##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  FORM 10-K/A Amendment No. 1
 (Mark One) x
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended June 30, 2004o
    
    Transition Report 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.  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    77-0156584
(I.R.S. Employer
Identification No.)1090 East Arques Avenue
Sunnyvale, California
(Address of principal executive offices)
    
    94085
(Zip code)
 Registrants telephone number, including area code: (408) 991-8800

Securities registered pursuant to Section 12(b) of the Act: None

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

Common Stock, $0.001 Par Value
(Title of class) Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes x No o The aggregate market value of the Common Stock held by non-affiliates of
the Registrant, based upon the closing price of the Common Stock on December
31, 2003 ($17.42 per share), as reported on the NASDAQ National Market was
approximately $235,219,281. Shares of Common Stock held by executive officers
and directors and by each person who owns 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes. The number of shares of the registrants $0.001 par value Common Stock
outstanding on August 31, 2004, was 22,941,958. DOCUMENTS INCORPORATED BY REFERENCE None.




---



TRIDENT MICROSYSTEMS, INC. FORM 10-K/A AMENDMENT NO. 1 FOR THE FISCAL YEAR ENDED JUNE 30, 2004 INDEX  
 PagePart IItem 1.
    
    Business-Trident Technologies, Inc. (TTI)
    
    
    3Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    5Item 11.
    
    Executive Compensation
    
    
    7Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    11Item 13.
    
    Certain Relationships and Related Transactions
    
    
    13Item 14.
    
    Principal Accountant Fees and Services
    
    
    14Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    15EXHIBIT 31.1EXHIBIT 31.2
  EXPLANATORY NOTE Trident Microsystems, Inc. (TMI or the Company) hereby amends a
portion of Item 1 of Part I of its Annual Report on Form 10-K for the fiscal
year ended June 30, 2004, as filed with the Securities and Exchange Commission
(the SEC) on September 13, 2004. Specifically, the paragraphs under the
heading Trident Technologies, Inc. (TTI) are amended to read in their entirety
as provided below. The purpose for the amendment of this section is to
properly state in the fifth paragraph of this section that the Companys
diluted percentage ownership of TTI as of September 2004 was 80% instead of
82%. The Company also hereby amends Items 10 through 14 of Part III of its
Annual Report on Form 10-K for the fiscal year ended June 30, 2004 to read in
their entirety as provided below. - 2 -




---



##### Table of Contents



PART I 
 Item 1. Business Trident Technologies, Inc. (TTI) With the assistance of TMI and its other subsidiaries, TTI is responsible
for development, sales and marketing of our digital media products. Our
current TTI subsidiary is the result of a reorganization in September 2003.
Combining the Digital Media division with TTI allowed us to aggressively focus
on developing more exciting products in the emerging digital television market,
and the restructured TTI has the potential to seek a separate IPO in Taiwan.
To facilitate this opportunity TTI added independent members to its board of
directors. As TTI would be viewed as a pre-IPO company in Taiwan we were in
a far better position to attract and retain good multimedia engineering talent
in the Far East. While we currently own approximately 83% of TTI, our interest in TTI may
decline over time, as discussed below. The quarterly results of TMI depend, in
part, on the charges we incur as a result of the minority ownership of TTI. In
general, such minority interest charges represent the share of income relating
to minority shareholders of our consolidated subsidiaries. If our equity
interest in TTI were to decline, the percentage of income taken as a charge for
minority interests in our consolidated subsidiaries would increase, thereby
affecting our financial results. TTI grants stock options separately in TTI to its employees, and virtually
all of the previous parent company employees, other than our executive
officers, stopped vesting in TMI options when they became employed by TTI. To
ensure a continuity of interests in both parent and subsidiary activities,
executive officers continued to vest in equity in both companies. As is the
practice in Taiwan, the exercise price of options granted by TTI is initially
fixed at the inception of the plan for a given pool of options, and all options
are granted at that price until the pool has expired. The initial fixed
exercise price of NT$ 10 for TTIs initial 16.2 million share pool under its
employee stock option plan was customary for an emerging company and was
equivalent to the par value of the stock. As stock options are granted this
fixed exercise price may be well below the fair market value of the stock at
the time of grant. Consistent with generally accepted accounting principles,
TMI measures the intrinsic value of these stock options and records deferred
compensation at the time of grant to be amortized to expense over the vesting
period of the option. TMI and TTI continue to explore the possibility of an IPO in Taiwan, but
no final decision has been reached in this regard. The IPO process typically
takes approximately 2 years in Taiwan. At this point, even if the company were
to decide to move forward, the earliest such an event might take place would be
during the summer of 2005. As is the practice in Taiwan, an IPO is not required
for shares of private companies to trade in limited volumes in so called
emerging market transactions, and this is true today of TTI. Whether or not
an IPO of TTI stock occurs, TMIs long-term strategy is to maintain a majority
interest in TTI. As a majority shareholder, TMI expects to continue to
consolidate TTI operations as part of its financial statements. TMI will
continue to be actively involved in overseeing the operations of TTI. As of June 30, 2004, there were outstanding 65.0 million shares of TTI
common stock and options to purchase 14.1 million shares of TTI common stock,
none of which were exercisable as of that date. Such options vest over a
period of four years from the grant date. The majority of such options were
granted on August 29, 2003 when TTI was reconstituted. So, for example, if the
options vested as of September 2004 were exercised and TTI did not reacquire
the shares purchased by employees or sell additional shares, TMIs interest in
TTI would be diluted from 83% to approximately 80%. Likewise, in the absence
of TTI reacquiring or selling additional shares, TMIs interest in TTI may be
diluted in future periods as vested options are exercised. There are
approximately 2.1 million options remaining available for grant in the TTI
stock option plans initial pool, after which TTI must have sufficiently
prospered and declared sufficient stock dividends to investors that the
cumulative historical grants to employees falls below 15% of the new higher
number of shares then outstanding. At that point, TTI may add to the pool and
bring the cumulative options granted or available to grant up to the 15% level
if it so chooses, which increment will then have an exercise price fixed at no
less than 85% of the fair market value of the stock at that time. Dilution of our interest in TTI would also result if we determine in the
future to sell further interests in TTI. We have considered the possibility of
a public offering by our TTI subsidiary in Taiwan and have taken steps to
prepare for such an offering, including facilitating the trading of unlisted
shares on Taiwans emerging stock market, which is a necessary step in the IPO
process. However, no final decision has been made to proceed with such an
offering. Our long-term strategy is to retain a majority interest in TTI in
all cases, but any such offering would increase the minority ownership in TTI. - 3 -




---



##### Table of Contents



As of June 30, 2004, TTIs Board Members are Mr. Frank Lin, Chairman and
CEO of Trident Microsystems, Inc.; Mr. Jung-Herng Chang, President of Trident
Technologies, Inc.; Mr. Charles Kau, President of Inotera Memories, Inc.; Mr.
Gary Cheng, General Partner of Venglobal Capital; Mr. Daniel Wu, Chief Strategy
Officer, Taishin Financial Holding Co., Ltd. As of June 30 2004, TTIs
executive officers are Jung-Herng Chang, President and Jason Wang, Chief
Financial Officer, Vice President of Operations and Finance. - 4 -




---



##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant Directors This section sets forth the ages and backgrounds of The Companys current
directors. Positions
    
    DirectorName
    
    Age
    
    With the Company
    
    SinceClass III Directors whose terms expire at the 2004 Annual Meeting of StockholdersFrank C. Lin
    
    
    59
    
    
    President, Chief Executive Officer
and Chairman of the Board of Directors
    
    
    1987Glen M. Antle
    
    
    66
    
    
    Director
    
    
    1992Class I Director whose term expires at the 2005 Annual Meeting of Stockholders:Yasushi Chikagami
    
    
    65
    
    
    Director
    
    
    1994Class II Directors nominated for election at the 2006 Annual Meeting of Stockholders:Millard Phelps
    
    
    76
    
    
    Director
    
    
    1995John Luke
    
    
    71
    
    
    Director
    
    
    1999
 Mr. Lin founded the Company and has served as President, Chief Executive
Officer and Chairman of the Board of Directors of the Company since July 1987.
His career spans 26 years in the computer and communications industries. From
June 1984 to July 1987, he was Vice President of Engineering at Genoa Systems,
Inc., a graphics and storage product company that he co-founded. From 1982 to
1984, Mr. Lin was a senior manager at Olivetti Advanced Technical Center, a PC
peripheral equipment design company. Prior to Olivetti, Mr. Lin worked for
IBM-Rolm, GTE and Exxon Office System in various engineering positions. Mr. Antle has served as a director of the Company since July 1992. From
July 1996 to August 1997 Mr. Antle was a director of Compass Design Automation,
a company providing EDA tools and libraries. From February 1991 to June 1993,
he served as Chairman of the Board of Directors of PiE Design Systems, an
electronic design automation company, and from August 1992 to June 1993 as its
Chief Executive Officer. In June 1993, PiE merged into Quickturn Design
Systems, Inc., also an electronic design automation company, and Mr. Antle
served as Chairman of the Board of Directors of Quickturn from June 1993 to
June 1999. From June 1989 to February 1991 Mr. Antle was retired. Mr. Antle
was a co-founder of ECAD, Inc., now Cadence Design Systems, Inc., and served as
its Co-Chairman of the Board of Directors from May 1988 to June 1989 and as its
Chairman of the Board of Directors and Chief Executive Officer from August 1982
to May 1988. Mr. Antle is also a director of Semtech, a semiconductor
corporation. Mr. Chikagami has served as a director of the Company since April 1994.
From 1974 to January 1996, Mr. Chikagami served as Chairman of the EI-EN Group,
a group of private companies located in Asia engaged in the electronics
components and computer peripherals business. Since March 1992, Mr. Chikagami
has served as Chairman of Arise Corporation, operating in Taiwan. Mr.
Chikagami has also served as Chairman of Arise, Inc. since 2000, operating in
Japan. Mr. Chikagami is also a director of Silicon Storage Technology, Inc.
and Integrated Silicon Solution Inc. Mr. Phelps has served as a director of the Company since September 1995.
From September 1984 to May 1994, he served as Senior Semiconductor Analyst for
Hambrecht & Quist, an investment banking firm, and was a Principal in the firm.
Mr. Phelps served as an advisory director of Hambrecht & Quist from 1994 to
1997, when he retired. Prior to joining Hambrecht & Quist, Mr. Phelps spent 23
years in the semiconductor industry in various executive positions. Mr. Phelps
is also a director of Pericom, a semiconductor corporation. Mr. Luke has served as a director of the Company since January 1999. From
May 1989 to September 1997, Mr. Luke served as President of TSMC, USA and had
been President Emeritus until 1999. Prior to that, from 1982 to 1989, Mr. Luke
served as Vice President of Sales for Monsanto Electronic Materials, Inc.; from
1978 to 1982, as Vice President of Worldwide Sales at Signetics Corporation;
from 1976 to 1978, as Vice President of Marketing and - 5 -




---



##### Table of Contents



International Sales for American Microsystems, Inc.; from 1974 to 1976, as
Vice President of Marketing and Sales for Monolithic Memories and from 1971 to
1974, as Vice President of Sales at Fairchild. Mr. Luke also spent 10 years at
Texas Instruments in sales and engineering management positions. Audit Committee The Audit Committee of the Board of Directors oversees our corporate
accounting and financial reporting process. For this purpose, the Audit
Committee performs several functions:  
    
    approves all professional services performed by the
independent public accountants;  
    
    recommends the retention of the independent public
accountants to the Board of Directors, subject to ratification by
the stockholders;  
    
    reviews, with the Companys independent public accountants,
management and the Board of Directors, the Companys financial
reporting processes and internal financial controls;  
    
    reviews the independence of the Companys independent public
accountants;  
    
    reviews and discusses with management the results of the
examination of the Companys financial statements by the independent
public accountants and the independent public accountants opinion;
and  
    
    discusses with the independent auditors the matters required
to be discussed by SAS 61 (Codification of Statements on Auditory
Standards No. 380). The Audit Committee was composed of three independent, non-employee
directors of the Company, Glen M. Antle, Millard Phelps and John Luke during
fiscal 2004. The Audit Committee adopted a formal charter on June 13, 2000 and
the Audit Committee Charter has been amended and restated on April 21, 2004 to
provide for annual review of such charter in accordance with the rules of
Nasdaq. The Audit Committee held four (4) meetings during the fiscal year
ended June 30, 2004. The Board of Directors annually reviews the Nasdaq listing standards
definition of independence for Audit Committee members and has determined that
all members of our Audit Committee are independent (as independence is
currently defined in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing
standards). We currently do not have an Audit Committee financial expert as
defined in Item 401(h) of Regulation S-K. The Board considered whether to seek
such a financial expert. It considered the scope and current size of the
Companys current operations, the expense and effort involved in recruiting and
retaining an Audit Committee financial expert, the fact that each member of the
Audit Committee has financial experience, and the need to focus recruiting
efforts on the search for a CFO (which was recently concluded). The Board
determined, based on these considerations, not to seek such a financial expert
at this time. Executive Officers See Part I of the Annual Report on Form 10-K for the fiscal year ended
June 30, 2004, filed with the SEC on September 13, 2004. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the
Companys executive officers, directors and persons who beneficially own more
than 10% of the Companys Common Stock to file initial reports of beneficial
ownership and reports of changes in beneficial ownership with the SEC. Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons. Based solely on the Companys review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that, during fiscal 2004, all filing requirements applicable to the
Companys executive officers, directors and more than 10% stockholders were
met. Code of Conduct We have adopted the Trident Microsystems, Inc. Code of Conduct that
applies to all of our officers, directors and employees. The Code of conduct
is available on our website at http://www.tridentmicro.com. If we make any
substantive amendments to the Code of Conduct or grant any waiver from a
provision of the Code to any of our executive officers or directors, we will
promptly disclose the nature of the amendment or waiver on our website. - 6 -




---



##### Table of Contents



Item 11. Executive Compensation EXECUTIVE COMPENSATION AND OTHER MATTERS The following table sets forth information concerning the compensation
during the fiscal years ended June 30, 2004, June 30, 2003 and June 30, 2002 of
the Chief Executive Officer of the Company and the two most highly compensated
executive officers of the Company as of June 30, 2004, whose salary and bonus
for the fiscal year ended June 30, 2004 exceeded $100,000. Amounts under the
caption Bonus are amounts earned during the fiscal year, including amounts
paid after the end of the fiscal year, but exclude amounts paid in one fiscal
year for performance in the prior fiscal year. Summary Compensation Table Long-TermAnnual Compensation
    
    CompensationSecuritiesOther Annual
    
    UnderlyingName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Compensation
    
    Options (#)Frank C. Lin
    
    
    2004
    
    
    $
    505,523
    
    
    $
    186,821
    
    
    $
    319,425
    (1)
    
    
    0
    (5)President and Chief
    
    
    2003
    
    
    $
    505,523
    
    
    $
    228,787
    
    
    $
    0
    
    
    
    80,000Executive Officer
    
    
    2002
    
    
    $
    505,523
    
    
    $
    0
    
    
    $
    25,962
    (2)
    
    
    100,000Jung-Herng Chang
    
    
    2004
    
    
    $
    272,200
    
    
    $
    58,789
    
    
    $
    55,675
    (3)
    
    
    0
    (5)President, Digital Media
    
    
    2003
    
    
    $
    272,200
    
    
    $
    47,399
    
    
    $
    0
    
    
    
    30,000Business Unit
    
    
    2002
    
    
    $
    272,200
    
    
    $
    0
    
    
    $
    2,025
    (4)
    
    
    50,000Peter Jen
    
    
    2004
    
    
    $
    268,840
    
    
    $
    48,224
    
    
    $
    68,705
    (3)
    
    
    0
    (5)Sr. Vice President, Asia
    
    
    2003
    
    
    $
    268,840
    
    
    $
    45,853
    
    
    $
    0
    
    
    
    30,000Operations and Chief
    
    
    2002
    
    
    $
    268,964
    
    
    $
    0
    
    
    $
    6,246
    (4)
    
    
    50,000Accounting Officer
   (1)
    
    Includes $128,320.16 accrued vacation payout. Also includes $191,104.94
overseas housing (rental fee) and hardship allowance.(2)
    
    Includes $7,290.92 accrued vacation payout for 9-11 donation. Also
includes $18,670.95 loan interest reduction due to an amendment of loan
agreement, in which interest rate was retroactively changed, effective
January 1, 2001, to the monthly Applicable Federal Rates, as published by
revenue rulings of the U.S. Internal Revenue Service.(3)
    
    Accrued vacation payout.(4)
    
    Reflects accrued vacation payout for 9-11 donation.(5)
    
    No options to purchase shares of the Companys stock were granted in
fiscal year 2004. However, options to purchase shares of the common stock
of the Companys Taiwanese subsidiary, TTI, were granted in fiscal year
2004. See TTI STOCK OPTIONS GRANTED DURING LAST FISCAL YEAR. TMI Stock Options Granted During Last Fiscal Year The following table provides the specified information concerning grants
of options to purchase the Companys Common Stock made during the fiscal year
ended June 30, 2004 to the persons named in the Summary Compensation Table and
John Edmunds, who joined the Company in the capacity of Chief Financial Officer
on June 14, 2004. - 7 -




---



##### Table of Contents



TMI Option Grants In Last Fiscal Year Individual GrantsNumber of
    
    % of Total
    
    
    
    
    
    
    
    Potential Realizable Value atSecurities
    
    Options
    
    
    
    
    
    
    
    Assumed Annual Rates of StockUnderlying
    
    Granted to
    
    Exercise
    
    
    
    
    
    Price AppreciationOptionsGranted
    
    Employeesin Fiscal
    
    or BasePrice
    
    Expiration
    
    for Option Term(3)Name
    
    (#)(1)
    
    Year
    
    ($/Sh)(2)
    
    Date
    
    5% ($)
    
    10% ($)Frank C. Lin
    
    
    0
    
    
    
    0
    %
    
    $
    0.00
    
    
    
    N/A
    
    
    $
    0.00
    
    
    $
    0.00Jung-Herng Chang
    
    
    0
    
    
    
    0
    %
    
    $
    0.00
    
    
    
    N/A
    
    
    $
    0.00
    
    
    $
    0.00John Edmunds
    
    
    150,000
    
    
    
    42.8571
    %
    
    $
    13.77
    
    
    
    6/14/14
    
    
    $
    1,298,981.85
    
    
    $
    3,291,875.05Peter Jen
    
    
    0
    
    
    
    0
    %
    
    $
    0.00
    
    
    
    N/A
    
    
    $
    0.00
    
    
    $
    0.00
   (1)
    
    The option listed was granted on June 14, 2004 under the 2002 Stock
Option Plan (the Option Plan) and vests as to one-fourth of the shares
subject to the option on each anniversary of the date of grant. The
Option Plan permits the grant of both incentive stock options within the
meaning of Section 422 of the Internal Revenue Code, as amended (the
Code), and nonstatutory stock options. 29,000 shares underlying the
option granted to John Edmunds in the above table were under an incentive
stock option and 121,000 shares were under a nonstatutory stock options.
Under the Option Plan, the Compensation Committee retains discretion to
modify the terms, including the exercise price of outstanding options.
See CHANGE IN CONTROL ARRANGEMENTS.(2)
    
    All options were granted with exercise prices at or above the market
value of a share of our common stock on the date of grant.(3)
    
    Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission rules.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock, overall market conditions and the
option-holders continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved. TTI Stock Options Granted During Last Fiscal Year The following table provides the specified information concerning grants
of options to purchase stock in the Companys Taiwanese subsidiary, TTI, made
during the fiscal year ended June 30, 2004 to the persons named in the Summary
Compensation Table and John Edmunds, who joined the Company in the capacity of
Chief Financial Officer on June 14, 2004. - 8 -




---



##### Table of Contents



TTI Options Grants In Last Fiscal YearIndividual Grants
    
    Potential Realizable Value at Assumed AnnualNumber of
    
    % of Total
    
    
    
    
    
    
    
    Rates of Stock Price Appreciation for optionSecurities
    
    Options
    
    
    
    
    
    
    
    Term (1)Underlying
    
    Granted to
    
    ExerciseOptions
    
    Employees
    
    or Base
    
    
    
    
    
    
    
    Base
    
    BaseGranted
    
    in Fiscal
    
    Price
    
    Expiration
    
    
    
    Appreciation
    
    AppreciationName
    
    (#) (1)
    
    Year
    
    ($/Sh)(2)
    
    Date
    
    0% ($)
    
    5% ($)
    
    10% ($)Frank C. Lin
    
    
    2,270,000
    
    
    
    16.0
    %
    
    $
    0.30
    
    
    August 2013
    
    $
    546,494
    
    
    $
    890,181
    
    
    $
    1,417,465Jung-Hern Chang
    
    
    1,900,000
    
    
    
    13.4
    %
    
    $
    0.30
    
    
    August 2013
    
    $
    457,418
    
    
    $
    745,086
    
    
    $
    1,186,424John Edmunds
    
    
    130,000
    
    
    
    0.9
    %
    
    $
    0.30
    
    
    July 2008
    
    $
    31,297
    
    
    $
    38,200
    
    
    $
    46,204Peter Jen
    
    
    130,000
    
    
    
    0.9
    %
    
    $
    0.30
    
    
    August 2013
    
    $
    31,297
    
    
    $
    50,980
    
    
    $
    81,176
   (1)
    
    The share numbers represent shares of the common stock of TTI. As of
June 30, 2004, there were outstanding 65.0 million shares of TTI common
stock, and options to purchase a further 14.2 million shares of TTI common
stock, none of which were exercisable as of that date. See TRIDENT
TECHNOLOGIES, INC. (TTI) in Item 1 of Part I, as amended, above. Each
option grant listed was granted under the TTI 2003 stock option plan (the
TTI Plan) and vests 35% on the first anniversary of the date of grant,
15% on the second anniversary of the date of grant, 25% on the third
anniversary of the date of grant and 25% on the fourth anniversary of the
date of grant.(2)
    
    All TTI options were granted at an exercise price of NT$ 10, or
approximately $0.30 based upon an exchange rate of NT$ 33.864 per $1 on
October 15, 2004. As is the practice in Taiwan, the exercise price of
these options is initially fixed at the inception of the plan for a given
pool of options, and then options are granted at that price until the pool
is depleted. The initial fixed exercise price of NT$ 10 for TTIs initial
16.2 million share pool was customary for an emerging company in Taiwan,
and is equivalent to the par value of the stock. As stock options are
granted, this fixed exercise price may be well below the fair market value
of the stock at the time of grant. Consistent with generally accepted
accounting principles, the Company measures the intrinsic value of these
stock options and records deferred compensation at the time of grant to be
amortized to expense over the vesting period of the option. See Note 8,
Stock Options in TTIin the Notes to Consolidated Financial Statements
filed as part of the Annual Report on Form 10-K for the fiscal year ended
June 30, 2004, filed with the SEC on September 13, 2004. However, given
the fact that TTI is not a public company, in Taiwan or elsewhere, the
fair market value of TTI common stock is difficult to ascertain precisely
as of any given date, and we believe that the fair market
value is lower than NT$ 90 at this time.(3)
    
    Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission rules.
Actual gains, if any, on stock option exercises are dependent on the
further development of a liquid market for TTI common stock or other
transactions involving TTI common stock, the future performance of the TTI
common stock, overall market conditions and the option-holders continued
employment through the vesting period. The amounts reflected in this
table may not necessarily be achieved. The 0% column represents the
difference between the exercise price and fair value on the date of grant. TMI Option Exercises and Fiscal 2004 Year-End Values The following table provides the specified information concerning
exercises of options to purchase the Companys Common Stock in the fiscal year
ended June 30, 2004, and unexercised options held as of June 30, 2004, by the
persons named in the Summary Compensation Table. - 9 -




---



##### Table of Contents



Aggregate TMI Option Exercises in Last Fiscal Year And Fiscal Year-End Values Shares
    
    
    
    
    
    Number of Securities UnderlyingAcquired
    
    
    
    
    
    Unexercised Options at FY-
    
    Value of Unexercised In-the-MoneyOn
Exercise
    
    Value
    
    End(1)
    
    Options at FY-End(2)Name
    
    (#)
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableFrank Lin
    
    
    0
    
    
    $
    0.00
    
    
    
    1,027,500
    
    
    
    60,000
    
    
    $
    6,416,361.00
    
    
    $
    415,002.00Jung-Herng Chang
    
    
    125,000
    
    
    $
    1,721,515.00
    
    
    
    437,500
    
    
    
    22,500
    
    
    $
    2,676,178.50
    
    
    $
    155,625.75John Edmunds
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    150,000
    
    
    $
    0.00
    
    
    $
    0.00Peter Jen
    
    
    97,500
    
    
    $
    1,220,241.60
    
    
    
    412,500
    
    
    
    22,500
    
    
    $
    2,552,553.75
    
    
    $
    155,625.75
   (1)
    
    The options of Frank Lin, Jung-Herng Chang and Peter Jen were granted
under the 1992 Stock Option Plan and the options of John Edmunds were
granted under the 2002 Stock Option Plan.(2)
    
    The value of the unexercised in-the-money options is based on the closing
price of the Companys Common Stock on June 30, 2004 ($8.97 per share), as
reported by the Nasdaq National Market, and is net of the exercise price
of such options. TTI Option Exercises and Fiscal 2004 Year-End Values There were no exercises of TTI options by the named officers of the
Company during Fiscal 2004. Compensation of Directors Board members other than the Companys non-employee directors receive no
compensation for attending Board meetings. The Companys non-employee
directors receive $20,000 per year as an annual retainer and reimbursement of
certain expenses in connection with attendance at Board meetings and Committee
meetings. In addition, each non-employee director receives $1,500 for each
Board or Committee meeting attended in person, and $1,000 for each Board or
Committee meeting attended by telephone. In July 2004, the Board and the
Compensation Committee approved a new director compensation package which
continues an annual retainer of $20,000 and $1,500 for each Board meeting
attended in person, but lowers the fees to $1,250 for the Committee chairperson
and $1,000 for the committee member for each Committee meeting attended in
person. The fee for each Board or Committee meeting attended by telephone is
also decreased from $1,000 to $500. Under the Companys 1994 Outside Directors Stock Option Plan (the
Directors Plan), on the day of the initial election or appointment of each
new non-employee director, such non-employee director automatically receives an
option to purchase 20,000 shares of the Companys Common Stock and receives an
additional option to purchase 20,000 shares of the Companys Common Stock on
the date of the first annual meeting of stockholders following the third
anniversary of his or her previous Directors Plan option grant, provided that
he or she remains in office. Furthermore, each non-employee director currently
in office who previously was granted an option under the Directors Plan
automatically receives an additional option to purchase 20,000 shares of the
Companys Common Stock on the day of each third annual meeting of stockholders
of the Company subsequent to the date of the prior option grant after which the
individual remains in office. Each option granted under the Directors Plan
becomes exercisable in three annual installments, subject to the non-employee
directors continued Board service. In July 2004, pursuant to the new
director compensation package approved by the Compensation Committee and the
Board, the director stock option grant to non-employee directors was increased
from 20,000 shares to 25,000 shares vesting over a three year period effective
as of the date of the Companys 2004 Annual Meeting of Stockholders. Such
grants will be made under the Companys 2002 Stock Option Plan. Change-in-Control Arrangements The Companys 1992 Stock Option Plan (the Option Plan) provides that in
the event of a merger of the Company with or into another corporation, unless
the successor corporation assumes or substitutes equivalent options for options
granted under the Option Plan, all outstanding options under the Option Plan
will become fully exercisable prior to the merger. Options which are neither
assumed or substituted for by the successor corporation, nor exercised prior to
the expiration of a 15-day notice period, will terminate upon the expiration of
such period. - 10 -




---



##### Table of Contents



All shares subject to options granted under the Directors Plan will become
fully vested and exercisable as of the date 15 days prior to a change in
control of the Company, as defined in the Directors Plan, unless the surviving
or successor corporation either assumes or substitutes its options for options
outstanding under the Directors Plan. Any such options which are neither
assumed or substituted for by the successor corporation, nor exercised, will
terminate as of the date of the change in control. The Company entered into a change-in-control agreement, effective
September 25, 2001, with Frank Lin, the Chairman, CEO and President of the
Company. The agreement provides for severance and other benefits to be paid to
Mr. Lin in the event of Mr. Lins termination following a change in control
of the Company. The agreement defines a change in control as a merger or
consolidation or the sale, or exchange by the stockholders of the Company of
40% or more of the capital stock of the Company, or the sale or exchange of 40%
or more of the Companys assets. The agreement provides that in the event of
Mr. Lins involuntary termination, constructive termination, death or
disability within 36 months following a change in control, Mr. Lin will be
entitled to receive: (1) severance in the amount of 36 months of Mr. Lins
annual base salary then in effect, (2) three times Mr. Lins potential annual
bonus then in effect, (3) acceleration in vesting of up to 1,000,000 of Mr.
Lins options, and (4) continued group insurance coverage of medical, dental,
prescription drug, vision care and life insurance for 36 months following Mr.
Lins termination. The Board of Directors believes that the agreement is in the best
interests of the Company in order to ensure the continued dedication and
objectivity of Mr. Lin, notwithstanding the possibility of a change in
control. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management Equity Compensation Plan Information We currently maintain four compensation plans that provide for the
issuance of our Common Stock to officers, directors, other employees or
consultants. These consist of the 1992 Stock Option Plan (the 1992 Plan),
1994 Outside Directors Stock Option Plan (the 1994 Plan), 2002 Stock Option
Plan (the 2002 Plan) and 2001 Employee Stock Purchase Plan (the Purchase
Plan), which have been approved by stockholders, and the 1996 Nonstatutory
Stock Option Plan (the 1996 Plan), which has not been approved by
stockholders. The following table sets forth information regarding outstanding
options and shares reserved for future issuance under the foregoing plans as of
June 30, 2004: Number of sharesremaining available forfuture issuanceNumber of shares to
    
    
    
    
    
    under equitybe issued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excluding sharesoutstanding options,
    
    outstanding options,
    
    reflected inwarrants and rights
    
    warrants and rights
    
    column (a))Plan Category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
stockholders
    
    
    2,406,167
    (1)
    
    $
    3.82
    
    
    
    1,320,139
    (2)Equity compensation
plans not approved
by stockholders(3)
    
    
    2,127,076
    
    
    $
    3.71
    
    
    
    917,211Total
    
    
    4,533,243
    
    
    $
    3.77
    
    
    
    2,237,350
   (1)
    
    These shares include 2,053,000 shares that are reserved and issuable upon
exercise of outstanding options under the 1992 Plan which expired on
October 16, 2002 and 203,167 shares that will be issued upon exercise of
outstanding options under the 1994 Plan which expired on January 13, 2004
and 150,000 shares that are reserved and issuable upon exercise of
outstanding options under the 2002 Plan.(2)
    
    These shares include 457,639 shares reserved for issuance under the
Purchase Plan and 862,500 shares reserved under the 2002 Plan, but exclude
126,234 shares which ceased to be so reserved when the 1994 Plan expired
on January 13, 2004.(3)
    
    Consists of shares subject to options that are outstanding or may be
issued pursuant to the 1996 Plan. - 11 -




---



##### Table of Contents



Material Features of the 1996 Nonstatutory Stock Option Plan As of June 30, 2004, we had reserved an aggregate of 6,150,000 shares of
Common Stock for issuance under the 1996 Plan, of which 917,211 shares remained
available for future grant on such date. The 1996 Plan provides for the
granting of nonstatutory stock options to employees and consultants who are not
officers or directors of the Company, with exercise prices per share equal to
no less than 85% of the fair market value of our Common Stock on the date of
grant. Options granted under the 1996 Plan generally have a 10-year term and
vest at the rate of 25% of the shares subject to the option on each of the
first four anniversaries of the date of grant. The vesting of options granted
under the 1996 Plan will be accelerated in full in the event of a merger of the
Company with or into another corporation in which the outstanding options are
neither assumed nor replaced by equivalent options granted by the successor
corporation or a parent or subsidiary of the successor corporation. The 1996
Plan is not required to be and has not been approved by the Companys
stockholders. Material Features of the Director Options As of June 30, 2003, Millard Phelps held a nonstatutory stock option to
purchase 5,000 shares of Common Stock at a price of $13,875 per share granted
to him by the Compensation Committee of the Board of Directors in April 1996,
while Glen Antle held a nonstatutory stock option to purchase 6,250 shares of
Common Stock at a price of $3,375 per share granted to him by the Compensation
Committee in October 1998. The exercise price of each option is equal to the
per share closing price of the Common Stock on the date of grant. Each option
has a term of 10 years measured from the date of grant and became exercisable
in full one year after the date of grant. Stock Ownership of Certain Beneficial Owners and Management The following table sets forth certain information, as of October 15,
2004, with respect to the beneficial ownership of the Companys Common Stock by
(i) all persons known by the Company to be the beneficial owners of more than
5% of the Companys outstanding Common Stock, (ii) each director and
director-nominee of the Company, (iii) the Chief Executive Officer and the two
other most highly compensated executive officers of the Company as of June 30,
2004, whose salary and incentive compensation for the fiscal year ended June
30, 2004 exceeded $100,000 (Named Executive Officers) plus John Edmunds, who
joined the Company in the capacity of Chief Financial Officer on June 14, 2004,
and (iv) all executive officers and directors of the Company as a group. Shares Owned (1) (2)Number
    
    PercentageName and Address of Beneficial Owners
    
    of Shares
    
    of ClassBeneficial Owners of in Excess of
5% (other than directors and named executive officers)FMR Corp.(3)
    
    
    3,054,691
    
    
    
    12.15
    %82 Devonshire Street
Boston, MA 02109Kern Capital Management LLC (4)
    
    
    2,308,350
    
    
    
    9.19
    %114 West 47th Street, Suite 1926
New York, NY 10036Next Century Growth Investors LLC (5)
    
    
    1,437,040
    
    
    
    5.72
    %5500 Wayzata Blvd.
Minneapolis, MN 55416Named Executive Officers and directors(6)Glen M. Antle(7)
    
    
    52,500
    
    
    
    *Yasushi Chikagami(8)
    
    
    77,716
    
    
    
    *Frank C. Lin(9)
    
    
    2,899,693
    
    
    
    11.54
    %John Luke(10)
    
    
    30,000
    
    
    
    *
 - 12 -




---



##### Table of Contents



Shares Owned (1) (2)Number
    
    PercentageName and Address of Beneficial Owners
    
    of Shares
    
    of ClassMillard Phelps(11)
    
    
    34,466
    
    
    
    *Jung-Herng Chang(12)
    
    
    523,110
    
    
    
    2.08
    %John Edmunds
    
    
    0
    
    
    
    *Peter Jen (13)
    
    
    501,705
    
    
    
    2.00
    %Executive officers and directors
as a group (8 persons)(14)
    
    
    4,119,190
    
    
    
    16.39
    %
   *
    
    Less than 1%(1)
    
    Except as otherwise noted, the persons named in the table have the sole
voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where
applicable and to the information contained in the footnotes to this
table. The number of shares indicated includes in each case the number of
shares of Common Stock issuable upon exercise of stock options to the
extent such options are currently exercisable for purposes of this table.
Options and warrants are deemed to be currently exercisable if they may
be exercised within 60 days of October 15, 2004.(2)
    
    Calculated on the basis of 22,955,508 shares of Common Stock outstanding
as of October 15, 2004, provided that any additional shares of Common
Stock that a stockholder has the right to acquire within 60 days after
October 15, 2004 are deemed to be outstanding for the purpose of
calculating that stockholders percentage beneficial ownership.(3)
    
    Based on a Schedule 13G filed on February 17, 2004 by FMR Corp.(4)
    
    Based on a Schedule 13G filed on February 13, 2004 by Kern Capital
Management LLC.(5)
    
    Based on a Schedule 13G filed on February 17, 2004 by Next Century Growth
Investors LLC.(6)
    
    The address of the executive officers and directors is c/o Trident
Microsystems, Inc., 1090 East Arques Avenue, Sunnyvale, CA 94085.(7)
    
    Includes 52,500 shares subject to options exercisable by Mr. Antle within
sixty days of October 15, 2004.(8)
    
    Includes 76,216 shares subject to options exercisable by Mr. Chikagami
within sixty days of October 15, 2004. Also includes 1,500 shares held by
a joint tenant account for Mr. Chikagamis wife, son and daughter(9)
    
    Includes 1,087,500 shares subject to options exercisable by Mr. Lin
within sixty days of October 15, 2004. Also includes 15,750 shares held by
Mr. Lins wife, 37,631 shares held by Mr. Lins second son and 36,131
shares held by Mr. Lins youngest son.(10)
    
    Includes 30,000 shares subject to options exercisable by Mr. Luke within
sixty days of October 15, 2004.(11)
    
    Includes 34,451 shares subject to options exercisable by Mr. Phelps
within sixty days of October 15, 2004.(12)
    
    Includes 460,000 shares subject to options exercisable by Mr. Chang
within sixty days of October 15, 2004.(13)
    
    Includes 435,000 shares subject to options exercisable by Mr. Jen within
sixty days of October 15, 2004.(14)
    
    Includes 2,175,667 shares subject to options exercisable within sixty
days of October 15, 2004. 
 Item 13. Certain Relationships and Related Transactions In October 1998, the Board approved a loan to Frank Lin pursuant to which
Mr. Lin could borrow $500,000 from the Company for his personal use. On April
27, 2000, the Company and Mr. Lin entered into a loan agreement pursuant to
which Mr. Lin borrowed $500,000 from the Company, payable on April 27, 2002
together with interest at a rate of 6.46% per annum. Due to a prolonged
softness of the global economy and Mr. Lins personal financial hardship, the
Board approved on April 22, 2002 a proposal to amend Mr. Lins loan and extend
the term for one more year to April 27, 2003 with unpaid accrued interest be
added on the principal amount. The Board also approved a proposal to change
the interest rate effective January 1, 2001 to the monthly Applicable Federal
Rates published by the - 13 -




---



##### Table of Contents



revenue ruling of the U.S. Internal Revenue Service as
part of Mr. Lins compensation package. On April 27, 2003, the initial
principal of $500,000 together with the interest of $60,350 accrued from April
27, 2000 to April 27, 2003 was paid in full. Item 14. Principal Accountant Fees and Services Principal Accountant Fees and Services The following is a summary of the fees billed by PricewaterhouseCoopers
LLP for professional services rendered for the fiscal years ended June 30, 2004
and 2003: Fiscal YearFee Category
    
    2004
    
    2003Audit
    
    $
    292,000
    
    
    $
    206,000Audit-related
    
    
    22,000
    
    
    
    36,000Tax
    
    
    122,000
    
    
    
    141,000All other fees
    
    
    
    
    
    
    Total fees
    
    $
    436,000
    
    
    $
    383,000
 Audit Fees. Consists of fees billed for professional services rendered
for the audit of the Companys consolidated financial statements and review of
the interim consolidated financial statements included in quarterly reports and
services that are normally provided by PricewaterhouseCoopers LLP in connection
with statutory and regulatory filings or engagements. Audit-Related Fees. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of Companys consolidated financial statements and are not reported under Audit
Fees. These services include accounting consultations in connection with
restructuring, attest services that are not required by statute or regulation,
and consultations concerning financial accounting and reporting standards. Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and international tax compliance, tax audit defense,
customs and duties, mergers and acquisitions, and international tax planning. All Other Fees. Consists of fees for products and services other than the
services reported above. No such services were rendered by
PricewaterhouseCoopers LLP during the periods presented. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors The Audit Committees policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other
services. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The independent auditors and
management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditors in accordance with
this pre-approval, and the fees for the services performed to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis. - 14 -




---



##### Table of Contents



PART IV 
 Item 15. Exhibits and Financial Statement Schedules 3. Exhibits Exhibit
    
    Description31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer*31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer*
   *
    
    Filed herewith. - 15 -




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. TRIDENT MICROSYSTEMS, INC.Dated: October 28, 2004
    
    /s/ John S. EdmundsJohn S. EdmundsChief Financial Officer
 - 16 -




---



##### Table of Contents



Index to Exhibits Exhibit
    
    Description31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer*31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer*
   *
    
    Filed herewith. - 17 -