##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
    Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    June 30, 2008ORo

TRANSITION REPORTING PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    Number: 0-20784
  TRIDENT MICROSYSTEMS,
    INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

77-0156584(State or other jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)3408 Garrett Drive, Santa Clara, California(Address of principal
    executive offices)

95054-2803(Zip Code)   (408) 764-8808
 (Registrants telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value

NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 





TRIDENT
    MICROSYSTEMS, INC.
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


11Item 1B.


Unresolved Staff Comments


21Item 2.


Properties


21Item 3.


Legal Proceedings


21Item 4.


Submission of Matters to a Vote of Security
    Holders


23PART IIItem 5.


Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


24Item 6.


Selected Financial Data


26Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


43Item 8.


Financial Statements and Supplementary Data


45Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


80Item 9A.


Controls and Procedures


80Item 9B.


Other Information


83PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


84Item 11.


Executive Compensation


86Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


86Item 13.


Certain Relationships and Related Transactions
    and Director Independence


87Item 14.


Principal Accounting Fees and Services


87PART IVItem 15.


Exhibits, Financial Statement Schedules


88Signatures


91Power of Attorney


91EXHIBIT 10.30EXHIBIT 10.31EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




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FORWARD-LOOKING
    STATEMENTS
  This Annual Report on
    Form 10-K
    contains forward-looking statements within the
    meaning of the Private Securities Litigation Reform Act of 1995
    which provides a safe harbor for statements about
    future events, products and future financial performance that
    are based on the beliefs of, estimates made by and information
    currently available to the management of Trident Microsystems,
    Inc. (we, our, Trident or
    the Company). The outcome of the events described in
    these forward-looking statements is subject to risks and
    uncertainties. Actual results and the outcome or timing of
    certain events may differ significantly from those projected in
    these forward-looking statements due to the factors listed under
    Risk Factors, and from time to time in our other
    filings with the Securities and Exchange Commission, or SEC. For
    this purpose, statements concerning industry or market segment
    outlook, market acceptance of or transition to new products,
    revenues, earnings growth, other financial results and any
    statements using the terms believe,
    expect, expectation,
    anticipate, can, should,
    would, could, estimate,
    appear, based on, may,
    intended, potential, are
    emerging and possible or similar statements
    are forward-looking statements that involve risks and
    uncertainties that could cause our actual results and the
    outcome and timing of certain events to differ materially from
    those projected or managements current expectations. By
    making forward-looking statements, we have not assumed any
    obligation to, and you should not expect us to, update or revise
    those statements because of new information, future events or
    otherwise, except as required by law.
 PART I  ITEM 1.
    BUSINESS  Overview
  TM
     3




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system-on-a-chip,
    ®
  Markets
    and Applications
  high-quality
 4




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##### Table of Contents



Product Family

Description

MarketsDPTV/SVP

Integrated multi-standard video decoding, format conversion, and
    image enhancement processors.

Advanced TV including cathode ray tube, or CRT, plasma, LCD,
    rear- projection and front-projection display types, AV Notebook
    PC, Multi-function LCD Monitors.HiDTV

Integrated ATSC/DVB (MPEG2) decoding, format conversion, and
    image enhancement processors.

Digital TV including CRT, plasma, LCD, rear-projection and
    front-projection display types.TDM

Demodulation for ATSC, DVB-C, DVB-T and DTMB IF signals.

Digital TV including CRT, plasma, LCD, rear-projection and
    front-projection display types.   Digital
    Media Products:
    DCRe ®
  SVP-AX TM all-in-one
  SVP-CX TM all-in-one
  SVP-EX TM all-in-one TM de-interlacing
 5




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SVP-LX TM. all-in-one SVP-LX
  SVP-PX TM
  SVP-UX/WX TM all-in-one
  HiDTV ® ® ® ®
  HiDTV ® LX. ® ®
 6




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HiDTV ® PRO. ® ® ® ®
  HiDTV ® Pro
    AX. ® all-in-one ®
  HiDTV ® Pro
    FX. ®
  HiDTV ® Pro
    PX/LX. ® ®
  HiDTV®
    Pro
    QX/WX. ® system-on-a-chip th ® ®
  TAFE TM
  PCTV
    Application Products:
  TV
    Master TM TM6000.
 7




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TV
    MasterTM
    TM5600.
  TV
    Solution Products:
  Connected TV Solution. video-on-demand, QAM16/32/64/128/256
  Sales,
    Marketing and Distribution
          Competition
   8




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Research
    and Development
      Manufacturing
     9




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Backlog
        Seasonality
    Patent
    and Proprietary Rights
     10




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Trademarks
  Form 10-K
  Employees
    Available
    Information
  Form 10-K, Form 10-Q Form 8-K 1-800-SEC-0330. http://www.sec.gov.
  Form 10-K http://www.tridentmicro.com. Form 10-Q Form 8-K http://www.FreeEdgar.com. Form 10-K, Form 10-Q, Form 8-K 408-764-8808
  ITEM 1A.
    RISK
    FACTORS  Form 10-K
 11




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As a
    result of our investigation into our historical stock option
    granting practices and the restatement of our previously-filed
    financial statements, we are subject to civil litigation claims
    and regulatory investigations that could have a material adverse
    effect on our business, customer relationships, results of
    operations and financial condition.
  Form 10-K
  and/or
  We
    face risks related to SEC, Department of Justice, or DOJ, and
    other investigations into our historical stock option grant
    practices and related accounting, which could require
    significant management time and attention, and could require us
    to pay fines or other penalties.
  and/or and/or and/or
  We
    have been named as a party to derivative action lawsuits, and we
    may be named in additional litigation, all of which will require
    significant management time and attention and result in
    significant legal expenses and may result in an unfavorable
    outcome which could have a material adverse effect on our
    business, financial condition, results of operations and cash
    flows.
  In re Trident Microsystems Inc. Derivative
    Litigation, No. C-06-3440-JF. Limke v. Lin
    et al No. 1:07-CV-080390.
 12




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We are
    subject to the risks of additional lawsuits in connection with
    our historical stock option grant practices and related issues,
    the resulting restatements, and the remedial measures we have
    taken.
    The
    operation of our business could be adversely affected by the
    transition of key personnel as we rebuild our executive
    leadership team and make additional organizational
    changes.
    Intense
    competition exists in the market for digital media
    products.
     13




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cost-effectively
  Our
    success depends upon the digital media market and we must
    continue to develop new products and to enhance our existing
    products.
  long-term
  We
    depend on a small number of large customers for a significant
    portion of our sales. The loss of, or a significant reduction or
    cancellation in sales to, any key customer would significantly
    reduce our revenues.
        
    substantially all of our sales are made on a purchase order
    basis, which permits our customers to cancel, change or delay
    product purchase commitments with little or no notice to us and
    without penalty; 14




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
    our customers may purchase integrated circuits from our
    competitors;
    our customers may develop their own solutions; or
    our customers may discontinue sales or lose market share in the
    markets for which they purchase our products.  If we
    do not achieve additional design wins in the future, our ability
    to sell additional products could be adversely
    affected.
    The
    average selling prices of our products may decline over
    relatively short periods.
    We may
    face risks resulting from the failure to allow former employees
    to exercise stock options.
  non-employee Form S-8 non-employee
 15




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We do
    not have long-term commitments from our customers, and plan
    purchases based upon our estimates of customer demand, which may
    require us to contract for the manufacture of our products based
    on inaccurate estimates.
    Our
    dependence on sales to distributors increases the risks of
    managing our supply chain and may result in excess inventory or
    inventory shortages.
    Product
    supply and demand in the semiconductor industry is subject to
    cyclical variations.
    The
    process of restating our financial statements, making the
    associated disclosures, and complying with SEC requirements are
    subject to uncertainty.
  Form 10-K
 16




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We
    have had fluctuations in quarterly results in the past and may
    continue to experience such fluctuations in the
    future.
    
    our ability to develop, introduce, ship and support new products
    and product enhancements, especially our newer SoC products, and
    to manage product transitions;
    new product introductions by our competitors;
    delayed new product introductions;
    uncertain demand in the digital media markets in which we have
    limited experience;
    our ability to achieve required product cost reductions;
    the mix of products sold and the mix of distribution channels
    through which they are sold;
    fluctuations in demand for our products, including seasonality;
    unexpected product returns or the cancellation or rescheduling
    of significant orders;
    our ability to attain and maintain production volumes and
    quality levels for our products;
    unfavorable responses to new products;
    adverse economic conditions, particularly in the United States
    and Asia; and
    unexpected costs associated with our investigation of our
    historical stock option grant practices and related issues, and
    any related litigation or regulatory actions.    We are
    vulnerable to undetected product problems.
    Our
    reliance upon one independent foundry could make it difficult to
    maintain product flow and affect our sales.
   17




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If we
    have to qualify a new contract manufacturer or foundry for any
    of our products, we may experience delays that result in lost
    revenues and damaged customer relationships.
    Changes
    in, or interpretations of, tax rules and regulations may
    adversely affect our effective tax rates.
    Our
    success depends to a significant degree on the continued
    employment of key personnel, some of whom have only worked
    together for a short period of time.
   18




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Changes
    in our business and product strategy will affect our
    operations.
    The
    market price of our common stock has been, and may continue to
    be volatile.
    We
    currently rely on certain international customers for a
    substantial portion of our revenue and are subject to risks
    inherent in conducting business outside of the United
    States.
    
    exchange rate variations, tariffs, import restrictions and other
    trade barriers;
    potential adverse tax consequences;
    challenges in effectively managing distributors or
    representatives to maximize sales;
    difficulties in collecting accounts receivable;
    political and economic instability, civil unrest, war or
    terrorist activities that impact international commerce;
    difficulties in protecting intellectual property rights,
    particularly in countries where the laws and practices do not
    protect proprietary rights to as great an extent as do the laws
    and practices of the United States; and
    unexpected changes in regulatory requirements, such as delays by
    the U.S. Federal Communications Commission in imposing its
    pending requirement that all new televisions have a digital
    receiver by February 2009.   19




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Our
    success depends in part on our ability to protect our
    intellectual property rights, which may be
    difficult.
    We
    have been involved in intellectual property infringement claims,
    and may be involved in others in the future, which can be
    costly.
    If
    necessary licenses of third-party technology are not available
    to us or are very expensive, our products could become
    obsolete.
   20




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Our
    operations are vulnerable to interruption or loss due to natural
    disasters, power loss, strikes and other events beyond our
    control, which would adversely affect our
    business.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES  3408-3410
      ITEM 3.
    LEGAL
    PROCEEDINGS  Shareholder
    Derivative Litigation
  In re Trident Microsystems Inc. Derivative
    Litigation No. C-06-3440-JF. Limke v. Lin
    et al No. 1:07-CV-080390.
 21




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Regulatory
    Actions
  and/or and/or and/or and/or
  Special
    Litigation Committee
  Form S-8
     22




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Indemnification
    Obligations
    Prior
    Software Usage
    General
    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITIES HOLDERS    Proposal 1:
  Shares


PercentFor approval


28,029,222



78.95Against approval


7,435,435



20.94Abstained


36,627



0.10    23




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Part II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON STOCK, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information and Holders
    High


LowFiscal Year 2008First Quarter

$
19.49


$
13.52Second Quarter

$
17.05


$
5.35Third Quarter

$
6.57


$
4.62Fourth Quarter

$
5.37


$
3.63Fiscal Year 2007First Quarter

$
25.24


$
14.85Second Quarter

$
25.54


$
18.17Third Quarter

$
23.16


$
16.54Fourth Quarter

$
23.59


$
18.00   Approximate
    Number of Stockholders
    Dividends
    Issuer
    Repurchases of Equity Securities
   24




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Stock
    Performance Graph and Cumulative Total Return
    COMPARISON
    OF 5 YEARS CUMULATIVE RETURN
    Among Trident Microsystems, Inc., The NASDAQ Composite Index,
    The Philadelphia Semiconductor Sector Index, and 
    The S&P Semiconductors Index
  
 25




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ITEM 6.
    SELECTED
    FINANCIAL DATA    TRIDENT
    MICROSYSTEMS, INC.
    SELECTED CONSOLIDATED FINANCIAL DATA
  Years Ended June 30,2008(1)(3)


2007(1)(2)(4)


2006(1)(4)


2005


2004(In millions, except per share amounts)Summary of Operations:Net revenues

$
257.9


$
270.8


$
171.4


$
69.0


$
52.6Income (loss) from operations


18.8



40.1



28.4



(29.9
)


(11.9
)Net income (loss)


10.2



30.1



26.2



(30.2
)


(4.8
)Net income (loss) per share  Basic


0.17



0.52



0.48



(0.64
)


(0.11
)Net income (loss) per share  Diluted


0.16



0.48



0.42



(0.64
)


(0.11
)Financial Position at Fiscal Year End:Cash, cash equivalents, and short-term investments

$
240.0


$
199.3


$
152.7


$
92.2


$
84.3Working capital


215.9



158.3



125.3



81.6



75.5Total assets


309.3



283.9



207.2



135.0



96.3Stockholders equity


237.3



201.8



153.7



109.3



74.4     (1)
    
    Effective July 1, 2005, we adopted
    SFAS No. 123(R), Share-Based Payment, which
    requires the measurement and recognition of compensation expense
    for all stock-based payment awards made to employees and
    directors, including stock options, based on their fair values.
    See Notes 1 and 8 of Notes to Consolidated Financial
    Statements, included in Part II, Item 8 of this Report.(2)
    
    Effective July 1, 2006, we adopted Emerging Issue Task
    Force Issue No.
    06-2,
    Accounting for Sabbatical Leave and Other Similar
    Benefits Pursuant to FASB Statement No. 43, Accounting for
    compensated absences,or EITF
    06-2, which
    addressed the accounting for sabbatical leave and other similar
    benefits and recorded a cumulative charge from change in
    accounting principle.(3)
    
    Effective July 1, 2007, we adopted FIN 48,
    Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109, which
    requires us to make certain estimates and judgments in
    determining income tax expense for financial statement purposes.
    See Note 9, Income Taxes, of Notes to
    Consolidated Financial Statements, included in Part II,
    Item 8 of this Report.(4)
    
    We have revised the classification of certain amounts from
    Research and development to Cost of
    revenues. See Note 1, Description of Business and
    Summary of Significant Accounting Policies, of Notes to
    Consolidated Financial Statements, included in Part II,
    Item 8 of this Report.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Forward-Looking
    Statements
  This Annual Report on
    Form 10-K
    contains forward-looking statements within the
    meaning of the Private Securities Litigation Reform Act of 1995
    which provides a safe harbor for statements about
    future events, products and future financial performance that
    are based on the beliefs of, estimates made by and information
    currently available to the management of Trident Microsystems,
    Inc. (we, our, Trident or
    the Company). The outcome of the events described in
    these forward-looking statements is subject to risks and
    uncertainties. Actual results and the outcome or timing of
    certain events may differ significantly from those projected in
    these forward-looking statements due to the factors listed under
    Risk Factors, and from time to time in our other
    filings with the SEC. For this purpose, statements concerning
    industry or market segment outlook, market acceptance of or
    transition to new products, revenues, earnings growth, other
    financial results and any statements using the terms
 26




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believe, expect,
    expectation, anticipate,
    can, should, would,
    could, estimate, appear,
    based on, may, intended,
    potential, are emerging and
    possible or similar statements are forward-looking
    statements that involve risks and uncertainties that could cause
    our actual results and the outcome and timing of certain events
    to differ materially from those projected or managements
    current expectations. By making forward-looking statements, we
    have not assumed any obligation to, and you should not expect us
    to, update or revise those statements because of new
    information, future events or otherwise, except as required by
    law.
    Overview
          Critical
    Accounting Estimates
  Form 10-K,
 27




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Revenue
    Recognition
  Revenue Recognition
  and/or
    Allowance
    for Sales Returns and Pricing Adjustments
    Stock-based
    Compensation Expense
  Share-Based Payment Accounting for Stock Issued to Employees
  Accounting for
    Stock-Based Compensation
 28




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Goodwill
    and Purchased Intangible Assets
  and/or
 29




---



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Investments
  Accounting for
    Certain Investments in Debt and Equity Securities Other-Than-Temporary
    Impairment of Certain Investments in Debt and Equity Securities FAS 115-1 124-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments
  Inventories
  (first-in,
  Product
    Warranty
    Income
    Taxes
  Accounting
    for Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
     30




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Litigation
    and Other Loss Contingencies
  Accounting for
    Contingencies
  Accrued
    Expenses
  See
    contingencies, prior software usage, below.
  Results
    of Operations
  Financial
    Data for Fiscal Years Ended June 30, 2008, 2007 and
    2006.
  Net
    Revenues
  Fiscal YearsNet Revenues by Region(1)

2008


% Change


2007


% Change


2006(Dollars in thousands)Japan

$
91,306



0
%

$
91,721



38
%

$
66,705South Korea


79,608



(31
)%


115,513



107
%


55,742Europe


53,801



209
%


17,421



108
%


8,383Asia Pacific


32,618



(29
)%


45,725



14
%


40,085Americas


605



46
%


415



(21
)%


527Total net revenues

$
257,938



(5
)%

$
270,795



58
%

$
171,442     (1)
    
    Net revenues by region are classified based on the locations of
    the customers principal offices even though our
    customers revenues may be attributable to end customers
    that are located in a different location.   31




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Years Ended June 30,2008


2007


2006Revenue:Samsung


29
%


41
%


31
%Midoriya


28
%


25
%


30
%Philips


19
%






     Comparison
    of Fiscal Year 2008 and Fiscal Year 2007
        Comparison
    of Fiscal Year 2007 and Fiscal Year 2006
     32




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Gross
    Margin
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Gross profit

$
120,026



(7
)%

$
129,107



47
%

$
87,886Gross margin


46.5
%






47.7
%






51.3
%     Comparison
    of Fiscal Year 2008 and Fiscal Year 2007
      Fiscal Years2008


2007


2006(Dollars in thousands)Additions to inventory reserves

$
2,747


$
2,204


$
2,952Sales of previously reserved products


(4,676
)


(4,463
)


(4,613
)Net increase in gross profit

$
(1,929
)

$
(2,259
)

$
(1,661
)        33




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Comparison
    of Fiscal Year 2007 and Fiscal Year 2006
  ramp-up
    Research
    and Development
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Research and development

$
52,608



28
%

$
40,970



23
%

$
33,314As a percentage of total revenues


20
%






15
%






19
%     Comparison
    of Fiscal Year 2008 and Fiscal Year 2007
    Comparison
    of Fiscal year 2007 and Fiscal year 2006
   34




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Selling,
    General and Administrative
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Selling, general and administrative

$
48,598



1
%

$
47,993



83
%

$
26,178As a percentage of total revenues


19
%






18
%






15
%     Comparison
    of Fiscal Year 2008 and Fiscal Year 2007
    Comparison
    of Fiscal Year 2007 and Fiscal Year 2006
    Analysis
    of Goodwill Impairment
  Goodwill and Other Intangible
    Assets
  Using Cash Flow
    Information and Present Value in Accounting Measurements
 35




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Interest
    Income, Net
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Interest income, net

$
6,166



26
%

$
4,890



113
%

$
2,293As a percentage of net revenues


2
%






2
%






1
%       Impairment
    Loss on UMC Investment
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Impairment loss on UMC investment

$
(6,480
)


(100
)%

$
0



0
%

$
0As a percentage of net revenues


(3
)%






0
%






0
%   Accounting for
    Certain Investments in Debt and Equity Securities Other-Than-Temporary
    Impairment of Certain Investments in Debt and Equity Securities FAS 115-1 124-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments.
  Other
    Income (Expense), Net
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Other income (expense), net

$
445



(77
)%

$
1,947



15,077
%

$
(13
)As a percentage of net revenues


0.2
%






0.7
%






0.0
%    36




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##### Table of Contents



Provision
    for Income Taxes
  Fiscal Years2008

Change

2007

Change

2006Income tax provision


8,799



(89
)%


16,673



62
%


6,317Effective tax rate


46
%


11
%


35
%


14
%


21
%     Cumulative
    Effect of Change in Accounting Principle
  Fiscal Years2008

% Change

2007

% Change

2006(Dollars in thousands)Cumulative effect of change in accounting principle, net of tax

$

(100)%

$
(190
)

(110)%

$
1,819   No. 06-2, Accounting for Sabbatical Leave and Other Similar
    Benefits Pursuant to FASB Statement No. 43, Accounting for
    compensated absences, EITF 06-2,
  Liquidity
    and Capital Resources
    June 30,


June 30,


Increase/2008


2007


(Decrease)(Dollars in millions)Cash, cash equivalents and short-term investmentsCash and cash equivalents

$
213.3


$
147.6


$
65.7Short-term investments


26.7



51.7



(25.0
)Total

$
240.0


$
199.3


$
40.7    37




---



##### Table of Contents



Fiscal Years2008


2007


2006(In millions)Net cash flow provided by (used in):Operating activities

$
57.9


$
62.1


$
60.8Investing activities


1.7



(17.7
)


(5.4
)Financing activities


6.1



0.1



10.0Net increase in cash and cash equivalents

$
65.7


$
44.5


$
65.4   Operating
    Activities
        Investing
    Activities
      Financing
    Activities
  Form S-8
 38




---



##### Table of Contents



Liquidity
    Contractual
    Obligations
    Payments Due by PeriodLess Than








More Than1 Year


1-3 Years


3-5 Years


5 Years


Total(Dollars in millions)Contractual ObligationsOperating Leases(1)

$
1.1


$
1.7


$
0.1


$



$
2.9Purchase Obligations(2)


9.8



0.7











10.5Total

$
10.9


$
2.4


$
0.1


$



$
13.4     (1)
    
    We lease office space and have entered into other lease
    commitments in North America as well as various locations in
    Japan, Hong Kong, China and Taiwan. Operating leases include
    future minimum lease payments under all our noncancelable
    operating leases as of June 30, 2008.(2)
    
    Purchase obligations primarily represent unconditional purchase
    order commitments with contract manufacturers and suppliers for
    wafers and software licensing.    Contingencies
  Shareholder
    Derivative Litigation
  In re Trident Microsystems Inc. Derivative
    Litigation No. C-06-3440-JF. Limke v. Lin
    et al No. 1:07-CV-080390.
 39




---



##### Table of Contents



Regulatory
    Actions
  and/or and/or and/or and/or
  Special
    Litigation Committee
  Form S-8
     40




---



##### Table of Contents



Indemnification
    Obligations
    Prior
    Software Usage
    General
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
 41




---



##### Table of Contents



No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
    Services to Be Used in Future Research and Development
    Activities (EITF 07-3). EITF 07-3 EITF 07-3 EITF 07-3
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  SFAS No. 157-1, pplication of FASB Statement No. 157 to FASB Statement
    No. 13 and Its Related Interpretive Accounting
    Pronouncements That Address Leasing Transactions, SFAS No. 157-2, Effective Date of FASB Statement No. 157. SFAS No. 157-1 Fair Value Measurements. SFAS No. 157-2 SFAS No. 157-1 SFAS No. 157-2
  Disclosures about Derivative
    Instruments and Hedging Activities.
 42




---



##### Table of Contents



The Hierarchy of General
    Accepted Accounting Principles The Meaning of Present Fairly in
    Conformity with GAAP
  SFAS 142-3, Determination of the Useful Life of Intangible Assets Business Combinations SFAS 142-3 SFAS 142-3
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Foreign
    currency exchange rate risk
      Interest
    rate risk
     43




---



##### Table of Contents



Investment
    risk
    start-up
 44




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  TRIDENT
    MICROSYSTEMS, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Years Ended June 30,2008


2007


2006(In thousands, except per share data)Net Revenues

$
257,938


$
270,795


$
171,442Cost of revenues


137,912



141,688



83,556Gross profit


120,026



129,107



87,886Operating expenses:Research and development


52,608



40,970



33,314Selling, general and administrative


48,598



47,993



26,178Total operating expenses


101,206



88,963



59,492Income from operations


18,820



40,144



28,394Interest income


6,166



4,890



2,293Impairment loss on UMC investment


(6,480
)






Other income (expense), net


445



1,947



(13
)Income before provision for income taxes and cumulative effect
    of change in accounting principle


18,951



46,981



30,674Provision for income taxes


8,799



16,673



6,317Income before cumulative effect of change in accounting principle


10,152



30,308



24,357Cumulative effect of change in accounting principle, net of tax






(190
)


1,819Net income

$
10,152


$
30,118


$
26,176Net income per share  Basic:Income before change in accounting principle


0.17



0.52



0.45Cumulative effect of change in accounting principle










0.03Net income per share  Basic


0.17



0.52



0.48Net income per share  Diluted:Income before change in accounting principle


0.16



0.48



0.39Cumulative effect of change in accounting principle










0.03Net income per share  Diluted

$
0.16


$
0.48


$
0.42Shares used in computing net income per share  Basic


59,367



57,637



54,822Shares used in computing net income per share  Diluted


62,751



63,380



62,526    45




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  CONSOLIDATED
    BALANCE SHEETS
  As of June 30,2008


2007(In thousands,except par values)ASSETSCurrent assets:Cash and cash equivalents

$
213,296


$
147,562Short-term investments


26,704



51,744Accounts receivable, net of allowances for sales returns of $300
    and $1,101 in 2008 and 2007, respectively


4,510



9,161Inventories


8,680



16,263Prepaid expenses and other current assets


12,863



13,668Total current assets


266,053



238,398Property and equipment, net


23,425



19,581Intangible assets, net


8,428



12,845Goodwill


1,432



Other assets


9,977



13,055Total assets

$
309,315


$
283,879LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
10,889


$
19,313Accrued expenses and other


22,910



24,605Income taxes payable


16,309



36,171Total current liabilities


50,108



80,089Long-term income taxes payable


21,579



Deferred income tax liabilities


370



1,942Total liabilities


72,057



82,031Commitments and contingencies (Notes 6 and 8)Stockholders equity:Preferred stock, $0.001 par value; 500 shares
    authorized; none issued and outstanding






Common stock, $0.001 par value; 95,000 shares
    authorized; 61,238 and 57,748 shares issued and outstanding
    at June 30, 2008 and 2007, respectively


61



58Additional paid-in capital


208,299



179,390Retained earnings


28,950



18,798Accumulated other comprehensive income (loss)


(52
)


3,602Total stockholders equity


237,258



201,848Total liabilities and stockholders equity

$
309,315


$
283,879    46




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended June 30,2008


2007


2006(In thousands)Cash flows from operating activities:Net income

$
10,152


$
30,118


$
26,176Adjustments to reconcile net income to net cash provided by
    operating activities:Cumulative effect of change in accounting principle






190



(1,819
)Stock-based compensation expense


24,270



15,607



13,183Excess tax benefit from stock-based compensation


(561
)


(855
)


(1,742
)Depreciation and amortization


5,354



1,501



1,230Increase (decrease) in allowance for sales returns


(801
)


(374
)


1,062Amortization of intangible assets


5,725



6,345



5,469Loss on disposal of property and equipment


52



59



106Impairment loss on investment in UMC


6,480







(Gain) loss on sales of investments


(969
)


(216
)


560Deferred income taxes


(722
)


1,179



(1,378
)Changes in assets and liabilities, net of effect of acquisitions:Accounts receivable


5,466



(4,509
)


976Inventories


7,583



(1,622
)


(11,906
)Prepaid expenses and other current assets


6,088



5,742



(2,728
)Accounts payable


(8,902
)


384



12,788Accrued expenses and other liabilities


(3,574
)


2,398



11,560Income taxes payable


2,273



6,145



7,259Net cash provided by operating activities


57,914



62,092



60,796Cash flows from investing activities:Purchases of property and equipment


(6,246
)


(17,690
)


(2,633
)Purchases of stock of privately held companies






(500
)


(1,492
)Proceeds from the capital reduction of UMC investment


7,829







Proceeds from sale of available-for-sale investments


6,079







Proceeds from sale of investments in private companies


1,056



1,228Acquisition of businesses, net of cash acquired


(1,960
)






Other assets


(5,070
)


(748
)


(1,189
)Proceeds from sale of property, plant and equipment


48







Purchase of minority interest in subsidiary










(61
)Net cash provided by (used in) investing activities


1,736



(17,710
)


(5,375
)Cash flows from financing activities:Proceeds from issuance of common stock to employees


5,523



805



8,285Excess tax benefit from stock-based compensation


561



855



1,742Net cash settlements of stock options in connection with IRC
    Section 409A






(1,526
)


Net cash provided by financing activities


6,084



134



10,027Net increase in cash and cash equivalents


65,734



44,516



65,448Cash and cash equivalents at beginning of year


147,562



103,046



37,598Cash and cash equivalents at end of year

$
213,296


$
147,562


$
103,046Supplemental disclosure of cash flow information:Cash paid for income taxes

$
1,219


$
2,080


$
44Supplemental schedule of non-cash investing and financing
    activities:Accrued expense for Shanghai building

$
(208
)

$



$
Prepaid taxes in connection with intercompany profit on assets
    remaining within consolidated group

$



$
20,583


$
    47




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 AND
    COMPREHENSIVE INCOME
  IncomeShares


Amount


Capital


Compensation


Deficit


(Loss)


Equity(In thousands)Balance at June 30, 2005


51,840


$
52


$
164,610


$
(23,187
)

$
(37,496
)

$
5,341


$
109,320Net income


















26,176







26,176Elimination of deferred stock-based compensation due to adoption
    of SFAS 123(R)










(23,187
)


23,187











Unrealized loss on investments, net of tax






















(3,222
)


(3,222
)Comprehensive income


























22,954Shares issued pursuant to stock awards, net


5,366



5



8,272















8,277Stock-based compensation expense










13,183















13,183Tax benefit from stock-based compensation










1,742















1,742Cumulative effect of change in accounting principle, net of tax










(1,819
)














(1,819
)Balance at June 30, 2006


57,206



57



162,801



0



(11,320
)


2,119



153,657Income before cumulative effect of change in accounting principle


















30,308







30,308Cumulative effect of change in accounting principle, net of tax


















(190
)






(190
)Unrealized gains on investments, net of tax






















1,483



1,483Comprehensive income


























31,601Shares issued pursuant to stock awards, net


542



1



804















805Stock-based compensation expense










15,607















15,607Tax benefit from stock-based compensation










1,704















1,704Net cash settlement of stock options in connection with IRC
    Section 409A










(1,526
)














(1,526
)Balance at June 30, 2007


57,748


$
58


$
179,390






$
18,798


$
3,602


$
201,848Net income


















10,152







10,152Unrealized loss on investments, net of tax






















(3,654
)


(3,654
)Comprehensive income


























6,498Shares issued pursuant to stock awards, net


3,490



3



5,520















5,523Stock-based compensation expense










24,270















24,270Net cash settlement of stock options










(1,274
)














(1,274
)Tax benefit from stock-based compensation










393















393Balance at June 30, 2008


61,238


$
61


$
208,299






$
28,950


$
(52
)

$
237,258    48




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    DESCRIPTION
    OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES  Description
    of Business
        Principles
    of Consolidation
    Use of
    Estimates
    Fair
    Value of Financial Instruments
    Foreign
    Currency Remeasurement
   49




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash
    and Cash Equivalents
    Investments
      Concentrations
    of Credit Risk and Other Risk
         50




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Inventories
  first-in-first-out work-in-process
  Property
    and Equipment
    Long-lived
    Assets
    Goodwill
    and Purchased Intangible Assets
  Goodwill and Intangible
    Assets
     51




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Sabbatical
    Leave
  No. 06-2, Accounting for Sabbatical Leave and Other Similar
    Benefits Pursuant to FASB Statement No. 43, Accounting for
    compensated absences, EITF 06-2,
  Revenue
    Recognition
  Revenue
    Recognition
  and/or
  01-9, Accounting for Consideration Given by a Vendor to a Customer
    (Including a Reseller of the Vendors Products)
     52




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock-based
    Compensation
  Share-Based Payment Accounting for Stock Issued to Employees
  Accounting for Stock-Based
    Compensation
    Transition Election Related
    to Accounting for Tax Effects of Share-based Payment
    Awards, No. D-32
   53




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Shipping
    and Handling Costs
    Research
    and Development
    Software
    Development Costs
  Computer Software to be Sold, Leased, or Otherwise Marketed.
  Income
    Taxes
  Accounting for Income Taxes
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
    Net
    Income per Share
  Earnings per Share.
 54




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment
    Reporting
  Disclosure about Segments of an Enterprise and
    Related Information
    Comprehensive
    Income
    Reclassifications
    Year EndedJune 30, 2007As Reported


Revised(Dollars in thousands)Cost of revenues

$
138,142


$
141,688Gross Profit


132,653



129,107Research and development


44,516



40,970Total operating expenses


92,509



88,963   Year EndedJune 30, 2006As Reported


RevisedCost of revenues

$
83,061


$
83,556Gross Profit


88,381



87,886Research and development


33,809



33,314Total operating expenses


59,987



59,492  55




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Product
    Warranty
    Advertising
    Expense
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
    Services to Be Used in Future Research and Development
    Activities (EITF 07-3). EITF 07-3 EITF 07-3 EITF 07-3
  Business Combinations
 56




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  SFAS No. 157-1, pplication of FASB Statement No. 157 to FASB Statement
    No. 13 and Its Related Interpretive Accounting
    Pronouncements That Address Leasing Transactions, SFAS No. 157-2, Effective Date of FASB Statement No. 157. SFAS No. 157-1 Fair Value Measurements. SFAS No. 157-2 SFAS No. 157-1 SFAS No. 157-2
  Disclosures about Derivative
    Instruments and Hedging Activities.
  The Hierarchy of General
    Accepted Accounting Principles The Meaning of Present Fairly in
    Conformity with GAAP
  SFAS 142-3, Determination of the Useful Life of Intangible Assets Business Combinations SFAS 142-3 SFAS 142-3 SFAS 142-3
 57




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2.
    INVESTMENTS
    AND RELATED PARTY TRANSACTIONS    As of June 30, 2008Gross

GrossUnrealized

Unrealized

Estimated FairHistorical Cost

Gains

Losses

Value(Dollars in thousands)Short-term InvestmentsCorporate equity securities

$
26,756


$



$
(52
)

$
26,704Total short-term investments

$
26,756


$



$
(52
)

$
26,704   As of June 30, 2007Gross

GrossUnrealized

Unrealized

Estimated FairHistorical Cost

Gains

Losses

Value(In thousands)Short-term investmentsCorporate equity securities

$
46,104


$
5,640


$



$
51,744Total short-term investments

$
46,104


$
5,640


$



$
51,744   Short-term
    investments
  United
    Microelectronics Corporation
    Miscellaneous Accounting, SFAS 115-1 The Meaning of Other-Than-Temporary Impairment
    and Its Application to Certain Investments
  Long-term
    investments
  Related
    Party Transactions
   58




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      3.
    BALANCE
    SHEET COMPONENTS  June 30,2008


2007(Dollars in thousands)Cash and cash equivalentsCash

$
37,295


$
81,774Money market funds


132,419



22,478Certificates of deposit


43,582



43,310Total cash and cash equivalents

$
213,296


$
147,562Inventories:Work in process

$
4,170


$
9,416Finished goods


4,510



6,847Total inventories

$
8,680


$
16,263Property and equipment, net:Building and leasehold improvements

$
18,738


$
1,044Machinery and equipment


8,773



6,283Software


3,319



3,599Furniture and fixtures


1,465



974Construction in progress


103



15,14832,398



27,048Accumulated depreciation and amortization


(8,973
)


(7,467
)Total property and equipment, net

$
23,425


$
19,581Accrued expenses and other :Compensation and benefits

$
5,927


$
6,644Royalties


1,014


$
2,838Professional fees


1,572



4,269Deferred revenue less cost of revenue


1,274



1,448Prior software usage(1)


1,387



Contingent liabilities on certain option modification(2)


4,336



Others


7,400



9,406Total accrued expenses

$
22,910


$
24,605     (1)
    
    See Note 6, Commitments and Contingencies, of
    Notes to Consolidated Financial Statements(2)
    
    See Note 8, Employee Stock Plans, of Notes to
    Consolidated Financial Statements 59




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    GOODWILL
    AND PURCHASED INTANGIBLE ASSETS      2008


2007Accumulated


AccumulatedGross


Amortization


Net


Gross


Amortization


Net(In thousands)Core and developed technologies

$
24,587


$
(17,129
)

$
7,458


$
23,694


$
(11,991
)

$
11,703Customer relationships


2,521



(1,561
)


960



2,120



(978
)


1,142Tradename


14



(4
)


10











Total

$
27,122


$
(18,694
)

$
8,428


$
25,814


$
(12,969
)

$
12,845     2008


2007


2006(Dollars in thousands)Reported as:Cost of revenues

$
5,138


$
5,742


$
5,128Selling, general and administrative


587



603



341Total

$
5,725


$
6,345


$
5,469     5.
    GUARANTEES  Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others,
    2008


2007


2006(Dollars in thousands)Accrued product warranty, beginning of fiscal year

$
800


$
1,082


$
Charged to (reversal of) cost of revenues


(372
)


1,171



1,190Actual product warranty expenses


(172
)


(1,453
)


(108
)Accrued product warranty, end of fiscal year

$
256


$
800


$
1,082  60




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    COMMITMENTS
    AND CONTINGENCIES  Commitments
  Lease
    Commitments
    Purchase
    Commitments
    Contingencies
  Shareholder
    Derivative Litigation
  In re Trident Microsystems Inc. Derivative
    Litigation No. C-06-3440-JF. Limke v. Lin
    et al No. 1:07-CV-080390.
  Regulatory
    Actions
  and/or and/or
 61




---



##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or and/or
  Indemnification
    Obligations
    Prior
    Software Usage
    General
    7.
    STOCKHOLDERS
    EQUITY  Preferred
    Shares Rights
   62




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Comprehensive
    Income (Loss)
    8.
    EMPLOYEE
    STOCK PLANS  Equity
    Incentive Plans
     63




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Valuation
    Assumptions
     64




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Equity Incentive Plans2008


2007


2006Year Ended June 30,Expected terms (in years)


4.20



4.25



5.00Volatility


52.25
%


61.92
%


68.81
%Risk-free interest rate


3.97
%


4.77
%


4.14
%Expected dividend rate










Weighted average fair value

$
5.04


$
10.65


$
10.37       Stock-Based
    Compensation Expense
    Year Ended June 30,2008


2007


2006(Dollars in thousands)Cost of revenues(1)

$
763


$
896


$
261Research and development(1)


12,418



8,901



8,764Selling, general and administrative


15,424



5,810



4,158Total stock-based compensation expense

$
28,605


$
15,607


$
13,183     (1)
    
    The amounts included in fiscal years 2007 and 2006 reflect the
    reclassification of certain prior period balances from
    Research and development to Cost of
    revenues to conform to the current year presentation.   65




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting
    for Contingencies
    Shares


Options OutstandingAvailable for


Number of


Weighted AverageGrant


Shares


Exercise Price(In thousands, except per share amounts)Balance at June 30, 2005


3,336



12,770


$
1.65Additional shares reserved


4,350







Plan shares expired


(161
)






Options granted


(2,423
)


2,423



12.99Options exercised






(5,366
)


1.54Options cancelled, forfeited or expired


233



(233
)


3.43Balance at June 30, 2006


5,335



9,594


$
4.49Plan shares expired


(622
)






Restricted stock granted(1)


(380
)






Options granted


(1,553
)


1,553



20.17Options exercised






(541
)


1.49Options cancelled, forfeited or expired


804



(804
)


8.34Balance at June 30, 2007


3,584



9,802


$
6.82Options increase under 2006 Plan


4,000Plan shares expired


(594
)






Restricted stock granted(1)


(1,273
)






Restricted stock cancellation(1)


192Options granted


(1,870
)


1,870



10.60Options exercised






(2,778
)


2.01Options cancelled, forfeited or expired


1,369



(1,369
)


10.58Balance at June 30, 2008


5,408



7,525


$
8.94Vested and expected to vest at June 30, 2008






7,097


$
8.74     (1)
    
    Restricted stock is deducted from shares available for grant
    under the 2006 Plan at a 1 to 1.38 ratio.     66




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Options Outstanding


Options ExercisableWeightedAverageRemaining


Weighted





WeightedContractual


Average





AverageNumber of


Term


Exercise


Number of


ExerciseRange of Exercise Prices

Shares


(in Years)


Price


Shares


Price$0.78    $1.41


2,081



5.4


$
0.94



1,703


$
0.98$1.44    $8.75


1,928



7.0


$
4.20



1,034


$
2.87$8.99   $15.23


1,922



7.7


$
12.99



633


$
12.41$15.34  $28.15


1,594



8.6


$
20.23



447


$
20.26Total


7,525



7.1


$
8.94



3,817


$
5.65        67




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restricted
    Stock Awards and Restricted Stock Units
    Weighted AverageGrant-Date FairShares


Value per Share(In thousands, exceptper share amounts)Nonvested balance at June 30, 2006





$
Granted


275



19.98Vested






Forfeited






Nonvested balance at June 30, 2007


275


$
19.98Granted


923



12.20Vested


(50
)


19.64Forfeited


(140
)


13.92Nonvested balance at June 30, 2008


1,008


$
13.71         Employee
    Stock Purchase Plan
   68




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Modification
    of Certain Options
  Extended
    Exercise
  Form S-8 S-8). S-8, Form 10-Q S-8
  Contingent
    Liabilities
  Contingent liabilities
 69




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Changing
    Employment Status from Employee to Consultant
    9.
    INCOME
    TAXES        Total(In thousands)Balance at July 1, 2007

$
40,708Increases related to current year tax positions


3,093Increases related to prior year tax positions


1,515Expiration of the statute of limitations for the assessment of
    taxes


(2,329
)Balance at June 30, 2008

$
42,987      70




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Years Ended June 30,2008


2007


2006(In thousands)United States

$
(34,419
)

$
(20,358
)

$
(12,243
)Foreign


53,370



67,339



42,917$
18,951


$
46,981


$
30,674     Years Ended June 30,2008


2007


2006(In thousands)Current:Federal

$
311


$
180


$
(610
)State


1



2



2Foreign


9,209



15,312



8,303$
9,521


$
15,494


$
7,695Deferred:Federal










197State










Foreign


(722
)


1,179



(1,575
)(722
)


1,179



(1,378
)$
8,799


$
16,673


$
6,317  71




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    June 30,2008


2007(In thousands)Deferred income tax assets:Reserves and accruals

$
2,945


$
790Research and development credits


12,709



12,054Net operating loss carryforwards


2,743



6,623Other


5,435



6,593Deferred income tax assets


23,832



26,060Valuation allowance


(20,820
)


(23,641
)Deferred income tax assets, net


3,012



2,419Total deferred income tax liabilities:Capital gains not recognized for tax






(1,860
)Amortization


(198
)


Unremitted earnings of foreign subsidiaries


(2,220
)


(2,220
)Total deferred income tax liabilities


(2,418
)


(4,080
)Net deferred income tax assets (liabilities)

$
594


$
(1,661
)      72




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended June 30,2008


2007


2006Federal statutory rate


35.0
%


35.0
%


35.0
%State taxes, net of federal tax benefit


11.7



5.8



5.0Research and development credit


(3.5
)


1.4



(6.5
)Foreign rate differential


(53.8
)


(15.1
)


(27.0
)Valuation allowance


19.7



8.0



15.5Permanent differences


35.7



0.2



0.2Other


1.6



0.2



(1.6
)Effective income tax rate


46.4
%


35.5
%


20.6
%   non-U.S. subsidiaries non-U.S. subsidiaries
  10.
    NET
    INCOME PER SHARE    Years Ended June 30,2008


2007


2006(In thousands, except per share data)Net income

$
10,152


$
30,118


$
26,176Shares used in computing basic per share amounts


59,367



57,637



54,822Dilutive potential common shares


3,384



5,743



7,704Shares used in computing diluted per share amounts


62,751



63,380



62,526Net income per share:Basic

$
0.17


$
0.52


$
0.48Diluted

$
0.16


$
0.48


$
0.42     11.
    BUSINESS
    COMBINATION  Trident
    Microsystems (Beijing) Co., Ltd.
   73




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Trident
    Technologies, Inc.
    Business
    Combinations
  Fair value of Trident common stock

$
31,146Cash


6,206Transaction costs


501Total purchase price

$
37,853Purchase price allocation:Net tangible assets acquired

$
6,176In-process research and development


5,171Inventory
    write-up


366Customer relationships


2,147Core and developed technologies


23,993Total purchase price

$
37,853    74




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        12.
    SEGMENT
    AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS  Segment
    and Geographic Information
      Years Ended June 30,2008


2007


2006(In thousands)Revenues:Japan

$
91,306


$
91,721


$
66,705South Korea


79,608



115,513



55,742Europe


53,801



17,421



8,383Asia Pacific


32,618



45,725



40,085Americas


605



415



527Total

$
257,938


$
270,795


$
171,442  75




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    June 30,2008


2007(In thousands)Long-lived assets:China

$
21,265


$
17,401United States


1,749



1,681Taiwan


411



425Japan






74Total

$
23,425


$
19,581   Major
    Customers
    Years Ended June 30,2008


2007


2006Revenue:Samsung


29
%


41
%


31
%Midoriya


28
%


25
%


30
%Philips


19
%






    76




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    Fiscal Year 2008First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands, except per share amounts)Net revenues

$
88,174


$
74,984


$
55,284


$
39,496


$
257,938Gross profit

$
42,166


$
35,788


$
25,312


$
16,760


$
120,026Net income (loss)(1)(2)(3)

$
10,059


$
7,250


$
(227
)

$
(6,930
)

$
10,152Net income per share  Basic:

$
0.17


$
0.12


$
(0.00
)

$
(0.11
)

$
0.17Net income per share  Diluted:

$
0.16


$
0.12


$
(0.00
)

$
(0.11
)

$
0.16Shares used in computing net income per share  Basic


58,851



59,269



59,369



60,390



59,367Shares used in computing net income per share  Diluted


63,605



62,747



59,369



60,390



62,751     (1)
    
    Includes $4.9 million of stock-based compensation expense
    recorded in the quarter ended September 30, 2007 related to
    certain stock option modifications. See Modification of
    Certain Options under Note 8, Employee Stock
    Plans, of Notes to Consolidated Financial Statements.(2)
    
    Includes $3.7 million of stock-based compensation expense
    recorded in the quarter ended December 31, 2007 related to
    the decision of the Companys Special Litigation Committee
    not to allow the Companys former CEO and two former
    non-employee directors to exercise their vested options until
    March 31, 2008. See Modification of Certain
    Options under Note 8, Employee Stock
    Plans, of Notes to Consolidated Financial Statements.(3)
    
    Includes a $6.5 million impairment charge for loss on UMC
    investment that was recorded in the quarter ended June 30,
    2008. See United Microelectronics Corporation under
    Note 2, Investments and Related Party
    Transactions, of Notes to Consolidated Financial
    Statements.  77




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##### Table of Contents



TRIDENT
    MICROSYSTEMS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal Year 2007First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands, except per share amounts)Net revenues

$
71,363


$
68,260


$
60,579


$
70,593


$
270,795Gross profit

$
34,389


$
33,955


$
28,747


$
32,016


$
129,107Income before cumulative effect of change in accounting principle

$
10,703


$
7,229


$
5,615


$
6,761


$
30,308Cumulative effect of change in accounting principle


(190
)














(190
)Net income

$
10,513


$
7,229


$
5,615


$
6,761


$
30,118Net income per share  Basic:Income before cumulative effect of change in accounting principle

$
0.18


$
0.13


$
0.10


$
0.12


$
0.52Cumulative effect of change in accounting principle


















Net income per share  Basic

$
0.18


$
0.13


$
0.10


$
0.12


$
0.52Net income per share  Diluted:Income before cumulative effect of change in accounting principle

$
0.17


$
0.11


$
0.09


$
0.11


$
0.48Cumulative effect of change in accounting principle


















Net income per share  Diluted

$
0.17


$
0.11


$
0.09


$
0.11


$
0.48Shares used in computing net income per share  Basic


57,303



57,748



57,748



57,748



57,637Shares used in computing net income per share  Diluted


63,116



63,501



63,440



63,571



63,380  78




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Internal Control  Integrated
    Framework
         
    79




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Remediation
    of Past Material Weaknesses in Internal Control over Financial
    Reporting
      Internal Control  Integrated
    Framework
    
    Effective controls, including monitoring, were not maintained to
    ensure the proper exercise of authority to grant and administer
    stock options as well as the existence, completeness, valuation
    and presentation of our stock-based compensation transactions.
    There was insufficient segregation of duties with respect to
    stock option administration between those who had authority to
    grant options and those who maintained our stock administration
    records.    
    We appointed a new management team during fiscal years 2007 and
    2008. In February 2007, we appointed a new Chief Accounting
    Officer and in April 2007, we appointed a General Counsel. In
    October 2007, we appointed a new Chief Executive Officer, who
    was also appointed as President in February 2008 when our former
    President resigned. In January 2008, we appointed a Vice
    President of Human Resources as well as a Vice President,
    Finance and Interim Chief Financial Officer, who was appointed
    as our Chief Financial Officer in July 2008. The management team
    launched a number of key initiatives designed to foster open and
    direct communications and to establish a tone at the
    top based on integrity and excellence. The management team
    including the Chief Executive Officer, General Counsel, and VP
    of Human Resources and Administration regularly communicates
    with all employees to reinforce these values, and the Company
    believes that these values have been embraced by the management
    team and general employee population. 80




---



##### Table of Contents




    The Compensation Committee of the Board of Directors established
    a new process governing the grant of initial stock options and
    other equity awards to newly-hired employees who are not
    Section 16 officers. Such grants are now made by a newly
    constituted Stock Option Committee, at duly held meetings the
    last Friday of each month, in accordance with pre-approved grant
    guidelines from the Compensation Committee. The members of the
    Stock Option Committee are the Chief Financial Officer and the
    General Counsel. The grant date is the date of Stock Option
    Committee approval and is priced based on the market price on
    the grant date.
    We clarified and enhanced the administrative process for issuing
    stock option awards. For example, for stock option awards
    granted by the Compensation Committee, typically quarterly, the
    exercise price is the closing market price of our common stock
    on the date which is two full trading days after the issuance of
    our quarterly financial earnings press release. In addition, the
    grant date is the date that the exercise price has been
    determined. For stock option awards granted by our Stock Option
    Committee, the exercise price is determined as the closing sales
    price of our common stock as reported on the NASDAQ Stock Market
    on the date of the Stock Option Committees monthly
    meeting. We have also adopted procedures to ensure that these
    awards are communicated to the employee and promptly entered
    into our equity award database and financial records.
    Since July 2007, our stock option administrator has been a
    member of our finance department and has had extensive prior
    public company stock option administration experience.
    Throughout fiscal year 2008, we continued our review of our
    existing internal controls, together with an independent third
    party, and continued evaluating further improvements that might
    be made to our internal controls in connection with our ongoing
    effort to improve our control processes and corporate
    governance. We added controls in our stock administration, human
    resources and finance functions to ensure that stock-based
    compensation expenses are recorded correctly.
    In January 2008, we provided additional training to officers,
    managers and director-level employees with functions that
    require the preparation, execution or dating of documents with
    respect to the processes governing proper dating of documents.
    Throughout fiscal year 2008, the General Counsel and Vice
    President of Human Resources and Administration provided
    education to our global employees concerning our code of
    business conduct and other related policies.
    In March 2008, we enhanced our procedures for confidential
    employee reporting by establishing a confidential web-based
    hotline for use by our global employees, customers, vendors and
    other third parties to report actual or suspected wrongdoing and
    to answer questions about business conduct. Reports may be made
    anonymously, and all reports are investigated by our General
    Counsel, who serves as our compliance officer, or his designee.
    Information about this hotline is available on our internal and
    external websites, and employees are reminded of its existence
    at least annually. Periodic reports are made to the Audit
    Committee regarding submissions made via the hotline.
    Additionally, in June 2007 and in April 2008, the General
    Counsel communicated with all our employees to reinforce our
    code of business conduct, which we amended in May 2007.
    Throughout fiscal year 2008, we continued to review our
    corporate governance practices and considered recommendations
    for improvements, if any, that might enhance the ability of the
    Board of Directors to carry out its responsibilities. The
    Nominating and Corporate Governance Committee continued to make
    recommendations for certain improvements in corporate governance
    policies and procedures that might be implemented by the Board
    of Directors to enhance corporate governance.
    During fiscal year 2008, the Audit Committee of the Board of
    Directors continued to work on establishing a permanent internal
    audit function. The Audit Committee engaged an independent third
    party consulting firm to evaluate our internal audit needs and,
    together with our external counsel, developed an Internal Audit
    Charter, which was adopted in July 2008. The Audit Committee is
    in the process of evaluating candidates for Internal Audit
    Director, a position which will report directly to the Audit
    Committee. 81




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##### Table of Contents



Evaluation
    of Disclosure Controls and Procedures
    Rules 13a-15(e) 15d-15(e) Rules 13a-15(b) 15d-15b.
  Definition
    of Disclosure Controls and Procedures
    Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
    Limitations
    on the Effectiveness of Controls
   82




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   83




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Information
    about the Members of the Board of Directors
  Regulation S-K
  Information
    about the Executive Officers
    Name

Age

PositionSylvia D. Summers(1)

55

Chief Executive Officer and PresidentPete J. Mangan(2)

48

Senior Vice President and Chief Financial OfficerDr. Hungwen Li(3)

57

Senior Vice President and  Chief Marketing OfficerDavid L. Teichmann

52

Senior Vice President, General Counsel and Corporate SecretaryDr. Donna M. Hamlin(4)

54

Vice President, Human Resources and AdministrationChris P. Siu

37

Chief Accounting Officer and Director of Corporate Accounting     (1)
    
    Ms. Summers joined effective October 17, 2007 as Chief
    Executive Officer and was additionally appointed as President on
    February 27, 2008.(2)
    
    Mr. Mangan joined effective January 11, 2008 as Vice
    President, Finance and Acting Chief Financial Officer and was
    appointed as Senior Vice President and Chief Financial Officer
    on July 22, 2008.(3)
    
    Dr. Li joined effective January 15, 2007 as Senior
    Vice President, Strategic Marketing and was appointed as Chief
    Marketing Officer on August 29, 2008.(4)
    
    Dr. Hamlin joined effective January 11, 2008.  Sylvia D. Summers
  Pete J. Mangan
 84




---



##### Table of Contents



Dr. Hungwen Li
  David L. Teichmann
  Dr. Donna M. Hamlin
  Chris P. Siu
  Independence
    of the Board of Directors
    Section 16(a)
    Beneficial Ownership Reporting Compliance
   85




---



##### Table of Contents



Code of
    Conduct and Committee Charters
  http://www.tridentmicro.com.
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Executive
    Compensation
  Regulation S-K
  Director
    Compensation
    Compensation
    Committee Interlocks and Insider Participation in Compensation
    Decisions
    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Equity
    Compensation Plan Information
   86




---



##### Table of Contents



A


B


BNumber of





Number of SecuritiesSecurities to be





Remaining Available forIssued Upon


Weighted


Future IssuanceExercise of


Average Exercise


Under EquityOutstanding


Price of


CompenationOptions ,


Outstanding Options,


Plans (ExcludingWarrants and


Warrants and


Securities Reflected inPlan Category

Rights


Rights


Column A)Equity compensation plans approved by security holders


5,516,083
(1)

$
9.41



5,809,976
(2)Equity compensation plans not approved by security holders


2,008,610
(3)

$
7.64



Total


7,524,693


$
8.94



5,809,976     (1)
    
    Includes 75,000 shares that are reserved and issuable upon
    exercise of options outstanding under the 1992 Plan, which plan
    expired on October 16, 2002, 150,000 shares that are
    reserved and issuable upon exercise of options outstanding under
    the 1994 Plan, which expired on January 13, 2004,
    1,376,068 shares that are reserved and issuable upon
    exercise of options outstanding under the 2002 Plan and
    1,902,855 shares that are reserved and issuable upon
    exercise of options outstanding under the 2005 Plan, and
    2,012,160 shares that are reserved and issuable upon
    exercise of options outstanding under the 2006 Plan.(2)
    
    Includes 530,598 shares reserved for future issuance under
    the 2002 Stock Option Plan, and 5,279,378 shares reserved
    for future issuance under the 2006 Stock Option Plan, which has
    already included the additional 4,000,000 shares available
    for issuance, which was approved in a special stockholders
    meeting held on May 16, 2008.(3)
    
    Consists of shares subject to options that are outstanding
    pursuant to the 1996 Plan, which plan was terminated on
    June 19, 2007.  Material
    Features of the 1996 Nonstatutory Stock Option Plan
  10-year
  ITEM 13.
    CERTAIN
    RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE  Regulation S-K
  ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   87




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
    FORM 8-K    PageNumber1.


Financial Statements:Consolidated Statements of Operations For the Years Ended
    June 30, 2008, 2007 and 2006


45Consolidated Balance Sheets As of June 30, 2008 and 2007


46Consolidated Statements of Cash Flows For the Years Ended
    June 30, 2008, 2007 and 2006


47Consolidated Statements of Changes in Stockholders Equity
    and Comprehensive Income For the Years Ended June 30, 2008,
    2007 and 2006


48Notes to Consolidated Financial Statements


49Report of Independent Registered Public Accounting Firm


792.


Financial Statement Schedules:II  Valuation and Qualifying Accounts for each of the
    Years Ended June 30, 2008, 2007 and  2006


93   3.
    Exhibits:  Exhibit

Description3
.1

Restated Certificate of Incorporation.(1)3
.2

Certificate of Amendment of Restated Certificate of
    Incorporation.(2)3
.3

Amended and Restated Bylaws.(3)3
.4

Amendment to Article VIII of the Bylaws.(4)4
.1

Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4
.2

Specimen Common Stock Certificate.(5)4
.3

Form of Amended and Restated Rights Agreement between the
    Company and Mellon Investor Services, LLC, as Rights Agent dated
    as of July 23, 2008 (including as Exhibit A the Form
    of Certificate of Amendment of Certificate of Designation,
    Preferences and Rights of the Terms of the Series A
    Preferred Stock, as Exhibit B the Form of Right
    Certificate, and as Exhibit C the Summary of Terms of
    Rights Agreement).(6)10
.5(*)

1990 Stock Option Plan, together with forms of Incentive Stock
    Option Agreement and Non-statutory Stock Option Agreement.(5)10
.6(*)

Form of the Companys Employee Stock Purchase Plan.(5)10
.9(*)

Summary description of the Companys 401(k) plan.(5)10
.10(*)

Form of Indemnity Agreement for officers, directors and
    agents.(5)10
.13(*)

Form of 1992 Stock Option Plan amending and restating the 1990
    Stock Option Plan included as Exhibit 10.5.(5)10
.16

Foundry Venture Agreement dated August 18, 1995 by and
    between the Company and United Microelectronics
    Corporation.(7)10
.18(*)

Form of Nonstatutory Stock Option Agreement for non-plan grants
    to directors.(8)10
.19(+)

Form of 1996 Nonstatutory Stock Option Plan.(8)10
.20

Lease agreement dated April 11, 2006 between the Company
    and Cooperage Rose Properties for the Companys principal
    offices located at
    3408-3410
    Garrett Drive., Santa Clara, CA(9)10
.21

2006 Executive Bonus Plan(10)10
.22

2006 Equity Incentive Plan.(11)10
.23

Form of Agreements under the 2006 Equity Incentive Plan.(12)10
.24(*)

Offer Letter of Sylvia D. Summers, Chief Executive Officer.(13) 88




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##### Table of Contents



Exhibit

Description10
.25(*)

Offer Letter of Pete J. Mangan, Vice President, Finance.(14)10
.26(*)

Offer Letter of Donna Hamlin, Vice President, Human
    Resources.(15)10
.27(*)

Offer Letter of Ben A. Lee, Vice President, Worldwide Sales.(16)10
.28(*)

First Amendment to Trident Microsystems, Inc. 2006 Equity
    Incentive Plan.(17)10
.29(*)

Resignation and Consulting Agreement and General Release of
    Claims between the Company and Jung-Herng Chang.(18)10
.30

2009 Executive Bonus Plan(19)10
.31

Amended Form of Indemnity Agreement for officers and
    directors(19)21
.1

List of Subsidiaries.(19)23
.1

Consent of Independent Registered Public Accounting Firm(19)24
.1

Power of Attorney (included on signature page).(19)31
.1

Rule 13a  14(a) Certification of Chief Executive
    Officer.(19)31
.2

Rule 13a  14(a) Certification of Chief Financial
    Officer.(19)32
.1

Section 1350 Certification of Chief Executive Officer.(19)32
.2

Section 1350 Certification of Chief Financial Officer.(19)     (1)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K for the
    year ended June 30, 1993.(2)
    
    Incorporated by reference to Exhibit 99.4 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 28, 2008.(3)
    
    Incorporated by reference to Exhibit 3.2 to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2003.(4)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 30, 2007.(5)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Registration Statement on
    Form S-1
    (File
    No. 33-53768).(6)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 28, 2008.(7)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K for the
    year ended June 30, 1995. Confidential treatment has been
    requested for a portion of this document.(8)
    
    Incorporated by reference to exhibit of same number to the
    Companys Quarterly Report on Form
    10-Q for the
    quarter ended September 30, 2002.(9)
    
    Incorporated by reference to exhibit of same number to the
    Companys Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2006.(10)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    August 1, 2005.(11)
    
    Incorporated by reference to the Companys Proxy Statement
    filed with the Securities and Exchange Commission on
    April 26, 2006.(12)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K/A filed
    with the Securities and Exchange Commission on August 22,
    2007.(13)
    
    Incorporated by reference to Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    October 1, 2007.(14)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007.(15)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007. 89




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##### Table of Contents



(16)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2008.(17)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Current Report on Form 8-K filed with the
    Securities and Exchange Commission on May 19, 2008.(18)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 5, 2008.(19)
    
    Filed herewith.(*)
    
    Management contracts or compensatory plans or arrangements
    covering executive officers or directors of the Company.(+)
    
    Compensatory plans, contracts or arrangements adopted without
    the approval of security holders pursuant to which equity may be
    awarded. 90




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##### Table of Contents



SIGNATURES    TRIDENT MICROSYSTEMS, INC.
  By:
    /s/  Sylvia
    D. Summers  Sylvia D. Summers
    POWER OF
    ATTORNEY  Form 10-K, Form 10-K.
    Signature

Capacity

Date/s/  Glen
    M. AntleGlen
    M. Antle

Chairman of the Board of Directors

September 10, 2008/s/  Sylvia
    D. SummersSylvia
    D. Summers

Chief Executive Officer, President and Director
    (Principal Executive Officer)

September 12, 2008/s/  Pete
    J. ManganPete
    J. Mangan

Senior Vice President and Chief Financial Officer(Principal Financial Officer)

September 12, 2008/s/  Chris
    P. SiuChris
    P. Siu

Chief Accounting Officer and Director of Corporate Accounting(Principal Accounting Officer)

September 12, 2008/s/  Brian
    R. BachmanBrian
    R. Bachman

Director

September 10, 2008 91




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##### Table of Contents



Signature

Capacity

Date/s/  David
    H. CourtneyDavid
    H. Courtney

Director

September 10, 2008/s/  Hans
    GeyerHans
    Geyer

Director

September 10, 2008/s/  J.
    Carl HsuJ.
    Carl Hsu

Director

September 9, 2008/s/  Raymond
    K. OstbyRaymond
    K. Ostby

Director

September 8, 2008  92




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##### Table of Contents



Schedule II
  TRIDENT
    MICROSYSTEMS, INC.
  VALUATION
    AND QUALIFYING ACCOUNTS
  Write-offs orBalance at


Charged as a


AdjustmentsBeginning of


Reduction (Credit) to


Charged to


Balance atFiscal Year

Description

Period


Revenue


Allowance


End of Period(In thousands)2008

Allowance for sales returns

$
1,101


$
(801
)

$



$
3002007

Allowance for sales returns

$
1,475


$
(374
)

$



$
11012006

Allowance for sales returns

$
413


$
1,062


$



$
1475   Balance atBeginning of


Increase


Balance atFiscal Year

Description

Period


(Decrease)


End of Period(In thousands)2008

Valuation allowance for deferred tax assets

$
23,641


$
(2,821
)

$
20,8202007

Valuation allowance for deferred tax assets

$
24,151


$
(510
)

$
23,6412006

Valuation allowance for deferred tax assets

$
33,654


$
(9,503
)

$
24,151  93




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##### Table of Contents



INDEX TO
    EXHIBITS FILED TOGETHER WITH THIS ANNUAL REPORT
  Exhibit

Description3
.1

Restated Certificate of Incorporation.(1)3
.2

Certificate of Amendment of Restated Certificate of
    Incorporation.(2)3
.3

Amended and Restated Bylaws.(3)3
.4

Amendment to Article VIII of the Bylaws.(4)4
.1

Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4
.2

Specimen Common Stock Certificate.(5)4
.3

Form of Amended and Restated Rights Agreement between the
    Company and Mellon Investor Services, LLC, as Rights Agent dated
    as of July 23, 2008 (including as Exhibit A the Form
    of Certificate of Amendment of Certificate of Designation,
    Preferences and Rights of the Terms of the Series A
    Preferred Stock, as Exhibit B the Form of Right
    Certificate, and as Exhibit C the Summary of Terms of
    Rights Agreement).(6)10
.5(*)

1990 Stock Option Plan, together with forms of Incentive Stock
    Option Agreement and Non-statutory Stock Option Agreement.(5)10
.6(*)

Form of the Companys Employee Stock Purchase Plan.(5)10
.9(*)

Summary description of the Companys 401(k) plan.(5)10
.10(*)

Form of Indemnity Agreement for officers, directors and
    agents.(5)10
.13(*)

Form of 1992 Stock Option Plan amending and restating the 1990
    Stock Option Plan included as Exhibit 10.5.(5)10
.16

Foundry Venture Agreement dated August 18, 1995 by and
    between the Company and United Microelectronics
    Corporation.(7)10
.18(*)

Form of Nonstatutory Stock Option Agreement for non-plan grants
    to directors.(8)10
.19(+)

Form of 1996 Nonstatutory Stock Option Plan.(8)10
.20

Lease agreement dated April 11, 2006 between the Company
    and Cooperage Rose Properties for the Companys principal
    offices located at
    3408-3410
    Garrett Drive., Santa Clara, CA(9)10
.21

2006 Executive Bonus Plan(10)10
.22

2006 Equity Incentive Plan.(11)10
.23

Form of Agreements under the 2006 Equity Incentive Plan.(12)10
.24(*)

Offer Letter of Sylvia D. Summers, Chief Executive Officer.(13)10
.25(*)

Offer Letter of Pete J. Mangan, Vice President, Finance.(14)10
.26(*)

Offer Letter of Donna Hamlin, Vice President, Human
    Resources.(15)10
.27(*)

Offer Letter of Ben A. Lee, Vice President, Worldwide Sales.(16)10
.28(*)

First Amendment to Trident Microsystems, Inc. 2006 Equity
    Incentive Plan.(17)10
.29(*)

Resignation and Consulting Agreement and General Release of
    Claims between the Company and Jung-Herng Chang.(18)10
.30

2009 Executive Bonus Plan(19)10
.31

Amended Form of Indemnity Agreement for officers and
    directors(19)21
.1

List of Subsidiaries.(19)23
.1

Consent of Independent Registered Public Accounting Firm(19)24
.1

Power of Attorney (included on signature page).(19)31
.1

Rule 13a  14(a) Certification of Chief Executive
    Officer.(19)31
.2

Rule 13a  14(a) Certification of Chief Financial
    Officer.(19)32
.1

Section 1350 Certification of Chief Executive Officer.(19)32
.2

Section 1350 Certification of Chief Financial Officer.(19)     (1)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K for the
    year ended June 30, 1993.




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##### Table of Contents



(2)
    
    Incorporated by reference to Exhibit 99.4 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 28, 2008.(3)
    
    Incorporated by reference to Exhibit 3.2 to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2003.(4)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 30, 2007.(5)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Registration Statement on
    Form S-1
    (File
    No. 33-53768).(6)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    July 28, 2008.(7)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K for the
    year ended June 30, 1995. Confidential treatment has been
    requested for a portion of this document.(8)
    
    Incorporated by reference to exhibit of same number to the
    Companys Quarterly Report on Form
    10-Q for the
    quarter ended September 30, 2002.(9)
    
    Incorporated by reference to exhibit of same number to the
    Companys Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2006.(10)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    August 1, 2005.(11)
    
    Incorporated by reference to the Companys Proxy Statement
    filed with the Securities and Exchange Commission on
    April 26, 2006.(12)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Annual Report on Form
    10-K/A filed
    with the Securities and Exchange Commission on August 22,
    2007.(13)
    
    Incorporated by reference to Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    October 1, 2007.(14)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007.(15)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2007.(16)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2008.(17)
    
    Incorporated by reference to exhibit of the same number to the
    Companys Current Report on Form 8-K filed with the
    Securities and Exchange Commission on May 19, 2008.(18)
    
    Incorporated by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 5, 2008.(19)
    
    Filed herewith.(*)
    
    Management contracts or compensatory plans or arrangements
    covering executive officers or directors of the Company.(+)
    
    Compensatory plans, contracts or arrangements adopted without
    the approval of security holders pursuant to which equity may be
    awarded.