
    
    
    Hong KongFreestyle
    
    Sports  Basketball
    
    December 2005
    
    Licensed
    
    Item-billing
    
    PRCNanaimo
    
    Action
    
    December 2007
    
    Licensed
    
    Item-billing
    
    Hong KongPaipaijoy
    
    Sports  Tennis
    
    June 2008
    
    Licensed
    
    Item-billing
    
    PRC
  Game
    
    Description
    
    Status
    
    Game Source
    
    Target MarketAlliance of Valiant
Arms
    
    Massively
multiplayer
first-person
shooter
    
    Game Localization
    
    Licensed
    
    TaiwanHong KongMacauFreestyle Season 2
    
    Sports  Basketball
    
    Closed Beta Testing
    
    Licensed
    
    PRC
  26




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##### Table of Contents



Card, Chance-Based and Simple Casual Games
    Game Sources
 In-house development of MahJong, Card, Chance-Based and Simple Casual Games
  Sources of MMORPGs and Advanced Casual Games
      27




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##### Table of Contents



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 in online
in-club tournaments and compete in weekly online inter-club tournaments. On an annual
basis, FunTown organizes large-scale tournaments, in which a large number of players
are invited to the tournament premises and compete online via computers.
 
    
    Avatars. To enhance players overall entertainment experience, FunTown offers many
in-game virtual items which may be purchased by players to customize their online
personal graphic profiles, or avatars. Players use avatars to create their own unique
look while participating in the online community. The virtual items for avatars
include facial expressions, clothes and different accessories. These items are
particularly popular with younger players, who customize their avatars to establish
unique identities and pursue distinct fashions in the online community.
 
    
    Friends and Family Messenger. The FunTown platform has a unique function designed
for players personal contacts, which is similar to the contact list of instant message
programs. This enables players to see when their friends and family members are online
and invite people in their personal network to play games together.
 
    
    Social Networking. The FunTown platform provides an online social networking
community called FunTown Village, in which players meet each other through their online
avatars. In FunTown Village, players can interact and communicate, purchase virtual
items, and even get married virtually. 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.
 
    
    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.
  28




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##### Table of Contents




    
    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. 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. 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
  Our Marketing
  In-Game Events and Marketing
  Cross-Marketing
  Open Beta Testing
   29




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##### Table of Contents



Advertisements and Offline Promotions
  Game Magazines
  Direct Marketing
  Our Distribution and Payment Channels
  Offline Physical Distribution Channels
  Internet-Based Distribution Channels
  Telecommunication Network Operators
   Our Operation Architecture
   30




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##### Table of Contents



Technology Infrastructure
     Our Players
   Competition
    Gaming Software and Service Business
  CESLs Products and Services
  Online Gaming Software and Management Tools
   31




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##### Table of Contents



Application and Consulting Services
  
    
    Infrastructure Design and Management Services. CESL provided the architectural
design of various infrastructure elements, including the servers, databases, networks,
routers, firewalls and management tools that are required for Internet gaming
operations.
 
    
    Transaction Processing Services. These services included (i) payment consultation
for designing timely collection and distribution systems for payments through a variety
of channels and merchants; (ii) billing consultation for designing real-time and
out-of-band transaction processing and order management; and (iii) risk management
consultation for creating and designing tools and processes for fraud detection,
prevention and management.
 
    
    Customer Support Services. CESL offered UIM a comprehensive round-the-clock
consultation support to resolve infrastructure issues. CESL also provided platform
technical support during periodic maintenance to update, patch, and fine-tune the
system performance of our software solutions.
 
    
    Custom Gaming Software Development Services. CESL customized the entertainment
modules and interfaces for the gaming platform to meet specific requests of UIMs
affiliates or partners.
 
    
    Marketing Support Services. CESL created branded websites and provide marketing
support services to assist UIM in attracting new players.
 CESLs Technology and Infrastructure
  Relationship with UIM
 Prior License Arrangement with UIM
   32




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##### Table of Contents



UIM
   Sale of Material Assets of CESL and UIM to Mangas Everest, and Investment in Mangas Everest
     Competition
    33




---



##### Table of Contents



Intellectual Property
   Regulation
 Regulations Relating to Online Games in Taiwan
  Rating of Internet Content
 Computer Software Ratings.
 Online Game Contract Template.
 Personal Data Protection Act.
  34




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##### Table of Contents



Regulations Relating to Online Games in the PRC
    
    
    MIIT (formerly the Ministry of Information Industry);
 
    
    the Ministry of Culture, or MOC;
 
    
    the General Administration of Press and Publication, or GAPP (formerly known as the
State Press and Publications Administration, or SPPA);
 
    
    the Ministry of Public Security;
 
    
    the State Administration of Industry and Commerce, or SAIC;
 
    
    the State Administration for Radio, Film and Television, or SARFT;
 
    
    the State Council Information Office, or SCIO; and
 
    
    the Ministry of Commerce, or MOFCOM.
 Foreign Ownership Restrictions
   35




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##### Table of Contents



Licenses
   Online Games Regulations
    36




---



##### Table of Contents



Internet Content and Publishing Regulations
  Import Regulations
  Information Security Regulations
      37




---



##### Table of Contents



Internet Café Regulation
  Privacy Protection
   Global Regulatory Environment Relating to the Mangas Everest Business
      38




---



##### Table of Contents



U.S. Regulations on Online Gaming
   Regulatory Environment in Europe
          39




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##### Table of Contents



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;
 
    
    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;
  40




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##### Table of Contents




    
    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.
 
  41




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42




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesHeld by our CompanyGigaMedia International Holdings Limited
    
    2004
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia (Taiwan) Limited
    
    2004
    
    Taiwan
    
    
    100
    %
    
    Holding companyHeld by GigaMedia International Holdings LimitedGigaMedia SuperCup Holdings Limited
    
    2008
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Global Limited
    
    2004
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesCambridge Entertainment Software Limited
    
    2004
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia (HK) Limited
    
    2004
    
    Hong Kong
    
    
    100
    %
    
    Holding companyCrestmillion International Limited
    
    2007
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Japan Pte. Ltd.
    
    2007
    
    Singapore
    
    
    100
    %
    
    Holding companyGigaMedia Finance International Limited
    
    2000
    
    Cayman Islands
    
    
    100
    %
    
    Holding companyBridgepoint International Limited
    
    2004
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGloryland Asia Limited
    
    2008
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesGigaMedia Online Entertainment Corp.
    
    2009
    
    Cayman Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia Online Entertainment Corp.FunTown World Limited
    
    2005
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Asia Limited
    
    2005
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Asia Pacific Limited
    
    2006
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companySkyace Pacific Limited
    
    2006
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesCentermax Limited
    
    2007
    
    British Virgin Islands
    
    
    100
    %
    
    Holding company
  43




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesGigaMedia Capital Limited
    
    2007
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia Development Limited
    
    2007
    
    British Virgin Islands
    
    
    100
    %
    
    Online gamesGiga Slam Dunk Corporation
    
    2007
    
    Malaysia
    
    
    100
    %
    
    Online gamesGiga Wartime Corporation
    
    2007
    
    Malaysia
    
    
    100
    %
    
    Online gamesE-Sports International Corporation Limited
    
    2008
    
    Hong Kong
    
    
    100
    %
    
    Online gamesDragon Mark Holdings Limited
    
    2008
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyPremier Vantage Holdings Limited
    
    2009
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyGigaMedia
Freestyle Holdings Limited
    
    2009
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companySpring Asia
Limited (formally known as New Media Investment Corporation)
    
    2009
    
    Labuan
    
    
    100
    %
    
    Holding companyAsia Online Games Corporation (formally known
as GigaMedia (Labuan New) Limited)
    
    2006
    
    Labuan
    
    
    100
    %
    
    Holding companyGigaMedia (Labuan) Limited
    
    2005
    
    Labuan
    
    
    100
    %
    
    Holding companyMegabiz Limited
    
    2010
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyNova Matrix Limited
    
    2010
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by FunTown World LimitedFunTown Hong Kong Limited
    
    1999
    
    Hong Kong
    
    
    100
    %
    
    Online gamesHeld by FunTown Hong Kong LimitedFunTown Software (Shanghai) Limited
    
    2006
    
    PRC
    
    
    100
    %
    
    Online gamesHeld by Skyace Pacific LimitedDragongate Enterprises Limited
    
    2006
    
    British Virgin Islands
    
    
    70
    %
    
    Online gamesHeld by Dragongate Enterprises LimitedGigaMedia Dragongate Limited
    
    2007
    
    Malaysia
    
    
    100
    %
    
    Online games
  44




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesHeld 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 LimitedGigaMedia Europe Limited S.à.r.l.
    
    2010
    
    Luxembourg
    
    
    100
    %
    
    Holding company for 40% of Everest MangasUltra Internet Media S.A.
    
    2004
    
    Nevis
    
    
    100
    %
    
    Online entertainment operatorHeld by GigaMedia Europe Limited S.à.r.l.Mangas Everest
    
    2010
    
    France
    
    
    40
    %
    
    Online gaming operatorHeld by Dragon Mark Holdings LimitedWolverine Holdings Group Limited
    
    2009
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia (Labuan) LimitedLeisure Alliance Sdn. Bhd.
    
    2009
    
    Malaysia
    
    
    100
    %
    
    Holding companyHeld by Leisure Alliance Sdn. Bhd.Hoshin GigaMedia Center Inc.
    
    1998
    
    Taiwan
    
    
    100
    %
    
    Online gamesHeld by Bridgepoint International LimitedImplus International Limited
    
    2004
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia Asia Pacific LimitedSpring Asia Limited
    
    2005
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyInfocomm Asia Holdings Pte. Ltd.
    
    2004
    
    Singapore
    
    
    28.43
    %
    
    Online games
  45




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##### Table of Contents



OurYear of
    
    Place of
    
    PercentageEntity
    
    Incorporation
    
    Incorporation
    
    Holding
    
    
    Principal ActivitiesHeld by GigaMedia Asia LimitedGigaMedia China Limited
    
    2005
    
    British Virgin Islands
    
    
    100
    %
    
    Holding companyHeld by GigaMedia China LimitedT2CN Holding Limited
    
    2004
    
    British Virgin Islands
    
    
    67.09
    %
    
    Online gamesHeld by T2CN Holding LimitedJ-Town Information (Shanghai) Co., Ltd.
    
    2005
    
    PRC
    
    
    100
    %
    
    Online gamesT2CN Information Technology (Shanghai) Co., Ltd.
    
    2004
    
    PRC
    
    
    100
    %
    
    Online gamesControlled by T2CN Information Technology (Shanghai) Co., Ltd.Shanghai T2 Entertainment Co., Ltd.
    
    2004
    
    PRC
    
    
    *
    
    
    Online gamesShanghai T2 Advertisement Co., Ltd.
    
    2006
    
    PRC
    
    
    *
    
    
    AdvertisingShanghai Jinyou Network & Technology Co., Ltd.
    
    2007
    
    PRC
    
    
    *
    
    
    Online games
 *
    
    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
      46




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##### Table of Contents



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 A. Operating Results
  Overview
  
    
    Until April 8, 2010, through our gaming software and service business, we developed
and licensed 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
  Online Games Business.
   47




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##### Table of Contents



Certain Significant Events Affecting Our Results of Operations for 2007, 2008 and 2009
 Divestiture of Our Legacy Internet Access and Service Business
       48




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##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Revenue
    
    $
    15,164
    
    
    $
    9,289
    
    
    $
    159Income (loss) from discontinued operations before tax
    
    $
    1,090
    
    
    $
    (593
    )
    
    $
    222Gain on sale of the discontinued operations before tax
    
    
    
    
    
    
    11,014
    
    
    
    Income tax expenses
    
    
    (2
    )
    
    
    (986
    )
    
    
    Income from discontinued operations
    
    $
    1,088
    
    
    $
    9,435
    
    
    $
    222
  (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
 Consolidation of UIM, T2 Entertainment, T2 Advertisement, and Jinyou
  (in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Total revenue
    
    $
    118,650
    
    
    $
    144,765
    
    
    $
    112,694Net income (loss)
    
    $
    348
    
    
    $
    (206
    )
    
    $
    (1,226
    )
    49




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##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Total revenue
    
    $
    14,973
    
    
    $
    20,312
    
    
    $
    18,673Net income (loss)
    
    $
    2,429
    
    
    $
    1,571
    
    
    $
    (2,990
    )
  Acquisitions
 T2CN
   (in US$ thousands)
    
    
    
    
    
    
    
    AccumulatedDate of acquisition
    
    Purchase Price
    
    
    Description
    
    voting interest2006
    
    $
    15,000
    
    
    Purchased 7,500,000 convertible voting preferred shares
    
    
    19.02
    %2007
    
    $
    23,736
    *
    
    Acquired 38,613,681 common shares (including convertible voting preferred shares converted into common shares) in total
    
    
    58.11
    %2008
    
    $
    3,375
    
    
    Purchased 4,500,000 common shares
    
    
    65.68
    %2009
    
    $
    285
    
    
    Purchased 520,000 common shares
    
    
    67.09
    %
 *
    
    Includes the issuance of 226,385 common shares of GigaMedia, valued at approximately US$2.7
million. (a) Acquisition in 2007
  (b) Acquisition in 2008
    50




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##### Table of Contents



(c) Acquisition in 2009
  Impairment Loss Related to Underperforming Game Projects in Our Online Games And Service
Business
      Subsequent Events
 Litigation
     51




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##### Table of Contents



Transactions with Mangas
          52




---



##### Table of Contents



Transactions with Infocomm Asia
    Critical Accounting Policies
  Consolidation
  Acquisitions
   53




---



##### Table of Contents



Revenue Recognition
    Gaming Software and Service Revenues
     Online Game and Service Revenues
    54




---



##### Table of Contents



Revenue included within Discontinued Operations
   Player Account Balances
  Deferred Revenues
  Operating Costs
  Prepaid Licensing and Royalty Fees
    55




---



##### Table of Contents



Fair Value Measurement
   Allowance for Doubtful Accounts
   Marketable Securities
    Investments
   56




---



##### Table of Contents



Impairment of Intangible Assets, Goodwill and Long-Lived Assets
    Software Cost
    57




---



##### Table of Contents



Advertising
   Income Taxes
   Noncontrolling Interest
   58




---



##### Table of Contents



Share-Based Compensation
   Foreign Currency Translation
  Taxation
        59




---



##### Table of Contents



Recent Accounting Pronouncements
        60




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##### 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.
   61




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##### Table of Contents



For the year ended December 31,2007
    
    
    2008
    
    
    2009Amount in
    
    
    % of
    
    
    Amount
    
    
    % of
    
    
    Amount
    
    
    % ofUS$
    
    
    total
    
    
    in US$
    
    
    total
    
    
    in US$
    
    
    totalthousands
    
    
    revenues
    
    
    thousands
    
    
    revenues
    
    
    thousands
    
    
    revenuesParticularsOPERATING REVENUESGaming software and service revenues
    
    
    118,950
    
    
    
    78.4
    
    
    
    144,765
    
    
    
    76.0
    
    
    
    112,694
    
    
    
    70.6Online game and service revenues
    
    
    32,764
    
    
    
    21.6
    
    
    
    45,604
    
    
    
    24.0
    
    
    
    46,887
    
    
    
    29.4Total operating revenues
    
    
    151,714
    
    
    
    100.0
    
    
    
    190,369
    
    
    
    100.0
    
    
    
    159,581
    
    
    
    100.0OPERATING COSTSCost of gaming software and service
revenues
    
    
    16,201
    
    
    
    10.7
    
    
    
    22,770
    
    
    
    12.0
    
    
    
    20,102
    
    
    
    12.6Cost of online game and service revenues
    
    
    9,118
    
    
    
    6.0
    
    
    
    12,404
    
    
    
    6.5
    
    
    
    16,785
    
    
    
    10.5Total operating costs
    
    
    25,319
    
    
    
    16.7
    
    
    
    35,174
    
    
    
    18.5
    
    
    
    36,887
    
    
    
    23.1Gross profit
    
    
    126,395
    
    
    
    83.3
    
    
    
    155,195
    
    
    
    81.5
    
    
    
    122,694
    
    
    
    76.9OPERATING EXPENSESProduct development and engineering expenses
    
    
    7,338
    
    
    
    4.8
    
    
    
    13,455
    
    
    
    7.1
    
    
    
    14,195
    
    
    
    8.9Selling and marketing expenses
    
    
    60,106
    
    
    
    39.6
    
    
    
    74,173
    
    
    
    39.0
    
    
    
    79,421
    
    
    
    49.8General and administrative expenses
    
    
    20,983
    
    
    
    13.8
    
    
    
    25,035
    
    
    
    13.2
    
    
    
    29,692
    
    
    
    18.6Bad debt expense
    
    
    548
    
    
    
    0.4
    
    
    
    2,905
    
    
    
    1.5
    
    
    
    1,092
    
    
    
    0.7Impairment loss on property, plant, and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    0.8Impairment loss on goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,103
    
    
    
    8.8Impairment loss on prepaid
licensing fees and intangible
assets
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    0.8
    
    
    
    23,002
    
    
    
    14.4Total operating expenses
    
    
    88,975
    
    
    
    58.6
    
    
    
    117,092
    
    
    
    61.5
    
    
    
    162,755
    
    
    
    102.0Income from operations
    
    
    37,420
    
    
    
    24.7
    
    
    
    38,103
    
    
    
    20.0
    
    
    
    (40,061
    )
    
    
    (25.1
    )NON-OPERATING INCOME (EXPENSES)
    
    
    2,064
    
    
    
    1.4
    
    
    
    (1,324
    )
    
    
    (0.7
    )
    
    
    (15,524
    )
    
    
    (9.8
    )INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
    
    
    39,484
    
    
    
    26.1
    
    
    
    36,779
    
    
    
    19.3
    
    
    
    (55,585
    )
    
    
    (34.9
    )INCOME TAX EXPENSE
    
    
    (401
    )
    
    
    (0.3
    )
    
    
    (1,069
    )
    
    
    (0.6
    )
    
    
    (517
    )
    
    
    (0.3
    )INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    39,083
    
    
    
    25.8
    
    
    
    35,710
    
    
    
    18.7
    
    
    
    (56,102
    )
    
    
    (35.2
    )INCOME FROM DISCONTINUED OPERATIONS
    
    
    1,088
    
    
    
    0.7
    
    
    
    9,435
    
    
    
    5.0
    
    
    
    222
    
    
    
    0.2NET INCOME (LOSS)
    
    
    40,171
    
    
    
    26.5
    
    
    
    45,145
    
    
    
    23.7
    
    
    
    (55,880
    )
    
    
    (35.0
    )LESS: NET (INCOME) LOSS
ATTRIBUTABLE TO NONCONTROLLING
INTEREST
    
    
    (1,281
    )
    
    
    (0.9
    )
    
    
    (757
    )
    
    
    (0.4
    )
    
    
    6,795
    
    
    
    4.2NET INCOME (LOSS) ATTRIBUTABLE TO
GIGAMEDIA
    
    
    38,890
    
    
    
    25.6
    
    
    
    44,388
    
    
    
    23.3
    
    
    
    (49,085
    )
    
    
    (30.8
    )
  62




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##### Table of Contents



For the Years Ended December 31, 2009 and 2008
 Consolidated Results of Operations
      63




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Business Segment Results
 Gaming Software and Service Business
      64




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Online Games Business
        65




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##### Table of Contents



For the Years Ended December 31, 2008 and 2007
 Consolidated Results of Operations
        66




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Business Segment Results
 Gaming Software and Service Business
       67




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Online Games Business
          68




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##### Table of Contents



B. Liquidity and Capital Resources
   
    
    the rate at which we enter into strategic transactions;
 
    
    the rate at which we expand our operations and employee base;
 
    
    the timing of entry into new markets and new services offered;
 
    
    changes in revenues and cost splits with our business partners;
 
    
    the rate at which we invest in developing and licensing our products and upgrading
and maintaining our network and future technologies; and
 
    
    the rate at which we grow and monetize our customer bases.
     69




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Capital Expenditures
  Indebtedness
     Dividends From Our Subsidiaries
   70




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C. Research, Development, Patents and Licenses, etc.
  D. Trend Information
     71




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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
    
    
    3,733,072
    
    
    
    2,220,651
    
    
    
    
    
    
    
    
    
    
    
    5,953,7232. License fees
    
    
    0
    
    
    
    2,700,000
    
    
    
    
    
    
    
    
    
    
    
    2,700,0003. Minimum guarantees against royalties
    
    
    2,625,000
    
    
    
    8,600,000
    
    
    
    
    
    
    
    
    
    
    
    11,225,000Total contractual cash obligations*
    
    
    6,358,072
    
    
    
    13,520,651
    
    
    
    
    
    
    
    
    
    
    
    19,878,7234. Other liabilities-accrued pension
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,492
    
    
    
    82,4925. Other long-term obligations
    
    
    
    
    
    
    47,405
    
    
    
    
    
    
    
    
    
    
    
    47,405
 *
    
    In April 2010, we entered into termination agreements with certain of our game licensors. The
table above reflects the future payments considering these terminations. The table also reflects
the reduction of future operating lease payments resulting from the sale of our gaming software
and service business in April 2010.   Quantitative and Qualitative Disclosure About Market Risk
   72




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Year Appointed toName
    
    Age
    
    Position
    
    Current PositionDING, Michael Y.J.
    
    53
    
    Chairman of the Board, Chairman of the Audit Committee of the Board and Independent Non-Executive Director
    
    2009*/2003WANG, Arthur M.
    
    49
    
    Director and Chief Executive Officer
    
    2003HUI, Thomas T.
    
    38
    
    Director, President and Chief Operating Officer
    
    2005/2007BAO, Gilbert
    
    44
    
    Independent Non-Executive Director
    
    2003HSU, Emmet Yu-Jui
    
    47
    
    Independent Non-Executive Director
    
    2003HU ZEE, Nancy Jing-Ying
    
    51
    
    Independent Non-Executive Director
    
    2003LEE, Howe Yong
    
    54
    
    Independent Non-Executive Director
    
    2004LEE, John Francis Woon-Jae
    
    39
    
    Chief Strategy Officer and Head of International Business
    
    2008LEE, Yichin
    
    49
    
    Chairman of the Compensation Committee of the Board and Independent Non-Executive Director
    
    2009**/2003TANG, Quincy
    
    47
    
    Chief Financial Officer
    
    2008WONG, Lester A.
    
    43
    
    General Counsel
    
    2008WANG, Jim Ji
    
    39
    
    Head of Online Games Business in
the PRC and Chief Executive Officer of T2CN
    
    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.**
    
    Mr. Lee was appointed as Chairman of the Compensation Committee of the Board on May
14, 2009.  Directors
      73




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Executive Officers
      74




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B. Compensation
 Compensation of Directors and Executive Officers
   Employment of Executive Officers
  C. Board Practices
     75




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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.
    
    
    *
    
    
    
    3,049,000HUI, Thomas T.
    
    
    *
    
    
    
    2,300,000BAO, Gilbert T.C.
    
    
    *
    
    
    
    *HSU, Emmet Yu-Jui
    
    
    0
    
    
    
    *HU ZEE, Nancy Jing-Ying
    
    
    *
    
    
    
    *LEE, Howe Yong
    
    
    *
    
    
    
    *LEE, John Francis Woon-Jae
    
    
    0
    
    
    
    *LEE, Yichin
    
    
    *
    
    
    
    *TANG, Quincy
    
    
    0
    
    
    
    *WONG, Lester A.
    
    
    0
    
    
    
    *WANG, Jim Ji
    
    
    *
    
    
    
    *Directors and Officers as a group
    
    
    *
    
    
    
    6,639,000
 
 *
    
    Less than 1 percent  Employee Share Option Plans and Equity Incentive Plans
 2002 Employee Share Option Plan
    76




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##### Table of Contents



2004 Employee Share Option Plan
       2006 Equity Incentive Plan
     77




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##### Table of Contents



2007 Equity Incentive Plan
    78




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##### Table of Contents



2008 Equity Incentive Plan
   79




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##### Table of Contents



2009 Equity Incentive Plan
    Options
   80




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##### 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
    
    
    5,392
    
    
    4.50 years
    
    under $1
    
    
    5,392$1~$10
    
    
    1,590
    
    
    7.27 years
    
    $1~$10
    
    
    640$10~$20
    
    
    707
    
    
    7.65 years
    
    $10~$20
    
    
    3887,689
    
    
    
    
    
    
    
    6,420
  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, 2014August 9, 2007
    
    
    200,000
    
    
    
    10.15
    
    
    August 9, 2017December 1, 2008
    
    
    400,000
    
    
    
    4.24
    
    
    June 29, 2017515,000
    
    
    
    4.24
    
    
    June 19, 2018May 13, 2010
    
    
    1,965,000
    
    
    
    2.47
    
    
    May 13, 2020Total
    
    
    6,639,000
  81




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##### Table of Contents



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
    
    
    
    19.59
    %Martin Currie Investment Management Ltd.(2)
    
    
    3,989,265
    
    
    
    7.24
    %
 
 (1)
    
    Through Best Method Limited, a British Virgin Islands company, Jeffrey Koo, Jr. and Andre Koo
jointly have a beneficial ownership of 10,799,999 common shares of our Company.(2)
    
    Martin Currie Investment Management Ltd. owns 901,270 common shares of our Company through
its wholly owned subsidiary Martin Currie China Ltd.   B. Related-Party Transactions
    Licensing Contractual Arrangements
 Freestyle License Agreement
    82




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##### Table of Contents



Borrowings
  Stock Transaction
  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.
   83




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##### Table of Contents



84




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##### Table of Contents



Patent Litigation
     Mgame Arbitration
     85




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##### Table of Contents



ESET Litigation
  World Series of Poker Litigation
       Dividend Policy
   86




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##### Table of Contents



B. Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
    Common SharesYear Ending December 31
    
    High
    
    
    Low(in US$)2005
    
    $
    2.99
    
    
    $
    1.302006
    
    $
    12.38
    
    
    $
    2.902007
    
    $
    24.61
    
    
    $
    9.282008
    
    $
    20.70
    
    
    $
    2.902009
    
    $
    7.47
    
    
    $
    3.04
 Common SharesYear Ending December 31, 2009
    
    High
    
    
    Low(in US$)First quarter
    
    $
    7.47
    
    
    $
    4.33Second quarter
    
    $
    7.02
    
    
    $
    5.29Third quarter
    
    $
    5.77
    
    
    $
    4.41Fourth quarter
    
    $
    4.95
    
    
    $
    3.04
 Common SharesYear Ending December 31, 2010
    
    High
    
    
    Low(in US$)First quarter
    
    $
    3.32
    
    
    $
    2.74Second quarter (through June 25, 2010)
    
    $
    3.25
    
    
    $
    2.03
 Common SharesMonthly Highs and Lows
    
    High
    
    
    Low(in US$)December 2009
    
    $
    4.18
    
    
    $
    3.04January 2010
    
    $
    3.32
    
    
    $
    2.74February 2010
    
    $
    3.06
    
    
    $
    2.76March 2010
    
    $
    3.31
    
    
    $
    2.90April 2010
    
    $
    3.25
    
    
    $
    2.98May 2010
    
    $
    2.98
    
    
    $
    2.33June 2010 (only through June 25, 2010)
    
    $
    2.45
    
    
    $
    2.03
   87




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##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
   C. Material Contracts
  Sale of Internet Access and Service Business
 Share Sales and Purchase Agreement among Champion Limited, Gigamedia International Holdings
Limited and GigaMedia, dated August 28, 2008
  Share Sales and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin
GigaMedia, dated August 28, 2008
   88




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##### Table of Contents



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
  Transactions with Infocomm Asia
 Subscription Agreement between Infocomm Asia and GigaMedia Asia Pacific Limited, dated April
30, 2010
  The Amendment to the Subscription Agreement between Infocomm Asia and GigaMedia Asia Pacific
Limited, June 25, 2010
  Share Purchase Agreement between Infocomm Investments Pte Ltd and GigaMedia Asia Pacific
Limited, dated April 30, 2010
   89




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##### Table of Contents



Share Purchase Agreement between Bodhi Investments LLC and GigaMedia Asia Pacific Limited,
dated April 30, 2010
  Share Purchase Agreement between China Interactive Limited and GigaMedia Asia Pacific Limited, dated June 30, 2010
  Deed of Guarantee, Undertaking and Indemnity among GigaMedia Asia Pacific Limited, Management
Capital International Ltd and China Interactive Limited, dated April 30, 2010
  Shareholder Loan Agreement between GigaMedia Asia Pacific Limited and Infocomm Asia, dated
April 30, 2010
  Loan Assignment Agreement among GigaMedia Asia Pacific Limited, Infocomm Asia and Spring Asia
Limited, dated June 1, 2010
  Loan Agreement between Spring Asia Limited and Infocomm Asia, dated May 20, 2010
  Transaction with Mangas Gaming
 Stock and Asset Purchase Agreement among Mangas Gaming, GigaMedia Limited, UIM and the Other
Parties Named Thereto, dated December 15, 2009 and Amendment No. 1 to Stock and Asset Purchase
Agreement, dated March 31, 2010
    90




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T2CN Agreement with Jinyou
  Other Material Contracts
  D. Exchange Controls
     91




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E. Taxation
 Singapore Tax Considerations
 Taxation of Dividends received by Singapore Resident Shareholders
     
    
    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.
     92




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##### Table of Contents



Gains on Disposal of Shares
  Stamp Duty
   Singapore Estate Duty
   Goods and Services Tax (GST)
     93




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##### Table of Contents



U.S. Tax Considerations
 U.S. Federal Income Tax Considerations for U.S. Holders
  
    
    bank;
 
    
    broker-dealer;
 
    
    financial institution or insurance company;
 
    
    tax-exempt entity;
 
    
    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
  94




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Taxation of Dividends
    Sale or other disposition of Shares.
 Passive Foreign Investment Company Rules
   95




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##### 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.
    Backup Withholding and Information Reporting
   96




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##### Table of Contents



F. Dividends and Paying Agents
  G. Statements by Experts
  H. Documents on Display
    I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
   97




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##### Table of Contents



Interest Rate Risk
   Other Market Risks
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
   98




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##### Table of Contents



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Material Modification to the Instruments Defining the Rights of Security Holders
  B.
    Material Modification to the Rights of Registered Securities by Issuing or Modifying or any Other Class of Securities
  C.
    Withdrawal or Substitution of a Material Amount of the Assets Securing any Registered Securities
  D. Change of Trustees or Paying Agents for any Registered Securities
  E. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting
   99




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##### Table of Contents



Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control Over Financial Reporting
  
 ITEM 16. Reserved
 
 ITEM16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
     100




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##### Table of Contents



ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Years Ended December 31,
    
    2008
    
    
    2009(in US$)
    
    
    (in US$)Audit Fees
    
    
    1,190,974
    
    
    
    994,207Audit-Related Fees
    
    
    0
    
    
    
    12,746Tax Fees
    
    
    23,004
    
    
    
    23,123All Other Fees
    
    
    0
    
    
    
    0
 A. Audit Fees
  B. Audit-Related Fees
  C. Tax Fees
  D. All Other Fees
  E. Audit Committee Pre-Approval Policies and Procedures
   101




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##### Table of Contents



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
   102




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ITEM 18. FINANCIAL STATEMENTS
  Page(a) Report
of Independent Registered Public Accounting Firm
    
    
    F-1(b) Consolidated
Balance Sheets as of December 31, 2008 and 2009
    
    
    F-2F-3(c) Consolidated
Statements of Operations for the years ended December 31, 2007,
2008 and 2009
    
    
    F-4(d) Consolidated Statements of Comprehensive Income (Loss)
    
    
    F-5(e) Consolidated
Statements of Equity for the years ended December 31, 2007, 2008
and 2009
    
    
    F-6(f) Consolidated
Statements of Cash Flows for the years ended December 31, 2007,
2008 and 2009
    
    
    F-7F-8(g) Notes
to the consolidated financial statements
    
    
    F-9F-86
 
 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, incorporated by referance to Exhibit 4.4 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.5
    
    
    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, 2008
  103




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EXHIBIT
    
    INDEX4.13
    
    
    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, incorporated by reference to Exhibit 4.24 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.25
    
    
    Exclusive Call Option Agreement regarding Jinyou among Yang Zhuojun, Tan Yihui, Jinyou and T2
Technology, dated June 15, 2009, incorporated by reference to Exhibit 4.25 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.26
    
    
    Proxy Voting Agreement regarding Jinyou among T2 Technology, Jinyou, Yang Zhuojun and Tan Yihui, dated
June 15, 2009, incorporated by reference to Exhibit 4.26 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.27
    
    
    Exclusive Business Consultancy Service Agreement between T2 Technology and Jinyou, dated November 26,
2007, incorporated by reference to Exhibit 4.27 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.28
    
    
    Exclusive Technical Service and Consultancy Agreement between Jinyou and T2 Technology, dated November
26, 2007, incorporated by reference to Exhibit 4.28 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.29
    
    
    Share Sales and Purchase Agreement among Champion Limited, Gigamedia International Holdings Limited
and GigaMedia, dated August 28, 2008, incorporated by reference to Exhibit 4.29 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 2009
  104




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EXHIBIT
    
    INDEX4.30
    
    
    Share Sales and Purchase Agreement between China Network Systems Co., Ltd. and Hoshin GigaMedia, dated
August 28, 2008, incorporated by reference to Exhibit 4.30 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.31
    
    
    Asset Sale and Purchase Agreement among Ko Ying, Hoshin GigaMedia and China Network Systems Co., Ltd.,
dated August 28, 2008, incorporated by reference to Exhibit 4.31 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.32
    
    
    Transitional Service Agreement among Ko Ying, Hoshin GigaMedia and KBT, dated September 3, 2008,
incorporated by reference to Exhibit 4.32 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.33
    
    
    Assignment and Assumption Agreement between Hoshin GigaMedia and Hoshin Multimedia, dated September 3, 2008, incorporated by reference to Exhibit 4.33 to our annual report for the year 2008 on Form 20-F filed with the SEC on June 26, 20094.34
    
    
    Subscription Agreement between Infocomm Asia and GigaMedia Asia Pacific Limited, dated April 30, 2010#4.35
    
    
    The Amendment to the Subscription Agreement between Infocomm Asia and GigaMedia Asia Pacific Limited,
dated June 25, 2010#4.36
    
    
    Share Purchase Agreement between Infocomm Investments Pte Ltd and GigaMedia Asia Pacific Limited,
dated April 30, 2010#4.37
    
    
    Share Purchase Agreement between Bodhi Investments LLC and GigaMedia Asia Pacific Limited, dated April
30, 2010#4.38
    
    
    Deed of Guarantee, Undertaking and Indemnity among GigaMedia Asia Pacific Limited, Management Capital
International Ltd and China Interactive Limited, dated April 30, 2010#4.39
    
    
    Shareholder Loan Agreement between GigaMedia Asia Pacific Limited and Infocomm Asia, dated April 30,
2010#4.40
    
    
    Loan Assignment Agreement among GigaMedia Asia Pacific Limited, Infocomm Asia and Spring Asia Limited,
dated June 1, 2010#4.41
    
    
    Loan Agreement between Spring Asia Limited and Infocomm Asia, dated May 20, 2010#4.42
    
    
    Stock and Asset Purchase Agreement among Mangas Gaming, GigaMedia Limited, UIM and the Other Parties
Named Thereto dated December 15, 2009 and Amendment No. 1 to Stock and Asset Purchase Agreement, dated
March 31, 2010#4.43
    
    
    Fifth Amendment to the End-User License Agreement between Internet Media Licensing Limited and Ultra
Internet Media, S.A., dated April 1, 2009#4.44
    
    
    Share Purchase Agreement between China Interactive Limited and GigaMedia Asia Pacific Limited,
dated June 30, 2010#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 Rule 13a-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.  105




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SIGNATURE
  GIGAMEDIA LIMITEDBy:
    /s/ Arthur M. WangArthur M. WangChief Executive Officer
Date: June 30, 2010  106




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##### Table of Contents



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




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 December 31, 2008 and 2009
  December 312008
    
    
    2009ASSETSCURRENT ASSETSCash and cash equivalents (Note 11)
    
    $
    95,953
    
    
    $
    55,566Marketable securities-current (Note 12)
    
    
    3,419
    
    
    
    3,486Accounts receivable-net (Note 13)
    
    
    15,188
    
    
    
    4,228Prepaid expenses
    
    
    9,907
    
    
    
    1,204Restricted cash
    
    
    
    
    
    
    932Assets held for sale-current (Note 5)
    
    
    
    
    
    
    35,444Other current assets (Notes 15 and 23)
    
    
    4,332
    
    
    
    3,979Total Current Assets
    
    
    128,799
    
    
    
    104,839Marketable securities-noncurrent (Note 14)
    
    
    26,041
    
    
    
    18,356Investments
    
    
    1,905
    
    
    
    3,477Retained ownership of gaming software and service business (Note 5)
    
    
    
    
    
    
    25,951PROPERTY, PLANT AND EQUIPMENTLand and buildings
    
    
    1,832
    
    
    
    1,171Information and communication equipment
    
    
    11,601
    
    
    
    6,928Office furniture and fixtures
    
    
    2,575
    
    
    
    915Leasehold improvements
    
    
    5,115
    
    
    
    2,643Other
    
    
    250
    
    
    
    14821,373
    
    
    
    11,805Less: Accumulated depreciation
    
    
    (7,905
    )
    
    
    (5,816
    )13,468
    
    
    
    5,989GOODWILL (Note 7)
    
    
    87,098
    
    
    
    44,417INTANGIBLE ASSETS-NET (Note 8)
    
    
    28,930
    
    
    
    18,924ASSETS HELD FOR SALE-NONCURRENT (Note 5)
    
    
    
    
    
    
    31,301OTHER ASSETSRestricted cash
    
    
    2,125
    
    
    
    Refundable deposits
    
    
    7,265
    
    
    
    1,079Prepaid licensing and royalty fees (Notes 9 and 24)
    
    
    20,540
    
    
    
    5,557Other (Note 23)
    
    
    622
    
    
    
    291Total Other Assets
    
    
    30,552
    
    
    
    6,927TOTAL ASSETS
    
    $
    316,793
    
    
    $
    260,181
   F-2




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED BALANCE SHEETS-(Continued)  December 31, 2008 and 2009
 December 312008
    
    
    2009LIABILITIES & EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    899
    
    
    $
    591Accrued compensation
    
    
    3,503
    
    
    
    2,814Accrued expenses (Note 17)
    
    
    11,345
    
    
    
    6,719Short-term borrowings (Notes 16 and 24)
    
    
    15,243
    
    
    
    22,503Player account balances
    
    
    32,827
    
    
    
    Liabilities held for sale-current (Note 5)
    
    
    
    
    
    
    26,458Other current liabilities (Notes 18 and 23)
    
    
    12,386
    
    
    
    13,244Total Current Liabilities
    
    
    76,203
    
    
    
    72,329OTHER LIABILITIESAccrued pension liabilities (Note 19)
    
    
    108
    
    
    
    83Liabilities held for sale-noncurrent (Note 5)
    
    
    
    
    
    
    1,360Other (Note 23)
    
    
    3,406
    
    
    
    49Total Other Liabilities
    
    
    3,514
    
    
    
    1,492Total Liabilities
    
    
    79,717
    
    
    
    73,821COMMITMENTS AND CONTINGENCIES (Notes 25 and 26)
    
    
    
    
    
    
    EQUITY (Note 20)GigaMedia Shareholders Equity:Common shares, no par value, and
additional paid-in capital; issued and
outstanding 54,365 thousand and 54,995
thousand shares on December 31, 2008 and
2009
    
    
    300,021
    
    
    
    304,379Accumulated deficit
    
    
    (45,304
    )
    
    
    (94,389
    )Accumulated other comprehensive loss
    
    
    (26,261
    )
    
    
    (25,245
    )Total GigaMedia shareholders equity
    
    
    228,456
    
    
    
    184,745Noncontrolling interest
    
    
    8,620
    
    
    
    1,615Total Equity
    
    
    237,076
    
    
    
    186,360TOTAL LIABILITIES AND EQUITY
    
    $
    316,793
    
    
    $
    260,181
   F-3




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended December 31, 2007, 2008 and 2009
  2007
    
    
    2008
    
    
    2009OPERATING REVENUESGaming software and service revenues
    
    $
    118,950
    
    
    $
    144,765
    
    
    $
    112,694Online game and service revenues
    
    
    32,764
    
    
    
    45,604
    
    
    
    46,887Total
    
    
    151,714
    
    
    
    190,369
    
    
    
    159,581OPERATING COSTSCost of gaming software and service revenues
    
    
    (16,201
    )
    
    
    (22,770
    )
    
    
    (20,102
    )Cost of online game and service revenues
    
    
    (9,118
    )
    
    
    (12,404
    )
    
    
    (16,785
    )(25,319
    )
    
    
    (35,174
    )
    
    
    (36,887
    )GROSS PROFIT
    
    
    126,395
    
    
    
    155,195
    
    
    
    122,694OPERATING EXPENSESProduct development and engineering expenses
    
    
    (7,338
    )
    
    
    (13,455
    )
    
    
    (14,195
    )Selling and marketing expenses
    
    
    (60,106
    )
    
    
    (74,173
    )
    
    
    (79,421
    )General and administrative expenses
    
    
    (20,983
    )
    
    
    (25,035
    )
    
    
    (29,692
    )Bad debt expenses (Notes 13 and 15)
    
    
    (548
    )
    
    
    (2,905
    )
    
    
    (1,092
    )Impairment loss on property, plant and equipment (Note 10)
    
    
    
    
    
    
    
    
    
    
    (1,250
    )Impairment loss on goodwill (Note 10)
    
    
    
    
    
    
    
    
    
    
    (14,103
    )Impairment loss on prepaid licensing fees and intangible assets (Note 10)
    
    
    
    
    
    
    (1,524
    )
    
    
    (23,002
    )(88,975
    )
    
    
    (117,092
    )
    
    
    (162,755
    )INCOME (LOSS) FROM OPERATIONS
    
    
    37,420
    
    
    
    38,103
    
    
    
    (40,061
    )NON-OPERATING INCOME (EXPENSES)Interest income
    
    
    1,434
    
    
    
    1,460
    
    
    
    432Gains on sales of marketable securities
    
    
    184
    
    
    
    373
    
    
    
    Interest expense
    
    
    (547
    )
    
    
    (976
    )
    
    
    (390
    )Foreign exchange (loss) gain
    
    
    (679
    )
    
    
    240
    
    
    
    168Loss on disposal of property, plant and equipment
    
    
    (102
    )
    
    
    (253
    )
    
    
    (31
    )Loss on equity method investments
    
    
    (369
    )
    
    
    (3,010
    )
    
    
    (87
    )Impairment loss on marketable securities and investments (Note 10)
    
    
    
    
    
    
    
    
    
    
    (15,743
    )Other (Note 22)
    
    
    2,143
    
    
    
    842
    
    
    
    1272,064
    
    
    
    (1,324
    )
    
    
    (15,524
    )INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    39,484
    
    
    
    36,779
    
    
    
    (55,585
    )INCOME TAX EXPENSES (Note 23)
    
    
    (401
    )
    
    
    (1,069
    )
    
    
    (517
    )INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    39,083
    
    
    
    35,710
    
    
    
    (56,102
    )INCOME FROM DISCONTINUED OPERATIONS-NET OF TAX (Note 4)
    
    
    1,088
    
    
    
    9,435
    
    
    
    222NET INCOME (LOSS)
    
    
    40,171
    
    
    
    45,145
    
    
    
    (55,880
    )LESS: NET (INCOME) LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST
    
    
    (1,281
    )
    
    
    (757
    )
    
    
    6,795NET INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA
    
    $
    38,890
    
    
    $
    44,388
    
    
    $
    (49,085
    )NET INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA:Income (loss) from continuing operations-net of tax
    
    $
    37,802
    
    
    $
    34,953
    
    
    $
    (49,307
    )Income from discontinued operations-net of tax
    
    
    1,088
    
    
    
    9,435
    
    
    
    222$
    38,890
    
    
    $
    44,388
    
    
    $
    (49,085
    )EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO GIGAMEDIA (Note 2)Basic:Income (loss) from continuing operations
    
    $
    0.72
    
    
    $
    0.65
    
    
    $
    (0.90
    )Income from discontinued operations
    
    
    0.02
    
    
    
    0.17
    
    
    
    Net income (loss)
    
    $
    0.74
    
    
    $
    0.82
    
    
    $
    (0.90
    )Diluted:Income (loss) from continuing operations
    
    $
    0.63
    
    
    $
    0.58
    
    
    $
    (0.90
    )Income from discontinued operations
    
    
    0.02
    
    
    
    0.16
    
    
    
    Net income (loss)
    
    $
    0.65
    
    
    $
    0.74
    
    
    $
    (0.90
    )WEIGHTED AVERAGE SHARES USED TO COMPUTEEARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO GIGAMEDIA (Note 2)Basic
    
    
    52,876
    
    
    
    54,110
    
    
    
    54,524Diluted
    
    
    60,022
    
    
    
    60,152
    
    
    
    54,524
   F-4




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Years Ended December 31, 2007, 2008 and 2009
  2007
    
    
    2008
    
    
    2009NET INCOME (LOSS)
    
    $
    40,171
    
    
    $
    45,145
    
    
    $
    (55,880
    )OTHER COMPREHENSIVE INCOME-NET OF TAX:Unrealized gain (loss) on marketable securities
    
    
    58
    
    
    
    (282
    )
    
    
    67Defined benefit pension plan adjustment
    
    
    (54
    )
    
    
    95
    
    
    
    (68
    )Foreign currency translation adjustments
    
    
    855
    
    
    
    893
    
    
    
    1,003859
    
    
    
    706
    
    
    
    1,002COMPREHENSIVE INCOME (LOSS)
    
    
    41,030
    
    
    
    45,851
    
    
    
    (54,878
    )COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO
THE NONCONTROLLING INTEREST
    
    
    (1,607
    )
    
    
    (1,288
    )
    
    
    6,809COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO GIGAMEDIA
    
    $
    39,423
    
    
    $
    44,563
    
    
    $
    (48,069
    )
   F-5




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF EQUITY
 For the Years Ended December 31, 2007, 2008 and 2009
  GIGAMEDIA SHAREHOLDERSCommon shares
    
    
    
    
    
    
    Accumulated otherand additional paid-in capital
    
    
    Accumulated
    
    
    comprehensive
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    deficit (Note 20)
    
    
    income (loss)
    
    
    interest
    
    
    TotalBalance as of January 1, 2007
    
    
    51,495
    
    
    $
    289,495
    
    
    $
    (128,439
    )
    
    $
    (26,969
    )
    
    $
    1,534
    
    
    $
    135,621Issuance of common shares from exercise of stock options and RSUs
    
    
    1,979
    
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,733Issuance of common shares for acquisition (Note 6)
    
    
    226
    
    
    
    2,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,703Stock-based compensation
    
    
    
    
    
    
    1,862
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    1,920Adjustment for initial application of new guidance related to
uncertain tax positions (Note 23)
    
    
    
    
    
    
    
    
    
    
    (143
    )
    
    
    
    
    
    
    
    
    
    
    (143
    )Acquisitions and change in ownership interest of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,811
    
    
    
    6,811Cash dividend to noncontrolling interest shareholders of
variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    (200
    )Net income
    
    
    
    
    
    
    
    
    
    
    38,890
    
    
    
    
    
    
    
    1,281
    
    
    
    40,171Components of other comprehensive income:Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    58Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    (54
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    326
    
    
    
    855Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,030Balance as of December 31, 2007
    
    
    53,700
    
    
    
    296,793
    
    
    
    (89,692
    )
    
    
    (26,436
    )
    
    
    9,810
    
    
    
    190,475Issuance of common shares from exercise of stock options and RSUs
    
    
    665
    
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    495Stock-based compensation
    
    
    
    
    
    
    2,733
    
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    2,812Purchase of T2CN common shares from noncontrolling interest and
T2CN buy back and cancellation of its common shares (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,257
    )
    
    
    (2,257
    )Cash dividend to noncontrolling interest shareholders of
variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Net income
    
    
    
    
    
    
    
    
    
    
    44,388
    
    
    
    
    
    
    
    757
    
    
    
    45,145Components of other comprehensive income:Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    531
    
    
    
    893Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,851Balance as of December 31, 2008
    
    
    54,365
    
    
    
    300,021
    
    
    
    (45,304
    )
    
    
    (26,261
    )
    
    
    8,620
    
    
    
    237,076Issuance of common shares from exercise of stock options and RSUs
    
    
    630
    
    
    
    1,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,320Stock-based compensation
    
    
    
    
    
    
    3,150
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    3,277Purchase of T2CN common shares from noncontrolling interest
(Notes 1 and 6)
    
    
    
    
    
    
    (112
    )
    
    
    
    
    
    
    
    
    
    
    (173
    )
    
    
    (285
    )Cash dividend to noncontrolling interest shareholders of
variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (49,085
    )
    
    
    
    
    
    
    (6,795
    )
    
    
    (55,880
    )Components of other comprehensive loss:Change in unrealized gain (loss) on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    67Defined benefit pension plan adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (68
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,017
    
    
    
    (14
    )
    
    
    1,003Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,878
    )Balance as of December 31, 2009
    
    
    54,995
    
    
    $
    304,379
    
    
    $
    (94,389
    )
    
    $
    (25,245
    )
    
    
    1,615
    
    
    $
    186,360
   F-6




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##### Table of Contents



GIGAMEDIA LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2007, 2008 and 2009
  2007
    
    
    2008
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    40,171
    
    
    $
    45,145
    
    
    $
    (55,880
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation
    
    
    3,184
    
    
    
    4,031
    
    
    
    4,358Amortization
    
    
    3,214
    
    
    
    4,342
    
    
    
    5,219Stock-based compensation
    
    
    1,862
    
    
    
    2,780
    
    
    
    3,277Impairment loss on property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    1,250Impairment loss on goodwill
    
    
    
    
    
    
    
    
    
    
    14,103Impairment loss on prepaid licensing fees and intangible assets
    
    
    
    
    
    
    1,524
    
    
    
    23,002Provision for bad debt expenses
    
    
    743
    
    
    
    2,953
    
    
    
    1,092Gain on divestiture of business
    
    
    
    
    
    
    (11,014
    )
    
    
    Gain on sales of investment option rights
    
    
    (498
    )
    
    
    
    
    
    
    Gain on cancellation of preferred share call options
    
    
    (1,069
    )
    
    
    
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    134
    
    
    
    282
    
    
    
    31Gain on sale of marketable securities
    
    
    (205
    )
    
    
    (400
    )
    
    
    Loss on equity method investments
    
    
    369
    
    
    
    3,010
    
    
    
    87Impairment loss on marketable securities and investments
    
    
    
    
    
    
    
    
    
    
    15,743Other
    
    
    (86
    )
    
    
    300
    
    
    
    25Net changes in operating assets and liabilities, net of
business acquisitions and divestitures:Accounts receivable
    
    
    (3,864
    )
    
    
    465
    
    
    
    (5,015
    )Prepaid expenses
    
    
    (2,316
    )
    
    
    (4,373
    )
    
    
    1,061Other current assets
    
    
    3,673
    
    
    
    (2,304
    )
    
    
    (553
    )Accounts payable
    
    
    (327
    )
    
    
    33
    
    
    
    (298
    )Accrued expenses
    
    
    2,893
    
    
    
    2,326
    
    
    
    2,243Accrued compensation
    
    
    1,991
    
    
    
    (2,057
    )
    
    
    386Player account balances
    
    
    17,609
    
    
    
    5,691
    
    
    
    2,187Other current liabilities
    
    
    (1,259
    )
    
    
    336
    
    
    
    1,500Accrued pension liabilities
    
    
    (62
    )
    
    
    (167
    )
    
    
    (25
    )Prepaid licensing and royalty fees
    
    
    (9,829
    )
    
    
    (4,685
    )
    
    
    (4,216
    )Other
    
    
    (165
    )
    
    
    2,532
    
    
    
    (941
    )Net cash provided by operating activities
    
    
    56,163
    
    
    
    50,750
    
    
    
    8,636CASH FLOWS FROM INVESTING ACTIVITIES:(Increase) decrease in restricted cash
    
    
    (3,550
    )
    
    
    4,122
    
    
    
    187Proceeds from disposal of marketable securities
    
    
    20,151
    
    
    
    25,095
    
    
    
    Divestiture of business, net of cash transferred
    
    
    4,930
    
    
    
    16,471
    
    
    
    1,006Purchase of property, plant and equipment
    
    
    (4,900
    )
    
    
    (8,814
    )
    
    
    (5,761
    )Proceeds from disposal of property, plant and equipment
    
    
    46
    
    
    
    35
    
    
    
    17Proceeds from sales of investment option rights
    
    
    580
    
    
    
    
    
    
    
    Purchase of marketable securities
    
    
    (26,552
    )
    
    
    (24,746
    )
    
    
    (7,052
    )Purchase of investments
    
    
    (1,827
    )
    
    
    (190
    )
    
    
    (2,612
    )Purchase of intangible assets
    
    
    (4,642
    )
    
    
    (7,509
    )
    
    
    (8,807
    )Acquisitions, net of cash acquired
    
    
    (13,983
    )
    
    
    (4,642
    )
    
    
    (285
    )Increase in loan receivable
    
    
    (2,500
    )
    
    
    
    
    
    
    (637
    )Decrease (increase) in refundable deposits
    
    
    (610
    )
    
    
    (5,862
    )
    
    
    1,986Other
    
    
    (314
    )
    
    
    (380
    )
    
    
    (120
    )Net cash used in investing activities
    
    
    (33,171
    )
    
    
    (6,420
    )
    
    
    (22,078
    )
   F-7




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##### Table of Contents



GIGAMEDIA LIMITED  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)  For the Years Ended December 31, 2007, 2008 and 2009
 2007
    
    
    2008
    
    
    2009CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from (repayment of) short-term borrowings
    
    
    20,126
    
    
    
    (18,058
    )
    
    
    7,261Capital contribution received from non-controlling interest shareholders
    
    
    30
    
    
    
    
    
    
    
    Cash received from the exercise of stock options
    
    
    2,733
    
    
    
    495
    
    
    
    1,320Cash dividend to noncontrolling interest shareholders of variable
interest entity
    
    
    (200
    )
    
    
    (300
    )
    
    
    (150
    )Other
    
    
    (117
    )
    
    
    (13
    )
    
    
    (5
    )Net cash provided by (used in) financing activities
    
    
    22,572
    
    
    
    (17,876
    )
    
    
    8,426Exchange difference
    
    
    627
    
    
    
    936
    
    
    
    (356
    )Cash balance included in assets held for sale and retained ownership of
gaming software and service business
    
    
    
    
    
    
    
    
    
    
    (35,015
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    46,191
    
    
    
    27,390
    
    
    
    (40,387
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    22,372
    
    
    
    68,563
    
    
    
    95,953CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    68,563
    
    
    $
    95,953
    
    
    $
    55,566SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Interest paid during the year
    
    $
    621
    
    
    $
    1,008
    
    
    $
    388Income tax paid during the year
    
    $
    827
    
    
    $
    1,412
    
    
    $
    1,230NON-CASH FINANCING AND INVESTING ACTIVITIES:Change in unrealized holding gain (loss) on available-for-sale securities
    
    $
    58
    
    
    $
    (282
    )
    
    $
    67Accrual for investing in marketable securities
    
    $
    2,204
    
    
    
    
    
    
    
    Issuance of common shares for acquisition
    
    $
    2,703
    
    
    
    
    
    
    
    Divestiture of business  consideration receivable
    
    
    
    
    
    
    1,006
    
    
    
    
   F-8




---



##### 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
   F-10




---



##### Table of Contents



(c) Summary of significant accounting policies
 Use of Estimates
  Revenue Recognition
 General
   Multiple-Element Arrangements
    F-11




---



##### Table of Contents



Gaming Software and Service Revenues
    Online Game and Service Revenues
    F-12




---



##### Table of Contents



Revenue Included within 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
   Cash Equivalents
   F-15




---



##### Table of Contents



Marketable Securities
   Investments
    F-16




---



##### Table of Contents



Allowance for Doubtful Accounts
   F-17




---



##### 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 5
    F-18




---



##### Table of Contents



Acquisitions
  Intangible Assets and Goodwill
  Impairment of Intangible Assets, Goodwill and Long-Lived Assets
    F-19




---



##### Table of Contents



Software Cost
    F-20




---



##### Table of Contents



Product Development and Engineering
  Advertising
   Leases
  Share-Based Compensation
   F-21




---



##### Table of Contents



Retirement Plan and Net Periodic Pension Cost
   Comprehensive Income (Loss)
  Accounting for Income Taxes
   F-22




---



##### Table of Contents



Earnings Per Share
  Noncontrolling Interest
   F-23




---



##### Table of Contents



F-24




---



##### Table of Contents



Reclassification
  Recent Accounting Pronouncements
    F-25




---



##### Table of Contents



F-26




---



##### Table of Contents



F-27




---



##### Table of Contents



NOTE 2. EARNINGS PER SHARE
  (in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Weighted average outstanding sharesBasic
    
    
    52,876
    
    
    
    54,110
    
    
    
    54,524Effect of dilutive securitiesEmployee share-based compensation
    
    
    7,146
    
    
    
    6,042
    
    
    
    Diluted
    
    
    60,022
    
    
    
    60,152
    
    
    
    54,524
  NOTE 3. VARIABLE-INTEREST ENTITIES
 UIM
  (in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Total revenue
    
    $
    118,650
    
    
    $
    144,765
    
    
    $
    112,694Net income (loss)
    
    $
    348
    
    
    $
    (206
    )
    
    $
    (1,226
    )
  F-28




---



##### Table of Contents



T2CN
    Shareholder Voting Rights Proxy Agreements
  F-29




---



##### Table of Contents



Exclusive Equity Transfer Call Agreements
 Exclusive Technical Service and Consultancy Agreement .
 Equity Pledge Agreements .
  (in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Total revenues
    
    $
    14,973
    
    
    $
    20,312
    
    
    $
    18,673Net income (loss)
    
    $
    2,429
    
    
    $
    1,571
    
    
    $
    (2,990
    )
  F-30




---



##### Table of Contents



NOTE 4. DIVESTITURES
       F-31




---



##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Revenue
    
    $
    15,164
    
    
    $
    9,289
    
    
    $
    159Income (loss) from discontinued operations before tax
    
    $
    1,090
    
    
    $
    (593
    )
    
    $
    222Gain on sale of the discontinued operations before tax
    
    
    
    
    
    
    11,014
    
    
    
    Income tax expenses
    
    
    (2
    )
    
    
    (986
    )
    
    
    Income from discontinued operations
    
    $
    1,088
    
    
    $
    9,435
    
    
    $
    222
  (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
  F-32




---



##### Table of Contents



NOTE 5. ASSETS AND LIABILITIES HELD FOR SALE
   F-33




---



##### Table of Contents



(in US$ thousands)Assets Held for Sale-CurrentCash
    
    $
    35,015Accounts receivable
    
    
    15,817Prepaid expenses
    
    
    7,609Other current assets
    
    
    632Less: retained ownership
    
    
    (23,629
    )$
    35,444Assets Held for Sale-NoncurrentProperty, plant and equipment
    
    $
    7,358Goodwill
    
    
    29,243Intangible assets
    
    
    11,368Other assets
    
    
    4,199Less: retained ownership
    
    
    (20,867
    )$
    31,301Liabilities Held for Sale-CurrentAccounts payable
    
    $
    11Accrued compensation
    
    
    1,076Accrued expenses
    
    
    6,869Player account balances
    
    
    35,015Other current liabilities
    
    
    1,126Less: retained ownership
    
    
    (17,639
    )$
    26,458Liabilities Held for Sale-NoncurrentOther liabilities
    
    $
    2,266Less: retained ownership
    
    
    (906
    )$
    1,360
   F-34




---



##### Table of Contents



(in US$ thousands)Retained ownership of gaming software and service business:Current assets
    
    $
    23,629Noncurrent assets
    
    
    20,867Current liabilities
    
    
    (17,639
    )Noncurrent liabilities
    
    
    (906
    )$
    25,951
 NOTE 6. ACQUISITIONS
    F-35




---



##### Table of Contents



(in US$ thousands)
    
    
    
    
    
    
    
    AccumulatedDate of acquisition
    
    Purchase Price
    
    
    Description
    
    voting interest2006
    
    $
    15,000
    
    
    Purchased 7,500,000 convertiblevoting preferred shares
    
    
    19.02
    %2007
    
    $
    23,736
    *
    
    Acquired 38,613,681 common
shares (including convertible
voting preferred shares
converted into common shares) in total
    
    
    58.11
    %2008
    
    $
    3,375
    
    
    Purchased 4,500,000 common shares
    
    
    65.68
    %2009
    
    $
    285
    
    
    Purchased 520,000 common shares
    
    
    67.09
    %
 *
    
    Includes the issuance of 226,385 common shares of GigaMedia, valued at approximately $2.7 million. (a) Acquisition in 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
    
    
    
    
    1,050Noncontrolling interest
    
    
    
    
    6,171Total liabilities assumed
    
    
    
    
    18,721Total purchase price
    
    
    
    $
    38,713
  (in US$ thousands, except per share figures)
    
    (Unaudited)Net revenue
    
    $
    172,473Income from operations
    
    
    38,617Net income
    
    
    38,980Basic earnings per share
    
    
    0.74Diluted earnings per share
    
    
    0.65
   F-37




---



##### Table of Contents



(b) Acquisition in 2008
   (c) Acquisition in 2009
   F-38




---



##### Table of Contents



NOTE 7. GOODWILL
  Gaming software
    
    
    Online game(in US$ thousands)
    
    and service
    
    
    and service
    
    
    TotalBalance as of December 31, 2007
    
    $
    29,243
    
    
    $
    55,906
    
    
    $
    85,149Acquisition-T2CN (Note 6)
    
    
    
    
    
    
    1,738
    
    
    
    1,738Other adjustment
    
    
    
    
    
    
    511
    
    
    
    511Translation adjustment
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Balance as of December 31, 2008
    
    
    29,243
    
    
    
    57,855
    
    
    
    87,098Impairment charge (Note 10)
    
    
    
    
    
    
    (14,103
    )
    
    
    (14,103
    )Goodwill included in assets
held for sale and retained
ownership of gaming software
and service business (Note 5)
    
    
    (29,243
    )
    
    
    
    
    
    
    (29,243
    )Translation adjustment
    
    
    
    
    
    
    665
    
    
    
    665Balance as of December 31, 2009
    
    $
    
    
    
    $
    44,417
    
    
    $
    44,417
  F-39




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##### Table of Contents



NOTE 8. INTANGIBLE ASSETS  NET
  December 31, 2009Gross carrying
    
    
    Accumulated(in US$ thousands)
    
    amount
    
    
    amortization
    
    
    NetCompleted technology
    
    $
    2,363
    
    
    $
    (1,350
    )
    
    $
    1,013Trade name, trademark and non-competition agreement
    
    
    11,160
    
    
    
    (15
    )
    
    
    11,145Capitalized software cost
    
    
    8,633
    
    
    
    (5,137
    )
    
    
    3,496Customer relationships
    
    
    5,695
    
    
    
    (2,531
    )
    
    
    3,164Other
    
    
    115
    
    
    
    (9
    )
    
    
    106Total
    
    $
    27,966
    
    
    $
    (9,042
    )
    
    $
    18,924
 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
   F-40




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##### Table of Contents



Amount(in US$ thousands)2010
    
    $
    2,3352011
    
    
    2,0962012
    
    
    1,9062013
    
    
    8212014
    
    
    680$
    7,838
 NOTE 9. PREPAID LICENSING AND ROYALTY FEES
  December 31,(in US$ thousands)
    
    2008
    
    
    2009Beginning balance
    
    $
    16,739
    
    
    $
    20,540Additions
    
    
    6,968
    
    
    
    5,484Amortization of licensing and royalty costs
    
    
    (3,833
    )
    
    
    (2,146
    )Impairment charges (Note 10)
    
    
    
    
    
    
    (18,301
    )Translation adjustment
    
    
    666
    
    
    
    (20
    )Balance as of December 31, 2009
    
    $
    20,540
    
    
    $
    5,557
 NOTE 10. FAIR VALUE MEASUREMENTS
   F-41




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##### Table of Contents



Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
   Year EndedFair Value Measurement Using
    
    
    December 31,(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2009AssetsMarketable securities  current- Open-end fund
    
    $
    
    
    
    $
    3,486
    
    
    $
    
    
    
    $
    3,486Marketable securities  noncurrent- Debt securities
    
    
    
    
    
    
    
    
    
    
    14,204
    
    
    
    14,204- Equity securities
    
    
    4,152
    
    
    
    
    
    
    
    
    
    
    
    4,152Total
    
    $
    4,152
    
    
    $
    3,486
    
    
    $
    14,204
    
    
    $
    21,842
 Year EndedFair Value Measurement Using
    
    
    December 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2008AssetsCash equivalents  time deposits
    
    $
    
    
    
    $
    12,512
    
    
    $
    
    
    
    $
    12,512Marketable securities  current- Open-end fund
    
    
    
    
    
    
    3,419
    
    
    
    
    
    
    
    3,419Marketable securities  noncurrent- Debt securities
    
    
    
    
    
    
    
    
    
    
    26,041
    
    
    
    26,041Total
    
    $
    
    
    
    $
    15,931
    
    
    $
    26,041
    
    
    $
    41,972
   F-42




---



##### Table of Contents



Fair Value MeasurementsUsing Significant Unobservable Inputs(Level 3)Marketable Securities - NoncurrentDebt Securities(in US$ thousands)
    
    2008
    
    
    2009Beginning Balance
    
    $
    21,018
    
    
    $
    26,041Total gains or losses (realized/unrealized)Included in earnings
    
    
    
    
    
    
    (11,837
    )Included in other comprehensive income
    
    
    
    
    
    
    Purchases and settlements
    
    
    5,023
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    Ending Balance
    
    $
    26,041
    
    
    $
    14,204The amount of total gains or losses for the
period included in earnings attributable to
the change in unrealized gains or losses
relating to assets still held at the
reporting date
    
    None
    
    
    None
   F-43




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##### Table of Contents



Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
    F-44




---



##### Table of Contents



Year Ended
    
    
    TotalFair Value Measurement Using
    
    
    December 31,
    
    
    Impairment(in US$ thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2009
    
    
    LossesAssets(a) Investment  Cost method
    
    $
    
    
    
    $
    
    
    
    $
    700
    
    
    $
    700
    
    
    $
    1,005(b) Property, plant and equipment
 Land and Building
    
    
    
    
    
    
    1,171
    
    
    
    
    
    
    
    1,171
    
    
    
    473(b) Property, plant and equipment
 Information and
communication equipment
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    79
    
    
    
    777(c) Goodwill  Resulting from
acquisition of T2CN
    
    
    
    
    
    
    
    
    
    
    17,500
    
    
    
    17,500
    
    
    
    14,103(d) Intangible assets  Capitalized
software cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,701(e) Prepaid licensing and royalty
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,301Total
    
    $
    
    
    
    $
    1,171
    
    
    $
    18,279
    
    
    $
    19,450
    
    
    $
    39,360
 (a)
    
    Impairment losses on certain cost method investments which were determined to be impaired:In 2009, cost method investments with carrying amounts of $1.7 million were written down to their
fair value of $700 thousand, resulting in an impairment charge of $1 million which is included in
non-operating expenses within impairment loss on marketable securities and investments in the
Consolidated Statements of Operations. Cost method investments are measured at fair value on a
nonrecurring basis when deemed necessary, using other observable inputs such as trading prices of
similar classes of the stock or using discounted cash flows, incorporating adjusted available
market discount rate information and our Companys estimates for liquidity risk.(b)
    
    Impairment losses on certain property, plant, and equipment which were determined to be
impaired:In 2009, land and buildings with carrying amounts of $1.7 million were written down to their fair
value of $1.2 million, resulting in an impairment charge of $473 thousand which is included in
operating expenses within impairment loss on property, plant and equipment in the Consolidated
Statements of Operations. The impairment charge for the land and building was related to assets
that were used for the ISP business, which was disposed of in September 2008, and are currently
idle after the disposal. The land and building were valued based on the quoted prices of similar
assets in the market.  F-45




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##### Table of Contents



In 2009, information and communication equipment with carrying amounts of $856 thousand were
written down to their fair value of $79 thousand, resulting in an impairment charge of $777
thousand which is included in operating expenses within impairment loss on property, plant and
equipment in the Consolidated Statements of Operations. The impairment charge for the equipment
was related to servers used in certain impaired licensed games or internally developed games within
our online game and service business for which the carrying amount was determined not to be
recoverable from its related future undiscounted cash flows. This equipment was valued using
unobservable inputs such as discounted cash flows, incorporating adjusted available market discount
rate information and our Companys estimates for liquidity risk, and other cash flow model related
assumptions.(c)
    
    Impairment losses on goodwill which was determined to be impaired:In 2009, goodwill from the acquisition of T2CN with a carrying amount of $31.6 million was written
down to its fair value of $17.5 million, resulting in an impairment charge of $14.1 million which
is included within operating expenses in the Consolidated Statements of Operations. The impairment
charge resulted because our estimates of future cash flows for T2CNs business have been reduced
due to lower than expected operating performance results in 2009, which indicated that the carrying
amount of the goodwill from the acquisition of T2CN cannot be fully recovered as of December 31,
2009. Goodwill is valued on a nonrecurring basis when impairment exists, using unobservable inputs
such as discounted cash flows, incorporating adjusted available market discount rate information
and our Companys estimates for liquidity risk, and other cash flow model related assumptions.(d)
    
    Impairment losses on certain intangible assets  Capitalized software costs which were
determined to be impaired:In 2009, capitalized software costs with carrying amounts of $4.7 million were fully written down,
resulting in an impairment charge of $4.7 million which is included in operating expenses within
impairment loss on prepaid licensing fees and intangible assets in the Consolidated Statements of
Operations. The impairment charge for the intangible assets was the result of certain projects
within our online game and service business that we ceased further development on and as a result
we recorded a full impairment of the carrying value of the assets related to these projects.  F-46




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##### Table of Contents



(e)
    
    Impairment losses on certain prepaid licensing and royalty fees which were determined to be
impaired:In 2009, prepaid licensing and royalty fees with carrying amounts of $18.3 million were fully
written down, resulting in an impairment charge of $18.3 million which is included in operating
expenses within impairment loss on prepaid licensing fees and intangible assets in the
Consolidated Statements of Operations. The impairment charge for the prepaid licensing and royalty
fees related to certain licensed games within our online game and service business that we stopped
operating or for which the carrying amounts of the related assets were determined not to be
recoverable from their expected future undiscounted cash flows. The licensed games and related
royalties are valued on a nonrecurring basis when impairment exists, using unobservable inputs such
as discounted cash flows, incorporating adjusted available market discount rate information and our
Companys estimates for liquidity risk, and other cash flow model related assumptions. NOTE 11. CASH AND CASH EQUIVALENTS
  December 31,(in US$ thousands)
    
    2008
    
    
    2009Checking and savings accounts
    
    $
    83,441
    
    
    $
    55,566Time deposits
    
    
    12,512
    
    
    
    Total
    
    $
    95,953
    
    
    $
    55,566
 NOTE 12. MARKETABLE SECURITIES  CURRENT
  December 31,(in US$ thousands)
    
    2008
    
    
    2009Available-for-sale securitiesOpen-end funds
    
    $
    3,419
    
    
    $
    3,486
  F-47




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##### Table of Contents



NOTE 13. ACCOUNTS RECEIVABLE  NET
 December 31,(in US$ thousands)
    
    2008
    
    
    2009Accounts receivable
    
    $
    15,442
    
    
    $
    4,428Less: Allowance for doubtful accounts
    
    
    (254
    )
    
    
    (200
    )Net
    
    $
    15,188
    
    
    $
    4,228
  For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Balance at beginning of year
    
    $
    1,895
    
    
    $
    1,362
    
    
    $
    254Additions: Provision for bad debt expenses
    
    
    743
    
    
    
    313
    
    
    
    158Less: Write-offs
    
    
    (1,279
    )
    
    
    (399
    )
    
    
    (216
    )Divestiture  Internet access and service business
    
    
    
    
    
    
    (1,041
    )
    
    
    Translation adjustment
    
    
    3
    
    
    
    19
    
    
    
    4Balance at end of year
    
    $
    1,362
    
    
    $
    254
    
    
    $
    200
  F-48




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##### Table of Contents



NOTE 14. MARKETABLE SECURITIES  NONCURRENT
 December 31,(in US$ thousands)
    
    2008
    
    
    2009Available-for-sale securitiesDebt securities
    
    $
    26,041
    
    
    $
    14,204Equity securities
    
    
    
    
    
    
    4,152$
    26,041
    
    
    $
    18,356
       F-49




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##### Table of Contents



NOTE 15. OTHER CURRENT ASSETS
      F-50




---



##### Table of Contents



NOTE 16. SHORT-TERM BORROWINGS
     NOTE 17. ACCRUED EXPENSES
  December 31,(in US$ thousands)
    
    2008
    
    
    2009Accrued advertising expenses
    
    $
    5,013
    
    
    $
    2,382Accrued professional fees
    
    
    2,627
    
    
    
    1,160Other
    
    
    3,705
    
    
    
    3,177Total
    
    $
    11,345
    
    
    $
    6,719
  F-51




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##### Table of Contents



NOTE 18. OTHER CURRENT LIABILITIES
  December 31,(in US$ thousands)
    
    2008
    
    
    2009Deferred revenue
    
    $
    7,738
    
    
    $
    8,295Income taxes payable
    
    
    1,431
    
    
    
    1,222Other
    
    
    3,217
    
    
    
    3,727Total
    
    $
    12,386
    
    
    $
    13,244
 NOTE 19. PENSION BENEFITS
  Defined Benefit Pension Plan
    F-52




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##### Table of Contents



Defined Contribution Pension Plans
  Taiwan
   F-53




---



##### Table of Contents



North America
   PRC
  Hong Kong
   F-54




---



##### Table of Contents



NOTE 20. EQUITY
     F-55




---



##### Table of Contents



NOTE 21. SHARE-BASED COMPENSATION
  (in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Cost of online game and service revenues
    
    $
    48
    
    
    $
    27
    
    
    $
    101Product development & engineering expenses
    
    
    250
    
    
    
    480
    
    
    
    59Selling and marketing expenses
    
    
    142
    
    
    
    244
    
    
    
    231General and administrative expenses
    
    
    1,394
    
    
    
    1,954
    
    
    
    2,886Pre-tax stock-based compensation expense
    
    
    1,834
    
    
    
    2,705
    
    
    
    3,277Income tax benefit
    
    
    249
    
    
    
    497
    
    
    
    382Total stock-based compensation expense reported in continuing operations
    
    $
    1,585
    
    
    $
    2,208
    
    
    $
    2,895Total stock-based compensation expense reported in discontinued operations, net of tax
    
    $
    28
    
    
    $
    63
    
    
    $
    
   F-56




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##### Table of Contents



GigaMedia
 (a) Overview of Stock-Based Compensation Plan
 2002 Employee Share Option Plan
  2004 Employee Share Option Plan
   F-57




---



##### Table of Contents



2006 Equity Incentive Plan
  2007 Equity Incentive Plan
  2008 Equity Incentive Plan
  2008 Employee Share Purchase Plan
  2009 Equity Incentive Plan
   F-58




---



##### Table of Contents



2009 Employee Share Purchase Plan
   Stock-Based
    
    
    
    
    
    
    
    Options exercise
    
    RSUs grant date faircompensation plan
    
    Granted awards
    
    
    Vesting schedule
    
    price
    
    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
    
    
 *
    
    The granted awards, net of forfeited or canceled shares, were within reserved shares of
seven million common shares.   F-59




---



##### Table of Contents



(b) Options
   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 options granted
    
    $4.46
    
    $2.36
      F-60




---



##### Table of Contents



2007
    
    
    2008
    
    
    2009Weighted-AverageRemaining
    
    
    AggregateWeighted Avg.
    
    
    No. of Shares
    
    
    Weighted Avg.
    
    
    No. of Shares
    
    
    Weighted Avg.
    
    
    No. of Shares
    
    
    Contractual
    
    
    Intrinsic ValueExercise Price
    
    
    (in thousands)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Term
    
    
    (in thousands)Balance at
January 1,
    
    $
    1.11
    
    
    
    8,789
    
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287Options granted
    
    
    10.78
    
    
    
    1,145
    
    
    
    4.69
    
    
    
    1,341
    
    
    
    
    
    
    
    Options exercised
    
    
    1.43
    
    
    
    (1,911
    )
    
    
    0.95
    
    
    
    (518
    )
    
    
    2.42
    
    
    
    (543
    )Options
Forfeited/canceled/expired
    
    
    2.47
    
    
    
    (111
    )
    
    
    9.97
    
    
    
    (448
    )
    
    
    17.98
    
    
    
    (55
    )Balance at
December 31,
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287
    
    
    $
    2.36
    
    
    
    7,689
    
    
    
    5.36
    
    
    $
    13,673Exercisable at
December 31,
    
    $
    1.06
    
    
    
    6,692
    
    
    $
    1.33
    
    
    
    6,448
    
    
    $
    1.65
    
    
    
    6,420
    
    
    
    4.87
    
    
    $
    13,673Vested and expected
to vest at
December 31,
    
    $
    2.42
    
    
    
    7,912
    
    
    $
    2.47
    
    
    
    8,287
    
    
    $
    2.36
    
    
    
    7,689
    
    
    
    5.36
    
    
    $
    13,673
    F-61




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##### 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
    
    
    5,392
    
    
    4.50 years
    
    under $1
    
    
    5,392$1~$10
    
    
    1,590
    
    
    7.27 years
    
    $1~$10
    
    
    640$10~$20
    
    
    707
    
    
    7.65 years
    
    $10~$20
    
    
    3887,689
    
    
    
    
    
    
    
    6,420
 (c) RSUs
  Number of units
    
    
    Weighted-average(in thousands)
    
    
    grant date fair valueNonvested at December 31, 2008
    
    
    641
    
    
    $
    10.41Granted
    
    
    100
    
    
    $
    6.01Vested
    
    
    (86
    )
    
    $
    10.15Forfeited
    
    
    (15
    )
    
    $
    7.19Nonvested at December 31, 2009
    
    
    640
    
    
    $
    9.83
    F-62




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##### Table of Contents



T2CN
 (a) Overview of Stock-Based Compensation Plan
   (b) Options
   2007
    
    2008Option term (years)
    
    5.44~6.02
    
    3.50~6.26Volatility
    
    44.64%~46.96%
    
    47.85%~57.41%Weighted-average volatility
    
    45.03%
    
    48.19%Risk-free interest rate
    
    4.31%~4.68%
    
    2.20%~4.54%Dividend yield
    
    0%
    
    0%Weighted-average fair value of option granted
    
    $0.52
    
    $0.38
  F-63




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##### Table of Contents



2007
    
    
    2008
    
    
    2009Weighted-AverageRemaining
    
    
    AggregateWeighted Avg.
    
    
    No. of Shares
    
    
    Weighted Avg.
    
    
    No. of Shares
    
    
    Weighted Avg.
    
    
    No. of Shares
    
    
    Contractual
    
    
    Intrinsic Value*Exercise Price
    
    
    (in thousands)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Term
    
    
    (in thousands)Balance at
Beginning of the year
    
    $
    1.30
    
    
    
    2,973
    
    
    $
    1.24
    
    
    
    3,300
    
    
    $
    1.07
    
    
    
    6,841Options granted
    
    
    1.00
    
    
    
    501
    
    
    $
    1.02
    
    
    
    6,500
    
    
    $
    
    
    
    
    Options
Forfeited/canceled
/expired
    
    
    1.57
    
    
    
    (174
    )
    
    $
    1.15
    
    
    
    (2,959
    )
    
    $
    1.02
    
    
    
    (1,639
    )Balance at
December 31,
    
    $
    1.24
    
    
    
    3,300
    
    
    $
    1.07
    
    
    
    6,841
    
    
    $
    1.08
    
    
    
    5,202
    
    
    
    4.38
    
    
    $
    Exercisable at
December 31,
    
    $
    1.20
    
    
    
    937
    
    
    $
    1.27
    
    
    
    1,406
    
    
    $
    1.19
    
    
    
    2,246
    
    
    
    5.70
    
    
    $
    Vested and expected
to vest at
December 31,
    
    $
    1.24
    
    
    
    3,016
    
    
    $
    1.06
    
    
    
    5,753
    
    
    $
    1.11
    
    
    
    3,758
    
    
    
    4.81
    
    
    $
    
 *
    
    Since the estimated fair value of T2CNs stock was below the exercise price for all stock
options on December 31, 2009, there was no aggregate intrinsic value.  F-64




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##### 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
    
    
    4,502
    
    
    3.98 years
    
    $
    1.00
    
    
    
    1,546$1.60
    
    
    700
    
    
    6.96 years
    
    $
    1.60
    
    
    
    7005,202
    
    
    
    
    
    
    
    
    
    2,246
 NOTE 22. OTHER NON-OPERATING INCOME
 For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Gain 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
    
    
    
    
    
    
    
    
    
    
    Subsidy received from tax authority
    
    
    
    
    
    
    561
    
    
    
    190Other
    
    
    (25
    )
    
    
    281
    
    
    
    (63
    )$
    2,143
    
    
    $
    842
    
    
    $
    127
  F-65




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##### Table of Contents



NOTE 23. INCOME TAXES
  For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009U.S. operations
    
    $
    489
    
    
    $
    1,095
    
    
    $
    1,324Non-U.S. operations
    
    
    38,995
    
    
    
    35,684
    
    
    
    ($56,909
    )$
    39,484
    
    
    $
    36,779
    
    
    
    ($55,585
    )
  For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009U.S. operations
    
    $
    224
    
    
    $
    620
    
    
    $
    557Non-U.S. operations
    
    
    177
    
    
    
    449
    
    
    
    ($40
    )$
    401
    
    
    $
    1,069
    
    
    $
    517
  For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009U.S. federalCurrent
    
    $
    281
    
    
    $
    (57
    )
    
    $
    863Deferred
    
    
    (111
    )
    
    
    528
    
    
    
    (443
    )$
    170
    
    
    $
    471
    
    
    $
    420U.S. state and local:Current
    
    $
    84
    
    
    $
    208
    
    
    $
    156Deferred
    
    
    (30
    )
    
    
    (59
    )
    
    
    (19
    )$
    54
    
    
    $
    149
    
    
    $
    137Non  U.S.:Current
    
    $
    132
    
    
    $
    976
    
    
    $
    967Deferred
    
    
    45
    
    
    
    (527
    )
    
    
    (1,007
    )$
    177
    
    
    $
    449
    
    
    $
    (40
    )Total income tax
provisions
    
    $
    401
    
    
    $
    1,069
    
    
    $
    517
  F-66




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##### Table of Contents



For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Federal statutory rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %State and local  net of
federal tax benefit
    
    
    6.27
    %
    
    
    6.27
    %
    
    
    8.14
    %Foreign tax differential
    
    
    (36.16
    %)
    
    
    (32.56
    %)
    
    
    (43.53
    %)Loss carryforward utilized
    
    
    (3.33
    %)
    
    
    (2.89
    %)
    
    
    Change in valuation allowance
    
    
    
    
    
    
    (4.69
    %)
    
    
    (1.73
    %)Other
    
    
    0.24
    %
    
    
    2.78
    %
    
    
    2.19
    %Effective rate
    
    
    1.02
    %
    
    
    2.91
    %
    
    
    (0.93
    %)
    December 31,(in US$ thousands)
    
    2008
    
    
    2009Net operating loss carryforwards
    
    $
    1
    
    
    $
    80Deferred revenue
    
    
    472
    
    
    
    540Amortization
    
    
    378
    
    
    
    (136
    )Investment credits
    
    
    185
    
    
    
    Share-based compensation
    
    
    116
    
    
    
    230Impairment charges
    
    
    34
    
    
    
    1,465Pension expense
    
    
    80
    
    
    
    41Depreciation
    
    
    22
    
    
    
    86Others
    
    
    180
    
    
    
    1211,468
    
    
    
    2,427Less: valuation allowance
    
    
    (106
    )
    
    
    (1,068
    )Deferred tax assets  net
    
    $
    1,362
    
    
    $
    1,359
  F-67




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##### Table of Contents



December 31,(in US$ thousands)
    
    2008
    
    
    2009Depreciation and amortization
    
    $
    1,754
    
    
    $
    69Others
    
    
    (244
    )
    
    
    (37
    )Deferred tax liabilities  net
    
    $
    1,510
    
    
    $
    32
   For the years ended December 31,(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Balance at beginning of year
    
    $
    4,032
    
    
    $
    3,012
    
    
    $
    106Subsequent reversal/utilization of valuation allowance
    
    
    (1,224
    )
    
    
    (2,787
    )
    
    
    (45
    )Reversal of valuation allowance due to loss
carryforwards expired unused
    
    
    (990
    )
    
    
    
    
    
    
    Addition of valuation allowance
    
    
    
    
    
    
    
    
    
    
    1,006Divestiture
    
    
    
    
    
    
    (219
    )
    
    
    Acquisition
    
    
    1,197
    
    
    
    
    
    
    
    Exchange differences
    
    
    (3
    )
    
    
    100
    
    
    
    1Balance at end of year
    
    $
    3,012
    
    
    $
    106
    
    
    $
    1,068
   F-68




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F-69




---



##### Table of Contents



Uncertain Tax Positions
   (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
    
    
    Increase for prior year tax positions
    
    
    220Increase for current year tax positions
    
    
    460Exchange differences
    
    
    22Balance at December 31, 2009
    
    $
    702
     F-70




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F-71




---



##### Table of Contents



NOTE 24. RELATED-PARTY TRANSACTIONS
     F-72




---



##### Table of Contents



NOTE 25. COMMITMENTS AND CONTINGENCIES
 Commitments
 (a) Operating Leases
  (in US$ thousands)Year2010
    
    $
    3,7332011
    
    
    1,5742012
    
    
    646Total
    
    $
    5,953
   (b) License Agreements
  Minimumguarantees against(in US$ thousands)
    
    License fees
    
    
    future royalties
    
    
    TotalMinimum required payments:In 2010
    
    $
    
    
    
    $
    2,625
    
    
    $
    2,625After 2010
    
    
    2,700
    
    
    
    8,600
    
    
    
    11,300$
    2,700
    
    
    $
    11,225
    
    
    $
    13,925
   F-73




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##### Table of Contents



Contingencies
 (a) T2CN VIE
   F-74




---



##### Table of Contents



(b) Other
  NOTE 26. LITIGATION
 Class Action
    F-75




---



##### Table of Contents



F-76




---



##### Table of Contents



F-77




---



##### Table of Contents



NOTE 27. SEGMENT INFORMATION
 Segment data
   F-78




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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-79




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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-80




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##### Table of Contents



Gamingsoftware and
    
    
    Online game(in US$ thousands)
    
    service
    
    
    and service
    
    
    Total2009:Segment profit or loss:Net revenue from external customers
    
    $
    112,694
    
    
    $
    46,887
    
    
    $
    159,581Income (loss) from operations
    
    $
    7,472
    
    
    $
    (34,649
    )
    
    $
    (27,177
    )Share-based compensation
    
    $
    501
    
    
    $
    931
    
    
    $
    1,432Impairment loss on prepaid licensing fees and intangible assets
    
    $
    212
    
    
    $
    22,787
    
    
    $
    22,999Impairment loss on property, plant and equipment
    
    $
    
    
    
    $
    777
    
    
    $
    777Impairment loss on goodwill
    
    $
    
    
    
    $
    14,103
    
    
    $
    14,103Interest income
    
    $
    242
    
    
    $
    129
    
    
    $
    371Interest expense
    
    $
    
    
    
    $
    
    
    
    $
    Foreign exchange gain (loss)
    
    $
    521
    
    
    $
    (114
    )
    
    $
    407Loss on equity method investments
    
    $
    
    
    
    $
    87
    
    
    $
    87Impairment loss on marketable securities and investments
    
    $
    
    
    
    $
    13,719
    
    
    $
    13,719Depreciation
    
    $
    2,279
    
    
    $
    1,500
    
    
    $
    3,779Amortization, including intangible assets
    
    $
    2,027
    
    
    $
    3,120
    
    
    $
    5,147Income tax expense (benefit)
    
    $
    871
    
    
    $
    (101
    )
    
    $
    770Segment assets:Equity method investments
    
    $
    
    
    
    $
    222
    
    
    $
    222Additions to property, plant and equipment
    
    $
    2,731
    
    
    $
    2,929
    
    
    $
    5,660Additions to intangible assets
    
    $
    5,793
    
    
    $
    2,307
    
    
    $
    8,100Additions to goodwill
    
    $
    
    
    
    $
    
    
    
    $
    Total assets
    
    $
    145,776
    
    
    $
    111,354
    
    
    $
    257,130
    F-81




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##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Income (loss) from operations:Total segments
    
    $
    44,547
    
    
    $
    44,358
    
    
    $
    (27,177
    )Adjustment*
    
    
    (7,127
    )
    
    
    (6,255
    )
    
    
    (12,884
    )Total GigaMedia consolidated
    
    $
    37,420
    
    
    $
    38,103
    
    
    $
    (40,061
    )Share-based compensationTotal segments
    
    $
    921
    
    
    $
    1,796
    
    
    $
    1,432Adjustment*
    
    
    913
    
    
    
    909
    
    
    
    1,845Total GigaMedia consolidated
    
    $
    1,834
    
    
    $
    2,705
    
    
    $
    3,277Impairment loss on prepaid licensing fees and intangible assets:Total segments
    
    $
    
    
    
    $
    1,524
    
    
    $
    22,999Adjustment*
    
    
    
    
    
    
    
    
    
    
    3Total GigaMedia consolidated
    
    $
    
    
    
    $
    1,524
    
    
    $
    23,002Impairment loss on property, plant and equipment:Total segments
    
    $
    
    
    
    $
    
    
    
    $
    777Adjustment*
    
    
    
    
    
    
    
    
    
    
    473Total GigaMedia consolidated
    
    $
    
    
    
    $
    
    
    
    $
    1,250Interest income:Total segments
    
    $
    1,065
    
    
    $
    1,047
    
    
    $
    371Adjustment*
    
    
    369
    
    
    
    413
    
    
    
    61Total GigaMedia consolidated
    
    $
    1,434
    
    
    $
    1,460
    
    
    $
    432Interest expense:Total segments
    
    $
    1
    
    
    $
    7
    
    
    $
    Adjustment*
    
    
    546
    
    
    
    969
    
    
    
    390Total GigaMedia consolidated
    
    $
    547
    
    
    $
    976
    
    
    $
    390Gain (loss) on sales of marketable securities:Total segments
    
    $
    (104
    )
    
    $
    4
    
    
    $
    Adjustments*
    
    
    288
    
    
    
    369
    
    
    
    Total GigaMedia consolidated
    
    $
    184
    
    
    $
    373
    
    
    $
    Foreign exchange gain (loss):Total segments
    
    $
    (681
    )
    
    $
    145
    
    
    $
    407Adjustments*
    
    
    2
    
    
    
    95
    
    
    
    (239
    )Total GigaMedia consolidated
    
    $
    (679
    )
    
    $
    240
    
    
    $
    168Impairment loss on marketable securities and investments:Total segments
    
    $
    
    
    
    $
    
    
    
    $
    13,719Adjustment*
    
    
    
    
    
    
    
    
    
    
    2,024Total GigaMedia consolidated
    
    $
    
    
    
    $
    
    
    
    $
    15,743
  F-82




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##### Table of Contents



(in US$ thousands)
    
    2007
    
    
    2008
    
    
    2009Depreciation:Total segments
    
    $
    1,649
    
    
    $
    3,144
    
    
    $
    3,779Adjustments*
    
    
    
    
    
    
    177
    
    
    
    579Total GigaMedia consolidated
    
    $
    1,649
    
    
    $
    3,321
    
    
    $
    4,358Amortization:Total segments
    
    $
    3,123
    
    
    $
    4,253
    
    
    $
    5,147Adjustments*
    
    
    26
    
    
    
    34
    
    
    
    72Total GigaMedia consolidated
    
    $
    3,149
    
    
    $
    4,287
    
    
    $
    5,219Income tax expense:Total segments
    
    $
    401
    
    
    $
    1,069
    
    
    $
    770Adjustments*
    
    
    
    
    
    
    
    
    
    
    (253
    )Total GigaMedia consolidated
    
    $
    401
    
    
    $
    1,069
    
    
    $
    517Additions to property, plant and equipment:Total segments
    
    $
    4,855
    
    
    $
    7,680
    
    
    $
    5,660Adjustments**
    
    
    1,392
    
    
    
    1,134
    
    
    
    101Total GigaMedia consolidated
    
    $
    6,247
    
    
    $
    8,814
    
    
    $
    5,761Additions to intangible assets:Total segments
    
    $
    5,645
    
    
    $
    7,336
    
    
    $
    8,100Adjustments**
    
    
    1,088
    
    
    
    309
    
    
    
    707Total GigaMedia consolidated
    
    $
    6,733
    
    
    $
    7,645
    
    
    $
    8,807Total assets:Total segments
    
    $
    185,741
    
    
    $
    262,958
    
    
    $
    257,130Adjustment**
    
    
    98,124
    
    
    
    53,835
    
    
    
    3,051Total GigaMedia consolidated
    
    $
    283,865
    
    
    $
    316,793
    
    
    $
    260,181
 *
    
    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-83




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##### Table of Contents



Geographic Information
  (in US$ thousands)Geographic region / country
    
    2007
    
    
    2008
    
    
    2009Canada
    
    $
    118,650
    
    
    $
    144,765
    
    
    $
    112,694Taiwan
    
    
    18,388
    
    
    
    20,932
    
    
    
    24,869PRC
    
    
    8,883
    
    
    
    19,652
    
    
    
    18,318Hong Kong
    
    
    5,360
    
    
    
    4,964
    
    
    
    3,700Others
    
    
    433
    
    
    
    56
    
    
    
    Total
    
    $
    151,714
    
    
    $
    190,369
    
    
    $
    159,581
  (in US$ thousands)
    
    December 31,Geographic region / country
    
    2007
    
    
    2008
    
    
    2009Taiwan
    
    $
    8,431
    
    
    $
    4,118
    
    
    $
    3,642Canada
    
    
    2,053
    
    
    
    2,264
    
    
    
    PRC
    
    
    1,334
    
    
    
    1,734
    
    
    
    1,920United States
    
    
    943
    
    
    
    4,642
    
    
    
    Hong Kong
    
    
    247
    
    
    
    710
    
    
    
    427Total
    
    $
    13,008
    
    
    $
    13,468
    
    
    $
    5,989
  Note 28. SUBSEQUENT EVENTS
 Litigation
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Transactions with Infocomm Asia
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