20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

Commission File Number: 000-30540

GIGAMEDIA LIMITED

(Exact name of registrant as specified in its charter)

REPUBLIC OF SINGAPORE
(Jurisdiction of incorporation or organization)

14th Floor, 122 TUNHWA NORTH ROAD, TAIPEI, TAIWAN, R.O.C.
(Address of principal executive offices)

Registrant’s telephone number, including area code
886-2- 8770-7966

Securities registered or to be registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Ordinary Shares	The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Exchange Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

51,495,156 ordinary shares

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ

     Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

     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 þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer þ      Non-accelerated filer o

     Indicate by check mark which financial statement item the registrant has elected to follow.           o Item 17 þ Item 18

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

TABLE OF CONTENTS

	Page
PART I		2
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		2
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE		2
ITEM 3. KEY INFORMATION		2
ITEM 4. INFORMATION ON THE COMPANY		20
ITEM 4A. UNRESOLVED STAFF COMMENTS		44
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		44
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		70
ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS		76
ITEM 8. FINANCIAL INFORMATION		76
ITEM 9. THE OFFER AND LISTING		78
ITEM 10. ADDITIONAL INFORMATION		80
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		93
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		93
PART II		93
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		93
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		94
ITEM 15. CONTROLS AND PROCEDURES		94
ITEM 16. [RESERVED]		95
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT		95
ITEM 16B. CODE OF ETHICS		95
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES		96
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		96
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		96
PART III		97
ITEM 17. FINANCIAL STATEMENTS		97
ITEM 18. FINANCIAL STATEMENTS		97
ITEM 19. EXHIBITS		97
SIGNATURE		100
EX-1.3 AMENDED MEMORANDUM AND ARTICLES OF ASSOCIATION OF GIGAMEDIA LIMITED
EX-4.42 AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
EX-4.43 SHARE PURCHASE AGREEMENT
EX-4.44 SHARE PURCHASE AGREEMENT
EX-4.45 SHARE PURCHASE AGREEMENT
EX-4.46 SHARE PURCHASE AGREEMENT
EX-4.47 SUBSCRIPTION AGREEMENT
EX-4.48 TERMINATION AGREEMENT
EX-4.49 LICENSE AND DISTRIBUTION AGREEMENT
EX-4.50 THIRD AMENDMENT TO LICENSE AGREEMENT
EX-4.51 SHAREHOLDERS' AGREEMENT DEC 7, 2006
EX-4.52 SHAREHOLDERS' AGREEMENT DATED FEB 2, 2007
EX-12.1 CERTIFICATION BY CEO
EX-12.2 CERTIFICATION BY CFO
EX-13.1 CERTIFICATION BY CEO
EX-13.2 CERTIFICATION BY CFO
EX-15.1 CONSENT OF PRICEWATERHOUSECOOPERS
EX-15.2 CONSENT OF GHP HORWATH

USE OF CERTAIN TERMS

     In this annual report, all references to (i) “we,” “us,” “our,” “our Company” or “GigaMedia” are to GigaMedia Limited and, unless the context requires otherwise, its subsidiaries, (ii) “Shares” are to ordinary shares of our Company, (iii) “CESL” are to Cambridge Entertainment Software Limited (previously known as Grand Virtual International Limited), a company incorporated under the laws of the British Virgin Islands, (iv) “Hoshin GigaMedia” are to Hoshin GigaMedia Center Inc., a company incorporated under the laws of Taiwan, Republic of China, (“R.O.C.”), (v) “FunTown” are to our online games business operated through Hoshin GigaMedia and FunTown World Limited, a company incorporated under the laws of the British Virgin Islands, and (vi) “T2CN” are to T2CN Holding Limited, a company incorporated under the laws of the British Virgin Islands. All references in this annual report to “U.S. dollar,” “$” and “US$” are to United States dollars and all references to “NT dollar” and “NT$” are to New Taiwan dollars.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     This annual report contains forward-looking statements that involve risks and uncertainties. These statements include certain projections and business trends that are “forward-looking” within the meaning of the U.S. Private Securities Litigation Reform Act 1995. These statements are generally indicated by the use of forward-looking

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terminology such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “project,” “may,” “will” or other similar words, and include, among others, the following statements:

• We believe that our cross-marketing relationships with certain well-known companies will increase the recognition of our online game brands.

• To cope with competition, we aim to develop new features and services that we think our players will pay for and enjoy.

• We do not believe that any potential merger or acquisition that we may be engaged in would alter our goal of preserving sufficient cash and cash equivalents to fund future operations; and

• We believe that our existing cash, cash equivalents, marketable securities and expected cash flow from operations will be sufficient to meet our capital expenditure, working capital, cash obligations under our existing lease arrangements, and other requirements through 2007.

     These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of risk factors and other factors noted throughout this annual report, including those described under Item 3D, “Risk Factors” and those detailed from time to time in other filings with the U.S. Securities and Exchange Commission (the “Commission”). We undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. Given this level of uncertainty, you are advised not to place undue reliance on such forward-looking statements.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

Exchange Rates

     Our consolidated financial statements were historically reported in New Taiwan dollars. Effective January 1, 2004, we adopted the U.S. dollar as our reporting currency because operations denominated in U.S. dollars represented an increasing portion of our business following the acquisition of our software licensing and online entertainment business. Comparative financial information has been recast as if the U.S. dollar had been used as our reporting currency for the periods ended and as of December 31, 2002 and 2003.

     The financial information for the periods presented has been translated from NT dollars to U.S. dollars based on the following exchange rates:

	2002		2003		2004		2005		2006
Year-end		34.75		33.97		31.71		32.85		32.60
Weighted-average		34.55		34.40		33.41		32.19		32.54

     Assets and liabilities on our balance sheet denominated in non-U.S. dollars are translated into U.S. dollars using year-end exchange rates. Income and expense items in our statement of operations denominated in non-U.S. dollars are translated into U.S. dollars using the weighted-average exchange rates. See Note 1 of our consolidated financial statements for additional information. Certain other operating financial information denominated in non-U.S. dollars, not included in our consolidated financial statements and provided in this annual report, are translated using

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weighted-average exchange rates. Transactions in 2007 denominated in non-U.S. dollars are translated into U.S. dollars using the year-end exchange rate for 2006.

A. Selected Financial Data

     The selected consolidated balance sheet data as of December 31, 2005 and 2006 and the selected consolidated statement of operations data for the years ended December 31, 2004, 2005 and 2006 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The selected consolidated balance sheet data as of December 31, 2002, 2003 and 2004, and the selected consolidated statement of operations data for the years ended December 31, 2002, and 2003 have been derived from our audited consolidated financial statements for the years ended December 31, 2002, 2003 and 2004, which are not included in this annual report. The audited consolidated financial statements for the years ended December 31, 2002 and 2003 were stated in NT dollars. We have converted certain information in such financial statements into U.S. dollars for inclusion in this annual report for the convenience of investors using the exchange rates provided under “Exchange Rates” above. The consolidated financial statements have been prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The selected consolidated financial data set forth below should be read in conjunction with Item 5 — “Operating and Financial Review and Prospects” and the consolidated financial statements and the notes to those statements included elsewhere in this annual report. The profit and loss statements for the years ended December 31, 2002, 2003, and 2004 have been restated to reflect the results of our music distribution business, which was sold in September 2005, as discontinued operations. Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no effect on the result of operation or shareholders’ equity as previously reported.

For the Years Ended December 31,
(in thousands except for earnings/loss per share amounts)

	2002			2003			2004			2005			2006
	US$			US$			US$			US$			US$
STATEMENT OF OPERATIONS DATA:
OPERATING REVENUES
Software licensing and online entertainment revenues		0			0			11,434			22,511			55,019
Online game revenues		0			0			0			0			18,692
Internet access and service revenues		19,144			19,396			21,303			21,589			20,537
Other revenues		122			117			107			87			44
Total operating revenues		19,266			19,513			32,844			44,187			94,292
OPERATING COSTS
Cost of software licensing and online entertainment revenues		0			0			(1,592	)		(3,327	)		(7,824	)
Cost of online game revenues		0			0			0			0			(3,667	)
Cost of Internet access and service revenues		(18,947	)		(15,093	)		(13,873	)		(13,568	)		(11,449	)
Cost of other revenues		(1,008	)		(1,022	)		(644	)		(488	)		(391	)
Total operating costs		(19,955	)		(16,115	)		(16,109	)		(17,383	)		(23,331	)
GROSS PROFIT		(689	)		3,398			16,735			26,804			70,961
OPERATING EXPENSES
Product development and engineering expenses		(1,865	)		(1,211	)		(2,513	)		(3,562	)		(5,738	)
Selling and marketing expenses		(4,095	)		(2,432	)		(6,310	)		(10,777	)		(30,123	)
General and administrative expenses		(4,155	)		(5,162	)		(5,657	)		(7,892	)		(12,421	)
Bad debt expenses		(869	)		(128	)		220			(207	)		(715	)
Impairment loss on intangible assets		(2,334	)		0			0			0			0
Impairment loss on property, plant and equipment		0			(1,557	)		0			0			0
		(13,318	)		(10,490	)		(14,260	)		(22,438	)		(48,997	)
Income (loss) from operations		(14,007	)		(7,092	)		2,475			4,366			21,964
Income (loss) from continuing operations		(10,617	)		(9,799	)		1,253			6,490			30,784
Income (loss) from discontinued operations		(7,849	)		(4,296	)		429			(154	)		0
Net income (loss)		(18,466	)		(14,095	)		1,682			6,336			30,784
Earnings (loss) per share (in dollars)
Basic:
Income (loss) from continuing operations		(0.21	)		(0.20	)		0.02			0.13			0.60
Income (loss) from discontinued operations		(0.16	)		(0.08	)		0.01			0			0
Net income (loss)		(0.37	)		(0.28	)		0.03			0.13			0.60
Diluted:
Income (loss) from continuing operations		(0.21	)		(0.20	)		0.02			0.12			0.51
Income (loss) from discontinued operations		(0.16	)		(0.08	)		0.01			0			0
Net income (loss)		(0.37	)		(0.28	)		0.03			0.12			0.51

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As of December 31,
(in thousands)

	2002		2003		2004		2005		2006
	US$		US$		US$		US$		US$
BALANCE SHEET DATA:
Total current assets		82,812		77,709		67,726		70,204		64,176
Property, plant and equipment-net		21,264		15,636		15,056		10,747		10,098
Goodwill		731		—		29,607		29,243		55,187
Intangible assets-net		6,964		6,199		8,372		2,704		23,067
Total assets		135,138		119,792		125,977		113,519		182,619
Total shareholders’ equity (net assets)		104,169		90,363		95,971		100,648		134,087
Common shares, no par value, and additional paid-in capital		239,004		239,004		287,657		287,920		289,495
Number of issued shares (basic, in thousands)		50,154		50,154		50,154		50,344		51,495
Dividend declared per share (in dollars)		0		0		0		0		0

Presentation of financial information for the financial years ended December 31, 2002 to December 31, 2005 has been reclassified to conform with the current year presentation for the year ended December 31, 2006.

B. Capitalization and Indebtedness

     Not applicable.

C. Reasons for the Offer and Use of Proceeds

     Not applicable.

D. Risk Factors

Risks Related to Our Business

     Our limited operating history as an software licensing and online entertainment provider and an online games operator, and the unproven long-term potential of those business models make evaluating our business and prospects difficult

     We acquired our software licensing and online entertainment business, CESL, in April 2004 and our online games business, comprised of the game platforms of FunTown and T2CN, in January 2006 and June 2007, respectively. We launched new poker software products in 2004, which generated approximately 2 percent, 18 percent and 56 percent of total software licensing and online entertainment revenues in 2004, 2005 and 2006, respectively. In addition, the senior management teams of our different businesses and our employees have worked together at our Company for only a relatively short period of time.

     As a result, we have a limited relevant operating history as a software licensing and online entertainment developer and an online games operator for you to evaluate. It is also difficult to evaluate our prospective business, because we may not have sufficient experience to address the risks frequently encountered by companies using new and unproven business models and entering new and rapidly evolving markets, including the online gaming and online games markets. These risks may include our potential failure to:

• retain existing customers or attract new customers;

• license, develop, or acquire additional online games that are appealing to consumers;

• anticipate and adapt to changing consumer preferences;

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• adapt to competitive market conditions;

• adapt to regulatory changes;

• respond to technological changes or resolve unexpected service interruptions in a timely manner;

• adequately and efficiently operate, upgrade and develop our transaction and service platforms; or

• maintain adequate control of our expenses.

If we are unsuccessful in addressing any of the risks listed above, our business and financial condition will be adversely affected.

     Our businesses face intense competition, which may adversely affect our revenues, profitability and planned business expansion

We face competition from many competitors, and we expect to face additional competition from potential competitors, including those with:

• significantly greater technological, financial, sales and marketing resources;

• larger customer bases and longer operating histories;

• greater name recognition; and

• more established relationships with distribution partners, advertisers, content and application providers and/or other strategic partners.

Competition in the software licensing and online entertainment business

     The Internet gaming software industry is characterized by rapid technological change and we face significant and intense competition from online gaming software design houses and application service providers. Given the relatively low barriers to entry into the software industry and the increasing popularity of Internet-based businesses, we face a large number of potential competitors from many different segments of software and Internet industries. Traditional entertainment service providers, many of which have financial resources significantly greater than ours, might expand and provide Internet-based entertainment services. Such Internet service providers and other entertainment service providers may also develop and offer the underlying software solutions and tools to others in direct competition with us.

     We are also exposed to competition in the Internet gaming industry through our licensees, such as UIM, as license fees with respect to gaming software provided by us typically include a variable fee based on revenues earned by such licensees from the operation of the licensed software. Our major licensee is Ultra Internet Media, S.A. (“UIM”), a provider of Internet gaming services. Although we do not have any equity ownership interest in UIM, in accordance with FIN 46(R), we consolidate its assets, liabilities and results of operations in our financial statements and are entitled to fees from UIM based upon its revenues. For additional information, see Item 5 — “Operating and Financial Review and Prospects — Certain Significant Events Affecting Our Results of Operations for 2004, 2005 and 2006 — Consolidation of UIM under FIN 46(R)”. Our licensees (including UIM), face strong competition in the online gaming industry.

     Furthermore, some of our competitors and competitors of our licensees (including UIM) are more established, enjoy greater market recognition, are substantially larger and have substantially greater resources and distribution capabilities than we do. There is no assurance that we or our licensees (including UIM) will be able to compete successfully with existing and future competitors, which could have a material adverse effect on our business, financial condition or results of operations. See Item 4 — “Information on the Company — Software Licensing and Online Entertainment Business — Competition” for additional information.

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     Finally, as a result of the Unlawful Internet Gambling Enforcement Act (the “UIGEA”) and subsequent closing of the online gaming market in the United States, we and our licensees (including UIM) face increasing competition from entertainment service providers in our markets in Continental Europe, which are also increasingly subject to regulation from governmental authorities. There is no assurance that we or our licensees (including UIM) will be able to compete successfully with existing and future competitors, which could have a material adverse effect on our business, financial condition or results of operations. See Item 4 — “Information on the Company — Software Licensing and Online Entertainment Business — Competition” for additional information.

Competition in the online games business

     Our main competitors in the online games business are casual game operators in Taiwan, Hong Kong, the People’s Republic of China (“PRC”) and Macau, or Greater China, including Shanda Interactive Entertainment Ltd. (“Shanda”), Nineyou (Shanghai Everstar Online Entertainment Co., Ltd.), Tencent Holdings Limited, Ourgames.com (Beijing Globalink Computer Technology Co., Ltd.) and Chinagames.net. Our competitors also include massively multi-player online role-playing game operators in Taiwan, including Gamania Digital Entertainment Co., Ltd. (“Gamania”) and Soft-World International Corporation.

     We expect more companies to enter the online games industry in Greater China and a wider range of online games to be introduced to the Greater China market, given the relatively low entry barriers to the online games industry. Our competitors vary in size and include large companies such as Shanda, many of which have significant financial, marketing and game development resources as well as name recognition. We may not be able to devote the same degree of resources to designing, developing or acquiring new games, undertaking extensive marketing campaigns, adopting aggressive pricing policies, paying high compensation to game developers or compensating independent game developers as a number of our competitors may be able to do. We cannot assure you that we will be able to compete successfully against any new or existing competitors.

     In June 2007, we acquired control over a majority of the voting rights of T2CN, an online game operator and distributor in the PRC. There is increasing regulation over the online games industry in the PRC, most notably, the “Opinions on the Development and Management of Online Games” and the “Anti-Internet Addiction Regulations”, which (among other things) regulate the online game products allowed to be distributed and operated in China, and require online game operators to install features to identify online game players and to discourage the playing of online games through limiting the time which players may spend on a game and the game awards which may be made to players which have spent more than a specified consecutive number of hours online.

     As a result of the above, the increased competition we anticipate in the online games industry may reduce the number of our users or growth rate of our user base, reduce the average number of hours played by our users, or cause us to reduce usage fees. All of these competitive factors could have a material adverse effect on our business, financial condition and results of operations.

Competition in the Internet access service business

     Our main competitors in the retail broadband Internet service provider (“ISP”) business are fixed-line service providers and other ISPs in Taiwan that offer asymmetrical digital subscriber line (“ADSL”) broadband services, including Chunghwa Telecom’s HiNet, the overwhelmingly dominant provider of broadband services; Taiwan Fixed Network, a fixed-line service provider; and Seednet, SoNet and Asia Pacific Online, which are all ISPs. Our competitors also include cable-based Internet access companies that have developed their own cable-based services and market those services to cable operators and those that are seeking to contract with cable operators to bring their services into geographic areas that are not covered by an exclusive relationship between our Company and our cable partners. Our corporate ISP business faces competition from fixed-line service providers, including Chunghwa Telecom, Taiwan Fixed Network, NCIC’s Sparq and Asia Pacific Online. The primary basis of competition in the Internet access business industry is price. We can offer no assurance that we will be able to attract new subscribers or retain existing subscribers, as a result of which our revenues may decline. Due to this intense competition, there may be limited market opportunities for our broadband access services. We cannot assure you that we will be successful in achieving widespread acceptance of our services before our competitors offer services similar to our current or prospective offerings, which might preclude or delay purchasing decisions by potential subscribers or cause us to lose our existing subscribers. All of these competitive factors could have a material adverse effect on our business, financial condition or results of operations. In recent years, we have experienced a reduction in the number of our new consumer subscribers and our total consumer subscribers, in line with our ongoing strategy to shift resources away from this legacy business. Consistent with our focus on online entertainment, we have retained financial advisors to explore the sale of this legacy business.

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     Our business could suffer if we do not successfully manage current growth and potential future growth

     We are pursuing a number of growth strategies, including leveraging our customer base to develop additional sources of revenues and exploring opportunities to expand into new software licensing and online entertainment business segments. Some of these strategies relate to new services or products for which there are no established markets, or relate to services, products or markets in which we lack experience and expertise. For example, we are currently expanding our online games business to include massively multi-player online role-playing games, or MMORPGs, starting with Hellgate:London and Phantasy Star Universe, which we have licensed in certain territories and expect to launch in the second half of 2007. We are also expanding our online poker software business into new European markets such as Greece, Poland, Finland and Hungary. We cannot assure you that we will be able to deliver new products or services on a commercially viable basis or in a timely manner, or at all.

     Our growth to date has placed, and our anticipated further expansion of our operations will continue to place, a significant strain on our management, systems and resources. In addition to training and managing our workforce, we will need to continue to develop and improve our financial and management controls and our reporting systems and procedures, including those of acquired businesses. We cannot assure you that we will be able to efficiently or effectively manage the growth of our operations, and any failure to do so may limit our future growth and materially and adversely affect our business, financial condition and results of operations.

     Our business strategy, which contemplates growth through acquisitions and strategic investments, exposes us to significant risks

     As a component of our growth strategy, we intend to continue to enhance our business development, including our game content offerings, by acquiring other businesses that complement our current online businesses, or which represent related but new lines of business that we believe to be appropriate areas of expansion, or that we believe may benefit us in terms of user base, product or content offering. We also intend to make selective strategic investments. We will continue to examine the merits, risks and feasibility of potential transactions, and expect to search for additional acquisition opportunities in the future.

     Such search and examination efforts and any related discussions with third parties, may or may not lead to future acquisitions and investments. Our reported financial results may be affected by any such acquisitions and/or investments, including any acquisitions or dispositions undertaken by us in anticipation of or in connection with any such acquisitions and/or investments. Our ability to grow through such acquisitions and investments will depend on the availability of suitable acquisition candidates at an acceptable cost, our ability to reach agreement with acquisition candidates or investee companies on commercially reasonable terms, the availability of financing to complete larger acquisitions or investments and our ability to obtain any required governmental approvals. In addition, the benefits of an acquisition or investment transaction may take considerable time to develop and we cannot assure you that any particular acquisition or investment will produce the intended benefits.

     Furthermore, the identification and completion of any such transaction may require us to expend significant management and other resources, and may require that we expend a significant portion of our cash reserves and/or issue a substantial amount of new equity, which could adversely affect our financial condition and

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liquidity and result in significant dilution of our shareholders’ interests. The impact of dilution may restrict our ability to consummate further acquisitions. We may also incur debt and losses related to the impairment of goodwill and other intangible assets upon or following the acquisition of another business, which could negatively impact our results of operations. For example, we wrote off goodwill associated with our music distribution business in the amount of US$7.0 million in 2002 and US$0.7 million in 2003, respectively, which reduced our profitability in both years. Any write-off of goodwill in the future may have a negative impact on our financial results.

     Additional risks associated with acquisitions include the following:

• It may be difficult to assimilate the operations and personnel of an acquired business into our own business;

• Management, information, and accounting systems of an acquired business would be different from our current systems and would need to be successfully integrated;

• Our management must devote its attention to assimilating the acquired business, which diverts attention from other business concerns;

• Suppliers, vendors and/or distributors may renegotiate or cancel contracts with us following the acquisition of a business;

• We may enter markets in which we have limited prior experience. For example, in December 2006, we entered into a strategic alliance with Infocomm Asia Holdings Pte Ltd (“Infocomm Asia”), an online gaming operator and distributor operating primarily in the Southeast Asian region and in June 2007, we also acquired control of a majority of the voting rights over T2CN, an online casual sports game operator in China, a business in which we had limited prior experience; and

• We may lose some of our key employees or key employees of an acquired business.

     Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business

     We regard our copyrights, service marks, trademarks, trade secrets, patents and other intellectual property as critical to our success. Unauthorized use of the intellectual property, whether owned by us or licensed to us, could adversely affect our business and reputation.

     We rely on trademark, patent and copyright law, trade secret protection and confidentiality agreements with our employees, customers, business partners and others to protect our intellectual property rights. Despite our precautions, it may be possible for third parties to obtain and use the intellectual property used in our business without authorization.

     The validity, enforceability and scope of protection of intellectual property in Internet-related industries are uncertain and evolving. In particular, the laws and enforcement procedures of Taiwan, Hong Kong, the PRC and certain other countries are uncertain or do not protect intellectual property rights to the same extent as do the laws and enforcement procedures of the United States. Moreover, litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, which could disrupt our business and could have a material adverse effect on our business, financial condition and results of operations.

     Our results of operations are subject to significant fluctuations

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     Our revenues, expenses and results of operations have varied in the past and may fluctuate significantly in the future due to a variety of factors, many of which are beyond our control. The key factors affecting each of our respective businesses include:

• Software licensing and online entertainment business: availability of Internet infrastructure, competition from existing and new competitors, the revenues, expenses and results of operations of our customer and major licensee, UIM, and the regulatory restrictions applicable to the Internet gaming industry.

• Online games business: existing and new competitors, the pace of rollout of new games and price competition in the industry, regulatory and other risks arising in connection with our China operations.

• Internet access service business: price competition in the Internet access business, the rate at which new customers subscribe to our services, subscriber turnover rates and the pace of rollout of our services.

     In addition, our operating expenses are based on our expectations of the future demand for our services and are relatively fixed in the short term. We may be unable to adjust spending quickly enough to offset any unexpected demand shortfall. A shortfall in revenues in relation to our expenses could have a material and adverse effect on our business and financial results.

     The markets for our principal businesses are characterized by rapid technological change, and failure to respond quickly and sufficiently to new Internet technologies or standards may have a material adverse effect on our business

     The markets for our software licensing and online entertainment business, online games business and Internet access service business are characterized by rapid technological advances, evolving industry standards, changes in user requirements and frequent new service introductions and enhancements.

     The online gaming and online games industries, in particular, are subject to rapid technological change. We need to anticipate the emergence of new technologies and games, assess their acceptance and make appropriate investments accordingly. If we are unable to do so, new technologies in online gaming and online games programming or operations could render our gaming software and online games obsolete or unattractive.

     We use internally developed software systems that support nearly all aspects of our billing and payment transactions in our online games business. All of our businesses may be adversely affected if we are unable to upgrade our systems quickly enough to accommodate future traffic levels, to avoid obsolescence or to successfully integrate any newly developed or acquired technology with our existing systems. Capacity constraints could cause unanticipated system disruptions and slower response times, affecting data transmission and game play. These factors could, among other things, cause us to lose existing or potential customers and existing or potential game developer partners.

     In April 2007, the PRC government issued regulations intended to discourage online game-players from spending excessive amounts of time playing online games. Pursuant to these regulations, Internet game operators have been ordered to install anti-addiction software features on games offered in the PRC by mid-July 2007, which will (among other features) limit the number of points and other benefits which can be awarded to game players after they have been online in excess of specified periods of time. Internet game operators will also be required to adopt real-name registration, which will require online game players to register their real identity information before they will be allowed to play online games. If we cannot adapt our games and software systems to comply with the requirements of these regulations before the stipulated timeframe, the PRC authorities are entitled to order that our non-complying games be shut down.

     The number of consumer subscribers for our Internet access service business decreased from approximately 108,000 in 2002 to approximately 11,447 in 2006, and revenues from our Internet access service business declined from approximately US$21.6 million in 2005 to US$20.6 million in 2006, mainly due to a decrease in the number of consumer subscribers and a corresponding decrease in revenues from such customers. If we are unable to effectively use leading technologies, continue to develop our technological expertise, enhance our current services and continue to improve the performance, features and reliability of our products and services, or we are unable to

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respond quickly and sufficiently to new technologies or standards, we may not be able to attract new customers and our business and financial results may be materially and adversely affected.

     Our software licensing and online entertainment business, online games business, and Internet access service business depend on the reliability of our network infrastructure, which is subject to physical, technological, security and other risks

     The development and operation of our online networks are subject to physical, technological, security and other risks which may result in interruption in service or reduced capacity for customers. These risks include physical damage, power loss, telecommunications failure, capacity limitation, hardware or software failures or defects and breaches of security by computer viruses, break-ins or otherwise. The occurrence of any of these events could result in interruptions, delays or cessation in service to users of our online services, which could have a material adverse effect on our business and operating results. For example, in February 2007, an earthquake off the coast of Taiwan damaged several undersea optic-fiber cables linking countries such as Malaysia, Singapore, Australia, Japan, South Korea, China, the United States and Europe, causing disruptions in Internet traffic worldwide. An increase in the volume of usage of online services could strain the capacity of our software and hardware employed, which could result in slower response time or system failures. We do not have redundant facilities in the event of an emergency, but we have a variety of backup servers at our primary site to deal with possible system failures.

     While we have implemented industry-standard security measures, our network may still be vulnerable to unauthorized access, computer viruses, denial of service attacks and other disruptive problems. A party that is able to circumvent security measures could misappropriate proprietary information and, perhaps, most importantly, cause interruptions in our operations. Internet and online service providers have, in the past, experienced and may, in the future, experience interruptions in service as a result of the accidental or intentional actions of Internet users, current and former employees or others. We may be required to expend significant capital or other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches. There can be no assurance that any measures implemented will not be circumvented in the future.

     The adoption of new laws or changes to or the application of existing laws relating to Internet commerce may affect the growth of our software licensing and online entertainment and online games businesses

     In addition to regulations pertaining specifically to online entertainment, we may become subject to a number of laws and regulations that may be adopted with respect to the Internet and electronic commerce. New laws and regulations that address issues such as user privacy, pricing, online content regulation, taxation, advertising, intellectual property, information security, and the characteristics and quality of online products and services may be enacted. For example, in order to counter alleged net addiction, in March 2007, the PRC government prohibited the opening of any new cyber-cafes for the rest of 2007, and in April 2007, it issued regulations to discourage online game-players from spending excessive amounts of time playing online games. Pursuant to these regulations, Internet game operators have been ordered to install anti-addiction software features on games offered in the PRC by mid-July 2007, which will (among other features) limit the number of points and other benefits which can be awarded to game players after they have been online in excess of specified periods of time. Internet game operators will also be required to adopt real-name registration, which will require online game players to register their real identity information before they will be allowed to play online games. If we cannot adapt our games and software systems to comply with the requirements of this regulation before the stipulated timeframe, the PRC authorities are entitled to order that non-complying games be shut down.

     Current laws, which predate or are incompatible with Internet commerce, may also be enforced in a manner that restricts the electronic commerce market. In addition, the application of such pre-existing laws regulating communications or commerce in the context of the Internet and electronic commerce is uncertain.

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     The adoption of new laws or regulations relating to the Internet, or particular applications or interpretations of existing laws, could decrease the growth in the use of the Internet, decrease the demand for our products and services, increase the cost of conducting our business or could otherwise have a material adverse affect on our business, revenues, operating results and financial condition.

     The worldwide legal and regulatory environment in which our software licensing and online entertainment business operates is characterized by uncertainties that could adversely affect our business and operating results

     Our software licensing and online entertainment business includes software development and the provision of application services for Internet gaming. We license our gaming software to operators of online gaming businesses and to UIM, which also sub-licenses our software products to third parties. Fees earned by us typically comprise an upfront license fee and a periodic license fee based on the revenues earned from the operation of the licensed software. Each of these businesses is subject to applicable laws and regulations relating to online gaming and electronic commerce in various jurisdictions throughout the world, and it is in many cases uncertain which governments have authority to legislate or regulate different aspects of these industries. Moreover, the Internet gaming industry is still in an early stage of development and the worldwide legal and regulatory environment in which the businesses operate remains highly fluid and subject to change. While most foreign jurisdictions have some form of legal framework applicable to games of chance, few provide clear guidance on how this framework applies to Internet gaming. Issues such as determining the physical location of a gaming event and significant differences among the gaming laws and “Cyberlaws” of various countries all make traditional concepts of jurisdiction and conflicts of laws difficult to apply. In addition, the very nature of Internet gaming creates new and unique forms of entertainment that were neither contemplated nor feasible in the past.

     Due to the uncertainties in the worldwide legal and regulatory environment in which our gaming software business operates and the potential for aggressive legal steps by certain governments to protect online gaming business in their jurisdiction, we cannot assure you that our operations as an application service provider to the gaming industry, or the Internet gaming services provided by our licensees (including UIM), are in compliance with all laws and regulations of the jurisdictions where our gaming software products are used, or that changes in such laws and regulations, or in their interpretation, will not adversely affect our business and operating results. UIM, our major licensee, currently holds a gaming license issued by the Kahnawake Gaming Commission in Canada. However, certain jurisdictions in which UIM operates may require local licensing in the future, and there can be no assurance that it will be successful in its efforts to obtain a gaming license from these jurisdictions, and that as a result UIM would not face the potential loss of key partners and service providers. Also, the substantial uncertainties in the global regulatory environment relating to online gaming expose us to the risk that regulatory authorities in various jurisdictions will determine that our Company provides online gaming services (rather than only providing software and application services to our licensees) and thus subject our Company to gaming laws and regulations in such jurisdictions.

     In Europe, several countries, led by the United Kingdom, have adopted a clear legal framework for online gaming utilizing licensing and regulation. But in some European countries, in particular where there are state-owned gaming monopolies, primarily related to lotteries and online sports betting, governments have taken action or introduced legislation aimed at banning foreign online gaming operators, which could have a material adverse effect on our licensees and consequently on our Company. For example, the French governmental authorities have passed legislation effective from March 2007, prohibiting operators other than certain specified state-owned enterprises from operating Internet gaming sites in France. Additionally, advertising restrictions have been placed on the promotion of online gaming sites with effect from September 2007, and the proposed implementation of the legislation also requires warnings to be placed on online gaming sites. In addition, new banking restrictions have been adopted, which require financial institutions with electronic payment systems to identify and block restricted transactions. As of June 15, 2007, regulations required to implement these laws and the banking restrictions have not been adopted.

     Such actions have generally been declared in violation of European Union ("EU") law which governs the EU and its 27 member nations. According to rulings by both the EU Commissioner of Internal Markets and the European Court of Justice, such actions by member nations are illegal violations of the freedom to provide services and of establishment as protected by the Treaty of the European Union.

     There can be no assurance, however, that the rulings of the European Commission or the European Court of Justice will be enforced in a timely manner without disruption to the business of our licensees (including UIM).

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     Our business is international and therefore faces associated risks

     There are certain difficulties and inherent risks faced by our licensees (including UIM), in doing business internationally, including the burden of complying with multiple and conflicting regulatory requirements, foreign exchange controls, potential restrictions or tariffs on gaming activities that may be imposed, potentially adverse tax consequences and tax risks. Changes in the political and economic stability, regulatory and taxation structures, and the interpretation thereof, in jurisdictions in which we or our licensees operate, and in which our licensees’ customers are located could have a material adverse effect on our business, revenues, operating results and financial condition.

     Our software licensing and online entertainment business is dependent on one master licensee, and any adverse effect on its business could have an adverse effect on our revenues, operating results and financial condition

     All of our revenues from our software licensing and online entertainment business have historically been derived from UIM, our master licensee which sub-licenses our software products to third parties. Although we do not have any ownership interest in UIM, we consolidate its assets, liabilities and results of operations in our financial statements and are entitled to fees from UIM based upon its revenues. We do not control its management and hence have no control over its business decisions. Any adverse effect on UIM’s business, operating results or financial performance could have an adverse effect on our business, operating results and financial performance. In December 2006, we agreed to license certain of our gaming software for use on Web sites to be launched and operated by a subsidiary of the Carmen Media Group.

     Online gaming is a relatively new industry and therefore, we do not know if the market will continue to grow

     Both the Internet entertainment and online gaming industries are relatively new industries that continue to evolve and are characterized by an increasing number of market entrants. The demand and market acceptance for recently introduced products and services are typically subject to a high level of uncertainty. The success of our software licensing and online entertainment business will depend on the widespread adoption of the Internet for commercial transactions. There can be no assurance that entertainment on the Internet and online gaming will become widespread.

     All of the revenues from our software licensing and online entertainment business to date have been derived from the licensing of our online gaming software and support of our associated services. Our continued success will depend largely upon the success of our online gaming software. If the market fails to develop, develops more slowly than expected, or becomes saturated with competitors or if our services do not achieve market acceptance, our business, revenues, operating results and financial condition could be materially adversely affected.

     We may be vulnerable to delays or interruptions due to our reliance on infrastructure and related services provided by third parties

     Our electronic commerce product for handling transactions over the Internet relies on ISPs to allow the customers of licensees and servers to communicate with each other. If all of the ISPs experienced lengthy service interruptions, it would prevent communication over the Internet and would greatly impair our ability to carry out our business. For example, in February 2007, an earthquake off the coast of Taiwan damaged several undersea optic-fiber cables linking countries such as Malaysia, Singapore, Australia, Japan, South Korea, China, the United States and Europe, causing disruptions in Internet traffic worldwide.

     Our ability to process e-commerce transactions depends on bank processing and credit card systems. In order to prepare for certain types of system problems, we are developing a formal disaster recovery plan. Nevertheless, any system failure, including network, software or hardware failure, which causes a delay or interruption in our e-commerce services could have a material adverse effect on our business, revenues, operating results and financial condition.

     The licensees of our gaming software depend on credit card transactions for a substantial portion of the deposits or payments by their customers

     Our software licensing and online entertainment business has historically derived all of its revenues from its major licensee, UIM. A substantial portion of the deposits or payments to UIM are made through credit card transactions. If credit card companies were to stop processing online gaming transactions, either generally or in jurisdictions where our licensees operate, our software licensing and online entertainment business could be materially and adversely affected.

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     Furthermore, there is a higher incidence of fraud associated with online credit card payments than with respect to other types of transactions, which could further discourage issuing banks from processing online gaming transactions.

     Undetected programming errors or defects in our software, services and games and the proliferation of cheating programs could materially and adversely affect our software licensing and online entertainment and online games businesses, financial condition and results of operations

     Our software, services and games may contain undetected programming errors or other defects. These errors or other defects could result in losses to our licensees (in the case of our software licensing and online entertainment business), end users and to us; and claims resulting from losses to end users could damage our reputation and subject us to liability.

     In addition, parties unrelated to us may develop Internet cheating programs that enable our users to acquire superior features for their game characters that they would not have otherwise. Furthermore, certain cheating programs could cause the loss of a character’s superior features acquired by a user. The occurrence of undetected errors or defects in our games, and our failure to discover and disable cheating programs affecting the fairness of our game environment, could disrupt our operations, damage our reputation and detract from the game experience of our users. As a result, such errors, defects and cheating programs could materially and adversely affect our business, financial condition and results of operations.

     We could be liable for breaches of security on our Web sites and fraudulent transactions by users of our Web sites

     Currently, a portion of our transactions are conducted through our Web sites and Web sites of UIM, our major licensee. In such transactions, and those conducted on our FunTown platform, secured transmission of confidential information (such as customers’ credit card numbers and expiration dates, personal information and billing addresses) over public networks is essential to maintain consumer confidence. Our current security measures may not be adequate. In addition, we and our licensees may face internal fraud, including potential unauthorized usage of customer credit card information by our employees and those of our licensees. While we have taken steps to prevent this, including the implementation of payment card industry data security standards, these measures may not be adequate. Security breaches could expose us to litigation and possible liability for failing to secure confidential customer information and could harm our or our licensees’ reputation and ability to attract customers.

     We face the risks of changing consumer preferences and uncertainty of market acceptance of our new products in our online games business

     Online games are a new and evolving entertainment concept in Asia. The level of demand and market acceptance of our online games is subject to a high degree of uncertainty. Our future operating results will depend on numerous factors beyond our control. These factors include:

• the popularity of existing and new online games operated by us;

• the introduction of new online games, competing with or replacing our existing online games;

• general economic conditions, particularly economic conditions adversely affecting discretionary consumer spending;

• changes in customer tastes and preferences;

• the availability of other forms of entertainment; and

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• critical reviews and public tastes and preferences, all of which change rapidly and cannot be predicted.

     Our ability to plan for product development and distribution and promotional activities will be significantly affected by how well we anticipate and adapt to relatively rapid changes in consumer tastes and preferences. Currently, two of the most popular types of online games in Greater China are online board and card games. However, there is no assurance that these games will continue to be popular in Greater China or that their status as one of the most popular types of online games in Greater China’s online games industry will not be replaced by new and different types of online or other games in the future. A decline in the popularity of online games in general or, in particular, the online board and card games that we operate, as well as in other genres of online games, such as MMORPGs, is likely to adversely affect our business, financial condition and results of operations.

     In addition, we expect that as we introduce new online games, a portion of our existing customers will switch to the new games. If this transfer of players from our existing games exceeds our expectations, we may have to adjust our marketing, pricing and other business plans and, as a result, our growth and profitability could be materially and adversely affected.

     We are exposed to risks associated with operating our online games business in the PRC

     In January 2006, we completed our acquisition of FunTown, an online game operator operating in Taiwan, Hong Kong and the PRC. In June 2007, we also acquired control over a majority of the voting rights in T2CN, an online sports game operator. Both FunTown and T2CN operate in the PRC, and are accordingly subject to risks which apply to online games businesses operating in the PRC, which include the following:

• the limited use of personal computers in the PRC and the relatively high cost of Internet access with respect to per capita gross domestic product may limit the development of the online games business in the PRC and impede the growth of FunTown and T2CN;

• if the PRC government finds that the operating agreements establishing the structure for FunTown or T2CN’s operations in the PRC do not comply with PRC government restrictions on foreign investment in the online game industry, the operating agreements may not be enforced, and FunTown or T2CN could be subject to severe penalties;

• our contractual arrangements with T2CN and its shareholders may not be as effective in providing operational control as compared to direct ownership. In addition, these arrangements may be difficult to enforce;

• the PRC government has promulgated regulations on investments made by PRC companies and residents in offshore companies and reinvestments in the PRC made by such offshore companies. These measures may have a significant impact on the business and operations of FunTown or T2CN which may be subject to more restrictive governmental supervision;

• the laws and regulations governing the online game industry and related businesses in the PRC are developing and subject to future changes. If FunTown, T2CN or any of our subsidiaries which operate in the PRC fail to obtain or maintain all applicable permits and approvals, their, or our, business and operations would be materially and adversely affected;

• the PRC government has announced its intention, and has begun, to intensify its regulation of Internet cafes, where online game-players access the Internet and online games. Intensified government regulation of Internet cafes could restrict FunTown or T2CN’s ability to maintain or increase its revenues and expand its customer base;

• currently there are no laws or regulations in the PRC governing virtual asset property rights and therefore, it is not clear what liabilities, if any, online game operators may have in respect of virtual assets;

• the PRC’s economic, political and social conditions, as well as government policies, could affect FunTown or T2CN’s business;

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• uncertainty in the PRC legal system;

• restrictions on currency exchange may limit FunTown or T2CN’s ability to utilize its revenues effectively; and

• inflation in China could negatively affect the profitability and growth of FunTown or T2CN.

     Our provision of online games and online game-related content on our Web sites in the PRC is subject to various Chinese laws and regulations relating to the telecommunications industry, Internet and online gaming, and is regulated by various government authorities, including the Ministry of Information Industry, the Ministry of Culture, the Administration of Press and Publication and the State Administration of Industry and Commerce. The principal PRC regulations governing the provision of Internet content and online gaming services include (among others) the Telecommunications Regulations (2000), the Administrative Rules for Foreign Investments in Telecommunications Enterprises (2001), the Administrative Measures for Telecommunications Business Operating Licenses (2001), the Tentative Measures for Administration of Internet Culture (2003), the Tentative Measures for the Administration of Internet Publications (2002), the Opinions on the Development and Management of Online Games (2005) and the Anti-Internet Addiction Regulations (2007).

     We may be affected by these regulations, which (among other things) seek to regulate the content of online games and discourage online game players from spending excessive amounts of time playing online games. This may (among other things) reduce the number of our users or the growth rate of our user base or the online games market in the PRC, reduce the average number of hours played by online game players, or cause us to reduce usage fees or other charges in connection with our online games business. In addition, such regulations may require us to incur substantial costs of compliance in modifying or adapting our game software to comply with the regulatory requirements. This may adversely affect our business, financial condition and results of operations.

      PRC regulations also limit foreign equity ownership of companies providing Internet content services, which includes operating online games, to 50 percent of the equity of such company, and prohibit foreign ownership of companies which distribute Internet culture products (which include online game products) and Internet publications within the meaning of the Tentative Measures for Internet Culture Administration (2003) and the Tentative Measures for the Administration of Internet Publications (2002), respectively. Such companies are also required to be licensed under the applicable licensing regulations. FunTown and T2CN are considered foreign or foreign-invested enterprises under PRC law and accordingly are ineligible to apply for the licenses required to operate online games in the PRC or to provide Internet information content, such as online advertising. In order to comply with foreign ownership restrictions, certain PRC entities, which hold the licenses and approvals that are required to operate their respective online games businesses in the PRC, have operated, and are operating, online games businesses in the PRC in accordance with a series of contractual agreements which they entered into with FunTown and T2CN.

     We believe that the ownership structure and the business and operation models of FunTown and T2CN with respect to their contractual arrangements with the respective PRC entities mentioned above comply with all existing PRC laws, rules and regulations. In addition, no consent, approval or license is required under any of the existing laws and regulations of the PRC for the respective ownership structures, businesses and operations of FunTown and T2CN. There are however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure you that the PRC regulatory authorities will not ultimately take a view contrary to the above. If we, FunTown or T2CN, or any of our subsidiaries with operations in the PRC are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion to deal with such violations, including the revocation of the business and operating licenses of FunTown, T2CN or those of the PRC entities which are licensed to operate online games in the PRC, discontinuing or restricting our, FunTown or T2CN’s operations, requiring FunTown or T2CN to restructure their respective ownership structures or operations or taking other regulatory or enforcement actions, including the levying of fines, that could be harmful to our business.

     There are no clear laws or regulations governing virtual asset property rights, in particular, in Greater China, and therefore, it is not clear what liabilities, if any, online game operators may have in respect of virtual assets

     In the course of playing online games, some virtual assets, such as special equipment, player experience grades and other features of our users’ game characters, are acquired and accumulated. Such virtual assets can be important to online game players. In practice, virtual assets can be lost for various reasons, often through unauthorized use of users’ IDs by other users and occasionally through data loss caused by delay of network service or by a network crash. Currently there are no clear laws and regulations in governing virtual asset property rights, in particular, in Greater China, where we operate our online games business. In the case

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of a loss of virtual assets, we may be sued by online game players and could be held liable for damages, which may negatively affect our business, financial condition and results of operations.

     Failure to achieve and maintain effective internal control could have a material adverse effect on our business, results of operations and the trading price of our Shares

     We are subject to reporting obligations under the U.S. securities laws. The Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring public companies to include a report of management on such companies’ internal control over financial reporting in its annual report, which contains an assessment by management of the effectiveness of such company’s internal control over financial reporting. In addition, an independent registered public accounting firm for a public company must attest to and report on management’s assessment of the effectiveness of the company’s internal control over financial reporting. Our annual report does not include an attestation report of a registered public accounting firm regarding internal controls over financial reporting, which is not required to be provided until the filing of our annual report for the financial year ended December 31, 2007.

     Our management conducted an evaluation of the effectiveness of our internal controls over financial reporting and concluded that our internal controls over financial reporting were effective as of December 31, 2006. However, there is no guarantee that we will not have weaknesses in our internal control over financial reporting in the future. If we are unable to successfully address such significant deficiencies in our internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected. In the event that deficiencies that have been or might be identified are not remediated within the required period, we may again determine that we have a material weakness in internal control over financial reporting and, consequently, that our internal control over financial reporting is not effective to ensure that material information relating to our Company and its subsidiaries is made known to our management, including our chief executive officer and chief financial officer, particularly during the period when our periodic reports are being prepared or to provide reasonable assurance that our financial statements are fairly presented in conformity with the accounting principles generally accepted in the United States.

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     Our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our Shares. Furthermore, we may need to incur additional costs and use significant management and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act going forward.

     We may need additional capital in the future and it may not be available on acceptable terms

     The development of our business may require significant additional capital in the future to:

• fund our operations;

• enhance and expand the range of products and services we offer; and

• respond to competitive pressures and perceived opportunities, such as investment, acquisition and international expansion activities.

     We cannot assure you that additional financing will be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be forced to curtail or cease our operations. Moreover, even if we are able to continue our operations, any failure to obtain additional financing could have a material and adverse effect on our business, financial condition and results of operations and we may need to delay the deployment of our services. See Item 5 — “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

     We depend on our key personnel, and our business and growth prospects may be severely disrupted if we lose their services

     Our future success is heavily dependent upon the continued service of our key executives and other key employees. In particular, we rely on the expertise, experience and leadership ability of our chief executive officer, Arthur Wang, and our chief financial officer, Thomas Hui, in our business operations, and rely on their personal relationships with our employees, the relevant regulatory authorities, and our game and service suppliers. We also rely on a number of key technology officers and staff for the development and operation of our online games. In addition, as we expect to focus increasingly on our online games businesses, we will need to continue attracting and retaining skilled and experienced professionals to maintain our competitiveness.

     If one or more of our key personnel are unable or unwilling to continue in their present positions, we may not be able to easily replace them and may incur additional expenses to recruit and train new personnel. As a result, our business could be severely disrupted, and our financial condition and results of operations could be materially and adversely affected. Furthermore, since our industry is characterized by high demand and intense competition for talent, we may need to offer higher compensation and other benefits in order to attract and retain key personnel in the future. We cannot assure you that we will be able to attract or retain the key personnel that we will need to achieve our business objectives.

     We may be classified as a passive foreign investment company for U.S. federal income tax purposes. As a result, you may be subject to materially adverse tax consequences with respect to our Shares

     Although we do not believe we should be classified as a passive foreign investment company for the 2007 taxable year, no assurances may be given that we will not be classified as a passive foreign investment company in the current or any future taxable year. For a discussion of the factors that will affect whether or not we are classified as a passive foreign investment company, see Item 10 — “Additional Information — E. Taxation — U.S. Federal Income Tax Considerations for U.S. Holders — Passive Foreign Investment Company Rules.” If you are a U.S. person holding our Shares, (or have held our Shares during a taxable year in respect of which we were classified as a passive foreign investment company and you continue to hold such Shares or portion thereof) and we are classified as a passive foreign investment company and you do not determine to make a mark-to-market election, you will be subject to special U.S. federal income tax rules that may have materially adverse tax consequences and will require annual reporting. See Item 10 — “Additional Information — E. Taxation — U.S. Federal Income Tax Considerations for U.S. Holders — Passive Foreign Investment Company Rules.”

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     Fluctuations in the exchange rates between U.S. dollar and other currencies in which we conduct our business could adversely affect our profitability

     Since January 1, 2004, we have reported our financial results in U.S. currency, which is subject to fluctuations in respect of the currencies of the countries in which we operate. The operations of UIM, our major licensee, are conducted in most major currencies, including U.S. dollars, British pounds sterling and Euros, and we earn revenues from these sources in such currencies, as well as incurring expenses in U.S. dollars and Canadian dollars. The operations of our online games business are conducted in NT dollars, Hong Kong dollars and Renminbi. Our Internet access service business is conducted mainly in NT dollars. Accordingly, fluctuations in the exchange rates of world currencies could have a positive or negative effect on our reported results. Given the constantly changing currency exposures and the substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. There can be no assurance that we will not experience currency losses in the future, which could have a material adverse effect on our business, revenues, operating results and financial condition.

     We are controlled by the Koo family, which has significant influence in determining the outcome of any corporate transaction or other matters submitted to our shareholders for approval, and their interests may conflict with your interests

     As of June 15, 2007, members of the Koo family beneficially owned approximately 20.44 percent of our outstanding shares. Accordingly, the members of the Koo family have significant influence in determining the outcome of any corporate transaction or other matters submitted to our shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of such members of the Koo family may differ from or conflict with your interests.

     Our transactions with affiliates may not benefit us and may harm our Company

     We have entered into several transactions with our affiliates. Our policy is that transactions with affiliates are to be conducted on an arm’s-length basis and on terms as favorable to us as with non-affiliates. However, we cannot assure you that all our future transactions with affiliates will be beneficial to us.

     Our operating results and financial condition are affected by general economic conditions, levels of consumer spending, political stability as well as the occurrence of natural disasters and epidemics

     Our operating results and financial condition, particularly in relation to our software licensing and online entertainment business and our online games business, are directly dependent upon general economic conditions and levels of consumer spending. Political unrest, war, acts of terrorism and other instability, as well as natural disasters such as earthquakes and typhoons which are common in Taiwan, can result in disruption to our business or the businesses of our customers. Similar occurrences in the future could result in increased volatility in or damage to the global financial markets, which in turn may adversely affect our business and results of operations. Past economic downturns have resulted in lower levels of consumer spending and have negatively impacted our sales and profit. There can be no assurance that rising interest rates, an economic recession, other adverse economic developments, or natural disasters or epidemics will not have a material adverse effect on our cash flows, profitability or financial condition.

     There are economic risks associated with doing business in Taiwan, particularly due to the tense relationship between Taiwan and the PRC

     Our principal executive offices, a major portion of our online games business and our Internet access service business are located in Taiwan and substantially all of our net revenues in respect of these businesses are derived from customers in Taiwan. Taiwan, as part of the Republic of China, has a unique international political status. The PRC asserts sovereignty over mainland China and Taiwan and does not recognize the legitimacy of the Taiwan government. Although significant economic and cultural relations have been established during recent years between Taiwan and the PRC, the PRC government has indicated that it may use military force to gain control over Taiwan if Taiwan declares independence or if any foreign power interferes in Taiwan’s affairs. Relations between Taiwan and the PRC and other factors affecting the political or economic conditions of Taiwan could also affect our online games and Internet access service businesses.

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     The ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of Singapore, Taiwan and the PRC

     We are a holding company, and some of our assets constitute our ownership interests in our subsidiaries in Taiwan, including Hoshin GigaMedia which owns the Taiwan-based operations of our online games business and our Internet access service business. Accordingly, part of our primary internal sources of funds to meet our cash needs is our share of the dividends, if any, paid by our subsidiaries, including those in Taiwan. The distribution of dividends from these subsidiaries in Taiwan to us is subject to restrictions imposed by the applicable corporate and tax regulations in these countries, which are more fully described in Item 5 — “Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Dividends from Our Subsidiaries in Taiwan.” In addition, although there are currently no foreign exchange control regulations which restrict the ability of our subsidiaries in Taiwan to distribute dividends to us, the relevant regulations may be changed and the ability of these subsidiaries to distribute dividends to us may be restricted in the future.

      In June 2007, we acquired control over a majority of the voting rights in T2CN, an online games operator and distributor which operates its business primarily in the PRC. Accordingly, going forward, we may be subject to further restrictions imposed by PRC corporate, tax and exchange control regulations which are applicable to T2CN and its business.

     We are a Singapore company, and because the rights of shareholders under Singapore law differ from those under U.S. law, you may have difficulty protecting your shareholder rights

     Our corporate affairs are governed by our Memorandum and Articles of Association and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of members of our board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States and, therefore, our shareholders may have more difficulty protecting their interests in connection with actions by the management, members of our board of directors or our controlling shareholders than they would as shareholders of a corporation incorporated in the United States.

     Anti-takeover provisions under the Singapore Securities and Futures Act (Chapter 289) and the Singapore Code on Take-overs and Mergers may delay, deter or prevent a future takeover or change of control of our Company, which could adversely affect the price of our Shares

     There are provisions under the Singapore Securities and Futures Act (Chapter 289) and the Singapore Code on Take-overs and Mergers that may delay, deter or prevent a future takeover or change of control of our Company. Anyone acquiring an interest, either on his own or together with parties acting in concert with him, in 30 percent or more of our voting shares must extend a takeover offer for the remaining voting shares. A person holding between 30 percent and 50 percent of our voting shares, either on his own or together with parties acting in concert with him, must also make a takeover offer if that person together with parties acting in concert with him acquires additional voting shares in excess of 1 percent of the total number of voting shares in any six-month period. These provisions may discourage or prevent transactions that involve an actual or threatened change of control of our Company. This may harm you because an acquisition bid may allow you to sell your Shares at a price above the prevailing market price.

     You may be subject to Singapore taxes

     You should consult your tax advisors concerning the overall tax consequences of acquiring, owning or selling the shares. Singapore tax law may differ from the tax laws of other jurisdictions, including the United States.

     We may be subject to claims of intellectual property right infringement, and our limited intellectual property protection causes us to be vulnerable to competitors infringing upon or misappropriating our proprietary rights

     As a distributor of Internet content, we face the same types of risks that apply to all businesses that publish or distribute information, such as potential liability for copyright, patent or trademark infringement, defamation, indecency and other similar claims. Any imposition of liability that is not covered by insurance, is in excess of insurance coverage or for which we are not indemnified by a content provider, could have a material adverse effect on our business and results of operations.

     We rely on a combination of copyright and trademark laws, trade secret protection, confidentiality and non-disclosure agreements, and other contractual provisions to protect our proprietary software, trade secrets and similar intellectual property. These are especially critical to our software licensing and online entertainment business. We

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can offer no assurance that our efforts will prove to be sufficient or that third parties will not infringe upon or misappropriate our proprietary rights. We may have to engage in litigation to enforce and protect our trade secrets and other intellectual property rights. We may also be sued for allegedly infringing the rights of others or to determine the scope and validity of their intellectual property rights. Any litigation involving proprietary rights could be costly, require us to seek licenses from third parties and prevent us from selling our products and services, any of which could have a material adverse effect on us.

     Risks Related to our Shares

     The price of our Shares has been volatile historically and may continue to be volatile, which may make it difficult for holders to resell the Shares when desired or at attractive prices

     The trading price of our Shares has been and may continue to be subject to wide fluctuations. In 2006, the sale prices of our Shares on the NASDAQ Global Market have ranged from US$2.90 to US$12.38 per share and the last reported sale price on June 15, 2007 was US$14.66. Our Share price may fluctuate in response to a number of events and factors. In addition, the financial markets in general, and the market prices for Internet-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our Shares, regardless of our operating performance.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of our Company

     Our legal and commercial name is GigaMedia Limited. We were incorporated in September 1999 as a company limited by shares organized under the laws of the Republic of Singapore. Our Singapore company registration number is 199905474H. Our principal executive offices are located at 14th Floor, 122 Tunhwa North Road, Taipei 10595, Taiwan, and our telephone number is 886-2-8770-7966. Our Web site address is: http://www.gigamedia.com.tw.

     Prior to September 2002, all our operations were conducted primarily through our wholly-owned subsidiary, Hoshin GigaMedia. Hoshin GigaMedia was incorporated in October 1998 in Taiwan. Hoshin GigaMedia, as an unlisted Taiwanese company, could not directly offer its shares to investors outside of Taiwan. To enable it to offer its shares to international investors, GigaMedia was incorporated in Singapore in September 1999 and acquired 99.99 percent of Hoshin GigaMedia in November 1999. In October 2002, GigaMedia acquired the remaining 0.01 percent of Hoshin GigaMedia.

     We completed the initial public offering of our Shares on February 18, 2000. Our Shares trade on the NASDAQ Global Market under the symbol “GIGM.” We were the first Internet company based in Taiwan to list on the NASDAQ Global Market.

     In September 2002, we acquired Rose Records (formerly known as Point Records Co., Ltd.) and Tachung Records (formerly known as Music King Co., Ltd.), two of the largest music store chains in Taiwan, with a view to expanding our business to retail entertainment services.

     Under new management in 2004, we began to restructure our Company to achieve profitability, generate growth and enhance shareholder value.

     In April 2004, we acquired the business and operations of Grand Virtual, Inc. and related affiliates, a privately-held gaming software developer and application service provider, through CESL, our wholly-owned subsidiary, with a view to enhancing our diversified entertainment products portfolio.

     In September 2005, we sold all of our ownership interest in the Rose Records and Tachung Records music store chains with a view to eliminating our non-core operations.

     In order to enhance our position in the online entertainment market, in January 2006, we acquired FunTown, an Asian online games business.

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     In April 2006, we entered into a strategic alliance with, and subscribed for 7.5 million convertible voting preferred shares of, T2CN, one of China’s leading online sports game operators. Subsequently, between February 2007 and June 2007, we acquired 18.1 million common shares of T2CN, subscribed for an additional 7.5 million convertible voting preferred shares and entered into a voting trust arrangement with a shareholder of T2CN pursuant to which we acquired control over a further 0.85 million common shares of T2CN. As of June 15, 2007, we own approximately 18.1 million common shares and 15 million convertible voting preferred shares of T2CN, and also control voting rights with respect to 0.85 million common shares of T2CN, which in aggregate represent a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN. The financial results of T2CN will only be consolidated in our financial results for the year ended December 31, 2007.

     In May 2006, we disposed of our ADSL business, which formed a part of our Internet access service business.

     In December 2006, we entered into a strategic alliance with Infocomm Asia, an operator and distributor of online games in Southeast Asia, in connection with which we acquired preferred shares convertible into an interest of approximately 32.26 percent of the issued ordinary shares of Infocomm Asia, which was subsequently diluted in February, 2007 due to Infocomm Asia securing additional equity investors. As of June 15, 2007, convertible preferred shares held by us in Infocomm Asia are convertible into a post-dilution interest of approximately 28.43 percent in the ordinary shares of Infocomm Asia. Upon conversion of the convertible securities held by us, we expect that we will become the largest shareholder of Infocomm Asia.

     See Notes 4 and 5 of our consolidated financial statements for additional information.

     For a description of the important events in the development of our business since the beginning of our last three financial years to the date of this annual report, see Item 5 — “Operating and Financial Review and Prospects — A. Operating Results.” A description of our principal capital expenditures and divestitures, since the beginning of our last three financial years to the date of this annual report is set forth in Item 5 — “Operating and Financial Review Prospects — B. Liquidity and Capital Resources.” Information concerning the principal capital expenditures and divestitures currently in progress is also described in Item 5 — “Operating and Financial Review and Prospect — B. Liquidity and Capital Resources.”

B. Business Overview

     We are a holding company and, through several subsidiaries, develop and license online gaming software and provide application services, own and operate an online games business, and provide broadband Internet access services. Our software licensing and online entertainment business is operated through our subsidiary CESL. Our Taiwan online games business is operated through Hoshin GigaMedia. Our Hong Kong and PRC online games business is operated through T2CN and our subsidiary, FunTown World Limited. Our Taiwan Internet access service businesses are operated through our subsidiary, Hoshin GigaMedia, which focuses on retail users, and Hoshin GigaMedia’s subsidiary, Koos Broadband Telecom Co., Ltd. (“KBT”), which focuses on corporate users.

     Prior to 2002, our primary business was the provision of broadband Internet access services in Taiwan. Since disposing of our music distribution business in 2005 and acquiring a gaming software provider in 2004 and an online games business in 2006, we have become a major provider of online entertainment software services.

     We acquired our software licensing and online entertainment business in a private transaction from the founding shareholders of GV Enterprise Voting Trust in April 2004 with a view to enhancing our portfolio of entertainment products. In this transaction, we acquired all the outstanding and issued shares of some of the founding

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shareholder’s subsidiaries, Grand Virtual, Inc., Grand Virtual Limited and Grand Virtual (Alderney) Limited, for an all-cash consideration of US$32.5 million, excluding related transaction costs. To help ensure a smooth transition and the continued expansion of our software licensing and online entertainment business in the future, we also retained the experienced management, engineering and operation teams of these companies. Since the acquisition, we have restructured the business and currently operate our software licensing and online entertainment business through our subsidiary CESL, which develops and provides software solutions through its wholly-owned subsidiary Cambridge Interactive Development Corporation (“CIDC”), in Cambridge, MA and in Montreal, Canada, and application services through its wholly-owned subsidiary Internet Media Licensing Limited (“IML”), for clients operating in the expanding Internet-based entertainment markets worldwide. Our software licensing and online entertainment business generated revenues of approximately US$22.5 million and US$55.0 million and operating income of approximately US$6.0 million and US$16.8 million for the years ended December 31, 2005 and 2006, respectively.

     We acquired FunTown, an online games business, in January 2006 to strengthen our online entertainment business. Founded in 1998, FunTown is one of the leading casual games platforms in Asia, with over 9 million registered users and an offering of more than 40 casual games and services in Greater China as of June 15, 2007. FunTown generates revenues through access fees and also through the sales of various in-game items. FunTown’s games can be played on personal computers, mobile phones and airplane entertainment consoles and are expected to be available on the Xbox 360 in the second half of 2007. FunTown has strong research and development capabilities and has developed over 90 percent of its online casual games in-house. FunTown also provides value-added services, such as tournaments, personal contact lists and social networking to help build a strong player community. Our online games business generated revenues of approximately US$18.7 million and operating income of approximately US$5.6 million for the year ended December 31, 2006.

     In December 2006, we entered into a strategic alliance with Infocomm Asia, a Southeast Asian online gaming platform offering game titles such as Granado Espada and Hellgate: London, both under exclusive licenses for most of Southeast Asia.

     Between April 2006 and June 2007, we acquired control over approximately 51.12 percent of the voting rights in T2CN, an online sports game operators operating mainly in the PRC. T2CN is one of the leading online sports and casual game operators in China and operates FreeStyle, an online sports game in China. T2CN is currently led by a management team with a strong track record in China’s online game industry, and has close marketing partnerships with international brands such as Coca Cola, Nike and Nokia. The financial results of T2CN will only be consolidated in our financial results for the year ended December 31, 2007.

     We operate our legacy Internet access service business through our subsidiary Hoshin GigaMedia, which provides Internet access services. In 2005, our access products consisted of ADSL and cable modem offerings, giving us the ability to deliver broadband connections island-wide. As of June 2007, we had 26 cable system partners, through which we had access to more than 3.8 million Taiwanese households, as well as approximately 520,000 small and medium-sized enterprises (“SMEs”). In addition, another of our subsidiaries, KBT, provides broadband services to corporate customers. On May 15, 2006, we entered into an asset purchase and sale agreement and a service agreement with Webs-TV Inc. (“Webs-TV”), previously known as Webs-TV Digital International Corporation to sell our ADSL business and provide certain telecom and consulting services on a transitional basis. Our Internet access service business generated revenues of approximately US$20.6 million and operating income of approximately US$4.2 million in 2006. Our ADSL business, which we disposed of in May 2006, generated approximately US$3.0 million in revenues in 2006, which represented approximately 15 percent of our Internet access services revenues and approximately 3 percent of our consolidated revenues. Consistent with our focus on online entertainment, we have retained financial advisers to explore the sale of this legacy business.

Software Licensing and Online Entertainment Business

Overview

     We operate our software licensing and online entertainment business through our subsidiary, CESL, and through its wholly-owned subsidiaries, CIDC and IML. CESL develops and licenses software solutions and application services in the expanding Internet-based online entertainment markets. CESL offers a wide array of products and services, including online entertainment and social networking. CESL’s software solutions and

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services also offer great expansion capabilities. CESL can help existing and potential clients expand geographically through language localization for products and services. Currently, our products and services are available in 16 languages, which include mostly European languages and some Asian languages. CESL also helps existing and potential clients who license our software and services to expand their business through a fully-customizable multi-tiered licensing program to a great number of sub-licensees.

Our Products

     Our software products are built upon modern Internet technologies capable of providing multi-player gaming platforms, powerful transaction engines, advanced risk management tools, comprehensive online marketing tools, sophisticated data mining and reporting utilities, intuitive graphical user interfaces and localization in 16 major languages including English, French, German, Italian, Spanish, Portuguese, Norwegian, Swedish, Danish, Dutch, Greek, Finnish, Polish, Hungarian, Simplified Chinese, and Japanese.

     Our software products are specially designed to enable our clients to manage the online entertainment properties and offer online entertainment to visitors of their online entertainment properties. We currently provide the following gaming software products:

     Online Entertainment Management — these are tools that enable our existing and potential clients to offer online gaming software, monitor end-user behavior, and potentially to monetize the traffic and patronage generated by the end users. Our integrated and comprehensive multi-lingual e-commerce system facilitates Internet-based transaction processing and can provide detailed analysis of transaction records of our diversified international end users. In addition, there are promotional tools that help build player loyalty and increase retention rates.

     Online Entertainment Modules — these are customizable entertainment modules that run on Microsoft Windows 95/98/NT/2000/ME/XP/VISTA and feature a realistic 3-D environment, selectable background music, and local language interface. In 2004 we developed and launched a new suite of software that enables players to compete against each other in real time.

Our Services

     In addition to licensing our software products to our licensees, including UIM, we offer a variety of application services and consulting services for backend operations. These services include:

Infrastructure Design Services —

• Infrastructure Design: Architecture design of servers, routers, firewalls, network software and management tools required for an Internet property.

• Site Creation: Creation and branding of our client’s Internet property, customized to match our licensees’ unique identities and creative themes.

Transaction Processing Design Services —

• Payment: Consultation for the design of timely collection and distribution of payments through a variety of channels and merchants.

• Billing: Consultation for the design of real-time and out-of-band transaction processing and order management.

• Risk Management: Consultation for design of tools and processes for fraud detection, prevention, and management.

Customer Support Services —

• Infrastructure Consultation Support: Complete round-the-clock consultation support to help clients resolve infrastructure issues.

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• Platform Technical Support: Consultation during periodic maintenance to update, patch, and fine-tune the system performance of our software solutions.

Custom Gaming Software Development Services —

• Design and development of custom entertainment modules and interfaces for our platform meeting client specific requests.

Our Technology and Infrastructure

     Our Universal Gaming Platform is based on a sophisticated modular distributed transaction processing architecture that is designed to be flexible, extensible, scalable and secure. Composed of multiple fault-tolerant distributed modules, our backend infrastructure provides the functions of gaming servers, game points management, financial stored-value management, e-commerce engines, a central database and an extensive toolset to handle fraud screening, data mining, player support and partner programs. Being comprehensive and extensible, our Universal Gaming Platform can be used as a generic common platform to support a wide range of online gaming, including skills-based gaming and multi-player gaming. Our multiple real-time gaming server software enables seamless integrated management of all end user registration, account administration, deposit and transactions. With our software, end users on various platforms can communicate securely across the Internet through multiple real-time gaming servers. To further increase the flexibility of our platform, a transaction server layer encapsulates business logic and abstracts data and third-party services, such as payment processors. This allows us to isolate the core processing module with business logic, greatly reducing the amount of development and quality assurance work required when we want to extend the system. Our comprehensive administration tools enable advanced data analysis to deliver high-quality end-user support and licensee management. Our multiple payment processor gateway capabilities provide choice and flexibility to handle the complexities of international markets.

     We have developed expertise as well as necessary infrastructure to make our products suitable for the local markets in which we operate, for the non-English speaking markets along with our in-house teams of native language experts to ensure cultural fidelity in everything from content to graphics to interfaces and controls.

UIM

     Our software licensing and online entertainment business is dependent upon our major licensee, UIM. The following is a brief description of UIM’s business. Since we have no equity interest in UIM and do not exercise any control over it, the information below has been obtained from publicly available sources, and in part was provided to us by officers of UIM. Though we have no reason to believe the information below is inaccurate, we could not independently verify the accuracy thereof.

     UIM is an online entertainment operator that provides online gaming services, including online casinos and virtual poker rooms. By utilizing our software, UIM offers these services through several Web sites, including Everest Casino (www.everestcasino.com) and Everest Poker (www.everestpoker.com). While each of these Web sites carries a unique appearance and theme, the services provided by each of them is substantially similar. UIM markets its Web sites, in part, through Affiliated Web Attractions’ “United Partner Program” (www.affiliatedweb.com), which also utilizes our software. Under this program, private and commercial owners of Web sites are invited to place on their Web sites banners containing links to UIM’s Web sites, in return for fees based on the revenues generated by users that have been directed to UIM’s Web site from such banners. Our software package also includes the platform to operate this aspect of the business.

     UIM is located in and operates exclusively from computer servers located in the Kahnawake Territory in Canada under a gaming license issued by the Kahnawake Gaming Commission, subject to continuing compliance with applicable licensing requirements. See “— Regulation — Regulation Relating to Online Gaming.” In addition to licensing our software, we provide UIM with application services and consulting services for its Internet property and infrastructure, including Web site design, payment gateways and database and operating systems, in return for a fixed percentage of UIM’s gross receipts.

     Although we do not have any equity ownership interest in UIM, we consolidated UIM’s assets, liabilities and results of operations as of and for the nine months ended December 31, 2004 and for the years ended December 31,

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2005 and 2006 in our consolidated financial statements in accordance with the requirements under FIN 46(R). We are entitled to fees from UIM based upon its revenues. See Item 5 — “Operating and Financial Review and Prospects — Overview — Consolidation of UIM Under FIN 46(R)” for additional information.

Competition

     The Internet gaming software industry is characterized by rapid technological change. Our success depends, in part, upon our ability to enhance our products and services to keep pace with technological developments, respond to evolving customer requirements and achieving continued market acceptance.

     Online gaming software design houses and application service providers are our primary competitors. However, given the low barriers to entry in the software industry and the increasing popularity of Internet-based businesses, there are a large number of competitors scattered throughout many different segments of software and Internet industries. We potentially compete with a number of public and private companies, which provide Internet property architecture design/development, Web design/development, online gaming software design/development, marketing tools and solutions providers, customer support tools and solutions providers, and e-commerce tools and solutions providers. The diversity of our potential competitors makes it difficult to compile information about the nature of our competitors, their operations and their resources. Traditional Internet service providers and other entities, many of which have significant financial resources and name brand recognition, may provide online entertainment services in the future. Such Internet service providers and entertainment service providers may also develop and offer the underlying software solutions and tools to others in direct competition with us.

     We are also exposed to competition in the Internet gaming industry through our licensees, such as UIM, as license fees with respect to gaming software provided by us typically include a variable fee based on revenues earned by such licensees from the operation of the licensed software. Our licensees (including UIM), face tough competition in the online gaming industry, which is also characterized by low barriers to entry, rapid technological change and ever-changing consumer preferences. New entrants to the online gaming sector, market consolidation and aggressive marketing and pricing by competitors may lead to a significant decline in the customer base, revenues and margins of our licensees. Any future liberalization of licensing or regulation of online gaming in countries where they generate significant revenues is likely to lead to increased competition, including competition from companies that do not currently offer online gaming services. For example, as a result of the UIGEA and subsequent closing of the online gaming market in the United States, we and our licensees (including UIM) face increasing competition from entertainment service providers in our markets in Continental Europe, which are also increasingly subject to regulation from governmental authorities.

     Furthermore, some of our competitors and competitors of our licensees (including UIM) are more established, enjoy greater market recognition, are substantially larger and have substantially greater resources and distribution capabilities than we do.

     Faced with our known competitors, and most likely several new competitors that may be established in the near future, we will continue to improve the principal competitive factors that we believe can differentiate us from our competitors, including: brand, technology, financial stability and resources, proven track record, regulatory compliance, independent oversight and transparency of business practices in our industry.

Online Games Business*

Overview

     We operate our online games business through our subsidiaries Hoshin GigaMedia and FunTown World Limited. Hoshin GigaMedia operates our online games business in Taiwan, and T2CN and FunTown World Limited operate our online games business in Hong Kong and the PRC.

     FunTown offers a broad range of online games and services, which we develop in-house or license from third parties. The online games offered by FunTown include casual games such as MahJong and numerous varieties of card, chess, and table games, most of which cater specifically to Asian audiences, as well as advanced casual games.

* We only acquired control over a majority of the voting rights in T2CN in June 2007. Owing to the recent nature of this development, we have not provided information relating to T2CN and its business.

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We plan to launch MMORPGs in late 2007. FunTown also provides services, such as game clubs for players, tournaments related to FunTown’s online games, and social networking, all of which are intended to help build a strong player community. As of May 31, 2007, FunTown had approximately 9.6 million registered members, and approximately 41,350 peak concurrent users and 20,500 average concurrent users in the month of May 2007.

     Our online games allow users access to a broad continuum of online entertainment, from traditional Asian games that are instantly recognizable and easy to learn and play, to more advanced online games that allow users to interact with each other in virtual worlds by assuming characters they may customize. We believe that the traditional appeal, and interactive and group-oriented nature of these games, combined with our brand, our community-focused services and the large size of our user base, contributes to retaining our current users and attracting new users.

     Our operating platform includes our technological infrastructure, distribution and payment system, customer service center, game content management and marketing platform. Our technological infrastructure consists of a server network throughout Greater China, the architecture of which is easily scalable to accommodate business growth and increased future user demand. Our distribution and payment network in Taiwan includes approximately 12,905 physical distribution points. Additionally, in 2006, we processed approximately 920,500 online transactions for virtual point cards. Our customer service system includes a 24-hour call center and a walk-in customer service center. In addition, our most popular online games have separate game content management teams that manage the operation of the games and the online community for the games.

     Currently, our games and services are primarily accessed through personal computers. Our games are also available on mobile phones, the Intel Viiv platform and on certain airlines. We expect FunTown’s games to be offered on Microsoft’s Xbox 360 in Taiwan in the second half of 2007.

     In March 2006, we entered into a co-operation agreement with Wretch Co., Ltd. (“Wretch”) pursuant to which we entered into a strategic alliance with Wretch for the development of an online entertainment community by combining Wretch’s strengths in blogs, online photo sharing and other community offerings with FunTown’s leading MahJong and other online casual game offerings. In connection with this, we also entered into a subscription rights agreement with Wretch and certain shareholders of Wretch, pursuant to which we obtained the right to subscribe for an equity interest in Wretch under certain circumstances. In 2006, Yahoo! Taiwan agreed to acquire Wretch, which acquisition was completed in May 2007. In connection with this transaction, we agreed to terminate our right to subscribe for an equity interest in Wretch, in consideration for a cash payment and the formation of a strategic partnership with Yahoo! Taiwan. Our right to subscribe for an equity interest in Wretch was terminated on May 8, 2007, the closing date of the acquisition of Wretch by Yahoo! Taiwan, and we were paid approximately US$0.6 million in connection with such termination. Under the strategic co-operation arrangement, we have continued to co-operate with Wretch under the original strategic alliance, which was expanded to include strategic co-operation with Yahoo! Taiwan, to develop a co-branded Web site with co-marketing of FunTown’s games on key Yahoo! Taiwan properties. Direct links to the co-branded Web site are prominently featured throughout Wretch, and have been placed on Yahoo! Taiwan’s online game and messenger homepages with banner advertisement rights designed to attract users to the co-branded Web site. Members of Yahoo! Taiwan are able to directly access FunTown’s games on the co-branded Web site with their Yahoo! login information.

     In December 2006, we entered into a strategic partnership with Infocomm Asia, a Southeast Asian online games operator and distributor offering blockbuster titles such as Granado Espada and Hellgate: London, both under exclusive license for most of Southeast Asia. We also secured an exclusive license to offer and operate Hellgate: London, an online game anticipated to be launched in 2007, in the territories of Taiwan, Hong Kong and Macau. We will operate Hellgate: London in partnership with Infocomm Asia through a strategic joint venture, Dragongate Enterprises Limited (“Dragongate Enterprises”), in which we hold a 70 percent interest and Cyber Gateway Pte. Ltd. (a wholly-owned subsidiary of Infocomm Asia) holds a 30 percent interest.

     In February 2007, we secured an exclusive license from the Toppig Corporation, a Korean company, to offer and operate Nanaimo, an online action role-playing game expected to be launched in late 2007, in the territories of Taiwan and Hong Kong.

     In March 2007, we also secured an exclusive license from the SEGA Corporation to offer and operate Phantasy Star Universe, an online action role-playing game which is expected to be launched in the second half of 2007, in the territories of Taiwan and Hong Kong.

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Our Products

     FunTown offers more than 40 online multi-player casual games in the following categories: MahJong, Chinese poker, Chinese chess, table games, social games, puzzle-style games, advanced casual games and chance-based games, and intends to launch certain MMORPGs in late 2007. These games are real-time and multi-player capable.

     In general, online casual games are games with simple rules that are easy to learn and play, and which can be completed in short sessions. MMORPGs are more complex, require much greater time to learn and often involve large groups of players competing simultaneously online.

MahJong

     MahJong is a traditional and highly popular Chinese social game, often played on holidays, at social gatherings and during special occasions, such as weddings. It is widely played in Japan, Korea, Greater China and other parts of Asia. Similar to poker, MahJong is a multi-player game, consisting of four players per game. FunTown offers different local versions of MahJong for players in the PRC, Hong Kong and Taiwan. Players select a table, based on either skill or stakes, and can then invite friends to play on the same table online. Players can compete with anyone throughout FunTown’s Greater China network. Virtual currency is purchased in order to play these games, and may be used to play other FunTown games or to purchase virtual items, if not used to play the games, but may not be redeemed for cash.

     Special offline events are held from time to time to stimulate interest and foster group solidarity among the many MahJong guilds that players can join online. FunTown organizes a large annual MahJong tournament in Taipei which is open to anyone belonging to one of FunTown’s MahJong guilds. In 2006, more than 400 guilds and 30,000 players participated in the event and attended the tournament. In December 2006, we also obtained the exclusive right to co-host the MahJong World Championship together with the World MahJong Organization. In conjunction with the World MahJong Organization, we intend to establish and operate a series of regional qualifying MahJong tournaments in Asia, Europe and North America for the MahJong World Championship.

Chinese Poker

     As with MahJong, there are several varieties of poker played in different regions of Greater China. FunTown offers many different Chinese poker games popular in various regions of Greater China. FunTown’s players can select their desired poker table based on the level of skill or stakes. Virtual currency is purchased in order to play these games, and may be used to play other FunTown games or to purchase virtual items, if not used to play the games, but may not be redeemed for cash.

Chinese Chess

     FunTown also offers various popular Chinese chess games. Players can select from opponents online based on different skill levels.

Social Games

     FunTown has a unique social networking and matching game called “FunTown Village”, which offers a virtual playground for players to meet other players through their online “avatars.” Players can purchase virtual items, such as clothing and accessories, to enhance the appeal of their online “avatars.” We plan to introduce more such virtual items to address the strong social interests of our players and to help increase FunTown’s overall appeal as a distinct game community and brand.

Puzzle-Style Games

     FunTown also operates a platform known as “Osuke Playground”, which offers a collection of puzzle-style games and matching games similar to historically popular and classic games such as Bejeweled. In addition, Osuke Playground also offers some table games such as nine-ball, a contemporary variation of pocket billiards. These games are designed with online multi-player features which allow players to pit their skills against one another. In addition, like all other games offered by FunTown, the Osuke Playground games are integrated into our FunTown platform with

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features such as a player-to-player messaging system, virtual currency and avatars. The more popular games in Osuke Playground include “Magical Blocks”, “Happy Link”, “Zoo Match” and “Fortress 2.”

Advanced Casual Games

     FunTown has broadened its games offering to include sports action games and arcade-style games, such as a multi-player obstacle running game that was launched in June 2006 called Tales Runner. In February 2007, we also secured an exclusive license from the Toppig Corporation to offer and operate Nanaimo, an online action role-playing game expected to be launched in late 2007, in the territories of Taiwan and Hong Kong. Nanaimo is a free, easy-to-play game set in a cartoon world and is filled with action, community activities and collectibles.

Chance-Based Games

     To enhance the varieties of FunTown products, FunTown also offers chance-based games for users, who purchase virtual currency in order to play the games. Virtual currency purchased may be used to play other FunTown games or to purchase virtual avatar items, if not used to play the games, which include bingo, lotto, horse racing, Sic-Bo, and various different kinds of slot games, but may not be redeemed for cash.

MMORPGs

     In December 2006, we, through our 70 percent owned subsidiary, Dragongate Enterprises, secured an exclusive license to offer and operate Hellgate: London, an online action-driven role-playing game expected to be launched in late 2007, in the territories of Taiwan, Hong Kong and Macau. In the game, the player creates a heroic character and completes quests and battles to advance through experience levels and branching skill paths. A robust, flexible skill and spell system, highly customizable appearances and a massive variety of randomly generated equipment allow players to create their own unique heroes. Hellgate: London is a creation of Flagship Studios, an online game development studio founded in 2003 by a team of executives and developers renowned for numerous best-selling games and multiple Game-of-the-Year Awards to their credit, including the worldwide best-selling Diablo®, Starcraft® and Warcraft® games.

     In March 2007, we also secured an exclusive license from the SEGA Corporation to offer and operate Phantasy Star Universe, an online and offline action role-playing game expected to be launched in the second half of 2007, in the territories of Taiwan and Hong Kong. Phantasy Star Universe is the long-awaited sequel to SEGA’s critically-acclaimed role-playing game series Phantasy Star. In the game, players customize their size and appearance, vehicles, weapons and helper robots to create their own unique characters. Players can join forces and exchange game items with each other to complete quests and battles, and build their characters into powerful warriors.

Our Services

     FunTown provides many online game services to its players to enhance their playing experiences and support the development of a strong player community.

Player Clubs

     We offer player clubs in which FunTown players can form their own club, invite players with similar interests or skill levels to join, and organize online and offline events for club members. Player clubs complement the strong social qualities of online games by helping to build and maintain an online game community.

Tournaments

     Tournaments are one of the most important services provided by FunTown. Players can organize and participate in clubs and compete in weekly online club tournaments. On an annual basis, FunTown also sponsors large-scale real-person tournaments where players attend the tournament in person and compete online via computers provided on the tournament premises. For example, FunTown organizes a large annual MahJong tournament in Taipei, Taiwan which is open to anyone belonging to one of FunTown’s MahJong guilds. In 2006, more than 400 guilds and 30,000 players participated in the event and attended the tournament. In December 2006, we also obtained the exclusive right to co-host the MahJong World Championship together with the World MahJong Organization. In conjunction with the World MahJong Organization, we intend to establish and operate a series of

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regional qualifying MahJong tournaments in Asia, Europe and North America for the MahJong World Championship.

Friends and Family

     The FunTown platform has a unique personal contact feature, similar to the contact list of instant message programs, which enables players to see when their personal network of friends and family are online. This enables players to invite people in their network to play online games together.

Social Networking

     FunTown’s platform is designed to be an attractive forum in which to make friends and have fun, as well as compete and win prizes. The platform has a virtual town hall, in which players may interact, meet new people or even get married. FunTown’s social networking features help build an important online community.

Avatars

     To help players customize their persona online and increase their overall entertainment experience, FunTown also offers many in-game items which may be purchased by players for their online personas, or avatars, in order to create their own unique look while participating in the online community. The items for sale for avatars include facial expressions, clothes and accessories. These items are particularly popular with younger players, who like to customize their avatars to express themselves and establish unique identities and distinct fashions in the online community.

Our Pricing, Distribution and Payment

     Our principal sources of revenue for online games are access fees and fees for sale of in-game items. We offer flexible pricing to suit different players’ playing habits. We have both hourly and monthly access fee pricing schemes to cater to light-usage and heavy-usage players, respectively.

     We also charge players fees for the purchase of various in-game items, mainly virtual coins and customized avatars.

     FunTown has both physical and virtual distribution channels for its games:

• Physical distribution channels. Physical distribution channels include convenience chain stores such as 7-11, and Internet cafés. At these locations, users may purchase pre-paid cards with varying amounts of credits to play FunTown’s suite of casual games. In addition, players may purchase game packs to play specific games on FunTown’s platform.

• Virtual distribution channels. Virtual distribution channels consist of various Web sites, including FunTown’s official Web site. Users may purchase game credits through online sites with their credit card or bill via their telecom carrier.

     To use our fee-based online games, a customer must register an account in our system. Once registered, the customer may log onto our network, select and activate the games the customer wishes to play, and then charge his or her account using a prepaid card or prepaid online points. Customers only need to maintain one account, which provides information regarding the customer’s available prepaid game credits and payment history.

Our Marketing

     Our marketing strategy is to capitalize on our established brand and utilize our large existing user base and distribution network to retain our existing users and attract new users. We employ a variety of traditional and online marketing programs and promotional activities to promote our games, which include:

• In-Game Events. We organize in-game events for our users, which we believe encourages the development of virtual communities among our users and increases user interest in our games. Examples of in-game events include special challenges or features introduced to the game environments for a scheduled period.

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In addition, we use in-game events to introduce users to new features of our games. We may also post announcements in the game environment to promote new features, other improvements to the games, and in-game events.

• In-Game Marketing. We may conduct in-game marketing programs from time to time, including online contests for prizes.

• Cross-Marketing. We have cross-marketing relationships with popular consumer brands, technology companies and major telecom carriers. We believe that our cross-marketing relationships with certain well-known companies, including Intel Corporation (“Intel”) and Microsoft Corporation (“Microsoft”), will increase the recognition of our online game brands.

• Open Beta Testing. Our open beta testing system tests both the operation of new games under open market conditions and introduces new games to users. During open beta testing, we do not charge users to play the new game. Open beta testing provides an initial user base and creates initial interest and word-of-mouth publicity to support the commercial launch of the game.

• Offline Events/Promotions. From time to time we distribute free game-related posters, promotional prepaid cards for beginners, and game-related souvenirs at trade shows, selected Internet cafés and other locations. We may conduct events at popular venues to stage exhibitions, distribute software and game content-related merchandise, and interact directly with our user base. Furthermore, we may sponsor select media events, such as industry-related awards shows and TV shows, to promote our brand names and our games.

• TV Commercials. We use TV commercials to attract potential customers and to promote our games and brand.

• Marketing Research. We use various qualitative and quantitative market research methods to analyze our target market and to differentiate our product offerings from those of our competitors.

• Game Magazine Advertisements. We also advertise certain of our games in various game magazines. From time to time, we also collaborate with such magazines in various promotions, including giving away copies of certain games free of charge with each magazine sold.

• Direct Marketing. We use telemarketing and email correspondence to inform our users of new products, promotions, and other product related services.

     We also regard customer service as a key marketing tool and we are committed to providing superior customer service to our users. We provide service to our customers through three principal channels:

• our call center in FunTown’s offices in Taiwan, which serves our customers 24 hours a day, seven days a week;

• our walk-in customer service centers in Taipei and Hong Kong; and

• e-mail and facsimile letters.

     In addition, we offer bulletin board services that allow users to post questions to, and receive responses from, other users.

     We have game masters dedicated to our most popular games. Game master responsibilities include organizing in-game events, troubleshooting and actively monitoring the online game environment. Game masters are available to respond to players’ inquiries, initiate “bug” reporting and removal processes, as well as to identify, record and

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deal with inappropriate player behavior such as cheating. We believe that our provision of game masters to monitor the gaming environment is an important element in maintaining our customer loyalty and efficiently addressing technical problems as they arise.

Our Players

     As of June 15, 2007, we had over 9 million registered players of our online games, and we recorded over 123,500 paying players, approximately 41,350 peak concurrent users and 20,500 average concurrent users, all in the month of May 2007. The majority of our online game players are 25 to 35 years old, and consist of approximately 55 percent male and 45 percent female players.

Our Sources of Products and Services

     Historically, we developed our games and services in-house to have better control of the game features and allow for seamless integration with our games platform. Occasionally, we outsource game development to game studios to expedite the development process and time to market. More recently, we have also begun to license games to expand the scope of our games offering. As of June 15, 2007, we hold licenses for the operation of five games in various territories, Tales Runner, Fortress 2, Hellgate: London, Phantasy Star Universe and Nanaimo. Game licensing costs consist typically of an upfront fee, and an ongoing licensing fee equal to a percentage of revenues earned from the licensed games.

     We continue to aggressively expand our products and services offerings by developing and launching new games, updating games and community features on our platform. We are currently working with Microsoft to launch FunTown’s online MahJong on the Xbox 360, which is expected to be launched in the second half of 2007. In order to support our product development capabilities and develop our proprietary online games, we have a strong research and development team composed of approximately 72 employees in Taipei and Shanghai as of June 15, 2007.

Our Technology and Infrastructure

     We have a scalable and modular platform that enables us to increase our game offerings and services. The platform consists of several key modules: authentication, billing, game management, customer service, and the basic platform operation. Since our platform was designed with scalability in mind, we have a unified user account system, which allows our players to use one single account to access all FunTown games. Our billing and game management modules are flexible enough to integrate both in-house developed and licensed games. Our customer service module enables us to assist our players both in and outside of the games.

     As technologies advance and enable people to access the Internet in new ways, we plan to expand our offerings to match these new access technologies and platforms. We are currently working with Microsoft to develop some of our available games for use on the Xbox 360 platform, with Intel to make some of our games and services available on its Viiv technology for digital home media centers; and Chunghwa Telecom to offer certain of our popular game titles on its media-on-demand system. We also have created games for use on other wireless mobile phone platforms. In addition to these new technologies, our games are currently available to air travelers on certain airlines, enabling players to play with other passengers travelling on the same flight.

Competition

      Our main competitors in the online games business are casual game operators in Greater China, including Shanda, Nineyou (Shanghai Everstar Online Entertainment Co., Ltd.), Tencent Holdings Limited, Ourgames.com (Beijing Globalink Computer Technology Co., Ltd.), International Games System Co., Ltd and Chinagames.net. Our competitors also include massively multi-player online role-playing game operators in Taiwan, including Gamania Digital Entertainment Co., Ltd. (“Gamania”) and Soft-World International Corporation.

     We expect more companies to enter the online games industry in Greater China and a wider range of online games to be introduced to the Greater China market, given the relatively low entry barriers to the online games industry. Our competitors vary in size and include large companies such as Shanda, many of which have significant financial, marketing and game development resources as well as name recognition. To cope with competition, we aim to develop new features and services that we think our players will pay for and enjoy. We also work on strengthening the appeal of our online games platform through building player communities, honorary titles, virtual badges and banners of honor, as well as other virtual assets.

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Intellectual Property and Proprietary Rights

     We rely on copyrights, trademarks, trade secrets and other intellectual property laws, as well as non-competition, confidentiality and license agreements with our employees, suppliers, business partners and others to protect our intellectual property rights. Our employees are generally required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assign to us any ownership rights that they may claim in those works.

     As of June 15, 2007, we were the owner of 37 software copyrights and 34 trademarks registered with various government agencies throughout Greater China and Taiwan. We also hold licenses for the operation of five online games, including Tales Runner, Fortress 2, Hellgate: London, Phantasy Star Universe and Nanaimo.

Internet Access Services Business

Our Services

     We provide broadband Internet access services to consumer and corporate customers through various technologies and products including, cable modems, leased-lines, virtual private network and other value-added services.

Internet Access Services Offerings

     CABLE MODEMS. We offer our broadband Internet access services for consumers via cable modems at transmission speeds of up to 6 Mbps. Our cable modem-based broadband access services allow subscribers to use bandwidth-intensive multimedia applications, such as interactive games, high-quality audio, video and distance learning applications, and electronic commerce applications, such as retailing, financial services and online software distribution more efficiently. We reached an agreement in principle in May 2004 with certain of our cable partners to whom we provide bandwidth on an exclusive basis to equally share revenues, thus providing our cable partners with increased economic incentives to promote two-way cable services through their systems. In September 2005, we started providing to certain of our exclusive cable partners, cable modem services that they could sell under their own brand name. Two-way cable systems allow us to offer subscribers higher upstream transmission speeds and “always on” Internet access capabilities. As of December 31, 2006, we had 11,447 cable modem-based broadband customers, as compared to 17,600 cable modem-based broadband customers as of December 31, 2005.

     CORPORATE INTERNET ACCESS SERVICES. We also offer dedicated and high-speed Internet access services to corporate customers over fiber optical lines. Our target customers include ISPs, Internet content providers (“ICPs”), corporations, SMEs and cyber cafés. Our corporate ISP services include leased-line services, ranging from 1 Mbps to 1 Gbps, virtual private network and other value-added services.

     ADSL. On May 15, 2006, we entered into an asset purchase and sale agreement and a transition service agreement with Webs-TV to sell our ADSL business and provide certain transition services. Under the agreements, Webs-TV purchased our ADSL business and agreed upon services in an all cash transaction with a total price of approximately US$18.1 million (including VAT). Approximately US$8.9 million of the price was for the ADSL business and approximately US$0.9 million of the price was for the right to use our ADSL brand for five years. Both are payable from May 15, 2006 through July 31, 2007. The remaining US$8.3 million of the total price represents fees for bandwidth, consulting and other support services to be provided by Hoshin GigaMedia on a transitional basis through December 31, 2007, and is payable from May 15, 2006 through February 28, 2008. The transferred ADSL business includes our ADSL-related equipment, business contracts, and subscription contracts between Hoshin GigaMedia and approximately 62,000 ADSL subscribers. Cash proceeds received in 2006 from the sale of the ADSL business, net of transaction costs and VAT, were approximately US$3.3 million, and cash proceeds to be received in 2007 related to such sale, net of VAT, will be approximately US$5.0 million.

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Markets for Internet Access Services

     CONSUMER INTERNET ACCESS SERVICES. Our two-way cable modem-based broadband service packages are offered at approximately US$33.80 per subscriber per month for premium service; approximately US$24.58 per subscriber per month for a mid-tier package; and approximately US$19.97 per subscriber per month for a basic service. We also offer selected subscribers discounts on their monthly access fees and quarterly or yearly payment options to further promote our access services. We recognize our revenues from access fees net of the split with cable partners and these discounts. In the future, our product mix may change in response to market dynamics.

     The number of subscribers of our two-way cable modem-based broadband services declined gradually due to competition. The table below sets forth the number of our subscribers on the dates specified. Our access revenues increased in 2006 compared to 2005, primarily due to the growth of our corporate broadband business, which offset declines in our retail broadband business. We do not expect to see significant growth in our subscriber base in the future, in line with our ongoing strategy to shift resources away from this legacy business. Consistent with our focus on online entertainment, we have retained financial advisers to explore the potential sale of this legacy business.

	Number of Subscribers
Date	2004		2005		2006
31-Mar		18,798		18,645		16,417
30-Jun		18,495		17,929		15,154
30-Sep		18,454		17,386		13,185
31-Dec		18,440		16,534		11,447

     Besides directly providing cable modem-based Internet services under GigaMedia’s brand name to end users, we also provide trunk bandwidth and backend systems, which include a customer provisioning system, billing system and network management system, to cable operators that wish to operate their cable modem-based Internet service under their own brand names, or turnkey cable modem services. We receive fees from these cable systems under various revenue sharing arrangements. As of December 31, 2006, we had exclusive agreements with 11 out of our 26 cable partners granting us the exclusive right to provide Internet access services through their cable systems.

     CORPORATE ACCESS SERVICES. KBT offers and sells dedicated and high-speed Internet access to corporate customers over fiber optical Ethernet MAN infrastructure. KBT offers various speeds of leased-line services, ranging from 1Mbps to 1Gbps, to different kinds of subscribers like ISPs, ICPs, corporations, SMEs and cyber cafés. KBT charges its customers monthly fees for access services and other value-added services depending on the level of bandwidth and type of services provided. As of June 2007, KBT has more than 600 corporate users, and the business contributes more than 40 percent of the revenues from our Internet access service business.

Other Services

     As part of our Internet services, we provide various other value-added services including free electronic mail, bulletin boards and photo albums.

Our Broadband Network — Cable and ADSL Network

     In early 2005, we completed the upgrade of our island-wide backbone network, which is based primarily on Gigabit Ethernet technologies and covers 20 major districts out of a total 25 districts in Taiwan. In addition, we built small regional data centers to host both the cable Internet and ADSL headend equipment in these 20 districts connected by our backbone network. These centers also act as service hubs for:

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• the provision of key community services, including electronic mail, photo albums and personal Web hosting, to subscribers;

• the management of network performance;

• the replication of content and applications; and

• the provision of a cost-efficient infrastructure to cache data.

     In connection with the sale of our ADSL business, we have given Webs-TV the right to co-locate their equipment into our network operation centers.

     NETWORK OPERATIONS CENTERS. We provide centralized network management through our network operations centers, which represent the nerve center of our whole network. Our centers use advanced proprietary network management tools and systems to monitor the network infrastructure 24 hours a day, 7 days a week, enabling us to effectively address network problems before they adversely affect our subscribers.

Data Backbone

     Ongoing privatization of the telecommunications market by Taiwan’s government has expanded the number of telecommunications operators. Including Chunghwa Telecom, there are currently four fixed-line telecommunications operators in Taiwan. It is our policy to continually monitor the usage pattern, adjust the network architecture, and select better leased-line circuits providers to optimize the user experience and service economics.

     Private peer-to-peer relationships among ISPs (i.e., private direct cable connections as opposed to public Internet connections) have become the most effective solutions to resolve the problems of packet loss and latency resulting from the significant traffic volume through Internet networks. We have peering arrangements with most of Taiwan’s major networks and ISPs, providing us with what we believe to be the one of the most comprehensive array of Internet connections in Taiwan. According to the Taiwan Network Information Center, as of April 2006, we had one of the best aggregate peering bandwidth arrangements among all commercial organizations in Taiwan. Our extensive peering arrangements have enabled us to route most of our traffic over the less congested private peering links. This enhances the efficiency of our network and allows us to provide better, faster access services to our subscribers.

     Through our peering arrangements with several Internet service providers and networks, we currently connect to Taiwan’s Internet backbone from our network operations center. We have installed direct Internet connections at each of our regional data centers to minimize backbone traffic flow and to provide Internet connection redundancies. We currently connect to the international Internet through a direct trans-Pacific submarine cable link. As competition in the trans-Pacific submarine cable segment provides better price economics, we are able to significantly increase our bandwidth without incurring additional cost. In 2005, we completed the upgrade of our infrastructure from STM-1 and STM-4 connections to Gigabit Ethernet-based connections to provide faster connections.

Information System

     We have established a versatile, scalable, real-time information system that integrates service provisioning, customer management, billing, data gathering and usage tracking functions. With independent multiple processing layers, we are able to respond to increases in user, subscriber or service data by expanding our information system’s capacity on demand.

Sales and Marketing

     CONSUMER ACCESS SERVICES. We plan to continue utilizing bundled marketing with our strategic partners to minimize costs.

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     TURNKEY CABLE MODEM SERVICES. For cable operators that are interested in providing or improving upon their cable Internet services, we have formed a team of sales personnel, network engineers, backend software engineers and customer service specialists to provide consultancy and turnkey solutions. We believe that direct sales contact and site visits to existing cable partners and referrals by our existing cable partners are the most efficient methods of marketing our cable modem services.

     CORPORATE ACCESS SERVICES. With an optical Ethernet MAN infrastructure and solution, KBT is able to provide corporate customers, one-megabit increment, on-demand leased-line services. We primarily use a direct sales force to reach our potential customers.

Customer Service

     We provide our subscribers with a comprehensive range of customer service, including assistance on cable modem installations, post-installation technical support and prompt responses to billing and service requests.

     Our customer service department is divided into two groups: technical support and general customer service. Our customer service department operates a toll-free help desk with extended hours of operation. Our subscribers may also contact us via electronic mail or through accessing our interactive self-service Web site. Our general customer service staff assists subscribers with cable modem questions and problems, as well as basic computer and software configuration questions and billing inquiries. Our technical support group handles technical problems referred by the general customer service staff.

Competition

     The Internet access service industry is highly competitive.

     We mainly compete with broadband ISPs, which provide basic Internet access to consumer and corporate users generally through the provision of ADSL services using existing telephone networks or cable modem-based services operating over cable television networks. The Internet access service industry in Taiwan is highly competitive. The broadband Internet access service industry in Taiwan is dominated by the main fixed-line telecommunication company, Chunghwa Telecom. Chunghwa Telecom’s HiNet broadband service is the current broadband ISP market leader estimated to have over 80 percent of the market share in 2006, while we have only managed to capture approximately 1 percent of the market share. The primary basis for competition is price. The availability of similar services at competitive prices has made it difficult for us to attract and retain customers.

     We also compete with other broadband technologies, including integrated services digital networks and wireless (and, in particular, WiMax). In the cable modem-based Internet access market, we believe that our close relationships with a large number of cable partners and our exclusive access to a substantial portion of Taiwan’s households and businesses provide us with a competitive advantage. Our competitors in Internet access services include all four fixed-line operators in Taiwan.

     We also face competition in corporate ISP services from fixed-line service providers, including Chunghwa Telecom, Taiwan Fixed Network, NCIC’s Sparq and Asia Pacific Online and other Internet access service providers in Taiwan.

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     Some of our major competitors, including Chunghwa Telecom, have certain competitive advantages over us, including financial and marketing resources, established customer relationships, brand awareness, customer access and telecommunications infrastructure.

Intellectual Property and Proprietary Rights

     As of June 15, 2007, we held 21 trademarks and two patents registered in Taiwan.

Regulation

Regulation Relating to Online Gaming

     Our software licensing and online entertainment business includes software development and the provision of application services for Internet gaming. We are dependent on UIM for all of the revenues from our software licensing and online entertainment business. UIM operates an online gaming business and also sub-licenses our software products to third parties. We earn fees from UIM based upon its revenues. In December 2006, we also entered into a licensing agreement with a subsidiary of the Carmen Media Group, an online entertainment provider, pursuant to which we licensed certain of our gaming software for use on Web sites to be launched and operated by such subsidiary. Each of these businesses is subject to applicable laws and regulations relating to online gaming and electronic commerce in various jurisdictions.

     We are incorporated in Singapore and Singapore law does not prohibit us from providing software products and application services to online gaming companies.

     UIM operates exclusively in the Kahnawake territory in Canada under a gaming license issued by the Kahnawake Gaming Commission, subject to continuing satisfaction of strict licensee requirements. All of UIM’s gaming transactions take place in Kahnawake. UIM operates exclusively from computer servers in Kahnawake.

     However, the end users of our software products, including the online gaming customers of UIM and its sub-licensees are located around the world and it is, in many cases, uncertain which governments have authority to legislate or regulate different aspects of these industries. Moreover, the Internet gaming industry is still in an early stage of development and the worldwide legal and regulatory environment in which the businesses operate therefore remains highly fluid and subject to change. While most foreign jurisdictions have some form of legal framework applicable to games of chance, few provide clear guidance on how this framework applies to Internet gaming. Issues such as determining the physical location of a gaming event as well as significant differences in the gaming laws and “Cyberlaws” of various countries all make traditional concepts of jurisdiction and conflicts of laws difficult to apply. In addition, the very nature of Internet gaming creates new and unique forms of entertainment that were neither contemplated nor feasible in the past. The risks and uncertainties in the worldwide legal and regulatory environment make it impossible to assess whether our status or operations as an application service provider to the online gaming industry, or the Internet gaming services provided by UIM, are in compliance with all laws and regulations of the jurisdictions where our gaming software products are used.

     In the United States, the current administration adheres to the view that Internet gambling is already prohibited by the Federal Wire Act and other federal laws, such as the Patriot Act. Under the Patriot Act, both U.S. and non U.S. banks which process online gaming transactions for U.S. persons may face potential criminal proceedings, as U.S. jurisdiction extends to non-U.S. banks that have correspondent accounts in the United States. Internet gambling activity also constitutes illegal gambling activity in all 50 U.S. states, including those states where other forms of gambling are legal.

     In addition, the UIGEA became law in the United States in September 2006. The UIGEA prohibits the use of communication facilities and financial transactions in connection with Internet gambling by restricting the payment methods for such activities and by imposing criminal penalties on Internet gambling businesses which accept wagers or payment in violation of such restrictions. The UIGEA also criminalizes any gambling business which arises from using a communication facility to transmit bets or wagers, or to transmit information assisting in the placing of bets and wagers, to or from the United States, and prevents gambling businesses from accepting credit cards or other bank instruments in connection with illegal Internet gambling. The UIGEA also directs various federal agencies to develop regulations that would require financial institutions with electronic payment systems to establish policies and procedures to identify and block restricted transactions, and creates judicial procedures through which federal agencies could obtain injunctions directing interactive computer services to remove or disable access to online sites that violate the law.

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     In November 2004, the World Trade Organization (“WTO”) found that the United States was in violation of its commitments under the General Agreement on Trade in Services (“GATS”), by not allowing operators of online gaming services licensed in Antigua and Barbuda to access U.S. markets. The decision was appealed and, in April 2005, the Appellate Body of the WTO found that the provisions of the Wire Act, Travel Act and Illegal Gambling Business Act are inconsistent with the obligations of the United States under the GATS, but also that the United States had shown that such measures are necessary to protect public morals or maintain public order and therefore fall within an exception to its general obligations. However, the Appellate Body further found that, in the light of existing federal legislation regarding Internet gambling on horseracing, the United States had failed to demonstrate that the Wire Act, Travel Act and Illegal Gambling Business Act are applied equally to both foreign and domestic providers of online gambling services for horseracing and therefore recommended that the United States bring its legislation into conformity with its obligations under the GATS. In March 2007, the WTO issued a report which found that the United States had failed to bring its legislation into conformity with its obligations under the GATS.

     It is unclear what steps the U.S. government will take following the decision of the Appellate Body of the WTO and the March 2007 report of the WTO and whether the threat of any sanction or fine relating to a failure to implement the recommendation of the Appellate Body would be sufficient to prompt a change in U.S. online gaming policy. A number of states are lobbying/petitioning the federal authorities to ensure they retain the ability to regulate state gaming and that this ability is not affected by the WTO decision.

     Finally, substantial uncertainties in the global regulatory environment relating to online gaming expose our Company to a real risk that regulatory authorities in various jurisdictions may determine that our software licensing and online entertainment business provides online gaming services (rather than only providing software and application services to our licensees) and thus subject our Company to the gaming laws and regulations in such jurisdictions.

     In Europe, several countries, led by the United Kingdom, are adopting a regulated online gaming approach. However, opposing views are present in Europe. Some European countries, where there are state-owned gaming monopolies, primarily related to lotteries and online sports betting, have taken action or introduced legislation aimed at banning foreign online gaming operators, which could have a material adverse effect on our licensees and consequently on our Company. For example, the French governmental authorities has passed legislation effective from March 2007, prohibiting operators other than certain specified state-owned enterprises from operating Internet gaming sites in France. Additionally, advertising restrictions have been placed on the promotion of online gaming sites with effect from September 2007, and the proposed implementation of the legislation also requires warnings to be placed on online gaming sites. In addition, new banking restrictions have been adopted, which require financial institutions with electronic payment systems to identify and block restricted transactions. As of June 15, 2007, regulations required to implement these laws and the banking restrictions have not been adopted.

     Such actions by these European Union (“EU”) member states are in contrast with rulings from the European Court of Justice and have prompted the European Commission (“EC”) to look at creating new legislation that could harmonize online gaming within the EU, in line with the EU’s principles regarding the European single market. There is no indication that any such legislation will be introduced in the near term.

     For additional information on the regulatory environment relating to online gaming, please see Item 3, “Key Information — Risk Factors — The worldwide legal and regulatory environment in which our software licensing and online entertainment business operates is characterized by uncertainties that could adversely affect our business and operating results.”

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Regulations Relating to Online Games in Taiwan

     At present, there is no specific law in Taiwan governing online game services, nor are there any specific licensing requirements imposed on Internet content providers in connection with offering online game services. The National Communications Commission (the “NCC”) was established in March 2006. It is anticipated that the NCC will overhaul the regulatory framework in the communications sector and may enact new regulations governing Internet content.

     Rating of Internet Content. The Government Information Office, which was the agency in charge of Internet content prior to establishment of the NCC, promulgated the Regulations for the Rating of Internet Content in April 2004, as amended in October 2005. In general, Internet content shall not include any illegal or banned materials. To avoid negative impact on the physical or mental development of children or adolescents, Internet content containing any of the following materials shall be rated as restricted and shall not be viewed by those below the age of 18: (i) excessive depiction of gambling, robbery or other criminal offenses; (ii) excessive depiction of suicide; (iii) depiction involving terror, blood or cruelty which is presented in an matter acceptable to adults; or (iv) depiction of sexual acts or sexual obscenity which does not embarrass or disgust adults in general. If Internet content is in violation of the Regulations for the Rating of Internet Content, competent authorities may order the relevant Internet service providers to restrict access to children or adolescents or remove the offending content and impose an administrative fine on the offenders.

     Computer Software Ratings. The Ministry of Economic Affairs announced in July 2006 the Regulations Governing Computer Software Rating which took effect in January 2007. Computer software includes the game software which can be installed in computers. The provider of computer software shall identify the rating of the computer software when it provides it to users. There are four ratings: (i) Mature Audience Only (not suitable for those below the age of 18); (ii) Parental Guidance Advisable (not suitable for those below the age of 12; parental guidance is advisable for those between the age of 12 to 18) (iii) Parental Guidance Strongly Suggested (not suitable for those below the age of 6; guidance from parents, teachers or adults is strongly suggested for those between the age of 6 to 12); and (iv) General Audience (suitable for all ages).

     Online Game Contract Template. The Ministry of Economic Affairs, which is the industrial authority in charge of online games, published a model contract template for online game services in February 2006 for reference only. However, under the Consumer Protection Act, the industrial authority can prescribe the terms and conditions that shall be, and shall not be, set forth in a model contract. It is unclear at this stage whether the Ministry of Economic Affairs will require that the template be used as a model contract.

Regulations Relating to Online Games in the PRC

     Our provision of online games and online game-related content on our Web sites in the PRC is subject to various Chinese laws and regulations relating to the telecommunications industry, Internet and online games, and is regulated by various government authorities, including the Ministry of Information Industry, the Ministry of Culture, the Administration of Press and Publication and the State Administration of Industry and Commerce. The principal PRC regulations governing the provision of Internet content and online games services include (among others) the Telecommunications Regulations (2000), the Administrative Rules for Foreign Investments in Telecommunications Enterprises (2001), the Administrative Measures for Telecommunications Business Operating Licenses (2001), the Tentative Measures for Administration of Internet Culture (2003), the Tentative Measures for the Administration of Internet Publications (2002), the Opinions on the Development and Management of Online Games (2005) and the Anti-Internet Addiction Regulations (2007).

     Under these regulations, a foreign investor is currently prohibited from owning more than 50 percent of the equity in a PRC entity which provides value-added telecommunications services. Internet content provision services are classified as value-added telecommunications businesses, and a commercial operator of such services must obtain a value-added telecommunications business operating license, or an ICP license, from the appropriate telecommunication authorities in order to carry on its operations in the PRC.

     In addition, since online games fall within the definition of “Internet culture products” under the Tentative Measures for Internet Culture Administration (2003), a commercial operator of online games must, in addition to the ICP license, obtain an Internet culture operation license from the appropriate Ministry of Culture for its operation of online games, and foreign investors are restricted from owning equity in such entities. The provision of online games is also deemed an Internet publication, within the meaning of the Tentative Measures for Internet Publication Administration (2002), and therefore, an online game operator must also obtain the approval of the relevant press and publication administrative authorities, as well as the appropriate licenses, in order to carry on its online games business in the PRC. Foreign investors are also restricted from owning equity in entities which provide Internet publications. Further, no online game products involving (among others) obscenity, gambling, violence, superstition or illegal money-collecting transactions are allowed to be produced and circulated in the PRC, and all imports of online games are required to be approved by the Ministry of Culture and be registered and recorded in accordance with relevant PRC law. If games are imported without such approval, the Ministry of Culture may impose penalties on the non-complying operator, which include the revocation of its Internet culture operation license. In addition, online game operators are required to develop identification verification and reorganization software for online game products, to restrain youths from playing online games and limit their playing time, and to reform gaming rules which might induce online gaming addiction (including adoption of real-name registration systems).

     In April 2007, the PRC governmental authorities also passed the “Anti-Internet Addiction Regulations”, with the purpose of discouraging online game-players from spending excessive amounts of time playing online games. Pursuant to these regulations, Internet game operators have been ordered to install anti-addiction software features on games offered in the PRC by mid-July 2007, which will (among other features) limit the number of points and other benefits which can be awarded to game players after they have been online in excess of specified periods of time. Internet game operators will also be required to adopt real-name registration, which will require online game players to register their real identity information before they will be allowed to play online games.

Telecommunications Regulation in Taiwan

     The NCC was established in March 2006 to act as the regulator of the telecommunications and broadcasting industry. Prior to the establishment of the NCC, the Ministry of Transportation and Communications and the Directorate General of Telecommunications of Taiwan regulated Taiwan’s telecommunications industry primarily under the Telecommunications Act of Taiwan. The Directorate General of Telecommunications has been merged into the NCC, while the Ministry of Transportation and Communications remains responsible for industrial policy and promotion of the telecommunications industry.

     The Telecommunications Act regulates two types of telecommunications companies, Type I operators and Type II operators. Type I operators, such as Chunghwa Telecom, are enterprises that have established their own switching and transmission facilities to provide telecommunications services. These facilities-based services are similar to common carrier services or basic services in the United States. Type II operators, such as Hoshin GigaMedia and KBT, comprise all telecommunications operators other than Type I operators, including companies which generate fees from providing Internet access, online information, electronic mail and electronic commerce services.

     Regulation of Type II Operators. Type II operators typically provide telecommunications services to customers by using the telecommunications facilities of Type I operators and are not permitted to engage in the buildup of telecommunications facilities. Type II telecommunications services can be further divided into special Type II telecommunications services and general Type II telecommunications services. A special Type II telecommunications license is required for any Type II operator which provides simple voice resale, Internet

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telephony, and other international telecommunications services by leasing international circuit(s). A general Type II telecommunications license is required for any Type II operator which provides telecommunications services other than those specified above. Hoshin GigaMedia and KBT each hold a general Type II telecommunication license.

• License. A Type II license is valid for ten years, and may be renewed six months before its expiration. The license is nontransferable. Hoshin GigaMedia’s license is due to expire in 2008. KBT’s license is due to expire in 2012.

• Tariff Regulation. Type II operators are required to announce their business regulations with respect to the terms for provision of services, including tariffs for major rates and charges. Any changes to the business regulations must be filed with the NCC before they become effective. Tariff information must include the types of services provided, terms and fee schedules for all service items, rights and obligations of customers, contract termination events and other matters affecting the right and obligations of customers, all to be included in the operator’s business plans.

• Change in Business. Under Taiwan’s Regulations Governing Type II Telecommunications Operators, any change of type or scope of business must be approved by the NCC. For change of the systems structure stated in the business plan, a report shall be filed with the NCC for recording within one month from the effective date of change of such system structure. In addition, Type II operators must report to the NCC and inform their customers in advance of any plan to suspend or terminate any of their businesses.

• Technical Standards. Special Type II operators are required to retain qualified senior telecommunications engineers to install and maintain telecommunications equipment. Any telecommunications equipment used by a Type II operator must also satisfy technical standards adopted by the NCC.

     Regulation of Type I Operators. Type I operators are more heavily regulated than Type II operators, and the government of Taiwan has broad powers to limit the number of operators and their business scope and markets. Under the Telecommunications Act, Type I operators must satisfy required levels of capital adequacy and, to ensure that they meet their facilities rollout obligations, are subject to pre-licensing merit review of their business plans and tariff rates. In addition, the Telecommunications Act prescribes that any adjustment to the tariff rates of a Type I operator is subject to a price cap set according to the annual increase rate of the consumer price index promulgated by the Directorate General of Budget, Account and Statistics under the Executive Yuan of Taiwan minus adjusted coefficient.

     Liberalization of Type I Fixed Network Licensing. The Directorate General of Telecommunications adopted the Regulations Governing Fixed Telecommunications Network Business (“Fixed Network Regulations”) in 1999 to govern the issuance of fixed network communication licenses and the business conducts of fixed network business operators. Type I fixed network communications licenses are subdivided into comprehensive network, local network, long distance network, international network and lease-circuit licenses. These regulations have been designed to grant additional comprehensive network licenses to encourage competition with Chunghwa Telecom, which is a state-owned company and currently the dominant fixed-line network operator in Taiwan. The NCC promulgated the amendments to the Fixed Network Regulations on May 21, 2007 whereby the NCC lowers the threshold for a cable TV system operator to operate a local telecommunications network within its franchise area on the one hand and allows a fixed network operator to operate a multimedia content transmission platform (to broadcast programmed channels) on the other.

     Content Liability. If content sent, transmitted or received via the Internet through an operator’s system is found to be obscene, defamatory or in violation of public order or national security, the relevant operator would be liable for the content only if it knew or should have known that the content was obscene, defamatory or in violation of public order or national security. In addition, carriers must provide telecommunications services on a fair and equal basis and may not refuse to receive or transmit telecommunications information unless the content would endanger the national security or offend against the public order of Taiwan.

Cable Regulation in Taiwan

     Regulation on Shareholding. In 2000 and 2001 the Cable Radio and Television Act were modified. Under the modified regulations, the original regulations of “a single shareholder cannot own more than 10 percent of the total

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issued shares of a cable operator,” and “no shareholder and its related parties may collectively own more than 20 percent of a cable operator’s total issued shares” were eliminated. Instead, the shares of a cable operator directly or indirectly held by foreign shareholders cannot exceed 60 percent of all outstanding shares of the cable operator. Furthermore, foreign shareholders who directly hold shares of a cable operator are limited to foreign corporations and the total shares held by them cannot exceed 20 percent of all outstanding shares of the cable operator.

     Operating Licenses. To obtain an operating license, a cable operator must first apply for a rollout permit. After receiving this permit, the cable operator generally has three years to complete the cable system rollout as set forth in its permit application. Upon the satisfactory completion of the rollout, the NCC will issue an operating license to the cable operator. If the cable operator has not received an operating license before its rollout permit expires, its right to engage in the cable television business will be terminated immediately.

     The term of an operating license is nine years. The NCC conducts a periodic review of the performance of each licensed cable operator on the basis of its business and operating plans every three years. Following a review, a licensed cable operator may be instructed by the NCC to make requested improvements in its business within a specified period. A failure to timely comply with the instruction could result in revocation of the cable operator’s license.

     Market Share Limitations. Under the Cable Radio and Television Act, the number of subscribers of all affiliated cable operators may not exceed one-third of the total number of cable television subscribers in Taiwan. In addition, the number of affiliated cable operators may not exceed one-third of the total number of all cable operators in Taiwan.

     Competition. Under the Cable Radio and Television Act, the NCC is authorized to issue additional licenses in a franchised area if it believes that the existing license holders in that area are engaging in anti-competitive or unfair competition practices. In addition, service fees charged by cable operators must be approved by local government authorities on an annual basis.

     Open Access Regulation. Under the Regulation Governing Fixed Network Business described above, cable operators must obtain leased-circuit licenses issued by the NCC in order to lease their circuits to companies that provide services through their cable systems. The Directorate General of Telecommunications (which was replaced by the NCC in March 2006) began to accept applications for these licenses from cable operators in June 1999 and most of the cable operators have been granted with leased-circuit licenses to lease out their cable capacities to Type I operators and Type II operators, including Hoshin GigaMedia and KBT. As a condition to holding these licenses, any licensed cable operator that is deemed to be a dominant operator in the fixed network business market (such as in leased-circuit business) may be required by the NCC to allow all parties to provide services, including Internet access services, through their cable systems on substantially similar terms. Any imposition of this requirement from the NCC on the cable partners having exclusive relationships with us will eliminate the benefits associated with our exclusive rights.

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C. Organizational Structure

We are a holding company incorporated in Singapore in September 1999. Prior to 2002, our primary business was to provide broadband Internet access services in Taiwan. After we acquired our software licensing and online entertainment business in April 2004 and our online games business in January 2006, we became a major provider of online entertainment software services. In September 2005, we sold our interest in our land-based music distribution business. The organization chart and the table below set forth our business structure and the name, year and country of incorporation for each of our principal subsidiaries and our percentage holding and principal activities as of June 15, 2007:

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*As of June 15, 2007, we own approximately 18.1 million common shares and 15 million convertible voting preferred shares of T2CN, and also control voting rights with respect to 0.85 million common shares of T2CN, which in aggregate represent a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN. The financial results of T2CN will only be consolidated in our financial results for the year ended December 31, 2007.

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			Place of	Our
	Year of		Incorporation	Percentage
Entity	Incorporation		Operation	Holding			Principal Activities
Held by our Company
GigaMedia International Holdings Limited		2004	British Virgin Islands		100	%	Holding company
Hoshin GigaMedia Center Inc.		1998	Taiwan		100	%	Cable-based Internet access services and FunTown online games portal
Held by Hoshin
GigaMedia Center Inc
Koos Broadband Telecom Co., Ltd.		2001	Taiwan		100	%	Broadband Internet access services targeting business clients
Held by GigaMedia
International Holdings Limited
Cambridge Entertainment Software Limited		2004	British Virgin Islands		100	%	Holding company
FunTown World Limited		2005	British Virgin Islands		100	%	Holding company
GigaMedia Asia Limited		2005	British Virgin Islands		100	%	Holding company
GigaMedia Asia Pacific Limited		2006	British Virgin Islands		100	%	Holding company
GigaMedia Finance International Limited		2000	Cayman Islands		100	%	Holding company
GigaMedia Global Limited		2004	British Virgin Islands		100	%	Online game company
GigaMedia (HK) Limited		2004	Hong Kong		100	%	Holding company
Skyace Pacific Limited		2006	British Virgin Islands		100	%	Holding company
Held by FunTown World Limited
FunTown Hong Kong Limited		1999	Hong Kong		100	%	Online games portal
Held by GigaMedia Asia Limited
GigaMedia China Limited		2005	British Virgin Islands		100	%	Holding company
Held by Skyace Pacific Limited
Dragongate Enterprises Limited		2006	British Virgin Islands		70	%	Online game developer and operator

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			Place of	Our
	Year of		Incorporation	Percentage
Entity	Incorporation		Operation	Holding			Principal Activities
Held by Cambridge
Entertainment Software Limited
Cambridge Interactive Development Corporation		1997	U.S.A.		100	%	Software developer and application service provider
Cambridge Interactive Development Corporation (Quebec) Inc.		2005	Canada		100	%	Financial and management services
Internet Media Licensing Limited		2005	British Virgin Islands		100	%	Software developer and application service provider
Held by GigaMedia
China Limited
T2CN Holding Limited		2004	British Virgin Islands		51.12	%*	Online game developer and operator

* As of June 15, 2007, we own approximately 18.1 million common shares and 15 million convertible voting preferred shares of T2CN, and also control voting rights with respect to 0.85 million common shares of T2CN, which in aggregate represent a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN. Owing to the recent nature of this development, we have not provided information relating to T2CN and its business.

D. Property, Plant and Equipment

     Our principal executive office and operating office are located at 14F, No. 122 Tunhwa North Road, Taipei 10595, Taiwan, where we lease approximately 24,368 square feet of office space. We also lease office and other space, including space for our servers, in various other locations.

     We operate our software licensing and online entertainment business from CESL’s headquarters at 100 Cambridge Park Drive, Cambridge, MA 02140, U.S.A., where we lease approximately 34, 674 square feet, and from the offices of Cambridge Interactive Development Corporation (Quebec) Inc. at 1550 Metcalfe Street, Suite 1510, Montreal, Quebec, H3A 1X6, Canada, where we lease approximately 1,638 square feet.

     We operate our online games business from FunTown’s office in Taiwan at 8F, No. 22, Lane 407, Sec. 2, Tiding Blvd., Taipei 114, Taiwan, where we lease approximately 28,235 square feet, and FunTown’s Hong Kong office at Suite 1403-1405 Sunbeam Plaza, 1155 Canton Rd. KL, Hong Kong, where we lease approximately 4,831 square feet.

     We operate our legacy Internet service and access business from Hoshin GigaMedia’s office at 4F, No.57, Dongxing Road, Taipei 110, Taiwan, where we lease approximately 9,272 square feet, and from KBT’s office at 6F, No. 20, Lane 478, Rueiguang Road, Neihu District, Taipei 114, Taiwan, where we lease approximately 13,092 square feet.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

     Unless stated otherwise, the discussion and analysis of our financial condition and results of operations in this section apply to our financial statements as prepared in accordance with U.S. GAAP. You should read the following discussion of our financial condition and results of operations together with the financial statements and the notes to these statements included elsewhere in this annual report.

Overview

     We are a holding company. We operate three principal businesses through our subsidiaries:

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• Our software licensing and online entertainment business is operated through our subsidiary, CESL. CESL is a software developer and support services provider. CESL develops software for online entertainment services. As a software developer and support services provider, CESL offers software solutions for online entertainment, which it licenses to UIM under a software license and support service contract.

• Our online games business is operated through our subsidiaries Hoshin GigaMedia and FunTown World Limited.

• Our Taiwan Internet access service business is operated through our subsidiary, Hoshin GigaMedia, which focuses on consumer users, and Hoshin GigaMedia’s subsidiary, KBT, which focuses on corporate users.

     In 2006, we recorded total operating revenues of approximately US$94.3 million, an increase of approximately US$50.1 million year-over-year, resulting mainly from our software licensing and online entertainment business which had an increase in operating revenues of approximately US$32.5 million year-over-year and the acquisition of FunTown in January 2006. We recorded net income of approximately US$30.8 million, an increase of approximately US$24.5 million year-over-year, and our total costs and expenses increased by approximately US$32.5 million year-over-year to US$72.3 million.

     Prior to April 2004, our main business was to provide broadband Internet access services in Taiwan. Since we did not acquire our software licensing and online entertainment business until April 2004, our historical financial results prior to fiscal 2004 did not reflect the financial results of our software licensing and online entertainment business. As we did not acquire our online games business until January 2006, our historical financial results prior to fiscal year 2006 do not reflect the financial results of our online games business.

     Software Licensing and Online Entertainment Business. We acquired our software licensing and online entertainment business in a private transaction on April 1, 2004 with a view to enhancing our diversified entertainment products portfolio. We have consolidated the results of operations of the acquired business as of and for the nine months ended December 31, 2004 and the years ended December 31, 2005 and 2006. Our software licensing and online entertainment business generated revenues of approximately US$55.0 million, gross profit of approximately US$47.2 million, and operating income of approximately US$16.8 million in 2006.

     We are dependent on our licensee, UIM, whose financial results were incorporated into our 2004, 2005 and 2006 consolidated financial statements pursuant to FIN 46(R) although we do not own any equity in UIM. See “— A. Operating Results — Overview — Consolidation of UIM Under FIN 46(R).” Under the terms of the licenses granted by us to our licensees (including UIM), we are entitled to a share of the revenues of such licensees and as such, we bear certain economic risks with respect to, and derive certain economic benefits from, their operations.

     Online gaming software design houses and application service providers are our primary competitors. However, given the low barriers to entry in the software industry and the increasing popularity of Internet-based businesses, there are a large number of competitors scattered throughout many different segments of the software and Internet industries. In addition to known current competitors, traditional entertainment service providers and other entities, many of which have significant financial resources and name brand recognition, may provide online entertainment services in the future, and thus become our competitors.

     Faced with our known competitors, and most likely several new competitors which may be established in the near future, we will continue to improve the principal competitive factors that we believe can differentiate our product offerings from those of our competitors, including: brand, technology, financial stability and resources, proven track record, regulatory compliance, independent oversight and transparency of business practices in our industry.

     Online Games Business. We operate our online games business through our subsidiaries Hoshin GigaMedia and FunTown World Limited. FunTown is a leading casual games business with operations throughout Greater China. We acquired FunTown in January 2006 and incorporated results of the business into our consolidated financial statements as of and for the year ended December 31, 2006. Our online games business generated revenues of approximately US$18.7 million, a gross profit of approximately US$15.0 million, and operating income of approximately US$5.6 million in 2006. As we did not acquire our online games business until January 2006, our historical financial results prior to fiscal year 2006 do not reflect the financial results of our online games business.

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     In March 2006, we entered into a strategic alliance with Wretch for the development of an online games community. This strategic alliance was expanded in December 2006 to include the formation of a strategic partnership with Yahoo! Taiwan in connection with its acquisition of Wretch which was completed in May 2007. We have developed a co-branded Web site with Yahoo! Taiwan to co-market our online games on key Yahoo! Taiwan properties. Direct links to the co-branded Web site are also prominently featured throughout Wretch, and have been placed on Yahoo! Taiwan’s online game and messenger homepages with banner advertisement rights designed to attract users to the co-branded Web site. Members of Yahoo! Taiwan are able to directly access FunTown’s games on the co-branded Web site with their Yahoo! login information.

     In December 2006, we entered into a strategic alliance with Infocomm Asia, a Southeast Asian online games operator and distributor offering blockbuster titles such as Granado Espada and Hellgate: London, both under exclusive license for most of Southeast Asia. We also secured an exclusive license to offer and operate Hellgate: London, an online game anticipated to be launched in 2007, in the territories of Taiwan, Hong Kong and Macau. We will operate Hellgate: London through a strategic joint venture, Dragongate Enterprises, in which we hold a 70 percent interest and Cyber Gateway Pte. Ltd. (a wholly-owned subsidiary of Infocomm Asia) holds a 30 percent interest.

     Online casual game operators in Taiwan and the PRC are currently our primary competitors. We also expect to compete in the future with online casual game and MMORPG operators throughout Greater China. Given the low barriers to entry in the online game industry and the increasing popularity of Internet-based businesses, there are a large number of potential competitors scattered throughout many different segments of the software and Internet industries. In addition to the aforementioned competitors, traditional entertainment service providers and other entities, many of which have significant financial resources and name brand recognition, may provide online game services in the future, and thus become our competitors.

     Faced with our known competitors, and most likely several new competitors which may be established in the near future, we will continue to improve the principal competitive factors that we believe can differentiate our product offerings from those offered by our competitors, including: brand, technology, financial stability and resources, proven track record, independent oversight and transparency of business practices in our industry.

     Internet Access Service Business. In 2006, we operated a major broadband ISP and provided broadband Internet access service with multiple delivery technologies in Taiwan targeting both consumer and corporate customers. Our Internet access service business generated revenues of approximately US$20.6 million, gross profit of approximately US$8.7 million, and operating income of approximately US$4.2 million in 2006.

     Our consumer ISP business is operated through Hoshin GigaMedia and our corporate ISP business is operated through Hoshin GigaMedia’s subsidiary, KBT. Of the total access revenues recorded for 2006, consumer access revenues through Hoshin GigaMedia were approximately US$13.7 million.

     In May 2006, we sold our ADSL business to Webs-TV. See “Business Overview.” The resulting decrease in monthly ADSL revenues will be partially offset for the transition period from May 16, 2006 to December 31, 2007 by service revenues from Web-TV for the provision of certain bandwidth and consulting services on a transitional basis. Following the sale of our ADSL business, our retail ISP business is primarily composed of our cable modem broadband business, which accounted for approximately 16 percent of our ISP access revenues in 2006.

     We reached an agreement in principle in May 2004 with our cable partners to equally share revenues, thus providing our cable partners with additional economic incentives to promote two-way cable services through their systems.

     Our corporate ISP services include leased-line, virtual private networks and other value-added services. Internet access service revenues from our corporate ISP business grew from US$6.5 million in 2005 to US$6.8 million in 2006, and accounted for approximately 33 percent of total Internet access service revenues in 2006. Internet access service revenues from our consumer ISP business declined 9 percent from US$15.1 million in 2005 to US$13.7 million in 2006, and accounted for approximately 67 percent of total Internet access service revenues in 2006 as compared to 70 percent of our Internet access service revenues in 2005.

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     Our Internet access service business continues to operate in a very competitive and challenging environment. Our principal competitor, Chunghwa Telecom is the dominant provider of broadband services in Taiwan and has significantly greater resources than us. The availability of similar services at competitive prices has made it difficult for us to attract and retain customers. We do not expect to see significant growth in our subscriber base in the future, in line with our ongoing strategy to shift resources away from this legacy business. Consistent with our focus on online entertainment, we have retained financial advisors to explore the sale of this legacy business.

Subsequent Events

     We entered into the following transactions after December 31, 2006.

Acquisition of Controlling Interest in T2CN

     On April 27, 2006, we entered into certain agreements for the formation of a strategic partnership with T2CN, an online casual sports game operator in the PRC, pursuant to which we made an initial investment of US$15 million for the acquisition of 7.5 million shares of convertible preferred stock, subject to customary preferred share rights and protections. Pursuant to a shareholder agreement which we entered into with T2CN and certain of its shareholders in April 2006, which was restated and amended in November 2006, we were granted the right to elect one member to the board of directors of T2CN, and acquired certain veto rights over the management of T2CN. We were also granted rights to subscribe for additional convertible preferred shares of T2CN, based on the financial performance of T2CN in each of the twelve-month periods ended March 31, 2007 and December 31, 2007. In addition, we provided shareholders with an aggregate of approximately 52.92 percent of the issued share capital of T2CN with an option to sell their shares to us within two years from May 8, 2006 at a price equivalent to 8.65 times the net operating income of T2CN per share, subject to certain adjustments.

     In February 2007, we agreed to acquire up to 18.1 million common shares of T2CN, representing 32.39 percent of the outstanding voting rights of T2CN at that date, for a consideration which was to be determined based on the financial performance of T2CN in the first half of 2007 as follows:

(a) US$1.05 per common share if the adjusted net operating income of T2CN for the first half of 2007 was not more than US$1 million;

(b) US$1.25 per common share if the adjusted net operating income of T2CN for the first half of 2007 was between US$1 million and US$1.5 million; or

(c) US$1.45 per common share if the adjusted net operating income of T2CN for the first half of 2007 was not less than US$2.5 million.

     Total consideration payable is in the range of US$19.0 million to US$26.3 million, and is to be paid in two instalments. The first instalment of US$9.4 million and 173,814 shares of our common stock was paid on completion of the acquisition of the shares, with the remaining consideration, ranging from US$7.8 million to US$15.0 million to be paid on August 15, 2007. The consideration for the acquisition is subject to adjustment based on the financial performance of T2CN in the first half of 2007. Following this acquisition, we held approximately 45.79 percent of the total voting rights of T2CN, including voting rights associated with preferred shares held by us.

     In May 2007, we subscribed for an additional 7.5 million convertible preferred shares of T2CN, pursuant to our rights to subscribe for additional convertible preferred shares under the shareholders’ agreement. In June 2007, we also entered into a voting trust agreement with a shareholder of T2CN, pursuant to which we obtained voting rights over an additional 0.85 million common shares of T2CN. We also notified T2CN of our intention to exercise our conversion rights over the convertible voting preferred shares held by us, which conversion is expected to take place in July 2007.

     As of June 15, 2007, we own approximately 18.1 million common shares and 15 million convertible voting preferred shares of T2CN, and also control voting rights with respect to 0.85 million common shares of T2CN, which in aggregate represents a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN. The financial results of T2CN will only be consolidated in our financial results for the year ended December 31, 2007.

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Termination of Subscription Agreement with Wretch

     On December 12, 2006, Hoshin GigaMedia entered into an agreement with Wretch to terminate the subscription rights agreement we signed on March 10, 2006, in connection with, and subject to, the acquisition of Wretch by Yahoo! Taiwan. Under this termination agreement, we gave up our right to acquire a 20 percent equity stake in Wretch if and when Wretch increased its share capital within three years of the date of the subscription right agreement, and we would no longer be obligated to provide Wretch with certain free Internet services after December 31, 2006. Our right to acquire Wretch shares was terminated on May 8, 2007, the closing date of the acquisition of Wretch by Yahoo! Taiwan. Pursuant to the termination agreement, Hoshin GigaMedia obtained compensation from Wretch in the amount of approximately US$0.6 million (NT$20 million) (including VAT).

     In connection with the termination of the subscription rights agreement, we also entered into a co-operation agreement with Yahoo! Taiwan. Under the strategic co-operation arrangement, we have continued to co-operate with Wretch under the original strategic alliance, which has been expanded to include strategic co-operation with Yahoo! Taiwan, to develop a co-branded Web site with co-marketing of FunTown’s games on key Yahoo! Taiwan properties. Direct links to the co-branded Web site are prominently featured throughout Wretch, and have been placed on Yahoo! Taiwan’s online game and messenger homepages with banner advertisement rights designed to attract users to the co-branded site. Members of Yahoo! Taiwan are able to directly access FunTown’s games on the co-branded Web site with their Yahoo! login information.

Investment in Softstar Entertainment Inc.

     In June 2007, we entered into certain agreements for the formation of a strategic alliance with Softstar Entertainment Inc. (“Softstar”), a games design house and online game operator in Taiwan, pursuant to which we made an initial investment of NT$60 million (or approximately US$1.8 million) for the acquisition of 10 million convertible preferred shares, subject to customary preferred share rights and protections. These shares are convertible into an interest of approximately 16.1 percent of the issued common shares of Softstar based on its issued common share capital as of June 11, 2007, and are subject to transfer restrictions for a period of three years from June 11, 2007. Pursuant to these agreements, we obtained the right to nominate one director and one supervisor to the board of Softstar, subject to our holding at least 10 percent of the total number of outstanding shares issued by Softstar on a fully diluted basis. The convertible preferred shares are entitled to receive cumulative dividends accrued at the rate of 3 percent per annum. The convertible preferred shares shall be converted on the third anniversary of the issue date of the shares, or June 11, 2010, into common shares of Softstar on a 1:1 basis, and will be registered with the Gre Tai Securities Market, which is an over-the-counter securities market in Taiwan.

Certain Significant Events Affecting Our Results of Operations for 2004, 2005 and 2006

Change in Reporting Currency and Basis of Presentation

     Our consolidated financial statements were historically reported in New Taiwan dollars. Effective January 1, 2004, we adopted the U.S. dollar as our reporting currency because operations denominated in the U.S. dollar have represented an increasing portion of our business following the acquisition of our software licensing and online entertainment business. See Item 3 — “Key Information — Exchange Rates.”

Discontinued Operations

Divestiture — Music Distribution Business

     On September 29, 2005, we sold our land-based music distribution business to Nextbase International Limited. The music distribution business has been accounted for as a discontinued operation under U.S. GAAP and, therefore, the results of operations for all periods presented have been restated to reflect the result of the music distribution business as a discontinued operation.

     See Note 1, “Business Overview, Basis of Presentation, and Summary of Significant Accounting Policy” of our consolidated financial statements for further information.

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     Summary select financial information for discontinued operations is as follows:

	2004		2005
	(in US$ thousands)
Revenues	$	66,975	$	37,907
Income (loss) before tax and minority interest income	$	752	$	(1,861	)
Income tax (benefit)/expenses	$	5	$	(1	)
Minority interest income (loss)	$	318	$	(796	)
Income (loss) from discontinued operations	$	429	$	(154	)

     Major classes of assets and liabilities which comprised the music distribution business at the date of disposal, September 29, 2005, included the following:

(in US$ thousands)
Cash (including restricted cash)	$	3,098
Accounts receivable		1,842
Inventory		6,679
Other current assets		683
Property and equipment		1,666
Intangible assets		4,689
Other assets		1,553
Total Assets	$	20,210
Accounts payable	$	11,239
Other liabilities		1,945
Total liabilities	$	13,184

Divestiture of our ADSL Business

     On May 15, 2006, we entered into an asset purchase and sale agreement and a transition service agreement with Webs-TV to sell our ADSL business and provide certain transition services. Under the agreements, Webs-TV purchased our ADSL business and agreed upon services in an all cash transaction with a total price of approximately US$18.1 million (including VAT). Approximately US$8.9 million of the price is for the ADSL business, and approximately US$0.9 million of the price is for the right to use our ADSL brand for five years. Both are payable from May 15, 2006 through July 31, 2007. Approximately US$8.3 million represents fees for bandwidth, consulting and other support services to be provided by Hoshin GigaMedia on a transitional basis through December 31, 2007, and is payable from May 15, 2006 through February 28, 2008. Cash proceeds received in 2006 from the sale of the ADSL business, net of transaction costs and VAT, were approximately US$3.3 million. We expect to receive approximately US$5.0 million in 2007 related to this sale, net of transaction costs and VAT. The transferred ADSL business includes our ADSL-related equipment, business contracts, and subscription contracts between Hoshin GigaMedia and approximately 62,000 ADSL subscribers. For further information, please see Note 4 of our financial statements.

     Our results of continuing operations in 2006 included a pre-tax one-time gain from the sale of the ADSL business of US$7.7 million, which was recorded in non-operating income. The ADSL business does not qualify under FAS 144 as a component that may be reported as discontinued operations since the operations and cash flows of our ADSL business cannot be clearly distinguished operationally and for financial reporting purposes from the rest of our ISP business. Therefore, we have not reported the sale of or ADSL business as discontinued operations.

Consolidation of UIM Under FIN 46(R)

     In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” (“FIN 46”), which clarifies when a company should consolidate in its financial statements the assets, liabilities and activities of a variable interest entity. FIN 46 provides general guidance as to the definition of a variable interest entity and requires a variable interest entity to be

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consolidated if a company absorbs the majority of the variable interest entity’s expected losses, or is entitled to receive a majority of the variable interest entity’s residual returns, or both.

     The FASB amended FIN 46 by issuing FIN 46(R) in December 2003. In April of 2004, we entered into a software license and support service contract with UIM to provide Internet software support services for UIM’s online entertainment operations. The contract allows us to charge a percentage of UIM gross receipts resulting from UIM’s online entertainment operations. The percentage of gross receipts varies depending upon the software and support services selected by UIM. We analyzed the provisions of FIN 46(R) as it relates to contractual relationships and determined that we were and continue to be the primary beneficiary of UIM. As a result of such determination, we have incorporated the results of UIM into our consolidated financial statements as of and for nine months ended December 31, 2004, and as of and for the years ended December 31, 2005 and 2006, even though we own none of UIM’s equity. UIM’s net assets as of December 31, 2005 and 2006 were approximately US$0.6 million and US$0.8 million, respectively, and the consolidation of UIM resulted in an increase in our assets and liabilities of approximately US$3.5 million and US$2.9 million in 2005, respectively, and US$12.8 million and US$12.1 million in 2006, respectively. Because we have no equity ownership interest in UIM, the consolidation had no impact on our net income.

Critical Accounting Policies

     The discussion and analysis of our financial condition and results of operations are derived from our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. We continually evaluate our estimates and assumptions, which are based on historical experience and other various factors that we believe are reasonable under the circumstances. The results of these estimates and assumptions form the basis for making judgments about the carrying values of certain assets and liabilities. Our actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussions address the most critical accounting policies applicable to our Company, which are those that are most important to the portrayal of the financial condition and results of operations of our Company, and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Acquisitions

     During 2004, we acquired Grand Virtual, Inc. and certain of its affiliates in a private transaction from the founding shareholders of GV Enterprise Voting Trust, through our wholly-owned subsidiary, CESL, for an all-cash consideration of US$32.5 million.

     On December 19, 2005, we entered into a definitive agreement with TWP to acquire FunTown. In January 2006, we completed the acquisition of FunTown and purchased certain assets and assumed certain liabilities of FunTown for a total consideration of approximately US$43 million, which included cash payments of approximately US$27.2 million and zero coupon convertible notes in the aggregate principal amount of approximately US$15 million with a valuation premium on the convertible notes of approximately US$0.8 million as determined by a third-party valuer. The transaction also included an incentive in the form of an additional amount to be paid by GigaMedia on April 1, 2007, which amount was to be determined based on the increase of adjusted pre-tax income of FunTown in 2006 as compared to 2005 as follows:

(i) If the increase in 2006 was 30 percent or more, an additional payment of US$5 million;

(ii) If the increase in 2006 was 15 percent or above but less than 30 percent, a reduced incentive payment; or

(iii) If the increase in 2006 was less than 15 percent, no additional payment.

     Adjusted pre-tax income of FunTown includes certain pre-agreed upon non-GAAP adjustments to the GAAP pre-tax income. At December 31, 2006, we accrued an additional payment of US$5 million, which was subsequently paid in April and May 2007, since the adjusted pre-tax income of FunTown in 2006 increased more

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than 30 percent as compared to 2005. We also redeemed the zero coupon convertible notes in full between July and September 2006.

     In the absence of a quoted market price for these businesses, the acquisition prices of these businesses were determined based on management’s estimates for the fair value of the acquired net assets, including goodwill and intangibles. We determined the purchase price allocation based on estimates of the fair values of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition. These estimates were arrived at with the assistance of independent valuation consultants utilizing recognized valuation techniques. Any excess of cost over the net of the amounts assigned to the assets acquired and liabilities assumed is recorded as goodwill. The actual fair value of such acquired net assets may differ significantly from management’s estimates.

Revenue Recognition

     We recognize revenues when persuasive evidence of an arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectibility is reasonably assured.

     We enter into multiple-element revenue arrangements, which may include any combination of services, software, and/or products. To the extent that a deliverable in a multiple-element arrangement is subject to specific guidance (e.g. leased cable modems and Internet access-related equipment solutions which are subject to Statement of Financial Accounting Standards (FAS) No. 13, “Accounting for Leases,” and online gaming software that is subject to the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) No. 97-2, “Software Revenue Recognition,”) whether and/or how to separate multiple deliverable arrangements into separate units of accounting (separability) and how to allocate the arrangement consideration among those separate units of accounting (allocation) for that deliverable is accounted for in accordance with such specific guidance. All other deliverables in multiple-element arrangements are accounted for in accordance with EITF 00-21 “Revenue Arrangements with Multiple Deliverables.”

     In addition to the aforementioned general policies, we have adopted specific revenue recognition policies for each major category of revenue.

Software Licensing and Online Entertainment Revenues

     We record revenues from our software licensing and online entertainment business from licensing our software and providing support services. These revenues are recognized monthly as a fixed percentage of our licensees’ gross receipts. Under the provisions of FIN 46(R), the results of UIM, our major licensee, have been incorporated into our 2004, 2005 and 2006 consolidated financial statements. UIM and GigaMedia are separately owned. (See Note 3 of our financial statements for additional information). Our software licensing and support service revenues are based upon a percentage of gross receipts generated by UIM’s online gaming operations, and are recognized monthly. Software licensing and support service revenues we receive from providing such services to UIM have been eliminated in consolidation.

     Multiple-element revenue arrangements involving UIM’s provision of software and software-related elements to customers are accounted for in accordance with SOP 97-2. UIM earns revenues by providing and promoting online games of skill and chance that are available on its gaming software, which may be downloaded free of charge. Generally, UIM operates online casino destinations in which players place bets against the house, and also operates an online multi-player poker platform in which players place bets among themselves, for which UIM charges a small transaction fee in each game played. Accordingly, revenues earned by UIM comprise mainly net house win and transaction fees. UIM’s online gaming service is inseparable from the software element involved and UIM does not sell each element separately. UIM’s online gaming service does not involve significant production, modification, or customization of the gaming software. Revenues derived from UIM’s online gaming software platform incorporated in our financial statements in accordance with FIN 46(R) are recognized at the time the games are played and are net of player earnings. Player account balances are presented as current liabilities, which are first accrued for in full upon the receipt of player deposits, and increased or decreased based on player activities, including player wins, losses, withdrawals and refunds. Transaction fee revenues derived from UIM’s online multi-player poker platform are recognized as services are provided. Residual expenses and commissions are charged to expenses as incurred.

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Online Game Revenues

     Online game revenues are related to our online games business in Asia.

     Online game revenues are collected through the sale of online game points, pre-paid cards, and game packs. Virtual online game points are sold directly to end-users who can make the payments through credit cards or channel partners such as telecommunication service operators. Physical pre-paid cards and game packs are sold through distributors and convenience stores. Proceeds from sales of online game points, physical cards and game packs, net of sales discounts, are deferred when received and revenue is recognized upon the actual usage of the playing time or in-game services by the end-users; over the estimated useful life of virtual items; or when the sold game points expire and are no longer eligible to access the online games or products in accordance with our published game points expiration policy.

     Revenue recognized on the sales of virtual online game points is reported on a gross basis, which includes service fees paid to channel partners for payment processing. Fixed percentage fees retained by channel partners for payment processing related to our online game services are recognized as cost of online game revenues.

Internet Access Service Revenues

     Internet access service revenues include revenues derived from cable modem Internet access services, ADSL Internet access service business, which we sold in May 2006 (see Note 4 of our financial statements for additional information), Internet access services to corporate customers, IP bandwidth services to cable operators which enable them to offer their own cable modem services, and Internet access-related services, including non-refundable activation fees, billing and consulting services, and other value-added services.

     Cable modem, ADSL, and corporate revenues are recorded net of discounts, and in the case of our cable modem and corporate services, net of fees paid to our cable partners in accordance with revenue sharing agreements in effect between our Company and our cable partners. Customers have a choice of paying either monthly or in advance for a certain period of time, for which they receive corresponding discounts. We record any such advanced payment receipts as other current liabilities on our balance sheet and amortize such revenues over the subscription period. Revenues related to provision of bandwidth to cable operators are recognized either on the basis of revenue sharing from cable operators, or on the basis of the subscriber numbers, or by the level of bandwidth usage. Non-refundable activation fees are combined with our Company’s Internet access revenues as a single unit of accounting. Since the activation fees are not in exchange for services performed that represent the culmination of a separate earnings process, such fees are deferred in accordance with the Staff Accounting Bulletin Topic 13 “Revenues Recognition.” As part of our Internet access-related services, our Company also provides a variety of value-added services, including billing, consulting, co-location, and VPN services to corporate customers, and premium mail, Web storage space, and online photo albums, to retail customers. The value-added services are not bundled together as a group of services within one contract, nor are they bundled with any of our Company’s broadband access services.

     All Internet access service revenues are recognized on a straight-line basis over the subscription period or for the period in which the service is performed if no significant Company obligations remain and collection of the receivables is reasonably assured.

     Our Company also provides cable modem equipment and Internet access-related equipment solutions to our subscribers on an operating lease basis. The rental service is bundled with the access service contract. Pursuant to EITF 00-21 and FAS 13, the contract considerations are allocated among/between the FAS 13 deliverable and non-FAS 13 deliverable(s) based on their relative fair values. For the leased cable modem, the amounts attributable to the rental elements are negligible and rental revenue is recognized over the same period as the access service is rendered. Our Company therefore does not allocate the FAS 13 deliverable separately from the total contract considerations. For leased Internet access related equipment solutions, the FAS 13 element is separated from the contract considerations and reported under the caption, “Other Revenues.”

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Other Revenues

     Other revenues consist of sales of other Internet access-related products and rental income from the lease of Internet access-related equipment to subscribers of our Company’s Internet access service business, and are recognized when products are delivered or services are provided.

Discontinued Operations

     For 2004 and 2005, a portion of our Company’s revenues were generated from retail sales of music merchandise comprised of pre-recorded music (including compact discs and audio cassettes), video (including DVD and pre-recorded videocassettes), video games and other complementary products (including electronics, accessories, blank tapes and CD-Rs). Revenues from these retail sales were recognized at the point of sale to the consumer, at which time payment was tendered. Our Company’s policy was to not accept sales refunds or exchanges.

     We disposed of our music distribution business in September 2005, and as a result have classified the income from these revenue-generating activities as part of discontinued operations.

Deferred Revenues

Deferred revenues consist of the prepaid fees related to our online games business, and the advance payment receipts related to Internet access services.

Prepaid fees related to our online games business are recognized as revenues upon the actual usage of the playing time or in-game services by the end-users; over the estimated useful life of virtual items; or when the sold game points expire and are no longer eligible to access the online games or products in accordance with our published game points expiration policy.

The advanced payment receipts related to Internet access services are deferred and amortized over the relevant subscription period.

Operation Costs

     Cost of sales consists primarily of online entertainment and online game processing costs, online game royalties, production costs for prepaid game cards, amortization of intangible assets, customer service department costs for our online game and Internet access businesses, Internet access engineering costs, Internet access bandwidth costs, and depreciation, maintenance and other overhead expenses directly attributable to the provision of software licensing and online entertainment, online game, and Internet access service revenues.

Allowance for Doubtful Accounts

     An allowance for doubtful accounts is provided based on an evaluation of collectibility of notes receivable, accounts receivable and other receivables.

Classification of Marketable Securities

     All of our investments in marketable securities are classified as available-for-sale. Marketable securities included in current assets represent securities with a maturity of less than one year or securities that management intends to sell within one year. Securities classified as non-current include securities that have a maturity of more than one year or securities that management does not intend to sell within one year. Marketable securities principally consist of debt securities and equity securities of public and privately held companies and investment funds. Debt securities and equity securities of public held companies, and investment funds are stated at fair value with any unrealized gains or losses recorded in accumulated other comprehensive income (loss) in shareholders’ equity until realized. Equity securities in non-publicly traded companies are primarily accounted for using the cost method. Unrealized losses that are considered other-than-temporary are included in the current year’s operations. Realized gains and losses, measured against cost, are also included in the current year’s operations.

     We had approximately US$20.4 million and US$13.8 million of investments classified as current marketable securities as of December 31, 2005 and 2006, respectively. As of December 31, 2005 and 2006, the balances of unrealized gains from these securities were approximately US$0.3 million and US$0.6 million, respectively. There

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is no unrealized loss for current marketable securities as at December 31, 2006. See Note 9 of our consolidated financial statements for additional information.

     As of December 31, 2004, we had an investment of approximately US$2.9 million in Gamania Digital Entertainment Co., Ltd. (“Gamania”). Our investment represented 4,905,000 shares or approximately 3 percent ownership in Gamania. We had no ability to exercise significant influence over Gamania’s operating and financial policies. The market price of Gamania’s shares had been below our carrying cost for an extended period of time; therefore, we recorded an other-than-temporary loss of US$1.8 million on December 31, 2004. As of December 31, 2005, our investment in Gamania shares was classified as marketable securities-current, as a result of our agreement with JSDWAY Digital Technology Co., Ltd (“JSDWAY”) regarding the purchase and sale of Gamania shares. Pursuant to the agreement, we granted JSDWAY an option to buy, at NT$18.70 per share, a total of 4,905,000 common shares of Gamania owned by us, and JSDWAY granted us an option to sell to JSDWAY, at NT$18.70 per share, the Gamania shares owned by us. JSDWAY also provided a deposit as a guarantee for fulfillment of its payment obligations under the aforementioned agreement. Due to this arrangement with JSDWAY, the Gamania securities were classified as marketable securities-current and marked-to-market at NT$18.70 per share in our consolidated financial statements for 2005. In December 2006, we entered into a termination agreement with JSDWAY to terminate the option agreement, and thereafter sold all of the Gamania Shares in the public market recording an after tax gain on the sale of approximately US$2.1 million.

We had approximately US$0 million and US$25 million of investments classified as non-current marketable securities as of December 31, 2005 and 2006, respectively. As of December 31, 2006, our non-current marketable securities consisted primarily of our investments in RMC, T2CN and Infocomm Asia.

Rock Mobile (Cayman) Corporation (“RMC”)

     On December 31, 2005, we exchanged all of our 3,000,000 Rock Internet Corporation (“RIC”) shares for 646,859 ordinary shares, or a 1.04 percent shareholding in RMC, a company headquartered in Mainland China that provides music-related digital entertainment content and services through mobile networks and telecommunication devices. RIC had a 24.02 percent effective beneficial shareholding in RMC before the share exchange. As of December 31, 2006, we held an approximate 0.88 percent direct shareholding in RMC. Our shareholding in RMC was diluted in 2006 as a result of RMC’s new share issuance during the year. In 2002 and 2003, this investment had been considered impaired due to the downturn in the music industry and the significant operating losses incurred by RIC, and the investment balance was fully written off.

T2CN

     Pursuant to a strategic investment agreement and a preferred share purchase agreement, both dated April 27, 2006, we acquired 7,500,000 voting convertible preference shares of T2CN for an aggregate consideration of US$15 million. These shares are convertible into 7,500,000 ordinary shares, representing an approximate 19.02 percent interest in the issued share capital of T2CN as of the date of the agreement. Pursuant to a shareholders’ agreement which we entered into with T2CN and certain of its shareholders in April 2006, which was subsequently amended and restated in November 2006, we also obtained the right to elect one director to the board of directors of T2CN, and acquired certain veto rights over the management of T2CN. We were also granted rights to subscribe for additional convertible preferred shares of T2CN, based on the financial performance of T2CN in each of the twelve-month periods ended March 31, 2007 and December 31, 2007. In addition, we provided shareholders with an aggregate of approximately 52.92 percent of the issued share capital of T2CN with an option to sell their shares to us within 2 years from May 8, 2006 at a price equivalent to 8.65 times the net operating income of T2CN per share, subject to certain adjustments. Such put price can be settled in cash or in our shares. We have evaluated the terms of the put option and determined that the fair value of such put option is immaterial.

     The convertible preferred shares have an initial liquidation preference equal to 1.2 times the original investment plus compound annual interest of 15 percent, are entitled to receive cumulative dividends, at 8 percent per annum on the aggregate nominal value of ordinary shares into which the preferred shares may be converted, and are redeemable at their original issue price starting December 31, 2009.

     They are convertible into T2CN common shares on a one-for-one basis, subject to certain adjustments, and shall be automatically converted upon the closing of a qualified public offering or the election of the holders of at least 50

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percent of the outstanding preferred shares. The embedded conversion options of the preferred shares do not meet the definition of derivative instruments under FAS 133 “Accounting for Derivatives Instruments and Hedging Activities,” (“FAS 133”) and are not bifurcated from the preferred share investment. We have applied the guidance provided in EITF 02-14 “Whether an Investor Should Apply the Equity Method of Accounting to Investment Other Than Common Stock,” (“EITF 02-14”) to determine whether our preferred share investments are in substance common shares which should be accounted for under the equity method. Given that our preferred shares have substantive liquidation preferences over those of T2CN’s common shares, we have accounted for our preferred share investment in T2CN under the cost method.

     We assessed potential impairment of our T2CN investment, and concluded that no write-down was required as of December 31, 2006.

     In February 2007, we acquired 18.1 million shares of T2CN, representing 32.39 percent of the outstanding voting rights of T2CN at that date, for a total consideration in the range of US$19.0 million to US$26.3 million. The consideration for the acquisition is subject to adjustment based on the financial performance of T2CN in the first half of 2007. In May 2007, we exercised our right under the shareholders’ agreement to subscribe for an additional 7.5 million convertible preference shares in T2CN. In June 2007, we also entered into a voting trust agreement with a shareholder of T2CN, pursuant to which we obtained voting rights over an additional 0.85 million common shares of T2CN. We also notified T2CN of our intention to exercise our conversion rights over the convertible voting preferred shares held by us, which conversion is expected to take place in July 2007.

     As of June 15, 2007, we own approximately 18.1 million common shares and 15 million convertible voting preferred shares of T2CN, and also control voting rights with respect to 0.85 million common shares of T2CN, which in aggregate represents a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN.

Infocomm Asia

     Pursuant to a share subscription agreement dated December 7, 2006, we acquired 500,000 voting convertible preference shares of Infocomm Asia for an aggregate consideration of US$10 million. These shares are convertible into 500,000 ordinary shares, representing an approximate 32.26 percent interest in the issued share capital of Infocomm Asia as of December 7, 2006, which would make our Company the largest shareholder of Infocomm Asia on an as converted basis. We also obtained the right to elect one director to the board of directors of Infocomm Asia. The purchase price may be settled in cash or shares at our Company.

     The convertible preferred shares have an initial liquidation preference which equals the subscription price of $10 million, are entitled to receive cumulative dividends, at 8 percent per annum, and are redeemable within five years of their issuance date. The redemption amount is the preferred share issuing cost plus interest accrued at the rate of 10 percent per annum.

     One preferred share is convertible into one common share of Infocomm Asia, subject to certain adjustments and limitations, and shall be automatically converted into the common shares of Infocomm Asia upon the closing of a qualified public offering or the election of the holders of at least 70 percent of the same class of outstanding preferred shares. The embedded conversion options of the preferred shares do not meet the definition of derivative instruments under FAS 133, and are not bifurcated from the preferred shares investment.

     We have applied the guidance provided in EITF 02-14 to determine whether our preferred share investments are in substance common shares which should be accounted for under the equity method. Given that our preferred shares have substantive liquidation preferences over those of Infocomm Asia’s common shares, we have accounted for our preferred share investment in Infocomm Asia under the cost method.

     We assessed potential impairment of our Infocomm Asia investment, and concluded that no write-down was required as of December 31, 2006.

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Impairment of Long-Lived Assets

     Fixed assets and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The estimate of fair value is generally based on quoted market prices or on the best available information, including prices for similar assets and the results of using other valuation techniques. During 2006, we did not record any asset impairment charges.

Impairment of Intangible Assets

     We have significant amortizable intangible assets arising from the acquisition of CESL and Fun Town and the capitalization of software development costs in our software licensing and online entertainment business and online games business. The amortizable intangible assets are amortized on a straight-line basis over estimated useful lives ranging from two to ten years. As of December 31, 2006, the balance of amortizable intangible assets was US$12.3 million. In determining the useful lives and recoverability of the intangibles, assumptions must be made regarding estimated future cash flows and other factors to determine the fair value of the assets, which may not represent the true fair value of such assets. If these estimates or their related assumptions change in the future, there may be a significant impact on our results of operations in the period of the change incurred. Based on our impairment test performed in 2006, we did not record any intangible assets impairment loss for 2006. However, as the value of intangible assets and its impairment are determined based on a number of assumptions and management’s estimates, a change in assumptions and circumstances in the future may have a significant impact on our results of operations in the period when a change occurred.

Impairment of Goodwill

     Goodwill represents the adjusted amount of the cost of acquisitions in excess of the fair value of net assets acquired in purchase transactions. Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“FAS 142”). Under the provisions of FAS 142, goodwill is no longer subject to amortization and the potential impairment of goodwill and purchased intangible assets with indefinite useful lives will be evaluated at least annually using the specific guidance provided by FAS 142. We periodically evaluate the carrying amount of goodwill to determine whether adjustments to these amounts are required based on current events and circumstances. We perform an analysis of the recoverability of goodwill using a cash flow approach consistent with the analysis of the impairment of long-lived assets. We performed an impairment test of our goodwill as of December 31, 2006 and recorded no goodwill impairment loss for 2006. However, as the value of goodwill and its impairment are determined based on a number of assumptions and management’s estimates, a change in assumptions and circumstances in the future may have a significant impact on our results of operations in the period when a change occurs.

Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Loss carryforwards and investment credits are measured using the enacted tax rate and laws that will be in effect in different jurisdictions in which we operate when the differences are expected to reverse. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are subject to valuation allowances based upon the management’s estimate of realization. Due to the slow market growth and strong competition we face in our Internet access service business, we made a full allowance for all of the aggregate net deferred tax assets as of December 31, 2006. Actual results may differ significantly from management’s estimate.

Minority Interest

     Minority interest includes 100 percent of the common stock of UIM held by outside shareholders. UIM was deemed a VIE as defined by FIN 46(R) and our Company was considered the primary beneficiary of UIM. Under

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the provisions of FIN 46(R), we have incorporated the results of UIM into our 2004, 2005 and 2006 Consolidated Financial Statements, even though we own none of UIM’s equity. For more information, please see Note 3 of our financial statements.

     Beginning in December 2006, minority interest also includes 30 percent of the common stock of Dragongate Enterprises. 30 percent of the common stock of Dragongate Enterprises is held by an outside shareholder, Cyber Gateway Pte Ltd, which is 100 percent owned by Infocomm Asia. Infocomm Asia is one of our Company’s investments, and is accounted for using the cost method. For more information, please see Note 12 of our financial statements.

     Prior to the sale of the music distribution business on September 29, 2005, minority interest also included 41.42 percent of the common stock of G-Music Limited held by outside shareholders; subsequent to the divestiture of G-Music Limited, related minority interest income was included in discontinued operations.

Share-Based Compensation

     Prior to January 1, 2006, we elected to measure stock-based compensation expense using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”), as interpreted, with pro-forma disclosures of net income (loss) and earnings (loss) per share, as if the fair-value method of accounting defined in FAS No. 123 “Accounting for Stock-Based Compensation,” (“FAS 123”) were used.

     Effective January 1, 2006, we adopted the fair value recognition provisions of FAS No. 123(R), “Share-Based Payment” (“FAS 123(R)”), using the modified prospective method and therefore have not restated results for prior periods. Under this transition method, stock-based compensation expense for the year ended December 31, 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the original provision of FAS 123. Stock-based compensation expense for all stock-based compensation awards granted after January 1, 2006, is based on the grant date fair value estimated in accordance with the provision of FAS 123(R). FAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. In connection with the adoption of FAS 123(R), we changed our method of attributing the value of stock-based compensation to expense from the graded-vesting method to the straight-line method. Compensation expense for all share-based payment awards granted on or prior to December 31, 2005 will continue to be recognized using the graded-vesting method, while compensation expense for all share-based payment awards granted subsequent to December 31, 2005 are recognized using the straight-line method. Because our Company had not recorded any compensation cost in our Statement of Operations prior to the adoption of FAS 123(R), no cumulative effect adjustment was recorded upon adoption. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of FAS 123(R) and the valuation of share-based payments for public companies. We have applied the provision of SAB 107 in our adoption of FAS 123(R). For more information, please see Note 19 of our financial statements.

Retirement Plan and Net Periodic Pension Cost

     Under our defined benefit pension plan, net periodic pension cost, which includes service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on an actuarial valuation report. Effective December 31, 2006, we adopted the provisions of FAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Post-Retirement Plans — An Amendment of FASB Statements Nos. 87, 88, 106, and 132(R),” (“FAS 158”). FAS 158 requires the recognition of the funded status of pension plans and non-pension post-retirement benefit plans (retirement-related benefit plans) as an asset or a liability in the consolidated balance sheets. In addition, the pronouncement requires previously unrecognized items, such as actuarial gains and unrecognized prior service costs or credits, to be recognized on the consolidated balance sheets as a component of other comprehensive income (loss). The provisions of FAS 158 were adopted pursuant to the transition provisions therein. (See Note 17 of our financial statements for additional information, including the incremental effect of the adoption on our Consolidated Financial Statements.)

     Under our defined contribution pension plan, net periodic pension cost is recognized as incurred.

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Recent Accounting Pronouncements

     In March 2006, the FASB issued FAS No. 156, “Accounting for Servicing of Financial Assets — an Amendment of FASB Statement SFAS No. 140, (“FAS 156”). FAS 156 simplifies the accounting for loan servicing rights and the financial instruments used to hedge risks associated with those rights. FAS 156 requires that servicing rights be valued initially at fair value, and subsequently accounted for at either fair value, or amortized over the economic life of the related lease. The provisions of FAS 156 will be effective for fiscal years beginning after September 15, 2006. The adoption of FAS 156 is not expected to have a material impact on our financial statements.

     In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. The provisions of FIN 48 will be effective for fiscal years beginning after December 15, 2006. We are in the process of determining what effect, if any, the adoption of FIN 48 will have on our financial statements.

     In September 2006, the SEC released Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB 108”), which provided the Staff’s view regarding the process of quantifying financial statement misstatements. SAB 108 requires an entity to quantify misstatements using both a balance sheet and income statement approach to determine if a misstatement is material. Our Company adopted SAB 108 in fiscal 2006, and it did not have a material effect on our financial statements.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures,” (“FAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are in the process of determining what effect, if any, the adoption of FAS No. 157 will have on our financial statements.

     In September 2006, the FASB issued FAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans — an Amendment of FASB Statements No 87, 88, 106 and 132(R),” (“FAS 158”). FAS 158 improves reporting of obligations for pensions and other post-retirement benefits by recognizing the over-funded or under-funded status of plans as an asset or liability. The pronouncement does not change how plan assets and benefit obligations are measured under FAS 87 and FAS 106 nor does it change the approach for measuring annual benefit cost reported in earnings. Rather, it eliminates the provisions that permit plan assets and obligations to be measured as of a date not more than three months prior to the balance sheet date, instead requiring measurement as of the reporting date. In addition, the pronouncement requires previously unrecognized items, such as actuarial gains and unrecognized prior service costs or credits to be recognized on the balance sheet as a component of other comprehensive income (loss). We adopted FAS No. 158 as of December 31, 2006, and the adoption had no material impact on our financial statements. (See Note 17, “Pension Benefits,” for additional information, including the incremental effect of the adoption on our financial statements.)

     In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Liabilities,” (“FAS 159”). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. If the fair value option is elected, unrealized gains and losses will be recognized in earnings at each subsequent reporting date. FAS 159 is effective for fiscal years beginning after November 15, 2007. We are in the process of determining what effect, if any, the adoption of FAS No. 159 will have on our financial statements.

Foreign Currency Exchange

     Effective January 1, 2004, we adopted the U.S. dollar as our reporting currency as operations denominated in the U.S. dollar have represented an increasing portion of our business following the acquisition of our software licensing and online entertainment business. Our financial results may be impacted by fluctuations of exchange rates between the NT dollar and the U.S. dollar, exposing us to foreign currency exchange risks. We have not sought to reduce our exposure to exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future. We recognized a foreign exchange loss of approximately US$0.8 million for 2004, and a gain of approximately US$0.2 million for 2005 and a loss of approximately US$0.2 million for 2006.

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Taxation

     At December 31, 2006, we had net operating loss carryforwards for tax purposes of approximately US$12.3 million and US$0.1 million, arising from our Internet access services operations in Taiwan and from our online games business in Hong Kong, respectively. These operating loss carryforwards will expire at various times from December 2007 through December 2009 for Taiwan and infinitely for Hong Kong. At December 31, 2006, we had a deferred tax asset of US$4.0 million, relating principally to our net operating loss. Our ability to realize the value of our deferred tax asset depends on many factors, including (among others) an assessment of our ability to generate taxable income, overall industry outlook and the outlook for the Taiwan and Hong Kong economies. We value our deferred income tax assets on an ongoing basis, and make valuation allowances if, in our assessment, current results suggest that it is more likely than not that a portion or all of our deferred income tax assets will not be realized before their expiration. We determined that valuation allowance was required as of December 31, 2004, 2005 and 2006. The current corporate income tax rate in Taiwan is 25 percent. Any future taxable income derived from Taiwan-based operations exceeding these operating loss carryforwards will be subject to Taiwan income tax.

     As per the R.O.C. income tax laws, all retained earnings generated beginning January 1, 1998 by our subsidiaries under Taiwan law and not distributed to us as dividends in the following year are assessed a 10 percent retained earnings tax. This rule applies primarily to our Internet access service business and our online games portal whose principal operating entities are incorporated under Taiwan law.

     On January 1, 2006, the R.O.C. government enacted the AMT Act. AMT imposed under the AMT Act is a supplemental tax which is payable if the income tax payable pursuant to the R.O.C. Income Tax Act is below the minimum amount prescribed under the AMT Act. The AMT rate for business entities is 10 percent. The taxable income for calculating the AMT includes most income that is exempted from income tax under various legislations, such as tax holidays and investment tax credits. For example, gains on disposal of marketable securities from our Taiwan-based entities were exempt from income tax based on Taiwan tax laws prior to AMT Act. However, such gains will need to be included for the purpose of calculating the AMT. The AMT did not have a material effect on our income tax expense in 2006.

     The majority of our software licensing and online entertainment business is located outside the United States, with the exception of CIDC, an entity registered in Delaware, which is subject to U.S. federal income tax, state tax and local tax. Current U.S. federal income tax rate and state and local tax rates applicable to our business for the year ended December 31, 2006 are 34 percent and 6.8 percent, respectively. Our operations in the United States did not have a significant tax impact on the Company’s consolidated financial statements.

Discussions of Results of Operations

Factors Affecting Our Performance

     We believe that the following are the principal factors affecting our results of operations:

     Acquisitions and dispositions. We have made several significant acquisitions and dispositions of businesses during the past several years, and may enter into additional acquisition and disposition transactions in the future. Past acquisitions and dispositions have had a significant impact on our results of operations over the past several years, and if we engage in such transactions in the future, the nature, amounts and timing of our revenues, expenses and cash flows and the nature and amounts our assets and liabilities are likely to be materially affected.

     Development of online gaming and online games industries. The gaming software and online games industries are in relatively early stages of development. We believe that our results of operations are likely to be affected by developments in these industries, including:

• the development and regulation of these industries generally;

• our adaptation to technological change;

• changing consumer preferences;

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• legal development affecting these industries, in particular the online gaming industry; and

• general economic conditions in the markets where we or our licensees operate.

     Competition. All of our businesses are in industries that are extremely competitive. Our gaming software and online games business are characterized by rapid technological change and we face significant and intense competition from online gaming software design houses, application service providers and casual games operators. Our Internet access service business has experienced a reduction in the number of new consumer subscribers and total consumer subscribers due to intense competition in the Internet access services industry in Taiwan. The primary basis of competition in the Internet access business industry is price. Due to this intense competition, there may be a limited market opportunity for our broadband access services.

     For each of our businesses, we cannot assure you that we will be successful in adapting to technological developments and achieving widespread acceptance of our services before our competitors offer services similar to our current or prospective offerings. As a consequence, we may lose our existing customers and not expand our client base, which would have a material adverse effect on our revenues and financial condition.

     The table below presents, for the periods indicated, information regarding certain revenues and expense items for our consolidated operations. The presentation of financial information for the financial years ended December 31, 2004 and December 31, 2005 has been reclassified to conform with the current year presentation for the year ended December 31, 2006:

	For the year ended December 31,
	2004						2005						2006
	Amount			% of			Amount			% of			Amount			% of
	in US$			total			in US$			total			in US$			total
Particulars	thousands			revenues			thousands			revenues			thousands			revenues
OPERATING REVENUES
Software licensing and online entertainment revenues		11,434			34.8			22,511			50.9			55,019			58.3
Online game revenues		—			—			—			—			18,692			19.8
Internet access and service revenues		21,303			64.9			21,589			48.9			20,537			21.8
Other revenues		107			0.3			87			0.2			44			0.1
Total operating revenues		32,844			100.0			44,187			100.0			94,292			100.0
OPERATING COSTS
Cost of software licensing and online entertainment revenues		1,592			4.8			3,327			7.5			7,824			8.3
Cost of online game revenues		—			—			—			—			3,667			3.9
Cost of Internet access and service revenues		13,873			42.2			13,568			30.7			11,449			12.1
Cost of other revenues		644			2.0			488			1.1			391			0.4
Total operating costs		16,109			49.0			17,383			39.3			23,331			24.7
Gross profit		16,735			51.0			26,804			60.7			70,961			75.3
OPERATING EXPENSES
Product development and engineering expenses		2,513			7.7			3,562			8.1			5,738			6.1
Selling and marketing expenses		6,310			19.2			10,777			24.4			30,123			31.9
General and administrative expenses		5,657			17.2			7,892			17.9			12,421			13.2
Bad debt expense		(220	)		(0.6	)		207			0.4			715			0.8
Total operating expenses		14,260			43.5			22,438			50.8			48,997			52.0
Income from operations		2,475			7.5			4,366			9.9			21,964			23.3
NON-OPERATING INCOME (EXPENSES)		(1,143	)		(3.5	)		2,710			6.1			10,690			11.3
INCOME TAX BENEFIT (EXPENSE)		84			0.3			(436	)		(1.0	)		(1,549	)		(1.6	)
INCOME FROM CONTINUING OPERATIONS		1,253			3.8			6,490			14.7			30,784			32.6
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		429			1.3			(154	)		(0.4	)		—			—
NET INCOME		1,682			5.1			6,336			14.3			30,784			32.6

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     The key items included in our income statement are:

     OPERATING REVENUES. Our operating revenues consist of revenues from the software licensing and online entertainment business, online games business and the Internet access service business. Revenues from the software licensing and online entertainment business include revenues of UIM, our licensee, from providing and promoting online games of skill and chance. See “— Consolidation of UIM Under FIN 46(R).” Software licensing and support services revenues received by our subsidiary, CESL, from UIM have been eliminated in consolidation. Online game revenues are related to our online game business in Asia and are collected through the sale of online game points, pre-paid cards and game packs. Revenues from the Internet access service business consist of Internet access revenues, subscription revenues and proceeds from sales of cable modems and other related products.

     OPERATING COSTS. Operating costs consist primarily of online entertainment and online game processing costs, online game royalties, production costs for prepaid game cards, amortization of intangible assets, customer service department costs for our online game and Internet access businesses, Internet access engineering costs, Internet access bandwidth costs, and depreciation, maintenance and other overhead expenses directly attributable to the provision of software licensing and online entertainment, online game, and Internet access services revenues.

     OPERATING EXPENSES. Operating expenses include product development and engineering expenses, selling and marketing expenses, general and administrative expenses, bad debt expenses, and impairment loss on property, plant and equipment.

     NON-OPERATING INCOME (EXPENSES). Non-operating income and expenses consist of interest income and expenses, gain or loss on sales of marketable securities, other-than-temporary impairment of marketable securities, gain on divestiture of business, foreign exchange gain or loss and gain or loss on disposal of property, plant and equipment.

     INCOME TAX BENEFITS (LOSSES). Taxes include income tax in various jurisdictions in which our subsidiaries operate and deferred tax assets or liabilities that arise due to the timing differences between book profits and taxable profits that originate in one period and are capable of reversal in one or more subsequent periods. Taxes are measured using the tax rates and laws that have been enacted or subsequently enacted as of the date of the financial statements.

     The financial information in relation to our business segments is provided net of inter-segment transactions.

For the Years Ended December 31, 2005 and 2006

Consolidated Results Of Operations

     OPERATING REVENUES. Operating revenues for 2006 grew by approximately 113 percent to approximately US$94.3 million from approximately US$44.2 million in 2005. The increase was primarily a result of strong revenue growth from the software licensing and online entertainment business, which contributed approximately US$55 million, or 58 percent, of our total revenues in 2006 compared to approximately US$22.5 million in 2005, or 51 percent of our total revenues in 2005 and the acquisition of our online games business in January 2006, which contributed approximately US$18.7 million, or 20 percent, of our total revenues in 2006.

     OPERATING COSTS. Operating costs increased by approximately 34 percent to approximately US$23.3 million in 2006 from approximately US$17.4 million in 2005. The increase in total operating costs was mainly due to a higher level of software licensing and online entertainment business volume in 2006, and the acquisition of our online games business in January 2006 which contributed approximately US$3.7 million of our total operating costs in 2006.

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     GROSS PROFIT. Gross profit increased by approximately 165 percent to approximately US$71.0 million in 2006 from approximately US$26.8 million in 2005. The increase in gross profit resulted from the strong revenue growth in our software licensing and online entertainment business, the acquisition of our online games business in January 2006 and a significant increase in gross margin from 60.7 percent in 2005 to 75.3 percent in 2006.

     OPERATING EXPENSES. Total operating expenses increased by approximately 118 percent to approximately US$49.0 million in 2006 from approximately US$22.4 million in 2005. The increase in total operating expenses was mainly due to a 130 percent increase in expenses related to our software licensing and online entertainment business, which was mainly attributable to the increased selling and marketing expenses as a result of our increased level of business volume, as well as to the acquisition of our online games business in January 2006, which contributed approximately US$9.4 million of our total operating expenses in 2006.

     OPERATING INCOME. Operating income for 2006 increased by approximately 403 percent to US$22.0 million from approximately US$4.4 million in 2005. The increase was primarily due to strong revenue growth in our software licensing and online entertainment business, the acquisition of our online games business in January 2006, which contributed approximately US$5.6 million income from operations in 2006, and a significant growth in operating income margin from 9.9 percent in 2005 to 23.3 percent in 2006.

     NON-OPERATING INCOME (EXPENSES). Non-operating income increased in 2006 by approximately 294 percent to approximately US$10.7 million in 2006 from approximately US$2.7 million in 2005. This was principally due to the sale of our ADSL business to Webs-TV in May 2006 which contributed approximately US$7.7 million.

     INCOME FROM DISCONTINUED OPERATIONS. We had no income from discontinued operations in 2006.

     NET INCOME. Net income for 2006 increased by approximately 386 percent to US$30.8 million from approximately US$6.3 million in 2005.

Business Segment Results

Software Licensing and Online Entertainment Business

     OPERATING REVENUES. Consolidated revenues of our software licensing and online entertainment business include the revenues of UIM, our licensee. Software licensing and support services revenues received by us from UIM have been eliminated in consolidation. Software licensing and support services revenues received by us from UIM increased by 120 percent from US$12.5 million in 2005 to US$27.5 million in 2006. Total operating revenues in 2006 increased by 144 percent to approximately US$55.0 million from US$22.5 million in 2005. Such increase was primarily attributable to strong growth in our poker software business, and growth in our traditional online gaming software business in 2006. Revenues from our poker software business grew from approximately US$4.1 million in 2005 to US$30.9 million in 2006 and accounted for approximately 56 percent of our software licensing and online entertainment revenues in 2006 compared to 18 percent in 2005. Revenues from our traditional online gaming software business increased to approximately US$24.1 million in 2006 from US$18.4 million in 2005.

     OPERATING COSTS. Cost of our software licensing and online entertainment revenues increased by 135 percent to approximately US$7.8 million in 2006 from US$3.3 million in 2005. The increase was due to higher business volume and the associated increase in payment processing costs in 2006.

     GROSS PROFIT. Gross profit increased by 146 percent to approximately US$47.2 million in 2006 from US$19.2 million in 2005. The increase resulted from strong revenue growth in the period.

     OPERATING EXPENSES. Total operating expenses increased by approximately 130 percent to approximately US$30.4 million in 2006 from approximately US$13.2 million in 2005. The increase in total operating expenses resulted from the increased level of business volume in the period and, in particular, an increase in selling and marketing expenses.

     Product development and engineering expenses. Product development and engineering expenses increased by approximately 72 percent to approximately US$4.3 million in 2006 from US$2.5 million in 2005, due to our ongoing efforts to develop and improve our products.

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     Selling and marketing expenses. Selling and marketing expenses increased by approximately 175 percent to approximately US$22.1 million in 2006 from US$8.0 million in 2005, primarily due to an increase in commissions to partners due to growth in revenue, and an increase in advertising and promotion expenses.

     General and administrative expenses. General and administrative expenses increased by 49 percent to approximately US$4.0 million in 2006 from US$2.7 million in 2005 due to increases in salaries and professional fees.

     OPERATING INCOME. Operating income in 2006 increased 182 percent to approximately US$16.8 million from US$6.0 million in 2005. The increase was primarily due to strong revenue growth and an expansion of operating margin from 26.5 percent in 2005 to 30.5 percent in 2006. Operating income does not reflect certain corporate headquarter expenses. For a reconciliation of business segment results to our consolidated net income, please see Note 24 of our financial statements.

Online Games Business

     We acquired our online games business in January 2006 and incorporated results of the business into our consolidated financial statements as of and for the year ended December 31, 2006. As this business was acquired in 2006, year over year comparisons of this business segment are not available, and total revenues, operating costs, gross profit, operating expenses, operating income, and net income figures for the 2005 and 2006 periods may not be comparable. See Note 5 of our consolidated financial statements for a summary of unaudited pro-forma results of operations for the years ended December 31, 2005 as if the acquisition of our online games business had occurred on January 1, 2005.

     For the year ended December 31, 2006, the online games business recorded total operating revenue of US$18.7 million, operating costs of US$3.7 million, gross profit of US$15.0 million, operating expenses of US$9.4 million (comprising product development and engineering expenses, selling and marketing expenses, general and administrative expenses and bad debt expenses of US$0.9 million, US$5.5 million, US$2.5 million and US$0.5 million, respectively) and operating income of US$5.6 million, respectively.

Internet Access Service Business

     OPERATING REVENUES. Total operating revenues decreased 5 percent to approximately US$20.6 million in 2006 from approximately US$21.7 million in 2005. Such decrease was attributable to the disposal of our ADSL business in May 2006, the impact of which on our revenues has been partially offset by fees received for the provision of consulting, support and bandwidth services related to the sale and transition of the business, and the decrease of our consumer access revenue through Hoshin GigaMedia. Of the total Internet access service revenues recorded for 2006, our consumer access revenues through Hoshin GigaMedia decreased by 9 percent to approximately US$13.7 million in 2006 from US$15.1 million in 2005, while corporate access revenues through KBT increased by 4 percent to approximately US$6.8 million in 2006 from US$6.5 million in 2005.

     The number of our retail broadband subscribers decreased from 80,541 as of December 31, 2005 to 11,447 as of December 31, 2006 as a result of our sale of the ADSL business. The average blended access revenues per retail broadband subscriber per month (ARPU) for access services in the fourth quarter of 2006 was approximately US$14.80, as compared to approximately US$11.36 for the fourth quarter of 2005. The increase in ARPU is due to the sale of our ADSL business, which had a lower blended ARPU rate.

     OPERATING COSTS. Operating costs decreased by 16 percent from approximately $14.1 million for 2005 to approximately US$11.8 million for 2006 due to decreases in depreciation, and customer service costs. We terminated the customer service representative department servicing the ADSL business in August 2006 following the sale of our ADSL business.

     GROSS PROFIT. Gross profit increased by 15 percent to approximately US$8.7 million in 2006 from US$7.6 million in 2005. The increase was due to decreased operating costs, which led to an expansion in gross margin from 35.2 percent in 2005 to 42.5 percent in 2006.

     OPERATING EXPENSES. Total operating expenses decreased by 17 percent from approximately US$5.5 million in 2005 to US$4.6 million in 2006, mainly as a result of declines in product development and engineering expenses, and in selling and marketing expenses.

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     Product development and engineering expenses. Product development and engineering expenses decreased by approximately 52 percent from approximately US$1.0 million in 2005 to approximately US$0.5 million in 2006 as a result of our continued effort to de-emphasize this aspect of our operations.

     Selling and marketing expenses. Selling and marketing expenses decreased by approximately 10 percent from approximately US$2.7 million in 2005 to approximately US$2.5 million in 2006, primarily due to a slight decline in promotional expenses.

     General and administrative expenses. General and administrative expenses decreased by 13 percent from approximately US$1.5 million in 2005 to US$1.3 million in 2006 due to centralizing of certain back-office functions in our headquarters.

     OPERATING INCOME. Operating income increased by 97 percent from approximately US$2.1 million for 2005 to US$4.2 million in 2006. The increase was primarily due to decreases in operating costs and expenses which resulted in an increase in operating margin from 9.8 percent in 2005 to 20.3 percent in 2006. Operating income does not reflect certain corporate headquarter expenses. For a reconciliation of business segment results to our consolidated net income, please see Note 24 of our financial statements.

For the Years Ended December 31, 2004 and 2005

Consolidated Results Of Operations

     OPERATING REVENUES. Total operating revenues for 2005 grew by approximately 35 percent to approximately US$44.2 million from approximately US$32.8 million in 2004. The increase was primarily a result of strong revenue growth from the software licensing and online entertainment business, which contributed approximately US$22.5 million, or 51 percent, of our total revenues in 2005 compared to approximately US$11.5 million in 2004 (which only included nine months of results from this segment), or 35 percent of our total revenues in 2004, and a slight increase in revenues from our Internet access service business to approximately US$21.7 million in 2005, which in total contributed approximately 49 percent of our total revenues in 2005, compared to approximately US$21.4 million in 2004.

     OPERATING COSTS. Total operating costs increased by approximately 8 percent from approximately US$16.1 million in 2004 to approximately US$17.4 million in 2005. The increase in operating costs was mainly due to the inclusion of full twelve-month results from our software licensing and online entertainment business in 2005 versus nine-month results in 2004 as well as increased operating costs as a result of an increased level of business volume in our software licensing and online entertainment business.

     GROSS PROFIT. Gross profit increased by 60 percent to approximately US$26.8 million in 2005 from US$16.7 million in 2004, primarily due to the inclusion of full twelve-month results from our software licensing and online entertainment business in 2005 versus nine-month results in 2004 as well as an increased gross margin.

     OPERATING EXPENSES. Total operating expenses increased by approximately 57 percent to approximately US$22.4 million in 2005 from approximately US$14.3 million in 2004. The increase was attributable to the inclusion of full twelve-month results from our software licensing and online entertainment business in 2005 versus nine-month results in 2004 and reflected increased selling and marketing expenses as a result of our increased level of business volume.

     OPERATING INCOME. Operating income for 2005 increased by approximately 76 percent to approximately US$4.4 million from approximately US$2.5 million for 2004. The increase was primarily due to strong revenue growth from, and an increase in operating margin in, our software licensing and online entertainment business.

     NON-OPERATING INCOME (EXPENSES). We had non-operating income in 2005 of approximately US$2.7 million compared to non-operating expenses of approximately US$1.1 million in 2004. This was principally due to a foreign exchange gain of approximately US$0.2 million in 2005 compared to a foreign exchange loss of approximately US$0.8 million in 2004, as well as an increase of approximately US$1.1 million in other non-operating revenues which included a gain of approximately US$0.6 million on the sale of our Internet content business gigigaga.com.tw and a reversal of US$0.5 million on the provision of a class action lawsuit. See Note 23

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of our consolidated financial statements for 2005 for additional information. In addition, we had no other-than-temporary impairment loss in 2005, compared with an other-than-temporary impairment loss of approximately US$1.8 million for our investment in Gamania in 2004.

     INCOME FROM DISCONTINUED OPERATIONS. In September 2005, we completed the sale of our land-based music distribution business. The transaction price, net of transaction costs, was US$5.02 million. The cash proceeds, net of transaction costs and cash transferred, was US$3.25 million. Results for the music distribution operations are reported as discontinued operations in each of the periods presented. In 2005, we recorded an operating loss of approximately US$1.1 million and a gain on the sale of the business of approximately US$0.9 million.

     NET INCOME. Net income for 2005 increased by approximately 277 percent to approximately US$6.3 million from approximately US$1.7 million in 2004.

Business Segment Results

Software Licensing and Online Entertainment Business

     We acquired our software licensing and online entertainment business in April 2004 and incorporated it into our consolidated financial statements as of and for the nine months ended December 31, 2004 and for the year ended December 31, 2005. As a result, total revenues, operating costs, gross profit, operating expenses, operating income, and net income figures for 2004 and 2005 periods may not be comparable. See Note 5 of our consolidated financial statements for a summary of unaudited pro-forma results of operations for the year ended December 31, 2004 as if the acquisition of our software licensing and online entertainment business had occurred on January 1, 2004.

     OPERATING REVENUES. Total operating revenues in 2005 increased by 97 percent to approximately US$22.5 million from US$11.5 million in 2004. Such increase was attributable to the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, strong growth in our poker software business, and growth in our traditional online gaming software business in 2005. Revenues from our poker software business grew from approximately US$0.2 million in 2004 to US$4.1 million in 2005 and accounted for 18 percent of our revenues in the software licensing and online entertainment business in 2005 compared to 2 percent in 2004. Revenues from our traditional online gaming software business increased in 2005 to approximately US$18.4 million from US$11.2 million in 2004, which was attributable to combinations of targeted promotions (bonuses) and a game-of-the-month campaign. These initiatives increased player acquisition and retention rates.

     OPERATING COSTS. Total operating costs increased by 109 percent to approximately US$3.3 million in 2005 from US$1.6 million in 2004. Such increase was attributable to the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, and a higher level of business volume in 2005.

     GROSS PROFIT. Gross profit increased by 95 percent to approximately US$19.2 million in 2005 from US$9.9 million in 2004. Such increase was due to the inclusion of full twelve-month results in 2005 versus nine-month results in 2004 and reflected our increased level of business volume.

     OPERATING EXPENSES. Total operating expenses increased by 84 percent to approximately US$13.2 million in 2005 from US$7.1 million in 2004. Such increase was attributable to the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, and operating expenses increasing as a result of our revenue growth in 2005.

     Product development and engineering expenses. Product development and engineering expenses increased by approximately 79 percent to approximately US$2.5 million in 2005 from approximately US$1.4 million in 2004 due to the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, as well as our ongoing efforts to develop and improve our products.

     Selling and marketing expenses. Selling and marketing expenses increased by approximately 134 percent to approximately US$8.0 million in 2005 from approximately US$3.4 million in 2004, primarily due to the inclusion

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of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, and an increase in commissions to partners due to growth in revenue and competitive pressure within the industry.

     General and administrative expenses. General and administrative expenses increased by 19 percent to approximately US$2.7 million in 2005 from approximately US$2.2 million in 2004 due to the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004.

     OPERATING INCOME. Operating income in 2005 increased 115 percent to approximately US$6.0 million from US$2.8 million in 2004. The increase was primarily due the inclusion of full twelve-month results of our software licensing and online entertainment business in 2005 versus nine-month results in 2004, and strong revenue growth from the launch of new games which led to an increase in operating margin from 24 percent to 26 percent. Operating income does not reflect certain corporate headquarter expenses. For a reconciliation of business segment results to our consolidated net income, please see Note 24 of our financial statements.

Internet Access Service Business

     OPERATING REVENUES. Total operating revenues increased by 1 percent to approximately US$21.7 million in 2005 from approximately US$21.4 million in 2004. Such increase was attributable to an increase in total access revenues, which contributed more than 99 percent of total revenues from our Internet access service business.

     INTERNET ACCESS SERVICE REVENUES. Internet access service revenues increased by 1 percent to approximately US$21.6 million in 2005 from approximately US$21.3 million in 2004, mainly as a result of the significant growth of our corporate Internet access service business. Of the total Internet access service revenues recorded for 2005, retail Internet service and access revenues through Hoshin GigaMedia were approximately US$15.1 million, while corporate Internet service and access revenues through KBT were approximately US$6.5 million. While revenues from our corporate ISP business represented only 30 percent of our total Internet access service revenues in 2005, they demonstrated a growth of 47 percent to approximately US$6.5 million in 2005 from approximately US$4.4 million in 2004, compared to a decline in revenues of 11 percent to approximately US$15.1 million in 2005 in our consumer ISP business from approximately US$16.9 million in 2004.

     The number of our retail broadband subscribers decreased from 94,520 as of December 31, 2004 to 80,541 as of December 31, 2005, of which 16,534 were two-way cable modem subscribers and 62,937 were ADSL subscribers. In the fourth quarter of 2005, the average blended internet service and access revenues per retail broadband subscriber per month (ARPU) for access services was approximately US$11.36, as compared to approximately US$12.40 for the fourth quarter of 2004. ARPU for two-way cable modem and ADSL services was approximately US$16.30 and US$10.50, respectively, during the fourth quarter of 2005, as compared to approximately US$16.50 and US$11.80, respectively, for the same services during the fourth quarter of 2004.

     OPERATING COSTS. Total operating costs associated with the cost of Internet and service revenues decreased by 3 percent from approximately US$14.5 million for 2004 to approximately US$14.1 million for 2005 due to decreases in depreciation and amortization, and customer service costs, partially offset by an increase in bandwidth costs.

     GROSS PROFIT. Gross profit increased by 11 percent from approximately US$6.9 million in 2004 to approximately US$7.6 million in 2005. Such increase was attributable to the increase in operating revenues and the decrease in the operating costs in the period.

     OPERATING EXPENSES. Total operating expenses decreased by 7 percent from approximately US$5.9 million in 2004 to approximately US$5.5 million in 2005, mainly as a result of declines in general and administrative expenses and in selling and marketing expenses.

     Product development and engineering expenses. Product development and engineering expenses decreased by approximately 6 percent from approximately US$1.1 million in 2004 to approximately US$1.0 million in 2005 as a result of our continued effort to de-emphasize this aspect of our operations.

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     Selling and marketing expenses. Selling and marketing expenses decreased by approximately 5 percent from approximately US$2.9 million in 2004 to approximately US$2.7 million in 2005, primarily due to a moderate decline in our advertising expenses.

     General and administrative expenses. General and administrative expenses decreased by 30 percent from approximately US$2.2 million in 2004 to approximately US$1.5 million in 2005 due to centralizing of certain back-office functions in our headquarters.

     OPERATING INCOME. Operating income increased by 121 percent from approximately US$1.0 million for 2004 to approximately US$2.1 million for 2005. Operating income does not reflect certain corporate headquarter expenses. For a reconciliation of business segment results to our consolidated net income, please see Note 24 of our financial statements.

B. Liquidity and Capital Resources

     Our principal sources of liquidity consist of cash generated from our operations, proceeds generated from the disposal of our investments and other assets, bank borrowings, and interest derived from our investments. Our cash and cash equivalents are held primarily in U.S. dollars and NT dollars. Our policy with respect to liquidity management is to maintain sufficient cash and cash equivalents to fund operations and strategic transactions, while placing remaining funds in higher yield investment instruments.

     Our future cash requirements will depend on a number of factors including:

• the rate at which we enter into strategic transactions;

• the rate of which we expand our operations and employee base;

• the timing of entry into new markets and new services offered;

• changes in revenues and cost splits with our business partners;

• the rate at which we invest in improving our products and upgrading and maintaining our network and future technologies; and

• the rate at which we grow and monetize our customer bases.

     As a result of our operating, investing and financing activities during 2006, the amount of our cash and cash equivalents as of December 31, 2006 decreased to approximately US$22.4 million compared to US$41.7 million as of December 31, 2005. Such decrease was primarily attributable to the cash outflows for our investments in 2006, and partially offset by operating cash flow and bank borrowings. In 2006, our cash used in the purchase of FunTown amounted to US$26.8 million (net of cash acquired). We also issued approximately US$15 million of zero coupon secured convertible notes in connection with such acquisition, which were fully redeemed in July and September 2006. Our acquisition of FunTown also included an incentive payment in the form of an additional variable amount to be determined based on the pre-tax income of FunTown in 2006, subject to a maximum limit of US$5 million. In April and May 2007, we paid US$5 million of such incentive payment. In 2006, we also made cash payments of US$15 million in connection with our acquisition of 7.5 million convertible preferred shares of T2CN, US$10.0 million in connection with our strategic investment in Infocomm Asia, and US$2.5 million in connection with the licensing of Hellgate: London, an online game expected to be launched in 2007.

     We believe that our existing cash, cash equivalents, marketable securities and expected cash flow from operations will be sufficient to meet our capital expenditure, working capital, and cash obligations under our existing lease arrangements through 2007. We continue to seek and review potential merger and acquisition opportunities on an ongoing basis, which may be funded through cash on our balance sheet, bank borrowings or equity. We do not believe that any potential merger or acquisition that we may be engaged in would alter our goal of preserving sufficient cash and cash equivalents to fund future operations.

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     OPERATING ACTIVITIES. In 2006, our net cash provided by operating activities amounted to US$29.4 million. This was primarily from income from continuing operations of US$30.8 million.

     INVESTING ACTIVITIES. Our net cash used in investing activities in 2006 was US$47.9 million. This was primarily due to our acquisition of FunTown and the purchase of marketable securities of US$42.5 million, which was offset by the sale of other marketable securities of US$26.7 million.

     FINANCING ACTIVITIES. Our net cash used in financing activities in 2006 was US$1 million. This was primarily due to redemption of our convertible notes of US$15 million, which was offset by bank borrowings of US$12.9 million.

     OTHER. Set forth below are the aggregate amounts, as of December 31, 2006, of our future cash payment obligations under our existing contractual obligations.

Capital Expenditures

     We typically finance our capital expenditures through cash holdings. Our gross capital expenditures for equipment, furniture and fixtures, software, intangible assets and other deferred assets were US$3.4 million, US$4.0 million and US$5.7 million for 2004, 2005 and 2006, respectively. Capital expenditures during 2006 were primarily for capitalized software development for our software licensing and online entertainment business and online games business. Our capital expenditure plans for 2007 will continue to focus primarily on software development for our software licensing and online entertainment business and for our online games business. We may adjust the amount of our capital expenditures upward or downward based on cash flow from operations, the progress of our expansion plans, and market conditions.

Indebtedness

     As of December 31, 2006, we have unsecured loans of US$6.1 million and secured loans of US$6.7 million. The weighted-average interest rate on total short-term loans as of December 31, 2006 was 2.48 percent. We also pledged time deposits of US$2.7 million, and a net value of land and buildings of US$1.7 million as collateral for secured bank loans as of December 31, 2006. All of our bank loans are one-year revolving facilities.

     The following table sets out certain information in respect of our outstanding loans as of December 31, 2006:

(in US$ thousands)				As at
Name	Nature	Interest rate range	Maturity date of Facility	December 31, 2006
China Trust Commercial Bank	Unsecured revolving facility	2.35% - 2.45%	March 10, 2007		6,135
China Trust Commercial Bank	Secured revolving facility	1.735% - 1.865%	March 10, 2007		2,117
Taishin International bank	Secured revolving facility	2.90% - 2.95%	September 30, 2007		4,601
					12,853

Dividends From Our Subsidiaries in Taiwan

     Under existing laws of Taiwan, dividends, whether in cash or shares of common stock, declared by our subsidiaries incorporated under Taiwan law, including Hoshin GigaMedia, out of retained earnings and distributed to us are subject to Taiwan withholding tax, currently at the rate of 20 percent for non-Taiwan investors holding a foreign investment approval granted by Taiwan’s Ministry of Economic Affairs, such as us, on the amount of any cash dividends or on the par value of any share dividends. An additional tax of 10 percent on retained earnings will be imposed on retained earnings which are not distributed to shareholders by the end of the year following the close of the tax year.

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C. Research, Development, Patents and Licenses, etc.

     We make investments in research and development to keep pace and remain competitive with technology advancements and product development relating to our software licensing and online entertainment business and our online games business. We do not believe our expenditure for research and development for 2004, 2005 and 2006 was material.

D. Trend Information

     Please see Item 3 — “D. Risk Factors,” Item 4 — “Information on the Company” and “ — A. Operating Results — Overview” for a discussion of the most recent trends in our operation costs and revenues since the end of 2006. In addition, please refer to discussions included in this Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonable likely to have a material effect on our net operating revenues, income from continuing operations, profitability or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-Balance Sheet Arrangements

     Other than as disclosed in Note 22 of our financial statements, we currently do not have (a) any obligation under a guarantee contract that has any of the characteristics identified in paragraph 3 of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”), as may be modified or supplemented, excluding the types of guarantee contracts described in paragraphs 6 and 7 of FIN 45; (b) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets; (c) any obligation under a derivative instrument that is both indexed to the company’s own stock and classified in stockholders’ equity, or not reflected, in the company’s statement of financial position or (d) any obligation, including a contingent obligation, arising out of a variable interest (as referenced in FASB Interpretation No. 46, Consolidation of Variable Interest Entities, as may be modified or supplemented) in an unconsolidated entity that is held by, and material to, the company, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with, the company.

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F. Tabular Disclosure of Contractual Obligations

	Payment Due by Period (in US$ thousands)
			Less than						More than
Contractual Obligations	Total		1 year		1-3 years		3-5 years		5 years
Operating leases		3,886		1,876		1,945		65		0
Minimum guarantee against royalties		6,500		2,500		2,500		1,500		0
Total contractual cash obligations		10,386		4,376		4,445		1,565		0
Other long-term obligations		605		0		534		71		0
Other liabilities — Accrued pension liabilities		434		0		0		0		434

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

     The following table sets forth information with respect to our directors and executive officers as of June 15, 2007:

				Year
				Appointed to
				Current
Name	Age		Position	Position
WU, Daniel Chuen-Tai		59	Chairman of the Board		2003
BAO, Gilbert		43	Independent Non-Executive Director		2003
CHANG, Nelson		42	Independent Non-Executive Director		2004
DING, Michael Y.J.		50	Independent Non-Executive Director		2003
HSU, Emmet Yu-Jui		44	Independent Non-Executive Director		2003
HU ZEE, Nancy Jing-Ying		48	Independent Non-Executive Director		2003
LEE, Howe Yong		51	Independent Non-Executive Director		2004
LEE, Yichin		46	Independent Non-Executive Director		2003
WANG, Arthur M.		46	Chief Executive Officer and Director		2003
HUI, Thomas T.		35	Chief Financial Officer and Director		2004/2005
CAHILL, Robert J.		41	Head of Software Licensing and Online Entertainment Business		2004
CHOU, Samuel		46	Head of Online Games Business		2007
CHU, Michel		38	Executive Vice President and Chief Technology Officer		2000
HUANG, Kenny Ching-Kun		42	Senior Vice President		2004
MAI, Falco		45	Executive Vice President and Chief Administrative Officer		2001
SHEA, Joseph		41	Executive Vice President		2004
TARN, Chen-Wen		47	Head of Internet Access Service Business		2003
TSENG, Jennifer		38	Senior Vice President and General Counsel		2004

     Mr. Samuel Chou was appointed as head of our online games business on April 20, 2007.

     Biographical information with respect to each of our directors and executive officers is set forth below.

     DANIEL CHUEN-TAI WU is the chairman of the board of directors of our Company. He brings to our Company significant operational experience and extensive business relationships in Taiwan. Dr. Wu is currently the chairman of CDIB & Partners Investment Holding Corp. in Taiwan and a director and senior executive vice president of China Development Financial Holding Corporation. Previously, he served as the chairman of various companies including CDIB & Partners Investment Holding Corp from 2004 to 2006, Videoland Inc. from 2002 to 2004, Grand Pacific Petrochemical Corp. from 1994 to 2004, Biocare Corp. from 1997 to 2003 and Precision Semiconductor Mask Corp. from 1998 to 2000. He was the chief executive officer of Wyse Technology Inc. from 1990 to 1994 and the president of Grand Pacific Petrochemical Corp. from 1992 to 1994. Dr. Wu was chairman of Crimson Asia Capital Holdings, Ltd. from 1993 to 2000. Prior to that, Dr. Wu was also the chairman of Monte Jade Science & Technology Association from 1993 to 1994. Dr. Wu received his doctorate in chemical engineering from the

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University of Delaware in 1976 and an undergraduate degree in the same discipline from National Taiwan University in 1970.

     GILBERT BAO is an independent non-executive director of our Company. He is also currently vice president of Chung Shing Textile Co., Ltd., general supervisor of Taiwan Spinners Association, and chairman of Taiwan Manmade Fiber Industry Association. He graduated from the University of Southern California in 1986.

     NELSON CHANG is an independent non-executive director of our Company. He is also currently the managing director of Shin-Long Construction Co., managing director of Enrich Venture Capital Management Co., Ltd., vice president of X-Legend Entertainment Corp., and vice president of EasyFun Entertainment Corp. Mr. Chang received a Master of Business Administration degree from National Taiwan University.

     MICHAEL Y.J. DING is an independent non-executive director of our Company. Mr. Ding is currently chairman of Fubon Securities Investment Consulting Co. Ltd. Prior to that, Mr. Ding was president and chief executive officer of Fubon Asset Management Co., Ltd., president and fund manager of the R.O.C. Fund (listed on the New York Stock Exchange), as well as president of the International Investment Trust Co. in Taiwan, where he also served as chief investment officer and a senior vice president. Mr. Ding was previously chief economist and head of research at Citicorp International Securities Ltd. in Taipei and head of research and information for the Greater China region at McKinsey & Co., Inc. Mr. Ding holds a Bachelor of Laws degree from Chinese Cultural University and a master’s degree and a doctorate in economics from Indiana University.

     EMMET YU-JUI HSU is an independent non-executive director of our Company. He is also currently chairman and president of Shihlin Electric and Engineering Corp., Hsinchu Transportation Co. Ltd., and The Ambassador Hotel in Taipei, Taiwan. He majored in business administration at the University of Southern California and received a Master of Business Administration degree from Chengchi University in Taiwan.

     NANCY JING-YING HU ZEE is an independent non-executive director of our Company. Ms. Hu is currently the president of Videoland Inc. She is also chairman of Ho Wei Communication, which is a subsidiary of Videoland Inc. She is a certified accountant in the United States and Hong Kong and is currently a director of NHL CPA and ETKING Media Technology Limited. Ms. Hu holds a bachelor’s degree from National Taiwan University, a master’s degree in computers from Barry University and a Master of Business Administration degree from Florida International University.

     HOWE YONG LEE is an independent non-executive director of our Company. He is currently the managing director of Lee Kim Yew (Pte) Ltd., an investment company based in Singapore. Mr. Lee received a Bachelor of Arts degree in business administration from the University of Washington in 1984.

     YICHIN LEE is an independent non-executive director of our Company. He is also currently managing director of Giant Management Consulting, LLC. of Taiwan and a founder of AMIA, Inc., an education consultancy based in Belmont, California. Mr. Lee holds a doctorate degree in resource planning and management from Stanford University.

     ARTHUR M. WANG is the chief executive officer and a director of our Company. He is also a member of the board of Linmark Group, a Hong Kong Stock Exchange listed global sourcing firm, where he serves as chair of the audit committee. Previously, Mr. Wang was a managing partner of 698 Capital Limited, an Asian investment firm, as well as an executive director of KGI Asia Limited (“KGI”). At KGI, Mr. Wang served as head of corporate finance. He also served as an investment advisor and board member of UFJ Asia Finance Technology Fund of the UFJ Group (formerly the Sanwa Bank Group of Japan), and as a board member and director of Softbank Investment International (Strategic) Limited, the Hong Kong Stock Exchange listed arm of Softbank Corporation. Mr. Wang received his Bachelor of Arts degree from the University of California, Los Angeles and his Juris Doctorate degree from Yale Law School. He practiced corporate and securities law in the New York and Hong Kong offices of Skadden, Arps, Slate, Meagher & Flom LLP.

     THOMAS T. HUI is the chief financial officer and a director of our Company. Mr. Hui joined GigaMedia from Goldman Sachs (Asia) L.L.C. (“Goldman Sachs”), where he was an executive director of the investment banking division. At Goldman Sachs, Mr. Hui originated and executed a broad range of mergers and acquisitions and financing transactions in Asia. Prior to working at Goldman Sachs, Mr. Hui served as an investment banker at

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Merrill Lynch & Co. and as a management consultant at McKinsey & Company, both in Hong Kong. Mr. Hui holds a Master of Engineering degree in electrical engineering from Cornell University and a Bachelor of Science degree in electrical engineering from the University of Wisconsin — Madison.

     ROBERT J. CAHILL is the head of the software licensing and online entertainment business of our Company. Mr. Cahill is the chief executive officer of CESL. Prior to joining our Company, Mr. Cahill served as the chief financial officer for Smarterkids.com. He also previously served in the finance group for Gensym Corporation and as an audit manager at Ernst & Young, LLC. Mr. Cahill received a Master of Business Administration degree from Bentley College and a Bachelor of Science degree in business administration from the University of Massachusetts.

     SAMUEL CHOU is the head of the online games business of our Company. Mr. Chou became the chief executive officer and president of online games and entertainment of GigaMedia in April 2007. Mr. Chou was chairman and chief executive officer of Warner Music for the Greater China Region from 2004 to 2006. Prior to that, Mr. Chou was managing director of Warner Music in Taiwan. Mr. Chou was also previously the chairman of the International Federation of the Phonographic Industry in Taiwan. Mr. Chou received his Master of Business Administration degree from the National Giao Tung University as well as a Bachelor of Sociology degree from National Taiwan University.

     MICHEL CHU is the chief technology officer and an executive vice president of our Company. He has extensive experience in Internet-related software development, system engineering and project management. Mr. Chu is responsible for the design, development and implementation of our broadband service infrastructure. Mr. Chu received a Master of Science degree in electrical engineering from National Taiwan University.

     KENNY CHING-KUN HUANG is a senior vice president of our Company. He has experience in investment banking, the television and cable industry, as well as the Asian gaming industry. Mr. Huang is responsible for the promotion and business development of our gaming software in Asia. Mr. Huang received his Master of Business Administration from the University of California, Irvine.

     FALCO MAI is the chief administrative officer and an executive vice president of our Company. He is also currently the chairman of KGI Futures Co. Ltd., and a director of KGI Securities Co. Ltd in Taipei, Global Securities Finance Corporation and Taiwan Futures Exchange. Prior to joining our Company, Mr. Mai worked at KGI Securities Co. Ltd in Taipei as a manager of the research department, the equity and sales—proprietary trading department and the derivatives product department. Mr. Mai was also senior vice president to the general management office, as well as the spokesman from 1993 to 2001. Mr. Mai received a Bachelor of Science degree in electrical engineering from National Taiwan University.

     JOSEPH SHEA is an executive vice president of our Company responsible for strategic and business development. Prior to joining us, Mr. Shea was an equity research analyst at Lehman Brothers Asia Limited covering the Internet industry. Mr. Shea was also a manager at A.T. Kearney (Hong Kong) Limited (“A.T. Kearney”) where he was responsible for project planning and engagement execution for clients based in Asia and Europe. While working at A.T. Kearney, Mr. Shea led several Internet-related projects. Mr. Shea also held design engineer positions in several major microprocessor design projects at Intel Corporation. Mr. Shea received his Master of Business Administration degree from the University of California, Berkeley. He also holds a Master of Science in electrical engineering from Columbia University as well as a Bachelor of Science in electrical engineering from Carnegie-Mellon University.

     CHEN-WEN TARN is the head of the Internet access service business of our Company. Prior to joining us, Mr. Tarn was a full professor of the National Taiwan University of Science and Technology. Mr. Tarn holds a doctorate degree in electrical and computer engineering from Syracuse University.

     JENNIFER TSENG is a senior vice president and general counsel of our Company. Prior to joining us, Ms. Tseng practiced law and presided over a local law firm in Taipei where she conducted a general litigation practice across a range of major business disputes and civil litigation, from counseling through trial and appeal. Ms. Tseng received her Master of Laws degree from School of Law at the University of Warwick in the United Kingdom and her Bachelor of Law degree from the Department of Law at the National Taiwan University.

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B. Compensation

     For the year ended December 31, 2006, the aggregate compensation paid by us to all of our executive officers was approximately US$0.9 million and the aggregate compensation paid by us to all of our directors, including the CEO and CFO, was approximately US$1.0 million. The total outstanding number of share options granted to our directors and officers was 7,057,587. For information on stock option plans, see Item 6 “Directors, Senior Management and Employees — E. Share Ownership.” For information on total amounts set aside by the Company to provide pension and retirement benefits, see Note 17 of our consolidated financial statements.

C. Board Practices

     Our board of directors has appointed an audit committee. Our audit committee currently consists of Michael Y. J. Ding, Gilbert Bao and Yichin Lee. Our audit committee will select and evaluate, on our behalf, the independent public accountants who audit our annual financial statements, and will review and approve the planned scope of our annual audit, subject to the appointment, replacement or removal from office of our independent public accountants been approved by our shareholders at our Annual General Meeting. In accordance with our Articles of Association and our audit committee charter, all of the members of our audit committee must be persons who qualify as “independent” directors for purposes of the rules and regulations of the NASDAQ Global Market.

     We also have a compensation committee that consists of Daniel Chuen-Tai Wu, Michael Y.J. Ding and Yichin Lee. Our compensation committee reviews and evaluates the compensation and performance of executive officers, and our Company’s general compensation plans and other employee benefit plans, and performs other duties and responsibilities pursuant to the compensation committee charter. In accordance with our compensation committee charter, all of the members of the compensation committee are qualified independent directors pursuant to the requirements of the NASDAQ Global Market.

D. Employees

     In the years ended December 31, 2004, 2005 and 2006, our total employees were 608, 323 and 503, respectively. As of May 31, 2007, we had a total of 555 employees, excluding part-time and temporary personnel and consultants. Our corporate headquarters employed 92 people. Our Internet access service business employed 134 people, including 60 people in Hoshin GigaMedia and 74 people in our subsidiary, KBT. Our software licensing and online entertainment business had 111 employees. Our online games business had 218 employees. Of the total 555 employees, 444 were in Asia, 7 were in Europe and 104 were in North America.

E. Share Ownership

Share Ownership of Directors and Executive Officers

     The tables below set forth information as to our directors’ and executive officers’ share ownership in our Company as of May 31, 2007:

			Number of Shares
	Number of		Issuable upon
Person	Common Shares		exercise of options
WU, Daniel Chuen-Tai		0		*
BAO, Gilbert T.C.		0		*
CHANG, Nelson		0		*
DING, Michael Y.J.		0		*
HSU, Emmet Yu-Jui		0		*
HU ZEE, Nancy Jing-Ying		0		*
LEE, Howe Yong		0		*
LEE, Yichin		0		*
WANG, Arthur M.		*		2,500,000
HUI, Thomas T.		*		1,200,000
CAHILL, Robert J.		0		*
CHOU, Samuel		0		0
CHU, Michel		*		*

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			Number of Shares
	Number of		Issuable upon
Person	Common Shares		exercise of options
HUANG, Kenny Ching-Kun		*		*
MAI, Falco		*		*
SHEA, Joseph		*		*
TARN, Chen-Wen		*		*
TSENG, Jennifer		*		*

* Less than 1 percent

     All options granted to our directors and executive officers were granted pursuant to the 2002 Plan and the 2004 Plan as defined under “Employee Share Option Plans” below. The options expire in 2014.

Beneficial Ownership

     No director or executive officer beneficially owns of record more than 1 percent of the outstanding shares of our Company. See Item 7 — “Major Shareholders and Related-Party Transactions” below.

Employee Share Option Plans

2002 Option Plan

     At the June 2002 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2002 Employee Share Option Plan (the “2002 Plan”) under which up to 3,000,000 common shares of our Company were reserved for issuance. All employees, officers, directors, advisors and consultants of our Company are eligible to participate in the 2002 Plan. The 2002 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, to determine which eligible individuals are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the maximum term for which any granted option is exercisable.

     In August 2004, options to purchase 3,000,000 shares of our Company’s common stock were granted and vested at an exercise price of US$0.79 pursuant to the 2002 Plan. As at December 31, 2006, no option had been exercised or cancelled. All options granted under the 2002 Plan expire on June 29, 2014. The maximum contractual term under the 2002 Plan is approximately 10 years. Termination of employment will not affect rights of exercise under vested options.

2004 Option Plan

     At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to 7,000,000 common shares of our Company were reserved for issuance. All employees, officers, directors, advisors and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, to determine which eligible individuals are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the maximum term for which any granted option is exercisable.

     In August 2004, options to purchase 5,462,530 shares of our Company’s common stock were granted at an exercise price of US$0.79 pursuant to the 2004 Plan. These options were subject to two vesting schedules. In accordance with the terms of the first vesting schedule, 3,863,888 options were vested and exercisable upon granting. As at December 31, 2006, 95,000 options were cancelled, 389,000 options had been exercised and the number of outstanding options under the first vesting schedule was 3,379,888 options. In accordance with the terms of the second vesting schedule, 1,598,642 options were granted, of which 399,663 options were vested and exercisable upon granting. The remaining 1,198,979 options will be vested at a rate of 399,661 options per year from the grant date. As at December 31, 2006, 309,229 options were cancelled, 559,655 options had been exercised and the number of outstanding options under the second vesting schedule was 729,758 options.

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     In May 2005, options to purchase 100,000 shares of our Company’s common stock were granted at an exercise price of US$1.45 pursuant to the 2004 Plan. In accordance with the terms of the vesting schedule, 25,000 options were vested and exercisable upon granting. The remaining 75,000 options will be vested at the rate of 25,000 options per year from the grant date. As at December 31, 2006, no options had been exercised or cancelled.

     In December 2005, options to purchase 1,805,655 shares of our Company’s common stock were granted at an exercise price of US$2.55. These options were subject to two vesting schedules. In accordance with the terms of the first vesting schedule, 1,570,655 options were vested and exercisable upon granting. As at December 31, 2006, 23,000 options had been cancelled and 202,859 options had been exercised under the first vesting schedule. In accordance with the terms of the second vesting schedule, 94,000 options will vest and be exercisable in December 2007. The remaining 141,000 options will vest and be exercisable in December 2008. As at December 31, 2006, no such option under the second vesting schedule had been exercised or cancelled.

     The maximum contractual term under the 2004 Plan is 10 years. Termination of employment will not affect exercise rights under vested options. Unvested options will be cancelled upon termination of employment. All options granted under the 2004 Plan expire on June 29, 2014.

2006 Equity Incentive Plan

     At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to one million common shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2006 Plan.

     In December 2006, we granted 115,000 restricted stock units (“RSUs”) to our employees. These RSUs were subject to two schedules for the lapsing of restrictions on transfer. 25,000 RSUs are subject to the terms of the first lapsing schedule, under which the restrictions on transfer shall lapse with respect to the first 33 percent of the RSUs upon granting with the remaining 67 percent of the RSUs vesting over a two-year period so long as the employee is employed by or providing services to our Company. 90,000 RSUs are subject to the terms of the second lapsing schedule, under which the restrictions on transfer shall lapse over a three-year period, beginning April 1, 2007 so long as the employee is employed by or providing services to our Company.

     The maximum contractual term under the 2006 Plan is 10 years. In the event that the employee’s employment with or service to our Company is terminated prior to the lapsing of restrictions with respect to any portion of the RSUs, such portion of the RSUs shall become forfeited.

     All options and RSUs are expected to be settled by issuing new shares.

Options

     No options were exercised before 2005. In 2006, 1,151,514 options were exercised, and cash received from the exercise of stock options was US$1.3 million, which resulted in no significant tax benefit realized on a consolidated basis.

     There were no stock-based compensation expenses recorded in 2004 and 2005 as all options were granted to employees at prices in excess of the common stock market price at the date of grant. The impact resulting from our adoption of FAS 123(R) to our 2006 consolidated financial statements for income before income taxes and net income was US$(310) thousand, and US$(250) thousand, respectively. The impact on basic and diluted earnings per share for 2006 was US$(0.005) and US$(0.004) per share, respectively.

Employee Share Purchase Plan

     At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Purchase Plan (the “2004 ESPP”) under which up to 2,000,000 common shares of our Company were reserved for issuance. Pursuant to the 2004 ESPP, our Company offered its shares to qualified employees on favorable terms and established a restricted period of six months during which employees

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may not transfer the shares after purchasing them. To be eligible, employees must be employed by our Company or its subsidiaries and the customary employment shall be no less than 20 hours per week. Employees are also subject to certain restrictions on the amount that may be invested to purchase the shares and to other terms and conditions of the 2004 ESPP. The 2004 ESPP is a one-time plan and is administered by a committee designated by the board of directors. In March 2005, there were 189,642 shares subscribed by eligible employees at a purchase price of approximately US$1.39 per share.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

A. Major Shareholders

     The following table sets forth information known to us with respect to the ownership of our shares as of March 31, 2007 by (1) each shareholder known by us to own more than 5 percent of our shares and (2) all directors and executive officers as a group.

	Shares		Percentage of
Name of Owner	Owned		Shares Owned
Best Method Limited (1)		10,799,999		20.53	%
Directors and executive officers as a group (10 persons)		402,222		0.76	%

(1) Through Best Method Limited, Jeffrey Koo, Jr. and Andre Koo jointly have a beneficial ownership of 10,799,999 common shares of our Company.

     As of May 31, 2007 we had 52,732,357 ordinary shares outstanding, of which 41,530,136 shares were listed on the NASDAQ Global Market and not held by our major shareholders and directors or executive officers as disclosed above and in Item 6 “Directors, Senior Management and Employees — E. Share Ownership,” representing 0.76 percent of our total outstanding shares. As of May 31, 2007, 41,292,442 shares listed on the NASDAQ Global Market were held by 30 record holders, including nominee holders, with the registered address in the United States.

     None of our major shareholders have different voting rights from those of our other shareholders.

B. Related-Party Transactions

     In the course of operating our business, we provide Internet access services to certain of our affiliates. We believe such transactions with affiliates were not material. As of May 31, 2007, we had a credit line and loan in an amount of NT$400 million (approximately US$12.3 million) from the China Trust Commercial Bank. As of May 31, 2007, we also had deposits in China Trust Commercial Bank in the amount of US$7.3 million (including US$3.8 million of restricted cash).

C. Interests of Experts and Counsel

     Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Financial Statements

     Please refer to Item 18 “Financial Statements.”

Information on Legal or Arbitration Proceedings

Class Action

     In December 2001, a class action lawsuit was filed in the U.S. District Court for the Southern District of New York against our Company in connection with the initial public offering of its stock.

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     The complaint alleged that our Company violated Sections 11 and Section 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In October 2002, the plaintiffs voluntarily dismissed their claims against the individual defendants without prejudice. On February 19, 2003, the court issued an opinion and order on the defendants’ motion to dismiss, which granted the motions in part and denied the motions in part. As to our Company, the Rule 10b-5 claims were dismissed without prejudice while the Section 11 claims survived the motion.

     In June 2004, the plaintiffs and issuer defendants, including our Company, presented the executed settlement agreement to the judge during a court conference. Subsequently, the plaintiffs and issuer defendants made a motion for preliminary approval of the settlement agreement. The key terms of the settlement agreement include: 1) the insurers of the issuers will provide an undertaking that guarantees that plaintiffs will recover a total of US$1 billion; 2) the insurers will pay up to US$15 million for the notice costs arising from the settlement; 3) the issuers shall assign their interest in certain claims against the underwriters to a litigation trust, represented by plaintiffs’ counsel; and 4) the plaintiffs shall release all of the settling issuer defendants. If plaintiffs are successful in recovering more than US$1 billion from the underwriters, the issuer defendants will not be obligated to pay any additional amounts. If the plaintiffs recover less than US$1 billion from the underwriters, the insurers will pay the deficit between US$1 billion and the amount received from the underwriters.

     On February 15, 2005, the judge issued an opinion and order granting preliminary approval to the settlement agreement subject to a narrowing of the proposed bar order as to only contribution claims. In July 2005, the settling parties reached agreement and submitted modifications to the settlement agreement in accordance with the court’s opinion.

     The underwriter defendants are not part of the settlement between the issuers and the plaintiffs. The underwriter defendants have continued to defend the action and discovery has proceeded. In April 2006, plaintiffs and JPMorgan Chase & Co., one of the underwriter defendants, announced that it had signed a memorandum of understanding (the “JPMorgan Chase MOU”) to settle the action for approximately US$425 million. This proposed settlement does not include the other underwriter defendants.

     On April 24, 2006, the court held a fairness hearing on the proposed Issuers’ Settlement, which is subject to the court’s approval. As of this date, the court has not issued its ruling.

     On June 23, 2006 and October 12, 2006, the court held meetings with the legal counsels involved in the case to discuss the proposed settlement. Subsequent to these meetings, the parties submitted an amendment to the Issuers’ Settlement, which included the following terms: (1) waiving insurers’ rights under the settlement agreement to recoup notice and defense cost, which is likely to exceed US$60 million; and (2) waiving 50 percent of the amount of the JPMorgan Chase MOU (US$425 million) which would operate as an offset to the US$1 billion guarantee. These changes were designed to address potential problems that the judge may have had with the proposed settlement.

     On December 5, 2006, the United States Court of Appeals for the Second Circuit issued an opinion vacating the District Court’s class certification of a litigation class in that portion of the case between the plaintiffs and the underwriter defendants. Because the Second Circuit’s opinion was directed to the class certification by the District Court for the plaintiffs’ litigation against the underwriter defendants, the opinion’s effect on the proposed class to be certified by the District Court in connection with the Issuers’ Settlement is unclear.

     On December 15, 2006, the District Court held a conference with all counsel in the IPO Securities Class Action to discuss the impact of the foregoing opinion. In the conference, the District Court agreed to stay all proceedings, including discovery and consideration of the Issuers’ Settlement and the JPMorgan Chase MOU, pending further decisions from the Second Circuit.

     On January 5, 2007, plaintiffs filed a petition in the Second Circuit for rehearing and rehearing en banc regarding the decision on class certification (the “Petition”). On January 24, 2007, the Second Circuit entered an order instructing the underwriter defendants to submit a brief in response to the Petition. On February 7, 2007, the underwriter defendants filed a brief in opposition to the Petition. On April 6, 2007, the Second Circuit rendered its decision which denied the Petition. On April 23, 2007, the District Court held a conference in which the following issues were discussed:

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• Class Certification: The plaintiffs are considering a new class definition, which is regarded as a priority by the District Court;

• Tolling Agreement: The plaintiffs requested tolling agreements for class members in the focus cases from the underwriters. If the underwriters do not agree to toll the plaintiffs’ claims, the plaintiffs may file individual actions. In such case, the underwriters may want to have these claims arbitrated;

• Settlements: The District Court indicated that the issuers settlement cannot stand in its present form, and any further discussions on the settlement between the issuers and the plaintiffs should depend on the plaintiffs’ new proposed class definition; and

• Discovery: The stay of discovery is continuing and will be addressed by the District Court at the next conference.

     On May 30, 2007, the District Court held a conference in which the following issues were discussed:

• New Class Definition: the plaintiffs proposed a new class definition and moved for class certification;

• Statutes of Limitation: the underwriters refused to agree to toll the statute of limitations on plaintiffs’ claims, which caused plaintiffs to file a motion of individuals to intervene as plaintiffs in a focus case in which the plaintiffs think that the statue of limitations is close to running;

• Issuers’ Settlement: Since the settlement in its present form is not viable, the issuers will ask the District Court to deny the motion to approve the settlement without prejudice to application to the District Court regarding any future settlement; and

• Discovery: There were unresolved issues regarding the scope of discovery and may further be discussed at the next conference.

     The parties are currently in a process of meeting and conferring to discuss the issues raised by the court in the recent court conferences.

     Neither we, nor our legal counsel, are able to assess the likelihood of the outcome, nor can we determine the amount or range of potential loss, if any. We had an insurance policy with American Insurance Group with US$10 million of liability coverage when the class action lawsuit was made. According to the insurance policy, our Company is required to pay a US$500,000 deductible. We recorded a provision of US$500,000 in 2003, representing our deductible amount, related to these claims. In 2005, our legal counsel advised that it is unlikely that we will have to pay any remaining, unused portion of our deductible with respect to the claims. Accordingly, we reversed the provision of US$500,000 in 2005. We believe that the insurance coverage is sufficient to cover the liability arising from the settlement and claim.

Dividend Policy

     We have not declared nor paid any dividends on our Shares. We anticipate that we will continue to retain any earnings for use in the operation of our business and we do not intend to pay dividends in the foreseeable future.

B. Significant Changes

     Except as disclosed in this annual report, no significant change has occurred since the date of our consolidated financial statements.

ITEM 9. THE OFFER AND LISTING

A. Offer and listing details

     The following table shows, for the periods indicated, the high and low closing prices for our Shares as quoted on the NASDAQ Global Market.

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	Common Shares
Year Ending December 31, 2002	High		Low
	(in US$)
First quarter	$	2.88	$	2.30
Second quarter	$	1.25	$	0.67
Third quarter	$	1.30	$	0.63
Fourth quarter	$	0.84	$	0.42

	Common Shares
Year Ending December 31, 2003	High		Low
	(in US$)
First quarter	$	1.52	$	0.66
Second quarter	$	1.21	$	0.86
Third quarter	$	2.98	$	1.17
Fourth quarter	$	3.35	$	1.44

	Common Shares
Year Ending December 31, 2004	High		Low
	(in US$)
First quarter	$	2.07	$	1.33
Second quarter	$	1.87	$	1.06
Third quarter	$	1.43	$	0.70
Fourth quarter	$	2.43	$	1.30

	Common Shares
Year Ending December 31, 2005	High		Low
	(in US$)
First quarter	$	1.86	$	1.30
Second quarter	$	2.48	$	1.38
Third quarter	$	2.66	$	1.68
Fourth quarter	$	2.99	$	1.76

	Common Shares
Year Ending December 31, 2006	High		Low
	(in US$)
First quarter	$	6.01	$	2.90
Second quarter	$	10.39	$	6.13
Third quarter	$	12.38	$	7.30
Fourth quarter	$	11.06	$	8.86

Year Ending December 31, 2007	High		Low
	(in US$)
First quarter	$	14.34	$	9.28
Second quarter (only through June 15, 2007)	$	15.97	$	13.92

B. Plan of Distribution

     Not applicable.

C. Markets

     Our Shares have been listed and traded on the NASDAQ Global Market since February 18, 2000.

     Under Rule 4350(l) of the NASDAQ rules, all securities listed on NASDAQ must be eligible for a direct registration program operated by a registered clearing agency. We are required to comply with the requirements of this rule by January 1, 2008. In order to fulfil the direct registration program eligibility requirements, we are required (among others) to amend our constitutional documents to allow for the issue of non-certificated securities.

     We are incorporated in the Republic of Singapore and are subject to the Singapore Companies Act (Cap.50). We are advised by our Singapore counsel that under the Singapore Companies Act, Singapore-incorporated companies are required to issue physical share certificates to its registered shareholders, and there are no exceptions to or exemptions from this requirement that would enable us to amend our constitutional documents to allow for the issue of non-certificated securities. Therefore, we will not be able to comply with the provisions of Rule 4350(l).

     Under Rule 4350(a)(1), as a foreign private issuer, we are allowed to follow our home country practice in lieu of the requirements set out in the rule, subject to certain exceptions. We will be relying on this rule for an exemption from the requirements of Rule 4350(l). We have informed the NASDAQ Global Market about our election to comply with the laws of Singapore in lieu of the direct registration system provisions of Rule 4350(l).

D. Selling Shareholders

     Not applicable.

E. Dilution

     Not applicable.

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F. Expenses of the issue

     Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

     Not applicable.

B. Memorandum and Articles of Association

     Our current Memorandum and Articles of Association were first adopted on our date of incorporation, being September 13, 1999, and have been amended since that date.

     The principal purpose of our Company is that of investment holding. Our Company’s objects and purposes are set out in full in Clause 3 of our Memorandum of Association. Subject to the provisions of the Singapore Companies Act (Chapter 50) (the “Singapore Companies Act”) and any other written law in Singapore and our Memorandum and Articles of Association, we have full capacity to carry on or undertake any business or activity, do any act or enter into any transaction and for such purposes, full rights, powers and privileges.

     The following is a summary of certain provisions of our Articles of Association.

DIRECTORS

     Each of our directors will remain in his office as a director until:

• He is prohibited from acting as a director by reason of any order made pursuant to the Singapore Companies Act;

• He ceases to be a director by virtue of any of the provisions of the Singapore Companies Act or the Articles of Association of our Company;

• He resigns from his office;

• He receives a bankruptcy order made against him;

• He has a receiving order made against him or suspends payment or compounds with this creditors generally;

• He is found to be a lunatic or of unsound mind; or

• He is removed by an ordinary resolution passed by our shareholders in accordance with the provisions of the Singapore Companies Act.

     A director of our Company who is directly or indirectly interested in a transaction, contract or arrangement with our Company shall, as soon as practicable after the relevant facts have come to his knowledge, disclose the nature of his interest at a meeting of the board of directors. Subject to such disclosure, a director shall be entitled to vote in respect of any contract or arrangement in which he is interested and he shall be taken into account in ascertaining whether a quorum is present.

     Our directors may borrow or raise money from time to time for the purpose of our Company or secure the payment of such sums as they think fit and may secure the repayment or payment of such sums by mortgage or charge upon all or any of our property or assets or by the issue of debentures or otherwise as they may think fit, provided that the directors shall not carry into effect any proposals for disposing of the whole or substantially whole of our Company’s undertaking or property unless those proposals have been approved by our Company in general meeting.

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     Subject to the Singapore Companies Act, the remuneration of the directors shall be determined from time to time by our Company in general meeting. Any director who is appointed to any executive office or serves on any committee or who otherwise performs or renders services, which in the opinion of the directors are outside his ordinary duties as a director, may, subject to the Singapore Companies Act, be paid such extra remuneration as the directors may determine.

     Our directors are not required to hold any of our Shares by way of qualification. A director who is not a shareholder of us is nevertheless entitled to attend and speak at shareholders meetings.

AUDIT COMMITTEE

     Our audit committee and our board of directors have the ultimate authority and responsibility to select and evaluate, on our behalf, the independent public accountants who audit our annual financial statements, subject to the appointment, replacement or removal from office of our independent public accountants being approved by our shareholders at our Annual General Meeting. Our audit committee will review and approve the planned scope of our annual audit. In accordance with our Articles of Association, all of the members of our audit committee must be persons who qualify as “independent” directors for purposes of the rules and regulations of the NASDAQ Global Market.

     The audit committee currently consists of Messrs. Gilbert Bao, Michael Y. J. Ding and Yichin Lee. We are in compliance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and the rules of the U.S. Securities and Exchange Commission thereunder and the NASDAQ Global Market’s requirements relating to audit committees.

DIVIDENDS

     Our Company may by an ordinary resolution declare dividends but no dividend shall be payable except out of the profits of our Company or in excess of the amount recommended by the directors. Our profits available for dividend and determined to be distributed shall be applied to pay dividends to shareholders according to their respective rights and priorities. Except for shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid up on shares.

     All dividends unclaimed after having been declared may be invested or otherwise made use of by our board of directors for the benefit of our Company. If any dividend has not been claimed for six years from the date of declaration, such dividend may be forfeited and shall revert to our Company. However, the directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture. No dividend shall bear interest against our Company.

LIQUIDATION DISTRIBUTION

     In the case of a winding up of our Company and in accordance with applicable laws, our shareholders may pass a special resolution to authorize a liquidator to divide and distribute our assets to our shareholders or, authorize the liquidator to vest the whole or part of our assets in trustees upon such trusts for the benefit of our shareholders but so that no shareholder will be compelled to accept shares or other securities on which there is any liability.

SHAREHOLDERS’ MEETINGS

     We are required to hold an annual general meeting once in every calendar year and not more than 15 months after the preceding annual general meeting. The directors may convene an extraordinary general meeting whenever they think fit, and they must do so upon the request in writing of shareholders representing not less than 10 percent of the voting rights of our Company. In addition, two or more shareholders holding not less than 10 percent of the total number of issued shares (excluding treasury shares) may call a meeting of our shareholders. Unless otherwise required by law or by our Articles of Association, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of those present and voting. An ordinary resolution suffices, for example, in respect of appointments of directors. A special resolution, requiring an affirmative vote of at least 75 percent of those present and voting, is necessary for certain matters under the Singapore Companies Act, such as an alteration of our Articles of Association. Subject to the Singapore Companies Act, at least 21 days’ advance written notice specifying the intention to propose a special resolution must be given of every general meeting convened for the

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purpose of passing a special resolution. Subject to the Singapore Companies Act, at least 14 days’ advance written notice must be given of every general meeting convened for the purpose of passing an ordinary resolution.

VOTING RIGHTS

     Voting at any meeting of our shareholders is by a poll. On a poll every shareholder who is present in person or by proxy has one vote for every share held by him.

SHARE CAPITAL

     We generally have the right by obtaining a general mandate at the annual general meeting to repurchase not more than 10 percent of our own Shares in issue.

     Our board of directors may make a capital call on our shareholders with respect to the amounts unpaid on their shares and the shareholders are required to pay the amount called at the time(s) and place as appointed by the board of directors. The board of directors may revoke a call or postpone the time previously fixed for the call payment.

     We may by ordinary resolution:

(i)	consolidate and divide all of our Shares;
(ii)	subject to the Singapore Companies Act, sub-divide some or all of our Shares, provided always that in such sub-division, the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and
(iii)	subject to the Singapore Companies Act and our Articles of Association, convert any class of shares into any other class of shares.

     We may also by special resolution reduce our share capital or any undistributable reserve in any manner as authorized by law.

     We are not required to provide any sinking fund pursuant to our Articles of Association. There was no provision discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of our Shares.

     There was no limitation on the rights of non-resident or foreign shareholders to hold or exercise voting rights on the shares.

MODIFICATION OF RIGHTS

     We may vary or abrogate any special rights attached to any class of our Shares by a special resolution passed at a separate meeting of holders of the shares of that class or, where the necessary majority for such special resolution is not obtained at the meeting, with the consent in writing of the holders of three-fourths of the issued shares of that class within two months of such meeting.

TRANSFER OF SHARES

     Subject to our Articles of Association, our Shares are freely transferable but our directors may, in their absolute discretion, decline to register any transfer of our Shares on which we have a lien. All of our outstanding Shares have been fully paid. In addition, our directors may refuse, at their discretion, to register or transfer shares to a transferee of whom they do not approve. Shares may be transferred by a duly signed instrument of transfer in the usual common form or in a form approved by our directors. Our directors may decline to register any transfer of shares evidenced in certificated form unless, among other things, it has been duly stamped and is presented for registration together with the certificate of payment of stamp duty (if any), the share certificates to which the transfer relates and other evidence of title as they may require. We will replace worn-out or defaced share certificates upon production thereof to the directors and upon payment of such fee as specified in our Articles of Association. We will replace lost, destroyed or stolen share certificates upon, among other things, the applicant furnishing evidence and such indemnity as the directors may require.

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TAKEOVERS

     The acquisition of shares of public companies is regulated by the Singapore Securities and Futures Act (Chapter 289) and the Singapore Code on Take-overs and Mergers. Any person, either on his own or together with persons acting in concert with him, acquiring an interest in 30 percent or more of our voting shares is obliged to extend a takeover offer for the remaining shares which carry voting rights, in accordance with the provisions of the Singapore Code on Take-overs and Mergers. Unless the contrary is established, “persons acting in concert” are presumed to include a company and its related and associated companies and a person who has provided financial assistance (other than a bank in the ordinary course of business) to such company or any of its related and associated companies for the purchase of voting rights, a company and its directors, including their close relatives and related trusts, a company and its pension funds and employee share schemes, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis and a financial advisor and its client in respect of shares held by the financial advisor and all the funds managed by the financial advisor on a discretionary basis where the shareholdings of the financial advisor and any of those funds in the client total 10 percent or more of the client’s equity share capital. The offer must be in cash or be accompanied by a cash alternative at not less than the highest price, excluding stamp duty and dealing costs, paid by the offeror or persons acting in concert with him for shares of that class within the preceding six months. A mandatory takeover offer is also required to be made if a person holding between 30 percent and 50 percent, both inclusive, of the voting shares, or any person acting in concert with him, acquires additional shares representing more than 1 percent of the voting shares in any six-month period.

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

     It should be noted that the Singapore Companies Act has been amended with effect from January 30, 2006 resulting in significant changes to the company law regime. These amendments include the abolition of the concepts of par value and authorized capital, and allowing repurchased shares to be held as treasury shares. With the abolition of the concept of par value pursuant to the Companies (Amendment) Act 2005, shares of a company no longer have any par or nominal value. The concepts of share premium and the issue of shares at a discount have also been abolished. Our Articles of Association were amended at the annual general meeting of our Company on June 29, 2006 to take into account changes to the Singapore Companies Act arising from the Companies (Amendment) Act 2005.

C. Material Contracts

     The following are summaries of our material contracts entered into over the past two years. However, these summaries may not contain all the information important to you. For more complete information, you should read the entire agreements, which have been included as exhibits to this annual report or incorporated into this annual report by reference from our annual report on Form 20-F/A filed with the Commission on December 8, 2006.

End-User License Agreement, dated April 1, 2004, between IML and UIM, as amended by the Second Amendment to the End-User License Agreement, dated March 1, 2006 and the Third Amendment to the End-User License Agreement, dated March 1, 2007.

     On April 1, 2004, IML entered into an end user license agreement with UIM pursuant to which IML granted a non-exclusive, non transferable, world wide license to UIM to use our software and certain operational and support services for a licensing fee based on a revenues sharing arrangement between us and UIM. The agreement is for a term of ten years.

     In March 2007, we amended the terms of the end user license agreement between ourselves and UIM. Pursuant to the terms of the amended agreement, UIM will pay us royalties based on revenues earned at the rate of 42 percent of gross revenues derived from our games of chance software and 17.5 percent of gross revenues derived from our multi-player game software.

Purchase and Sale Agreement, dated June 23, 2005, between Hoshin GigaMedia and Webs-TV

     On June 23, 2005, we entered into an agreement with Webs-TV to assign our Internet content business for a consideration of an amount in NT dollars equivalent to approximately US$0.7 million and, for a period of ten years

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commencing from January 1, 2006, a portion of the net revenues generated from the gigigaga.com.tw Web site will be transferred. Pursuant to the agreement, we have transferred to Webs-TV all properties relating to the operation of our gigigaga.com.tw Web site, including fixed assets, the gigigaga logo, and our content and data.

Share Purchase Agreement, dated September 17, 2005, between GigaMedia and Nextbase International Ltd.

     On September 17, 2005, we entered into an agreement with Nextbase International Ltd. to sell our 9,262,501 shares in G-Music Limited (the “Target Shares”) which accounted for 58.58 percent of the total issued and outstanding shares in G-Music Limited. The total purchase price for all the Target Shares was approximately US$5.15 million.

Asset Sale and Purchase Agreement, dated December 19, 2005, between GigaMedia, FunTown World Limited, Hoshin GigaMedia and TWP

     On December 19, 2005, through our wholly-owned subsidiaries, FunTown World Limited and Hoshin GigaMedia, we entered into a definitive agreement with TWP to acquire FunTown. On January 2, 2006, we completed the acquisition of FunTown and purchased certain assets and assumed certain liabilities of FunTown from TWP. The total purchase price of approximately US$43 million consisted of cash payments of approximately US$27.2 million and zero coupon convertible notes in the aggregate principal amount of approximately US$15 million, representing a valuation premium of US$0.8 million as determined by a third-party valuer. The convertible notes were issued on January 1, 2006 by our Company to TWP, in the aggregate principal amount of approximately NT$494 million (US$15 million) with 50 percent maturing on January 1, 2008 and 50 percent maturing on January 1, 2009 and were convertible into 4,794,323 shares of our common stock at US$3.1287 per share (The conversion price is subject to adjustment for stock dividend, stock split, reserve stock split, recapitalization, merger, and other dilution). We have the right to redeem the convertible notes, in whole or in part, within 12 months after the issue date, together with the accrued interest at 5 percent per annum. On January 1, 2006, we pledged our share holdings in Hoshin GigaMedia as collateral for the notes. Direct transaction costs amounting to approximately US$110 thousand were included as part of the acquisition cost.

     The transaction also included an incentive in the form of an additional amount to be paid by GigaMedia on April 1, 2007, which amount will be determined as follows:

(i)	If the growth of the adjusted pre-tax net income of FunTown in 2006 is 30 percent or more, the additional payment will be US$5 million;
(ii)	If the growth of the adjusted pre-tax net income of FunTown in 2006 is 25 percent or above but less than 30 percent, the additional payment will be US$4.17 million;
(iii)	If the growth of the adjusted pre-tax net income of FunTown in 2006 is 20 percent or above but less than 25 percent, the additional payment will be US$3.33 million;
(iv)	If the growth of the adjusted pre-tax net income of FunTown in 2006 is 15 percent or above but less than 20 percent, the additional payment will be US$2.5 million; and
(v)	If the growth of the adjusted pre-tax net income of FunTown in 2006 is less than 15 percent, no additional payment will be made by GigaMedia.

Put-Call Option Agreement, dated December 21, 2005, between Hoshin GigaMedia and JSDWAY

     On December 21, 2005, our wholly-owned subsidiary, Hoshin GigaMedia, entered into a put-call option agreement with JSDWAY. As of the date of the put-call option agreement, Hoshin GigaMedia owns 4,905,000 common shares (the “Put-Call Shares”) of Gamania. According to the put-call option agreement, JSDWAY granted Hoshin GigaMedia an option to sell to JSDWAY the Put-Call Shares at the price of NT$18.7 (US$0.57) per share exercisable before December 21, 2006, and Hoshin GigaMedia granted JSDWAY an option to buy from Hoshin GigaMedia the Put-Call Shares at the price of NT$18.7 (US$0.57) per share exercisable before December 21, 2006. As of December 31, 2005, neither Hoshin GigaMedia nor JSDWAY had exercised the put-call option agreement.

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This put-call option agreement was terminated on December 4, 2006. See Note 9, “Marketable Securities – Current” of our consolidated financial statements for further information.

Subscription Rights Agreement, dated March 10, 2006, between Hoshin GigaMedia, Wretch and the shareholders of Wretch

     On March 10, 2006, our wholly-owned subsidiary, Hoshin GigaMedia, entered into a subscription rights agreement with Wretch and its shareholders. Wretch is a leading online “community” offering a wide range of community services including blogs, photo albums and bulletin boards. According to the subscription rights agreement, Hoshin GigaMedia was granted a right to acquire up to a 20 percent equity stake in Wretch with a valuation based on a pre-agreed formula if and when Wretch increases its share capital within three years of the date of this subscription rights agreement. In exchange for these rights, Hoshin GigaMedia agreed to provide Wretch with certain free Internet services for three years.

Series A Preferred Share Purchase Agreement, dated April 27, 2006, between GigaMedia China Limited and T2CN and certain shareholders of T2CN

     On April 27, 2006, our wholly-owned subsidiary, GigaMedia China Limited (“GigaMedia China”), entered into a share purchase agreement with T2CN, an online casual sports games operator in the PRC, pursuant to which GigaMedia China made an initial investment of US$15 million to acquire 7.5 million shares of convertible preferred stock. The convertible preferred shares have an initial liquidation preference, are entitled to receive cumulative dividends at 8 percent per annum, and are redeemable starting December 31, 2009. The preferred shares are convertible into common shares of T2CN on a 1 : 1 basis, subject to certain adjustments.

Strategic Partnership Agreement, dated April 27, 2006, between T2CN and GigaMedia China

     On April 27, 2006, through our wholly-owned subsidiary, GigaMedia China, we entered into a strategic partnership agreement with T2CN. Pursuant to this strategic partnership agreement, GigaMedia and T2CN will together offer FunTown’s existing games to the T2CN user base. GigaMedia will become T2CN’s exclusive provider for FunTown’s existing games and preferred provider for games newly developed by GigaMedia.

Shareholders’ Agreement, dated April 27, 2006, between GigaMedia China, T2CN and certain shareholders of T2CN, as amended and restated by the Amended and Restated Shareholders’ Agreement dated November 25, 2006

     In connection with our strategic partnership with T2CN and subscription for preferential shares in T2CN, in April 2006, we entered into a shareholders’ agreement with T2CN and certain shareholders of TC2N to regulate our relationship with the ordinary shareholders of T2CN, which was subsequently amended and restated in November 2006. Pursuant to these agreements, we obtained the right to elect one member to the board of directors of T2CN, along with customary preferred share rights and protections, and acquired certain veto rights over the management of T2CN. We were also granted rights to subscribe for additional convertible preferred shares of T2CN, based on the financial performance of T2CN in each of the twelve-month periods ended March 31, 2007 and December 31, 2007. In addition, we provided shareholders of T2CN with an aggregate of approximately 52.92 percent of the issued share capital of T2CN with an option to sell their shares to us within two years from May 8, 2006 at a price equivalent to 8.65 times the net operating income of T2CN per share, subject to certain adjustments.

Asset Purchase and Sale Agreement, dated May 15, 2006, between Hoshin GigaMedia and Webs-TV

     On May 15, 2006, our wholly-owned subsidiary, Hoshin GigaMedia, entered into an agreement with Webs-TV, a Taiwan digital content provider, to sell GigaMedia’s ADSL business. Under the agreement, Webs-TV purchased our ADSL business in an all cash transaction with a total price of approximately US$8.9 million for our ADSL business and approximately US$0.9 million for the right to use our ADSL brand for five years. Both are payable from May 15, 2006 through July 31, 2007. The transferred ADSL business includes GigaMedia’s ADSL-related equipment, business contracts, and subscription contracts between Hoshin GigaMedia and approximately 62,000 ADSL subscribers.

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Service Agreement, dated May 15, 2006, between Hoshin GigaMedia and Webs-TV

     In connection with the sale of our ADSL business, we agreed on May 15, 2006 to provide Webs-TV with the following support and administrative services that are necessary for the ADSL business on a transitional basis: bandwidth, consulting and other support services through December 31, 2007. For these services, Webs-TV shall pay us a fee of approximately US$8.3 million which is payable from May 15, 2006 through February 28, 2008. The term of this agreement is from May 15, 2006 to December 31, 2007.

Subscription Agreement, dated December 7, 2006, between GigaMedia Asia Pacific Limited and Infocomm Asia

     On December 7, 2006, we entered into a subscription agreement with Infocomm Asia, an online game operator based in Singapore, through our wholly-owned subsidiary GigaMedia Asia Pacific Limited (“GigaMedia Asia Pacific”). Pursuant to this agreement, we made an investment of US$10 million to subscribe for 500,000 voting convertible preferred shares on an as-convertible basis, approximately representing 32.26 percent of the total issued and outstanding common shares of Infocomm Asia, making us the largest shareholder of Infocomm Asia.

Termination Agreement, dated December 12, 2006, between Hoshin GigaMedia, KBT, Wretch and certain shareholders of Wretch

     On December 12, 2006, we entered into an agreement with Wretch and certain of its shareholders to terminate the subscription rights agreement dated March 10, 2006 entered into between Hoshin GigaMedia, Wretch and its shareholders. Pursuant to this agreement, Wretch agreed to make a one-time termination payment of NT$1.5 million (or US$46 thousand) to us, an indemnification fee comprised of a fixed fee of NT$20 million (or US$0.6 million) (including VAT tax) and a variable fee, which amount was to be determined based on the final acquisition price to be paid by a third party investor for the acquisition of all the issued share capital of Wretch as follows:

(a)	if the final acquisition price exceeded US$24 million but was less than or equal to US$36 million, the additional payment would be equal to 18 percent of US$24 million;
(b)	if the final acquisition price exceeded US$36 million but was less than or equal to US$48 million, the additional payment would be equal to the sum of US$2,160,000 and 16 percent of US$ 36 million; and
(c)	if the final acquisition price exceeded US$48 million, the additional payment would be equal to the sum of US$4,080,000 and 14 percent of US$48 million.

     Pursuant to the agreement, we are also not obligated to provide Wretch with certain free Internet services after December 31, 2006. In 2007, we received approximately US$0.6 million from Wretch as a result of this agreement.

License and Distribution Agreement, dated December 13, 2006, between Dragongate Enterprises and HanbitSoft Inc.

     In December 2006, Dragongate Enterprises, our 70:30 joint venture with Cyber Gateway Pte. Ltd. (which is a wholly-owned subsidiary of Infocomm Asia), entered into an agreement with HanbitSoft Inc. (“HBS”)pursuant to which HBS granted an exclusive sub-license to Dragongate Enterprises for the operation, marketing, hosting and distribution of a multi-player online role playing game known as Hellgate: London in Taiwan, Hong Kong and Macau. Under the agreement, Dragongate Enterprises is to pay a non-refundable license fee of US$2.5 million, a non-refundable minimum guarantee against royalties of US$6.5 million and certain royalties on a revenue-sharing basis as set out in the agreement. We also committed to spend not less than US$10 million on related marketing, promotion and advertising activities.

Share Purchase Agreements, dated January 1, 2007 to January 17, 2007, between GigaMedia China Limited and certain shareholders of T2CN

     In January 2007, we entered into a series of share purchase agreements with certain shareholders of T2CN representing 32.39 percent of the issued voting rights of T2CN, pursuant to which we agreed to acquire shares held by them in T2CN for a purchase price per share to be determined as follows:

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(a)	US$1.05 per share if the net operating income of T2CN for the first half of 2007 is not more than US$1 million;
(b)	US$1.25 per share if the net operating income of T2CN for the first half of 2007 is equal to US$1.5 million; or
(c)	US$1.45 per share if the net operating income of T2CN for the first half of 2007 is equal to US$2.5 million,

to be adjusted on a pro rata basis if actual net operating income for such period were to fall between the three thresholds set out above.

Shareholders’ Agreement, dated December 7, 2006, as amended on February 2, 2007, between GigaMedia Asia Pacific, Bodhi China and India LLC, Etherfast Pte Ltd, Global Star International Development Limited, Commerzbank Infocomm Segregated Portfolio, Infocomm Investments Pte Ltd, Management Capital International Ltd and Infocomm Asia

     On February 2, 2007, we entered into an agreement with Infocomm Asia and its shareholders to regulate the affairs of Infocomm Asia. Pursuant to the agreement, we and other shareholders holding Class B shares in Infocomm Asia are entitled to convert such shares into ordinary shares at any time. Each Class B share is convertible into one ordinary share of Infocomm Asia, subject to certain adjustment provisions as set out in the agreement. Alternatively, holders of Class B shares are entitled to require Infocomm Asia to redeem their shares in cash upon the earlier of the 5^th anniversary from January 12, 2007 or the redemption of any Class A shares. The redemption price for any Class B share is stipulated to be 100 percent of the issue price, plus interest accrued at the rate of 10 percent on the issue price per annum compounded annually, less any declared and paid dividends thereon. In the event that the redemption is triggered by the redemption of any Class A shares, holders of Class B shares are first entitled to the payment of a premium equal to the sum of US$10 per Class B share to be redeemed and the compound interest payable on the Class B shares as stipulated above, less any declared and paid dividends on such Class B shares. The Class B shares may also be automatically converted into ordinary shares upon the election of 75 percent of Class B shareholders, or the occurrence of a qualifying initial public offering of Infocomm Asia as set out in the agreement.

D. Exchange Controls

     There are currently no foreign exchange regulations which restrict the export or import of our capital and the ability of our subsidiaries to distribute dividends to us. There are no limitations on the right of a non-resident or foreign owner to hold or vote the shares imposed by Singapore law or by our Articles of Association.

E. Taxation

Singapore Tax Considerations

Taxation of Dividends received by Singapore Resident Shareholders

     Dividends paid by us would be taxable in Singapore if they are received in Singapore or if they are considered, in the hands of a particular shareholder, to be derived in Singapore (for example if they constitute the income of a trade or business carried out in Singapore).

     Under the Singapore-Taiwan Tax Treaty, if a dividend is paid by a company which is tax resident in Taiwan to a person who is tax resident in Singapore, the tax on the dividend shall not exceed an amount which, together with the corporate income tax on the profits of the company paying the dividends, constitutes 40 percent of that part of the taxable income out of which the dividends are paid. The term “corporate income tax payable” shall be deemed to include the corporate income tax that would have been paid but for the reduction or exemption under the laws designed to promote economic development.

     If our shareholder, whether a company or an individual, receiving or deriving such dividends is tax resident in Singapore, he would be entitled to foreign tax credits under the Singapore-Taiwan Tax Treaty and, if the recipient is a company which owns not less than 25 percent of our shares, the tax credit will include underlying tax paid by us.

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Singapore foreign tax credit is limited to the lower of the foreign tax suffered and the Singapore tax payable on the net foreign income (after attributable and allowable expenses). Certain foreign dividends received by a Singapore resident person on or after June 1, 2003 will, however, be exempt from tax. The main conditions to be satisfied for such exemption are that:

     (a) the dividends are received from a jurisdiction with a maximum tax rate on the trade or business income of a company of at least 15 percent; and

     (b) the dividends themselves, or the income from which they are paid, have been subject to tax in the foreign jurisdiction or have been exempted from tax under an incentive granted for substantive business activities.

     The normal tax rate for corporate profits is 20 percent for the year of assessment 2007 (i.e. for the income earned in the financial year or other basis period ended 2006). With effect from year of assessment 2008 as announced in the 2007 budget, the corporate tax rate is reduced to 18 percent. Resident individuals are subject to tax at progressive rates. Based on proposals made by the government in the 2006 budget, the maximum individual tax rate would be 20 percent for the year of assessment 2007.

     If our shareholders are corporations, our shareholders will be regarded as being tax resident in Singapore if the control and management of our shareholders’ business is exercised in Singapore. For example, if our shareholders’ board of directors meets and conducts the business of our shareholders’ company in Singapore, our shareholders will be regarded as tax residents of Singapore. If our shareholders are individuals, our shareholders will be regarded as being tax resident in Singapore in a year of assessment if, in the preceding year, our shareholders were physically present in Singapore or exercised an employment in Singapore (other than as directors of a company) for 183 days or more or if our shareholders had resided in Singapore.

     All foreign-sourced income received (except for income received through a partnership in Singapore) in Singapore on or after January 1, 2004 by tax resident individuals will be exempt from tax.

Gains on Disposal of Shares

     Singapore does not impose a tax on capital gains. However, there are no specific laws or regulations which deal with the characterization of capital gains and hence, gains may be construed to be of an income nature and subject to tax if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore.

Stamp Duty

     There is no stamp duty payable in respect of the issuance and holding of shares. Where existing shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of S$2.00 for every S$1,000 of the consideration for, or market value of, the shares, whichever is higher. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where an instrument is executed outside Singapore, or no instrument of transfer is executed, no stamp duty is payable on the acquisition of existing shares. However, stamp duty would be payable if an instrument of transfer which is executed outside Singapore is received in Singapore.

     Under Singapore law, our directors may not register a transfer of shares unless the instrument of transfer has been duly stamped.

Singapore Estate Duty

     With respect to deaths occurring on or after January 1, 2002, the movable property of persons who are not domiciled in Singapore at the time of death are exempt from estate duty. Therefore, an individual holder of shares who is not domiciled in Singapore at the time of his or her death will not be subject to Singapore estate duty on the value of our Shares.

     If our shareholders are individuals who are domiciled in Singapore, Singapore estate duty is imposed on the value of most immoveable property situated in Singapore and on most movable property, wherever it may be situated, subject to specific exemption limits. Accordingly, our Shares held by an individual domiciled in Singapore

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are subject to Singapore estate duty upon such an individual’s death. Singapore estate duty is payable to the extent that the value of our Shares aggregated with any other assets subject to Singapore estate duty exceeds S$600,000. Unless other exemptions apply to the other assets, for example, the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed at 5 percent on the first S$12,000,000 of the individual’s Singapore chargeable assets and thereafter at 10 percent.

     Individuals should consult their own tax advisors regarding the Singapore estate duty consequences of their ownership of our shares.

U.S. Federal Income Tax Considerations for U.S. Holders

     The following is a discussion of certain U.S. federal income tax considerations for investors in our Shares that are U.S. persons (as defined below) that hold the shares as a capital asset. This discussion is based on U.S. federal income tax law as in effect on the date hereof which is subject to change, possibly on a retroactive basis. This discussion is for general information only and does not address all of the tax considerations that may be relevant to you in light of your particular circumstances or if you are subject to special treatment under the U.S. federal income tax laws including if you are:

• a bank;

• a broker-dealer;

• a financial institution or an insurance company;

• a tax-exempt entity;

• a person holding shares as part of a straddle, hedge, conversion or other integrated investment;

• a person owning, actually or constructively, 10 percent or more of the combined voting power of all classes of our stock; or

• a person whose “functional currency” is not the U.S. dollar.

     This discussion does not address any U.S. state, local or foreign or any U.S. federal estate, gift or alternative minimum tax consideration of a holder of our shares.

     As used in this discussion, the term “U.S. person” means:

• an individual who is a citizen or resident of the United States;

• a corporation, or other entity treated as a corporation, created or organized under the laws of the United States or any political subdivision thereof;

• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust if (1) it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) has otherwise elected to be treated as a U.S. person under the Internal Revenue Code.

     If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds our Shares, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Shares, you are urged to consult your tax advisors as to the particular U.S. federal income tax consequences as applicable to you.

     You are urged to consult your tax advisor concerning the particular U.S. federal, state, local and foreign income and other tax considerations regarding the ownership and disposition of the shares including the application of the passive foreign investment company rules discussed below. Investors should review the discussion below under “Passive Foreign Investment Company Rules” carefully.

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Taxation of Dividends

     Except as discussed below with respect to the passive foreign investment company tax rules, the amount of distributions you receive on your shares (other than certain pro rata distributions of shares or rights to subscribe for shares) will generally be treated as dividend income to you if the distributions are made from our current and accumulated earnings and profits as calculated according to U.S. federal income tax principles. You will include such dividends in your gross income as ordinary income on the day you actually or constructively receive them. The amount of any distribution of property other than cash will be the fair market value of such property on the date it is distributed. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a maximum U.S. federal tax rate of 15 percent rather than the marginal tax rates generally applicable to ordinary income so long as certain holding period requirements are met. A non-U.S. corporation (other than a passive foreign investment company) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. There is currently no tax treaty in effect between the United States and Singapore. Our shares are expected to be readily tradable on the NASDAQ Global Market, an established securities market in the United States. Distributions, if any, in excess of current and accumulated earnings and profits will constitute a return of capital and will be applied against and reduce the holder’s tax basis in such shares. To the extent that distributions are in excess of such basis, the distributions will constitute capital gain as discussed below. U.S. corporate holders will generally not be eligible for the dividends received deduction for distributions to domestic corporations in respect of distributions on shares.

     The amount of any distribution paid in a currency other than the U.S. dollar will equal the U.S. dollar value of the foreign currency you receive, calculated by reference to the exchange rate in effect on the date you actually or constructively receive the distribution regardless of whether the foreign currency is actually converted into U.S. dollars. If you do not convert the foreign currency you receive as a dividend on the date of receipt, you will have a basis in such foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss you realize when you subsequently sell or otherwise dispose of such foreign currency generally will be ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.

     Holders may generally elect to claim a credit against their U.S. federal income tax liability for Singapore tax withheld from dividends received in respect of the shares. The rules relating to the determination of the foreign tax credit are complex and prospective purchasers are urged to consult their personal tax advisors to determine whether and to what extent they would be entitled to such credit. Holders that do not elect or are not permitted to claim foreign tax credits may instead claim a deduction for Singapore tax withheld. You will not be eligible for a foreign tax credit for the underlying Singapore taxes on profits paid by us with respect to such dividends.

     Sale or other disposition of shares. Except as discussed below with respect to the passive foreign investment company tax rules, a holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon a sale or other disposition of our shares in an amount equal to the difference between the amount realized from the sale or disposition and the holder’s adjusted tax basis in the shares. Such gain or loss generally will be long-term (taxable at a reduced rate for individuals) if, on the date of sale or disposition, the shares were held by the holder for more than one year and will generally be treated as gain or loss from U.S. sources for foreign tax credit purposes. The deductibility of a capital loss may be subject to limitations.

Passive Foreign Investment Company Rules

     In general, we will be classified as a “passive foreign investment company” (“PFIC”) for any taxable year if either (i) at least 75 percent of our gross income is passive income or (ii) at least 50 percent of the value (determined on the basis of a quarterly average) of our assets produce or are held for the production of passive income. Based upon an analysis of our income and assets for the 2007 taxable year as reasonably approximated for purposes of applying the PFIC rules, we do not believe we should be classified as a PFIC for the 2007 taxable year. Whether we are classified as a PFIC in the current or any future taxable year will be determined on the basis of, among other things, our asset values (including, among other items, the level of our cash, cash equivalents and short-term investments), and gross income (including whether such income is active versus passive income as specially determined under the PFIC rules) for such taxable year, which assets, and gross income are subject to change from

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year to year. In January 2006, we acquired FunTown for cash (plus other consideration) and in between April 2006 and June 2007, we acquired control over a majority of the voting rights in T2CN, consideration for which mainly comprised cash. We will continue to investigate opportunities, which may give rise to the acquisition of additional businesses for cash, thereby reducing our cash or other investment assets. If we acquire additional businesses for cash, we may, in turn, mitigate our risk of being or becoming classified as a PFIC. Because the determination of whether we are a PFIC is a factual determination made annually and because there are uncertainties in the application of the relevant rules, there can be no assurance we will not be classified a PFIC in the current or any future taxable year. Provided we are a PFIC for any taxable year during your holding period of our shares, the PFIC tax rules discussed below generally will apply in future years even if we cease to be a PFIC in subsequent years. U.S. holders who are individuals will not be eligible for reduced rates of taxation on any dividends, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

     If we were classified as a PFIC for any taxable year during which you held shares, and unless you make a mark-to-market election (as described below), you will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to you (which generally means any distribution received by you in a taxable year that is greater than 125 percent of the average annual distributions received by you in the three preceding taxable years or your holding period for the shares, if shorter), and (ii) any gain realized on the sale or other disposition, including a pledge, of shares. Under these PFIC rules:

• the excess distribution or gain would be allocated ratably over your holding period for the shares;

• the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we are classified as a PFIC (a “pre-PFIC year”) would be taxable as ordinary income;

• the amount allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, would be subject to tax at the highest tax rate in effect applicable to you for that year; and

• the interest charge generally applicable to underpayments of tax would be imposed on the tax attributable to each prior taxable year, other than the current taxable year or a pre-PFIC year.

     As an alternative to the foregoing rules, a holder of “marketable stock” in a PFIC may make a mark-to-market election, provided that the shares are actively traded on a “qualified exchange.” Under applicable Treasury regulations, a “qualified exchange” includes a national securities exchange that is registered with the Commission or the national market system established under the Securities and Exchange Act of 1934 (i.e., the NASDAQ Global Market). In addition, we believe that, based on the current level of trading activity of our shares on the NASDAQ Global Market, our shares should qualify as being actively traded, but no assurances may be given in this regard. If you make this election, you will generally (i) include as income for each taxable year the excess, if any, of the fair market value of your shares at the end of the taxable year over the adjusted tax basis of the shares and (ii) deduct as a loss the excess, if any, of the adjusted tax basis of the shares over the fair market value of the shares at the end of the taxable year, but only to the extent of the amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in the shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If you make a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, you will generally not be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC.

     The “QEF Election”, which serves as a further alternative to the foregoing rules, is not available.

     If you own shares during any year that we are a PFIC, you must file an annual IRS Form 8621. In the case of investors who have held our Shares during any taxable year in respect of which we were classified as a PFIC and continue to hold such shares (or any portion thereof), who have not previously determined to make a mark-to-market election, and who are now considering the making of a mark-to-market election, special tax rules may apply relating to purging the PFIC taint of such shares. You are urged to consult your tax advisor concerning the U.S. federal income tax consequences of purchasing, holding, and disposing our Shares if we are or become classified as a PFIC, including the possibility of making a mark-to-market election.

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Information Reporting and Backup Withholding

     In general, unless you are an exempt recipient such as a corporation and demonstrate this when required, information reporting will apply to dividend payments that we make to you paid within the United States (and in some cases, outside of the United States). Additionally, if you fail to provide your taxpayer identification number, or fail either to report in full dividend and interest income or to make the necessary certifications, you will be subject to backup withholding.

     In general, payment of the proceeds from the sale of shares to or through a U.S. office of a broker is subject to both U.S. backup withholding and information reporting unless you certify as to your non-U.S. status under penalties of perjury or otherwise establish an exemption. U.S. information reporting and backup withholding generally will not apply to a payment made outside the United States of the proceeds of a sale of shares through an office outside the United States of a non-U.S. broker. However, U.S. information reporting requirements (but not backup withholding) will apply to a payment made outside the United States of the proceeds of a sale of shares through an office outside the United States if the broker is:

• a U.S. person;

• a foreign person 50 percent or more of whose gross income is effectively connected with a U.S. trade or business for a specified three-year period;

• a “controlled foreign corporation” for U.S. tax purposes; or

• a foreign partnership, if at any time during its tax year;

• one or more of its partners are U.S. holders (as defined in U.S. Treasury regulations) who in the aggregate hold more than 50 percent of the income or capital interest in the partnership; or

• such foreign partnership is engaged in a U.S. trade or business;

     unless the broker has documentary evidence in its files that you are a non-U.S. person or you otherwise establish an exemption.

     Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability, provided you furnish the required information to the Internal Revenue Service.

F. Dividends and Paying Agents

     Not applicable.

G. Statements by Experts

     Not applicable.

H. Documents on Display

     The Commission allows us to “incorporate by reference” the information we file with the Commission. This means that we can disclose important information to you by referring you to another document filed separately with the Commission. The information incorporated by reference in this annual report is considered to be part of this annual report. We therefore incorporate by reference in Item 19 of this annual report certain exhibits, which we filed with the Commission in prior filings. You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing for information on the operation of the Commission’s Public Reference Room.

     You may also request a copy of our Commission filings, at no cost, upon written request to our investor relations department at 14th Floor, No. 122, Tunhwa North Road, Taipei 10595, Taiwan, R.O.C., or e-mail to: Brad.miller@GigaMedia.com.tw. A copy of each report submitted in accordance with applicable U.S. law is also available for public review at our principal executive offices.

92

I. Subsidiary Information

     Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss related to adverse changes in market prices, including interest rates and foreign exchange rates, of financial instruments. We are exposed to various types of market risks, including changes in interest rates and foreign currency exchange rates, in the normal course of business.

Foreign Currency Exchange

     Our subsidiaries conclude most of their business transactions in their own measurement currencies, therefore the foreign currency risks derived from operations are not significant. However, we hold some assets or liabilities in foreign currency other than measurement currency and the value of these assets and liabilities are subject to foreign currency risks resulting from fluctuations in exchange rates between the foreign-denominated currency and the measurement currency. We have not tried to reduce our exposure to exchange rate fluctuations by using hedging transactions. However, we may choose to do so in the future.

     As of December 31, 2006, we had bank deposits of approximately US$0.3 million denominated in foreign currencies other than measurement currencies of the entities holding such assets. These assets are subject to foreign currency exchange risk. We recorded a realized foreign exchange loss of approximately US$0.2 million and unrealized foreign exchange gain of approximately US$17 thousand in 2006.

     As of December 31, 2006, we had available-for-sale marketable securities of approximately US$1.4 million denominated in foreign currencies other than measurement currencies of the entities holding such assets. Changes in the value of these marketable securities resulting from movements in foreign exchange rates are reported in the separate component of shareholders’ equity until realized. As of December 31, 2006, unrealized foreign exchange gain for these marketable securities was approximately US$5 thousand.

Interest Rate Sensitivity

     Our exposure to interest rates relates primarily to our investments in marketable securities, and short-term loans. As of December 31, 2006, we had approximately US$13.8 million of investment in fixed-income or money market investment funds. These investments are subject to interest rate risk in that the value of their holdings in debt instruments will fall if market interest rates increase. Declines in interest rates over time will, however, reduce our interest income from our bank deposits. As of December 31, 2006, we had approximately US$12.9 million of short-term loans, with a weighted average interest rate of approximately 2.48 percent. Increases in interest rates of the loans will increase our interest expenses. We have not entered into any interest rate swaps, caps or any hedge contracts to modify our exposure to interest rate fluctuations.

Other Market Risk

     We are also exposed to other market risk, which is mainly derived from our investments in Softstar, Infocomm Asia and RMC, as well as other investee companies and investment funds. Changes in the stock price, the performance or the net asset value of these companies and investment funds might have significant impact on our financial positions or operating results.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

93

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

     Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

     Our management, with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation and taking into account the foregoing, our chief executive officer and chief financial officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported on a timely basis and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

     Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Frameworks. Based on our assessment and those criteria, our management has determined that our internal control over financial reporting as of December 31, 2006 was effective.

     As of December 31, 2006, with regards to the scope of our assessment, we excluded FunTown from our assessment of internal control over financial reporting because it was acquired in a business combination purchase during 2006. FunTown’s total assets, total revenues, and net income represent approximately US$54.5 million, US$18.7 million and US$5.5 million respectively, of our total assets, total revenues and net income in 2006. We also did not extend our assessment to UIM, which was consolidated based on FIN46(R), because we do not control UIM and do not have the right or authority to assess, modify or dictate its internal controls. The consolidation of UIM resulted in an increase in assets, liabilities, and revenues of approximately US$12.8 million, US$12.1 million and US$27.5 million, respectively, as of and for the year ended December 31, 2006. Accordingly, our conclusions regarding the effectiveness of our disclosure controls and procedures and internal control over financial reporting do not extend to the disclosure controls and procedures and internal control over financial reporting of FunTown and UIM. However,

94

our internal control is adequate to ensure that the financial information for such excluded businesses is reflected properly in our financial statements.

Attestation Report of the Registered Public Accounting Firm

     Our annual report does not include an attestation report of a registered public accounting firm regarding internal control over financial reporting, which is not required to be provided until the filing of our annual report for the financial year ended December 31, 2007. Nonetheless, in 2006, we requested our independent auditors to evaluate our internal controls over financial reporting, and there were no material weaknesses identified in our internal controls.

Changes in Internal Control Over Financial Reporting

     During the year ended December 31, 2006, there have not been any significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. [Reserved]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     Our board of directors has determined that Mr. Michael Y. J. Ding, a member of our audit committee, qualifies as an audit committee financial expert in accordance with the requirements of Item 16A of Form 20-F. Mr. Ding has served as an independent director of our board and a member of our audit committee since July 30, 2003. Mr. Ding is currently chairman of Fubon Securities Investment Consulting Co. Ltd. Prior to that, Mr. Ding was president and chief executive officer of Fubon Asset Management Co. Ltd., president and fund manager of the R.O.C. Fund (listed on the New York Stock Exchange), as well as president of the International Investment Trust Co. in Taiwan, where he also served as chief investment officer and a senior vice president. Prior to that, Mr. Ding was a chief economist and head of research at Citicorp International Securities Ltd. in Taipei and head of research and information for the Greater China region at McKinsey & Co., Inc.

ITEM 16B. CODE OF ETHICS

     We have adopted a code of ethics, as defined in Item 16B of Form 20-F. Our code of ethics applies to our chief executive officer, chief financial officer and persons performing similar functions as well as to our directors, other officers, employees and consultants. The code of ethics was amended on December 19, 2005 in order to conform certain provisions in it with our newly adopted antifraud policy. Our code of ethics is available on our Web site at http://www.gigamedia.com.tw/code.htm. If we further amend any provisions of our code of ethics that apply to our chief executive officer, chief financial officer or persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our Web site at the same address. We will also provide any person without charge a copy of our code of ethics, upon written request to our investor relations department at 14th Floor, No. 122, Tunhwa North Road, Taipei 10595, Taiwan, R.O.C., or e-mail to: Brad.miller@GigaMedia.com.tw.

     On December 19, 2005, our board of directors adopted an antifraud policy for the purpose of preventing fraud schemes, including fraudulent financial reporting, misappropriation of assets, any fraud committed by senior management, and information technology fraud. According to our antifraud policy, our audit committee is responsible for monitoring the implementation of our antifraud policy and procedures, and an antifraud taskforce is assigned by our audit committee to be responsible for the hotline management, risk assessment, complaint investigation and resolution, and reporting to our chief executive officer, chief financial officer and audit committee.

     On May 10, 2006, our audit committee adopted a whistleblower program pursuant to our antifraud policy. The whistleblower program enables all employees to know how and when to use the whistleblower hotline, and communicate or report, on a confidential or anonymous basis, without fear of retribution, concerns related to wrongdoings or violations, and ensures that all reported incidents are properly investigated.

95

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following table summarizes the aggregate fees billed to us by GHP Horwath, P.C. during the fiscal years ended December 31, 2005 and 2006.

	Year Ended December 31,
	2005		2006
	(in US$)		(in US$)
Audit Fees		360,959		492,922
Audit-Related Fees		2,245		0
Tax Fees		11,967		32,515
Other Fees		0		0

A. Audit Fees

     Audit fees consist of fees billed for our statutory consolidated financial statements and the statutory financial statements of our subsidiaries.

B. Audit-Related Fees

     Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, such as accounting consultation in 2005.

C. Tax Fees

     Tax fees include fees billed for tax compliance services, including the preparation of original and amended tax returns.

D. Other Fees

     All other fees are fees billed for services provided by the principal accountant, other than the services reported as audit fees, audit-related fees and tax fees above. No other fees were billed during 2005 and 2006

E. Audit Committee Pre-Approval Policies and Procedures

     In May 2005, we adopted our audit committee charter. Consistent with the Commissions’ policies regarding auditor independence, our audit committee is directly responsible for the appointment, compensation, retention and oversight of the work of auditors engaged to provide us with audit, review or attest services. Our audit committee has sole discretion to review and pre-approve the appointment of auditors and to set their fees for the performance of audit and non-prohibited non-audit services in accordance with the Sarbanes-Oxley Act of 2002 and the Commission rules and regulations promulgated thereunder, subject to the appointment, replacement or removal from office of our independent public accountants been approved by our shareholders at our Annual General Meeting.

     The appointment of our independent auditors, GHP Horwath, P.C., as well as the scope of each audit, audit-related or non-prohibited non-audit service provided pursuant to such appointment and our auditors’ fees for all such services were approved by our audit committee.

ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     Not applicable.

ITEM 16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

     Not applicable.

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PART III

ITEM 17. FINANCIAL STATEMENTS

     We have elected to provide financial statements for fiscal year 2006 and the related information pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

     Our consolidated financial statements and the reports thereon by our independent registered public accounting firms listed below are attached hereto as follows:

	Page	Page
(a)	Reports of Independent Registered Public Accounting Firms	F-1, F-2
(b)	Consolidated Balance Sheets as of December 31, 2005 and 2006	F-3
(c)	Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006	F-5
(d)	Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2004, 2005 and 2006	F-7
(e)	Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006	F-8
(f)	Notes to the Consolidated Financial Statements	F-10

ITEM 19. EXHIBITS

EXHIBIT INDEX

1.1	Memorandum of Association of our Company*
1.2	Articles of Association of our Company*
1.3	Amended Memorandum and Articles of Association of our Company
4.1	Microsoft Commercial Internet System License Agreement between Hoshin GigaMedia Center Inc., dated April 1, 1998**
4.2	License Agreement between Portal Information Network, Inc. and Hoshin GigaMedia Center Inc., dated May 23, 1998**
4.3	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Prosperity CATV Inc., dated May 12, 1999 (including English summary)**
4.4	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Everlasting Cable TV Co., dated June 16, 1999 (including English summary)**
4.5	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Lee Kwan Cable TV Co., dated June 16, 1999 (including English summary)**
4.6	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Wonderful Cable TV Co. Ltd., dated June 16, 1999 (including English summary)**
4.7	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Powerful CATV Co. Ltd., dated May 14, 1999 (including English summary)**
4.8	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Netwave Cable TV Inc., dated April 16, 1999 (including English summary)**
4.9	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and New Visual Wave CATV Inc., dated August 18, 1999 (including English summary)**
4.10	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Da Fung CATV Co. Ltd., dated July 6, 1999 (including English summary)**
4.11	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Gaho Cable Co. Ltd., dated May 12, 1999 (including English summary)**
4.12	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and TeleFirst Cable Communication Co. Ltd., dated May 19, 1999 (including English summary)**
4.13	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Twinstar CATV Co. Ltd., dated April 16, 1999 (including English summary)**
4.14	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Sun Crown CATV Co. Ltd., dated April 16, 1999 (including English summary)**
4.15	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Shinyeongan CATV Co. Ltd., dated May 21, 1999 (including English summary)**

97

4.16	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Chung Lian Inc., dated April 16, 1999 (including English summary)**
4.17	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Gang Du Cable TV Co. Ltd., dated April 16, 1999 (including English summary)**
4.18	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Union Cable TV Co. Ltd., dated May 14, 1999 (including English summary)**
4.19	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and North Taoyuan CATV Company, dated August 9, 1999 (including English summary)**
4.20	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Top Cable TV System Co., dated November 1, 1999 (including English summary)**
4.21	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Shin Ho Cable TV Co. Ltd., dated May 13, 1999 (including English summary)**
4.22	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Shuang Shing Cable TV Co., dated June 16, 1999 (including English summary)**
4.23	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Hai Sun Cable Broadcasting System Co. Ltd., dated August 9, 1999 (including English summary)**
4.24	Broadband Internet over Cable Service Agreement between Hoshin GigaMedia Center, Inc. and Tien Wai Tien CATV Co., Ltd., dated October 25, 1999 (including English summary)**
4.25	Registration Rights Agreement among GigaMedia Limited and Microsoft Corporation, dated November 23, 1999**
4.26	Shareholders’ Agreement among GigaMedia Limited and Microsoft Corporation, Koos Develop Corp., Kudos Fund, Best Method Limited, TCC International, Mr. Chester Koo, Mr. Leslie Koo, Mr. Kent Yen, Mr. Raymond Chang, Mr. Yichun Chang, Mr. Chris Tung and Mr. Michel Chu, dated November 23, 1999**
4.27	Business Co-Operation Agreement among Hoshin GigaMedia Center, Inc. and Microsoft Corporation, dated November 1, 1999**
4.28	Strategic Alliance Agreement among GigaMedia Limited, Hoshin GigaMedia Center Inc., and Gamania Digital Entertainment Co., LTD., dated March 1, 2001***
4.29	Stock Purchase Agreement, dated as of March 17, 2004, by and among GigaMedia International Limited, GV Holding Company, and Alexander Saidakovsky, Alexander Ganelis and Daniil Utin******
4.30	End User License Agreement between Internet Media Licensing Limited and Ultra Internet Media S.A., dated April 1, 2004*******
4.31	Purchase and Sale Agreement between Hoshin GigaMedia Center, Inc. and Webs-TV, Digital International Corporation, dated June 23, 2005*******
4.32	Put-Call Option Agreement between Hoshin GigaMedia Center, Inc. and JSDWAY Digital Technology Co. Ltd., dated December 21, 2005*
4.33	Assets Sale and Purchase Agreement among GigaMedia Limited, FunTown World Limited, Hoshin GigaMedia Center, Inc. and TWP Corporation, dated December 19, 2005*
4.34	Share Purchase Agreement between GigaMedia Limited and Nextbase International Limited, dated September 17, 2005*
4.35	Subscription Rights Agreement between Hoshin GigaMedia Center, Inc. Wretch Co., Ltd. and the shareholders of Wretch Co. Ltd, dated March 10, 2006*
4.36	Series A Preferred Share Purchase Agreement among T2CN Holding Limited, GigaMedia China Limited, and certain shareholders of T2CN, dated April 27, 2006*
4.37	Shareholders’ Agreement among T2CN Holding Limited and the Shareholders dated April 27, 2006*
4.38	Strategic Partnership Agreement between T2CN Holding Limited and GigaMedia China Limited, dated April 27, 2006*
4.39	Assets Purchase and Sale Agreement between Hoshin GigaMedia Center, Inc. and Webs-TV Digital International Corporation, dated May 15, 2006*
4.40	Service Agreement between Hoshin GigaMedia Center, Inc. and Webs-TV Digital International Corporation, dated May 15, 2006*
4.41	Second Amendment to the End User License Agreement between Internet Media Licensing Limited and Ultra Internet Media S.A., dated March 1, 2006*
4.42	Amended and Restated Shareholders’ Agreement between T2CN Holding Ltd., certain shareholders of T2CN, GigaMedia China Limited, Marvel City Investments Limited, Patriot Capital Limited, TAE LLC and Ant Bridge No. 2 Venture Capital Secondary Investment Limited Partnership, dated November 25, 2006

98

4.43	Share Purchase Agreement between GigaMedia China Limited, Newmargin T2CN Investment Ltd. and Shanghai Newmargin Venture Capital Co., Ltd dated January 1, 2007
4.44	Share Purchase Agreement between GigaMedia China Limited and Chengwei (China) Investment Company, Greg. Wei Gang Ye, and Jia Yi Wan, dated January 1, 2007
4.45	Share Purchase Agreement between GigaMedia China Limited and certain shareholders of T2CN, dated January 17, 2007
4.46	Share Purchase Agreement between GigaMedia China Limited, Shanghai Newmargin Venture Capital Co. Ltd. and Newmargin Happydigital Investment Partners Inc., dated January 1, 2007
4.47	Subscription Agreement between GigaMedia Asia Pacific Limited and Infocomm Asia Holdings Pte. Ltd., dated December 7, 2006
4.48	Termination Agreement between Hoshin GigaMedia Center Inc., Koos Broadband Telecom Co., Ltd, Wretch Co., Ltd and certain shareholders of Wretch Co., Ltd, dated December 12, 2006
4.49	License and Distribution Agreement between Dragongate Enterprises Limited and HanbitSoft Inc., dated December 13, 2006
4.50	Third Amendment to the End User License Agreement dated March 1, 2007, between Internet Media Licensing Limited and Ultra Internet Media, S.A.
4.51	Shareholders’ Agreement between GigaMedia Asia Pacific Limited, Management Capital International Ltd, Infocomm Investments Pte Ltd, Commerzbank Infocomm Segregated Portfolios, Global Star International Development Limited and Etherfast Pte Ltd, dated December 7, 2006.
4.52	Shareholders’ Agreement, between GigaMedia Asia Pacific Limited, Bodhi China and India Investments LLC, Etherfast Pte Ltd, Global Star International Development Limited, Commerzbank Infocomm Segregated Portfolio, Infocomm Investments Pte Ltd, Management Capital International Ltd and Infocomm Asia, dated February 2, 2007
4.53	2006 Equity Incentive Plan********
8.1	List of Subsidiaries*
11	Code of ethics adopted by the registrant on April 21, 2004, as amended on December 19, 2005*
12.1	Certification by our Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act
12.2	Certification by our Chief Financial Officer pursuant to Rule13a-14(b) of the Securities Exchange Act
13.1	Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2	Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1	Consent of PricewaterhouseCoopers, Independent Registered Public Accounting Firm
15.2	Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm.

*	Filed with the Commission with the original 2005 annual report on Form 20-F of GigaMedia, Ltd. on June 28, 2006.
**	Incorporated by reference from our Registration Statement on Form F-1, file number 333-11416 filed with the Commission on February 2, 2000.
***	Incorporated by reference from our annual report on Form 20-F, file number 000-30540 filed with the Commission on June 28, 2001.
******	Incorporated by reference from our annual report on Form 20-F, file number 000-30540 filed with the Commission on June 30, 2004.
*******	Incorporated by reference from our annual report on Form 20-F, file number 000-30540 filed with the Commission on June 30, 2005.
********	Incorporated by reference from our Registration Statement on Form S-8, file number 333-142963 filed with the Commission on May 15, 2007
+	Does not contain portions for which confidential treatment has been requested.

99

SIGNATURE

     The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

GIGAMEDIA LIMITED

By:	/s/ Arthur Wang
Arthur Wang
Chief Executive Officer
Date: June 29, 2007

100

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
GigaMedia Limited

     We have audited the accompanying consolidated balance sheets of GigaMedia Limited and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GigaMedia Limited and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

     As discussed in Notes 1 and 19 to the consolidated financial statements, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

/s/GHP Horwath, P.C.
Denver, Colorado

April 23, 2007;
May 8, 2007 as to Note 25a;
and June 1, 2007 as to Note 25b

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
   of GigaMedia Limited:

     We have audited the accompanying consolidated statements of operations, of shareholders’ equity and of cash flows of GigaMedia Limited and its subsidiaries for the year ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of their operations and their cash flows of GigaMedia Limited and its subsidiaries for the year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

/s/ Pricewaterhouse Coopers
Taipei, Taiwan

     May 26, 2005, except as to the change in presentation basis for the discontinued operation as described in Note 1, which is as of December 9, 2005

F-2

GIGAMEDIA LIMITED

CONSOLIDATED BALANCE SHEETS
December 31, 2005 and 2006
(in thousands )

	December 31
	2005			2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 8)	$	41,731		$	22,372
Marketable securities-current (Note 9)		20,404			13,816
Notes and accounts receivable-net (Note 10)		6,443			15,076
Inventories-net (Note 11)		58			123
Prepaid expenses (Note 22)		274			3,196
Restricted cash (Note 13)		—			2,697
Other receivable (Note 4)		1,231			6,268
Other current assets		63			628
Total Current Assets		70,204			64,176
Marketable securities-noncurrent (Note 12)		—			25,000
PROPERTY, PLANT AND EQUIPMENT
Land		676			682
Building		1,153			1,162
Information and communication equipment		20,647			18,200
Modems rented		2,085			2,010
Office furniture and fixtures		1,445			1,919
Transportation equipment		369			368
Leasehold improvements		1,841			2,157
		28,216			26,498
Less: Accumulated depreciation		(17,469	)		(16,400	)
		10,747			10,098
GOODWILL (Notes 5 and 6)		29,243			55,817
INTANGIBLE ASSETS-NET (Notes 5 and 7)		2,704			23,067
OTHER ASSETS
Deferred assets		91			217
Refundable deposits		500			838
Prepaid royalty (Note 22)		—			3,374
Other (Note 20)		30			32
Total Other Assets		621			4,461
TOTAL ASSETS	$	113,519		$	182,619

F-3

GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEETS-(Continued)
December 31, 2005 and 2006
(in thousands )

	December 31
	2005			2006
LIABILITIES & SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term loans (Note 14)	$	—		$	12,853
Notes and accounts payable		1,427			1,751
Accrued compensation		1,194			3,458
Accrued expenses		1,791			4,786
Other current liabilities (Note 15 and 20)		6,245			22,359
Total Current Liabilities		10,657			45,207
OTHER LIABILITIES
Refundable deposits		831			752
Accrued pension liabilities (Note 17)		819			434
Convertible notes (Note 16)		—			—
Others		—			605
Total Other Liabilities		1,650			1,791
Total Liabilities		12,307			46,998
MINORITY INTERESTS		564			1,534
COMMITMENTS AND CONTINGENCIES (Note 22)		—			—
SHAREHOLDERS’ EQUITY
Common shares, no par value, and additional paid-in capital; issued 50,344 thousand and 51,495 thousand shares on December 31, 2005 and 2006 (Note 18)		287,920			289,495
Accumulated deficit (Note 18)		(159,223	)		(128,439	)
Accumulated other comprehensive loss		(28,049	)		(26,969	)
Total Shareholders’ Equity		100,648			134,087
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	113,519		$	182,619

The accompanying notes are an integral part of these consolidated financial statements.

F-4

GIGAMEDIA LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004, 2005 and 2006
(in thousands except for earnings per share amounts)

	2004			2005			2006
OPERATING REVENUES
Software licensing and online entertainment revenues	$	11,434		$	22,511		$	55,019
Online game revenues		—			—			18,692
Internet access and service revenues		21,303			21,589			20,537
Other revenues		107			87			44
Total		32,844			44,187			94,292
OPERATING COSTS
Cost of software licensing and online entertainment revenues		(1,592	)		(3,327	)		(7,824	)
Cost of online game revenues		—			—			(3,667	)
Cost of Internet access and service revenues		(13,873	)		(13,568	)		(11,449	)
Cost of other revenues		(644	)		(488	)		(391	)
		(16,109	)		(17,383	)		(23,331	)
GROSS PROFIT		16,735			26,804			70,961
OPERATING EXPENSES
Product development and engineering expenses		(2,513	)		(3,562	)		(5,738	)
Selling and marketing expenses		(6,310	)		(10,777	)		(30,123	)
General and administrative expenses		(5,657	)		(7,892	)		(12,421	)
Bad debt expenses		220			(207	)		(715	)
		(14,260	)		(22,438	)		(48,997	)
INCOME FROM OPERATIONS		2,475			4,366			21,964
NON-OPERATING INCOME (EXPENSES)
Interest income		140			411			722
Gains on sales of marketable securities		1,230			850			2,189
Other-than-temporary impairment of marketable securities (Note 12)		(1,833	)		—			—
Interest expense		(4	)		—			(582	)
Foreign exchange gain (loss)		(765	)		151			(161	)
Gain (loss) on disposal of property, plant and equipment		(44	)		204			(37	)
Gain on divestiture of business (Note 4)		—			—			7,668
Other (Note 16)		133			1,094			891
		(1,143	)		2,710			10,690
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTERESTS		1,332			7,076			32,654

F-5

	2004			2005			2006
INCOME TAX BENEFIT (EXPENSES) (Note 20)		84			(436	)		(1,549	)
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS		1,416			6,640			31,105
MINORITY INTERESTS INCOME		(163	)		(150	)		(321	)
INCOME FROM CONTINUING OPERATIONS		1,253			6,490			30,784
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		429			(154	)		—
	$	1,682		$	6,336		$	30,784
EARNINGS PER SHARE (Note 2)
Basic:
Income from continuing operations	$	0.02		$	0.13		$	0.60
Income from discontinued operations		0.01			—			—
Net income	$	0.03		$	0.13		$	0.60
Diluted:
Income from continuing operations	$	0.02		$	0.12		$	0.51
Income from discontinued operations		0.01			—			—
Net income	$	0.03		$	0.12		$	0.51
WEIGHTED AVERAGE SHARES USED TO COMPUTE
EARNINGS PER SHARE (Note 2)
Basic		50,154			50,312			50,921
Diluted		51,701			55,059			61,114

The accompanying notes are an integral part of these consolidated financial statements.

F-6

GIGAMEDIA LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2004, 2005 and 2006
(in thousands)

											Accumulated
	Common shares										other
	and additional paid-in							Accumulated			comprehensive
	capital				Warrant			deficit			income
	Shares		Amount		outstanding			(Note 18)			(loss)			Total
2004
Balance as of January 1, 2004		50,154	$	239,004	$	48,653			($167,241	)		($30,053	)		$	90,363
Net income		—		—		—			1,682			—				1,682
Cancellation of warrant		—		48,653		(48,653	)		—			—				—
Components of other comprehensive income (loss):
Net unrealized loss on marketable securities		—		—		—			—			(357	)			(357	)
Foreign currency translation adjustment		—		—		—			—			4,283				4,283
Total comprehensive income		—		—		—			—			—				5,608
Balance as of December 31, 2004		50,154		287,657		—			(165,559	)		(26,127	)			95,971
2005
Issuance of common shares for employee stock purchase plan		190		263		—			—			—				263
Net income		—		—		—			6,336			—				6,336
Components of other comprehensive income (loss):
Net unrealized loss on marketable securities		—		—		—			—			(333	)			(333	)
Foreign currency translation adjustment		—		—		—			—			(1,589	)			(1,589	)
Total comprehensive income		—		—		—			—			—				4,414
Balance as of December 31, 2005		50,344		287,920		—			(159,223	)		(28,049	)			100,648
2006
Issuance of common shares from exercise of stock options		1,151		1,265		—			—			—				1,265
Stock-based compensation		—		310		—			—			—				310
Net income		—		—		—			30,784			—				30,784
Components of other comprehensive income (loss):
Net unrealized gain on marketable securities		—		—		—			—			335				335
Adjustment to initially apply FAS 158		—		—		—			—			235				235
Foreign currency translation adjustment		—		—		—			—			510				510
Total comprehensive income		—		—		—			—			—				31,864
Balance as of December 31, 2006		51,495	$	289,495	$	—			($128,439	)		($26,969	)		$	134,087

The accompanying notes are an integral part of these consolidated financial statements.

F-7

GIGAMEDIA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2005 and 2006
(in thousands)

	2004			2005			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,682		$	6,336		$	30,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,675			4,203			3,167
Amortization		2,545			2,202			2,876
Stock-based compensation		—			—			310
Provision for bad debt expenses		247			307			715
Provision for (reversal of) inventory loss		(300	)		507			36
Gain on divestiture of business		—			(911	)		(7,668	)
Loss on physical inventory		9			—			—
Loss (gain) on disposal of property, plant and equipment		106			(204	)		37
Gain on sale of marketable securities		(1,230	)		(958	)		(2,189	)
Premium from debt securities		—			(3	)		(7	)
Interest income from premium of convertible notes		—			—			(140	)
Gain on early redemption of convertible notes		—			—			(625	)
Transfer property, plant, and equipment, and deferred assets to expenses		—			—			34
Cash dividend to minority interest shareholders of variable interest entity		—			—			(100	)
Minority interests income (loss)		481			(646	)		321
Other-than-temporary impairment on marketable securities		1,833			—			—
Net changes in operating assets and liabilities:
Notes and accounts receivable		699			(2,193	)		(5,723	)
Inventories		(5,531	)		3,186			(45	)
Prepaid expenses		730			185			(2,422	)
Other receivables		(236	)		(695	)		(62	)
Other current assets		145			28			(376	)
Notes and accounts payable		(4,089	)		(1,371	)		69
Accrued expenses		(924	)		(1,177	)		2,419
Accrued compensation		236			(18	)		2,264
Other current liabilities		981			2,663			7,694
Accrued pension liabilities		309			62			(150	)
Others		22			19			(1,776	)
Net cash provided by operating activities		2,390			11,522			29,443
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash		419			176			(2,697	)
Proceeds from disposal of marketable securities		69,352			36,970			26,700
Divestiture of business, net of cash transferred		—			3,253			3,318
Purchase of property, plant and equipment		(2,587	)		(2,652	)		(2,716	)
Proceeds from disposal of property, plant and equipment		415			949			8
Purchase of marketable securities		(60,834	)		(20,184	)		(42,509	)
Purchase of intangible assets		(663	)		(1,005	)		(2,583	)
Acquisitions, net of cash acquired		(32,797	)		—			(26,760	)
Decrease (increase) in refundable deposits		1,450			42			(197	)
Increase (decrease) in other assets		1			(16	)		(82	)
Increase in deferred assets		(193	)		(331	)		(368	)
Cash recognized on initial consolidation of variable interest entity		94			—			—
Net cash provided by (used in) investing activities		(25,343	)		17,202			(47,886	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) short-term loan		269			(284	)		12,853
Redemption of convertible notes		—			—			(15,000	)
Increase (decrease) in refundable deposits		125			268			(80	)
Acquisition of minority interests		(238	)		—			—

F-8

	2004			2005			2006
Cash received from the exercise of stock options		—			—			1,265
Issuance of common shares for employee stock purchase plan		—			263			—
Net cash provided by (used in) financing activities		156			247			(962	)
Exchange difference		736			(473	)		46
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(22,061	)		28,498			(19,359	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		35,294			13,233			41,731
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	13,233		$	41,731		$	22,372
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year	$	7		$	—		$	581
Income tax paid during the year	$	9		$	323		$	455
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Unrealized holding gain (loss) on available-for-sale securities		($357	)		($333	)	$	335
Issuance of convertible notes as acquisition consideration		—			—		$	15,000
Adjustment to acquisition purchase price		—			—		$	5,000
Divestiture of business		—			—		$	4,966

The accompanying notes are an integral part of these consolidated financial statements.

F-9

Notes to the Consolidated Financial Statements

NOTE 1. BUSINESS OVERVIEW, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Overview

GigaMedia Limited (referred to herein as GigaMedia, our Company, we, us, or our) is a major provider of online entertainment software and services, with headquarters in Taipei, Taiwan. We are a holding company and through several subsidiaries develop and license software for online entertainment, operate a leading casual game portal, and provide broadband Internet access.

In April 2004, we acquired a software developer and support service business through Cambridge Entertainment Software Limited (“CESL”). CESL develops software for online entertainment services. As a software developer and support service provider, CESL offers software solutions for online entertainment, which it licenses under a software license and support service contract.

In January 2006, we acquired from TWP Corporation, which is a subsidiary of Acer, Inc., an online casual game business marketed under the brand FunTown (“FunTown”). FunTown is a leading Asian online casual game portal.

We also operate a broadband Internet service provider (“ISP”) via our subsidiary Hoshin GigaMedia Center, Inc. (“Hoshin GigaMedia”), which provides Internet access service with multiple delivery technologies to consumers in Taiwan. Our access products consist of ADSL, which business we sold in May 2006 (see Note 4, “Divestitures,” for additional information), and cable modem offerings. Hoshin GigaMedia’s subsidiary, Koos Broadband Telecom Co., Ltd. (“KBT”), provides broadband services to corporate subscribers in Taiwan.

Basis of Presentation

On September 29, 2005, we sold our legacy land-based music distribution business to Nextbase International Limited. (See Note 4, “Divestitures,” for additional information.) The music distribution business has been accounted for as a discontinued operation under accounting principles generally accepted in the United States of America (GAAP) and, therefore, the results of operations of the music distribution business have been removed from our Company’s results of continuing operations for all periods.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of GigaMedia and our wholly-owned and majority-owned subsidiaries after elimination of all inter-company accounts and transactions. In addition, the accounts of a variable-interest entity (“VIE”) as defined by the Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) (“FIN 46(R)”) are included in the Consolidated Financial Statements. (See Note 3, “Variable-Interest Entity.”) The accounting policy for other investments in securities is described in Note 1 within “Marketable Securities.”

Reporting Currency and Foreign Currency Translation

The Consolidated Financial Statements of our Company and our subsidiaries have historically been reported in New Taiwan (“NT”) dollars. Effective January 1, 2004, we adopted the U.S. dollar as our reporting currency as operations denominated in the U.S. dollar have represented an increasing portion of our business following the acquisition of our Company’s entertainment software business. (See Note 5, “Acquisitions.”) As a result of this change, we recorded cumulative translation adjustments to other comprehensive income. Cumulative translation adjustments in 2004, 2005, and 2006 were $27 million, $28 million, and $28 million, respectively, and financial information has been translated into U.S. dollars

F-10

for all periods presented. Assets and liabilities denominated in non-U.S. currency are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at weighted-average rates of exchange prevailing during the year. Cumulative translation adjustments resulting from this process are charged or credited to other comprehensive income in shareholders’ equity. Gains and losses on foreign currency transactions are included in other income and expenses.

Exchange rates between the U.S. dollar and the NT dollar for the periods reported in the Consolidated Financial Statements were as follows:

	2004		2005		2006
Year-end		31.71		32.85		32.60
Weighted average		33.41		32.19		32.54

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the Consolidated Financial Statements and accompanying notes. Actual results could differ significantly from those estimates.

Revenue Recognition

General

Our Company recognizes revenues when persuasive evidence of an arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectibility is reasonably assured.

Multiple-Element Arrangement

Our Company enters into multiple-element revenue arrangements, which may include any combination of services, software, and/or products. To the extent that a deliverable in a multiple-element arrangement is subject to specific guidance (e.g. leased cable modems and Internet access-related equipment solutions which are subject to Statement of Financial Accounting Standards (FAS) No. 13, “Accounting for Leases,” (“FAS 13”) (see, “Internet Access and Service Revenue” and “Other Revenues”), online entertainment software that is subject to the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) No. 97-2, “Software Revenue Recognition,” (“SOP 97-2”) (see “Software Licensing and Online Entertainment Revenues,” below)), whether and/or how to separate multiple deliverable arrangements into separate units of accounting (separability) and how to allocate the arrangement consideration among those separate units of accounting (allocation) for that deliverable is accounted for in accordance with such specific guidance. All other deliverables in multiple-element arrangements are accounted for in accordance with EITF 00-21 “Revenue Arrangements with Multiple Deliverables,” (“EITF 00-21”).

In addition to the aforementioned general policies, the following are the specific revenue recognition policies for each major category of revenue.

Software Licensing and Online Entertainment Revenues

Software licensing and online entertainment revenues are related to software we develop and license and support services we provide for use within the online entertainment industry.

F-11

Under the provisions of FIN 46(R), the results of a software licensee of our Company, Ultra Internet Media (“UIM”), for the nine months ended December 31, 2004, and for the years ended December 31, 2005 and 2006 have been incorporated into our Consolidated Financial Statements. UIM and GigaMedia are separately owned. (See Note 3, “Variable-Interest Entity,” for additional information.) Our software licensing and support service revenues are based upon a percentage of gross receipts generated by UIM’s online gaming operations, and are recognized monthly. Software licensing and support service revenues we receive from providing such services to UIM have been eliminated in consolidation.

Multiple-element revenue arrangements involving UIM’s provision of software and software-related elements to customers are accounted for in accordance with SOP 97-2. UIM generates revenue by providing and promoting online games of skill and chance that are available on its free download gaming software. UIM’s online gaming service is inseparable from the software element involved and UIM does not sell each element separately. UIM’s online gaming service does not involve significant production, modification, or customization of the gaming software. Revenues derived from UIM’s online gaming software platform, which revenues we incorporate in our financials in accordance with FIN 46(R), are recognized at the time games are played and are net of player winnings. Player account balances are presented as current liabilities, which are first accrued for in full upon the receipt of player deposits, and increased or decreased based on player activities, including player wins or losses, withdrawals and refunds. Transaction fee revenues derived from UIM’s online multi-player poker platform are recognized as services are provided. Residual expenses and commissions are charged to expenses as incurred.

Online Game Revenues

Online game revenues are related to our online casual game business in Asia.

Online game revenues are collected through the sale of online game points, pre-paid cards, and game packs. Virtual online game points are sold directly to end-users who can make the payments through credit cards or channel partners such as telecommunication service operators. Physical pre-paid cards and game packs are sold through distributors and convenience stores. Proceeds from sales of online game points, physical cards and game packs, net of sales discounts, are deferred when received and revenue is recognized upon the actual usage of the playing time or in-game services by the end-users; over the estimated useful life of virtual items; or when the sold game points expire and are no longer eligible to access the online games or products in accordance with our published game points expiration policy.

Revenue recognized on the sales of virtual online game points is reported on a gross basis, which includes service fees paid to channel partners for payment processing. Fixed percentage fees retained by channel partners for payment processing related to our online game services are recognized as cost of online game revenues.

Internet Access and Service Revenues

Internet access and service revenues include revenues derived from cable modem Internet access services, ADSL Internet access service business, which we sold in May 2006 (see Note 4, “Divestitures,” for additional information), Internet access services to corporate customers, IP bandwidth services to cable operators which enable them to offer their own cable modem services, and Internet access-related service, including non-refundable activation fees, billing and consulting services, and other value-added services.

Cable modem, ADSL, and corporate revenues are recorded net of discounts, and in the case of our cable modem and corporate services, net of fees paid to our cable partners in accordance with revenue sharing agreements in effect between our Company and our cable partners. Customers have a choice of paying

F-12

either monthly or in advance for a certain period of time, for which they receive corresponding discounts. We record any such advanced payment receipts as other current liabilities on our balance sheet and amortize such revenues over the subscription period. Revenues related to provision of bandwidth to cable operators are recognized either on the basis of revenue sharing from cable operators, or on the basis of the subscriber numbers, or by the level of bandwidth usage. Non-refundable activation fees are combined with our Company’s Internet access revenues as a single unit of accounting. Since the activation fees are not in exchange for services performed that represent the culmination of a separate earnings process, such fees are deferred in accordance with the Staff Accounting Bulletin Topic 13 “Revenues Recognition”. As part of our Internet access-related services, our Company also provides a variety of value-added services, including billing, consulting, co-location, and VPN services to corporate customers, and premium mail, Web storage space, and online photo albums, to retail customers. The value-added services are not bundled together as a group of services within one contract, nor are they bundled with any of our Company’s broadband access services.

All the Internet access and service revenues are recognized on a straight-line basis over the subscription period or for the period in which the service is performed if no significant Company obligations remain and collection of the receivables is reasonably assured.

Our Company also provides cable modem equipment and Internet access-related equipment solutions to our subscribers on an operating lease basis. The rental service is bundled with the access service contract. Pursuant to EITF 00-21 and FAS 13, the contract considerations are allocated among/between the FAS 13 deliverable and non-FAS 13 deliverable(s) based on their relative fair values. For the leased cable modem, the amounts attributable to the rental elements are negligible and rental revenue is recognized over the same period as the access service is rendered. Our Company therefore does not allocate the FAS 13 deliverable separately from the total contract considerations. For leased Internet access related equipment solutions, the FAS 13 element is separated from the contract considerations and reported under the caption, “Other Revenues.”

Other Revenues

Other revenues consist of sales of other Internet access-related products and rental income from the lease of Internet access-related equipment to subscribers of our Company’s Internet access and service business, and are recognized when products are delivered or services are provided.

Discontinued Operations

For 2004 and 2005, a portion of our Company’s revenues were generated from retail sales of music merchandise comprised of pre-recorded music (including compact discs and audio cassettes), video (including DVD and pre-recorded videocassettes), video games and other complementary products (including electronics, accessories, blank tapes and CD-Rs). Revenues from these retail sales were recognized at the point of sale to the consumer, at which time payment was tendered. Our Company’s policy was to not accept sales refunds or exchanges.

We disposed of our music distribution business in September 2005, and as a result have classified the income from these revenue-generating activities as part of discontinued operations. (See Note 4, “Divestitures,” for additional information.)

Deferred Revenues

Deferred revenues consist of the prepaid fees related to our online games business, and the advance payment receipts related to Internet access services.

F-13

Prepaid fees related to our online games business are recognized as revenues upon the actual usage of the playing time or in-game services by the end-users; over the estimated useful life of virtual items; or when the sold game points expire and are no longer eligible to access the online games or products in accordance with our published game points expiration policy.

The advanced payment receipts related to Internet access services are deferred and amortized over the relevant subscription period.

Operation Costs

Cost of sales consists primarily of online entertainment and online game processing costs, online game royalties, production costs for prepaid game cards, amortization of intangible assets, customer service department costs for our online game and Internet access businesses, Internet access engineering costs, Internet access bandwidth costs, and depreciation, maintenance and other overhead expenses directly attributable to the provision of software licensing and online entertainment, online game, and Internet access services revenues.

Fair Value of Financial Instruments

Our Company’s financial instruments, including cash and cash equivalents, marketable securities, accounts receivable, accounts payable, short-term debt and accrued liabilities are carried at amounts which approximate their fair values.

Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, and so near to their maturity that they present insignificant risk from changes in interest rates. Commercial paper, negotiable certificates of deposit, time deposits and bank acceptances with original maturities of three months or less are considered to be cash equivalents.

Marketable Securities

All of our Company’s investments in marketable securities are classified as available-for-sale. Marketable securities included in current assets represent securities with a maturity of less than one year or securities that management intends to sell within one year. Securities classified as noncurrent include securities that have a maturity of more than one year or securities that management does not intend to sell within one year. Marketable securities principally consist of debt securities and equity securities of public and privately held companies and investment funds. Debt securities and equity securities of public held companies, and investment funds are stated at fair value with any unrealized gains or losses recorded in accumulated other comprehensive income (loss) in shareholders’ equity until realized. Equity investments in non-publicly traded companies are primarily accounted for using the cost method. Unrealized losses that are considered other-than-temporary are included in the current year’s operations. Realized gains and losses, measured against weighted-average cost, are also included in the current year’s operations.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided based on an evaluation of collectibility of notes receivable, accounts receivable and other receivables.

F-14

Inventories

Inventories are carried at the lower of cost or market value using the weighted average cost method, while net realizable value is used to determine the market value. An allowance for loss on obsolescence and decline in market value is provided, when necessary.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over useful lives that correspond to items as follows:

Item	Years
Buildings	50
Information and communication equipment	2 to 5
Modems rented	3 to 5
Office furniture and equipment	3 to 5
Transportation equipment	3 to 5
Leasehold improvements	5

Leasehold improvements are depreciated over the life of the lease or the assets, whichever is shorter. Improvements and replacements are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred.

Intangible Assets and Goodwill

Our Company’s intangible assets with definite lives are being amortized by the straight-line method over their estimated useful lives, ranging from two to 10 years. Our Company’s intangible assets with an indefinite useful life are not amortized. The recoverability of intangible assets is evaluated periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

In conjunction with the implementation of FAS No. 142, “Goodwill and Other Intangible Assets,” (“FAS 142”), all goodwill, including goodwill related to acquisitions prior to July 1, 2002, is no longer amortized and potential impairment of goodwill and purchased intangible assets with indefinite useful lives has been evaluated using the specific guidance provided by FAS 142. This impairment analysis has been performed at least annually, or whenever events or changes in circumstances indicate that the carrying value might not be recoverable from related future undiscounted cash flows. Impairment is measured as the difference between the carrying amounts and the fair value of the assets, and is recognized as a component of income (loss) from operations.

Impairment of Long-Lived Assets

Potential impairment of long-lived assets other than goodwill has been evaluated using the guidance provided by FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“FAS 144”). Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The estimate of fair value is generally based on quoted market prices or on the best available information, including prices for similar assets and the results of using other valuation techniques. When an impairment is identified, the carrying amount of the asset is reduced to its estimated fair value.

F-15

Software Cost

We recognize costs to develop our online entertainment and online game products in accordance with FAS No. 86, “Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed.” As such, costs are capitalized after technological feasibility has been established, until such time when product is available for general release to customers. Costs incurred prior to the establishment of technological feasibility are expensed when incurred and are included in product development and engineering expense. Capitalized amounts are amortized using the straight-line method, which is applied over periods ranging from three to five years. Periodic reviews are performed to ensure that unamortized software costs remain recoverable from future revenue.

Product Development and Engineering

Research, product development and engineering costs consist primarily of compensation, depreciation, and amortization, and are expensed as incurred.

Advertising

Advertising costs are expensed as incurred. Advertising costs incurred in 2004, 2005 and 2006 totaled $1.4 million, $915 thousand and $6.6 million, respectively (including amounts of $83 thousand, and $93 thousand, reported in discontinued operations in 2004 and 2005, respectively).

Stock-Based Compensation

Prior to January 1, 2006, we elected to measure stock-based compensation expense using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”), as interpreted, with pro-forma disclosures of net income (loss) and earnings (loss) per share, as if the fair-value method of accounting defined in FAS No. 123 “Accounting for Stock-Based Compensation,” (“FAS 123”) were used. Had our Company determined the stock-based compensation expense for our stock options based upon the fair-value as determined by the Black-Scholes option-pricing model at the grant date for the years ended December 31, 2004 and 2005, our net income (loss) and earnings (loss) per share would have been as the following pro-forma amounts indicate:

(in US$ thousands,	Years Ended December 31,
except per share figures)	2004			2005
Net income (loss)
As reported	$	1,682		$	6,336
Less: Stock compensation expense, net of related tax effects		(3,421	)		(1,951	)
Pro-forma	$	(1,739	)	$	4,385
Earnings (loss)per share:
As reported — basic	$	0.03		$	0.13
As reported — diluted		0.03			0.12
Pro-forma — basic		(0.03	)		0.09
Pro-forma — diluted		(0.03	)		0.08

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(See Note 19, “Share-Based Compensation,” for the assumptions and methodology used to determine the fair value of stock-based compensation.)

For the year ended December 31, 2004, pro-forma diluted loss per share included only weighted-average common shares outstanding as the inclusion of additional potential common shares would have been anti-dilutive since we incurred a pro-forma net loss for 2004.

Effective January 1, 2006, we adopted the fair value recognition provisions of FAS No. 123(R), “Share-Based Payment” (“FAS 123(R)”), using the modified prospective method and therefore have not restated results for prior periods. Under this transition method, stock-based compensation expense for the year ended December 31, 2006 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the original provision of FAS 123. Stock-based compensation expense for all stock-based compensation awards granted after January 1, 2006, is based on the grant date fair value estimated in accordance with the provision of FAS 123(R). FAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. In connection with the adoption of FAS 123(R), we changed our method of attributing the value of stock-based compensation to expense from the graded-vesting method to the straight-line method. Compensation expense for all share-based payment awards granted on or prior to December 31, 2005 will continue to be recognized using the graded-vesting method, while compensation expense for all share-based payment awards granted subsequent to December 31, 2005 are recognized using the straight-line method. Because our Company had not recorded any compensation cost in our Statement of Operations prior to the adoption of FAS 123(R), no cumulative effect adjustment was recorded upon adoption. In March 2005, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of FAS 123(R) and the valuation of share-based payments for public companies. We have applied the provision of SAB 107 in our adoption of FAS 123(R). (See Note 19, “Share-based Compensation,” for additional information.)

Retirement Plan and Net Periodic Pension Cost

Under the defined benefit pension plan, net periodic pension cost, which includes service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on an actuarial valuation report. Effective December 31, 2006, our Company adopted the provisions of FAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Post-Retirement Plans — An Amendment of FASB Statements Nos. 87, 88, 106, and 132(R),” (“FAS 158”). FAS 158 requires the recognition of the funded status of pension plans and non-pension post-retirement benefit plans (retirement-related benefit plans) as an asset or a liability in the Consolidated Balance Sheets. In addition, the pronouncement requires previously unrecognized items, such as actuarial gains and unrecognized prior service costs or credits, to be recognized on the Consolidated Balance Sheets as a component of other comprehensive income (loss). The provisions of FAS 158 were adopted pursuant to the transition provisions therein. (See Note 17 “Pension Benefits,” for additional information, including the incremental effect of the adoption on our Consolidated Financial Statements.)

Under our defined contribution pension plan, net periodic pension cost is recognized as incurred.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a company from transactions and other events and circumstances, excluding transactions resulting from investments from owners and distributions to owners. Comprehensive income (loss) is recorded as a component of shareholders’ equity.

F-17

Our Company’s comprehensive income (loss) consists of net income or loss, foreign currency translation adjustments, unrealized gains and losses on marketable securities, unrecognized actuarial gains or losses, and unrecognized transition assets or obligations arising from the adoption of FAS 158.

Accounting for Income Taxes

We have adopted FAS No. 109, “Accounting for Income Taxes,” (“FAS 109”). Under FAS 109, the asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities. Loss carryforwards and investment credits are measured using the enacted tax rate and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that will more likely than not be realized. In assessing the likelihood of realization, management considers estimates of future taxable income.

Earnings (Loss) Per Share

We compute earnings (loss) per share in accordance with FAS No. 128, “Earnings Per Share,” (“FAS 128”). Under the provisions of FAS 128, basic earnings or loss per share is computed by dividing the net income or loss available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share is computed by dividing the net income or loss for the period by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares, composed of incremental common shares issuable upon the exercise of warrants and share-based compensation and the assumed conversion of convertible debt, are included in the computation of diluted earnings or loss per share to the extent such shares are dilutive.

Minority Interest

Minority interest consists of 100 percent of the common stock of UIM held by outside shareholders. UIM was deemed a VIE as defined by FIN 46(R) and our Company was considered the primary beneficiary of UIM. Under the provisions of FIN 46(R), we have incorporated the results of UIM into our 2004, 2005 and 2006 Consolidated Financial Statements, even though we own none of UIM’s equity. (See Note 3, “Variable-Interest Entity,” for more information.)

Beginning in December 2006, minority interest also includes 30 percent of the common stock of Dragongate Enterprises Limited (“Dragongate Enterprises”). 30 percent of the common stock of Dragongate Enterprises is held by an outside shareholder, Cyber Gateway Pte Ltd (Cyber Gateway), which is 100 percent owned by Infocomm Asia Holdings Pte Ltd (“Infocomm Asia”). We also own 500,000 voting preferred shares of Infocomm Asia. (See Note 12, “Marketable Securities — Noncurrent,” for additional information.)

Prior to the sale of the music distribution business on September 29, 2005, minority interest also included 41.42 percent of the common stock of G-Music Limited held by outside shareholders; subsequent to the divestiture of G-Music Limited, related minority interest income is included in discontinued operations.

Reclassification

The presentation of certain prior years’ information has been reclassified to conform with current year presentations.

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Recent Accounting Pronouncements

In March 2006, the FASB issued FAS No. 156, “Accounting for Servicing of Financial Assets — an Amendment of FASB Statement SFAS No. 140,” (“FAS 156”). FAS 156 simplifies the accounting for loan servicing rights and the financial instruments used to hedge risks associated with those rights. FAS 156 requires that servicing rights be valued initially at fair value, and subsequently accounted for at either fair value, or amortized over the economic life of the related lease. The provisions of FAS 156 will be effective for fiscal years beginning after September 15, 2006. The adoption of FAS 156 is not expected to have a material impact on our Consolidated Financial Statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. The provisions of FIN 48 will be effective for fiscal years beginning after December 15, 2006. We are in the process of determining what effect, if any, the adoption of FIN 48 will have on our Consolidated Financial Statements.

In September 2006, the SEC released Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB 108”), which provided the Staff’s view regarding the process of quantifying financial statement misstatements. SAB 108 requires an entity to quantify misstatements using both a balance sheet and income statement approach to determine if a misstatement is material. Our Company adopted SAB 108 in fiscal 2006, and it did not have a material effect on our Consolidated Financial Statements.

In September 2006, the FASB issued FAS No. 157, “Fair Value Measures,” (“FAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The statement will be effective for financial statements issued for fiscal years beginning after November 15, 2007. We are in the process of determining what effect, if any, the adoption of FAS No. 157 will have on our Consolidated Financial Statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Liabilities,” (“FAS 159”). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. If the fair value option is elected, unrealized gains and losses will be recognized in earnings at each subsequent reporting date. FAS 159 will be effective for fiscal years beginning after November 15, 2007. We are in the process of determining what effect, if any, the adoption of FAS No. 159 will have on our Consolidated Financial Statements.

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NOTE 2. EARNINGS (LOSS) PER SHARE

	For the years end December 31,
(in US$ thousands, except per share figures)	2004		2005			2006
Weighted average outstanding shares
Basic		50,154		50,312			50,921
Effect of dilutive securities
Employee share-based compensation		1,547		4,747			7,509
Convertible notes		—		—			2,684
Diluted		51,701		55,059			61,114
Earnings Per Share — Basic
Income from continuing operations	$	1,253	$	6,490		$	30,784
Income (loss) from discontinued operations, net of taxes		429		(154	)		—
Net income	$	1,682	$	6,336		$	30,784
Earnings per share
Continuing operations	$	0.02	$	0.13		$	0.60
Discontinued operations		0.01		—			—
	$	0.03	$	0.13		$	0.60
Earnings Per Share — Diluted
Income from continuing operations	$	1,253	$	6,490		$	30,784
Interest charges associated with convertible notes		—		—			288
Income from continuing operations after assumed conversion of convertible notes		1,253		6,490			31,072
Income (loss) from discontinued operations, net of taxes		429		(154	)		—
Net income after assumed conversion of convertible notes	$	1,682	$	6,336		$	31,072
Earnings per share
Continuing operations	$	0.02	$	0.12		$	0.51
Discontinued operations		0.01		—			—
	$	0.03	$	0.12		$	0.51

NOTE 3. VARIABLE-INTEREST ENTITY

In January 2003, the FASB issued FIN 46, which addressed the consolidation by business enterprises of VIEs, to which the usual conditions of consolidating a controlling financial interest do not apply. As defined in FIN 46, variable interests are contractual, ownership or other interests in an entity that change with changes in the entity’s net asset value. Variable interests in an entity may arise from financial instruments, service contracts, guarantees, leases, or other arrangements with the VIE. An entity that will absorb a majority of the VIE’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both, is considered the primary beneficiary of the VIE. The primary beneficiary must include the VIE’s assets, liabilities and results of operations in its consolidated financial statements. FIN 46 became immediately effective for all VIEs created after January 31, 2003.

The FASB amended FIN 46 by issuing FIN 46(R) in December 2003. FIN 46(R) is an update of FIN 46 and contains different implementation dates based on types of entities subject to the standard and based

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on whether a company has adopted FIN 46. In April of 2004, our Company entered into a software license and support service contract with UIM to provide Internet software support services for UIM’s entertainment software operations. The contract allows for us to charge a percentage of UIM gross receipts resulting from UIM’s online entertainment operations. The percentage of gross receipts varies depending upon the software and support services provided to UIM. We analyzed the provisions of FIN 46(R) as it relates to contractual relationships and determined that we were and continue to be a primary beneficiary of UIM. As a result of such determination, we have incorporated the results of UIM into our 2004, 2005, and 2006 Consolidated Financial Statements, even though we own none of UIM’s equity, and recorded goodwill arising from the consolidation of UIM totaling $209 thousand. UIM’s net assets as of December 31, 2005 and 2006 were approximately $564 thousand and $784 thousand, respectively. The consolidation of UIM resulted in increases in assets and liabilities of approximately $3.5 million and $2.9 million, respectively, in 2005, and $12.8 million and $12.1 million, respectively, in 2006.

NOTE 4. DIVESTITURES

Divestiture – Music Distribution Business

In September 2005, we completed the sale of our land-based music distribution business. The transaction price, net of transaction costs, was $5.02 million. The cash proceeds, net of transaction costs and cash transferred, was $3.25 million. Results for the music distribution operations are reported as discontinued operations in 2004 and 2005. In 2005, such amount was negative $154 thousand, which included an after-tax loss from music distribution business, net of minority interest, of $1.07 million and a gain on the sale of the business of $911 thousand. (See Note 1, “Business Overview, Basis of Presentation, and Summary of Significant Accounting Policies” – “Basis of Presentation,” for additional information.)

Summarized select financial information for discontinued operations is as follows:

(in US$ thousands)	2004		2005
Revenue	$	66,975	$	37,907
Income (loss) before tax and minority interest income	$	752	$	(1,861	)
Income tax (benefit)/expense	$	5	$	(1	)
Minority interest income (loss)	$	318	$	(796	)
Income (loss) from discontinued operations	$	429	$	(154	)

Major classes of assets and liabilities which comprised the music distribution business at the date of disposal, September 29, 2005, included the following:

(in US$ thousands)
Cash (including restricted cash)	$	3,098
Accounts receivable		1,842
Inventory		6,679
Other current assets		683
Property and equipment		1,666
Intangible assets		4,689
Other assets		1,553
Total assets	$	20,210
Accounts payable	$	11,239
Other liabilities		1,945
Total liabilities	$	13,184

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Divestiture – ADSL Business

In May 2006, we sold our ADSL Internet access and service business to Webs-TV Digital International Corporation (“Webs-TV”). The total transaction price of approximately $18.1 million consisted of a cash payment of approximately $8.9 million related to the purchase of the ADSL business, and a cash payment of approximately $9.2 million related to the provision of certain agreed upon services, including bandwidth, billing, and consulting services, and the right to use GigaMedia’s ADSL brand for a period of five years. (See Note 22, “Commitments and Contingencies,” for additional information.) Cash proceeds in 2006 from the sale of the ADSL business, net of transaction costs and VAT, were approximately $3.3 million, and cash proceeds to be received in 2007 related to the sale, net of VAT, will be approximately $5.0 million. Such cash to be received in 2007 related to the sale is included in other receivables.

Our results of continuing operations in 2006 included a pre-tax one-time gain from the sale of the ADSL business of $7.7 million, which was recorded in non-operating income. The ADSL business does not qualify under FAS 144 as a component that may be reported as discontinued operations since the operations and cash flows of our ADSL business cannot be clearly distinguished operationally and for financial reporting purposes from the rest of our ISP business. Therefore, we have not reported the sale of our ADSL business as discontinued operations.

NOTE 5. ACQUISITIONS

Acquisition – FunTown

On January 2, 2006, GigaMedia acquired, through Hoshin GigaMedia, certain assets and liabilities of FunTown from TWP Corporation. The total purchase price of approximately $43 million consisted of a cash payment of approximately $27.2 million and convertible notes in the aggregate principal amount of $15.0 million with a yield to maturity of 0 percent per annum excluding any contingent interest, representing a valuation premium of $756 thousand as determined by a third-party valuation. Direct transaction costs amounting to approximately $110 thousand were included as part of the acquisition cost. The convertible notes were issued on January 1, 2006 by our Company to TWP Corporation, in the aggregate principal amount of approximately NT$494 million ($15.0 million) with 50 percent maturing on January 1, 2008 and 50 percent maturing on January 1, 2009 and were convertible into 4,794,323 shares of our common stock at $3.1287 per share. (The conversion price was subject to adjustment for stock dividends, stock splits, reverse stock splits, recapitalizations, mergers, and other dilutions.) On January 1, 2006, we pledged our share holdings in Hoshin GigaMedia as collateral for the convertible notes. These convertible notes were fully redeemed in July and September, 2006. (See Note 16, “Convertible Notes,” for more information.)

The transaction also included an incentive in the form of an additional amount to be paid by GigaMedia on April 1, 2007, which amount was to be determined based on the increase of adjusted pre-tax income of FunTown in 2006 as compared to 2005 as follows:

(i)	If the increase in 2006 was 30 percent or more, an additional payment of $5 million;
(ii)	If the increase in 2006 was 15 percent or above but less than 30 percent, a reduced incentive payment;
(iii)	If the increase in 2006 was less than 15 percent, no additional payment.

Adjusted pre-tax income of FunTown includes certain pre-agreed upon non-GAAP adjustments to the GAAP pre-tax income. At December 31, 2006, we accrued an additional payment of $5 million since the adjusted pre-tax income of FunTown in 2006 increased more than 30 percent as compared to 2005.

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In connection with the acquisition, including the incentive payment, we recorded goodwill of $26.6 million, which was assigned to our online game segment. Such goodwill amount is deductible for tax purposes. In 2006, we have elected not to deduct the goodwill amortization. Upon the closing of the acquisition on January 2, 2006, results of FunTown’s operations were included in our Consolidated Financial Statements under the online games business. The identified intangible assets are being amortized on a straight-line basis over their useful lives and the overall weighted-average life is 7.47 years.

The total purchase price allocation of the acquisition, including the incentive payment, is shown as follows:

	Amortization life		Original			Price		Total
(in US$ thousands)	(in years)		amount			adjustment		allocation
Cash acquired			$	463		$	—	$	463
Accounts receivable				3,626			—		3,626
Other current assets				106			—		106
Fixed assets / non-current assets				628			—		628
Intangible assets				—
Trade name and trademark		N/A		10,795			—		10,795
Customer relationships		9		5,546			—		5,546
Completed technology		7		2,301			—		2,301
Self-developed software		5		1,534			—		1,534
Others		5		73			—		73
Goodwill		N/A		21,409			5,000		26,409
Total assets acquired				46,481			5,000		51,481
Current liabilities				(3,501	)		—		(3,501	)
Noncurrent liabilities				(1	)		—		(1	)
Total liabilities assumed				(3,502	)		—		(3,502	)
Total purchase price			$	42,979		$	5,000	$	47,979

The following unaudited pro-forma information presents a summary of the results of operations of our Company as of December 31, 2005 as if the acquisition had occurred on January 1, 2005.

	Year ended
(in US$ thousands,	December 31, 2005
except per share figures)	Unaudited
Net revenue	$	61,219
Income from operations		8,949
Net income		11,279
Basic earnings per share		0.22
Diluted earnings per share		0.20

The above unaudited pro-forma financial information includes adjustments for interest expense associated with the convertible notes, amortization and depreciation of identified assets.

Acquisition — CESL

On April 1, 2004, GigaMedia acquired, through GigaMedia International Limited (“GMIL”), a wholly-owned subsidiary of our Company, all of the issued and outstanding shares of Grand Virtual, Inc. and selected affiliates in a private transaction for an all-cash consideration of $32.5 million, excluding related

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transaction costs. Subsequent to the acquisition, GMIL was renamed Cambridge Entertainment Software Limited. CESL is a software developer and support service provider. CESL develops software for online entertainment services. As a software developer and support service provider, CESL offers software solutions for online entertainment, which it licenses under a software license and support service contract. The acquisition of CESL strengthened our Company’s online entertainment product portfolio and revenue base. CESL’s software provides GigaMedia a secure, scalable technology platform that can be used to provide a range of entertainment services and develop highly efficient business models. These factors, among others, contributed to a purchase price in excess of the fair market value of the net tangible assets and intangible assets acquired. As a result, we recorded goodwill of $29.4 million, which was assigned to the entertainment software segment and is non-deductible for tax purposes.

Upon the closing of the acquisition, results of operations of CESL were included in our Consolidated Financial Statements under the entertainment software business. The identified intangible assets are being amortized on a straight-line basis over their useful lives and the overall weighted-average life is 3.85 years.

In 2005, our Company recorded a decrease in deferred tax liabilities with a corresponding offset in goodwill totaling $364 thousand.

The purchase price allocation of the acquisition was shown as follows:

	Amortization life		Original						Total
(in US$ thousands)	(in years)		amount			Price adjustment			allocation
Cash acquired			$	21		$	—		$	21
Accounts receivable				1,186			—			1,186
Other current assets				127			—			127
Fixed assets / non-current assets				450			—			450
Intangible assets
Completed technology		3		1,300			—			1,300
Trade name and trademark		10		700			—			700
Non-competition agreement		5		200			—			200
Others		2-4		373			—			373
Goodwill		N/A		29,398			(364	)		29,034
Total assets acquired				33,755			(364	)		33,391
Current liabilities				(573	)		—			(573	)
Noncurrent liabilities				(364	)		364			—
Total liabilities assumed				(937	)		364			(573	)
Total purchase price			$	32,818		$	—		$	32,818

The following unaudited pro-forma information presents a summary of the results of operations of our Company as of December 31, 2004 as if the acquisition had occurred on January 1, 2004.

	Year ended December 31
(in US$ thousands,	2004
except per share figures)	Unaudited
Net revenue	$	102,668
Income (loss) from operations		4,440
Net income (loss)		3,103
Basic earnings (loss) per share		0.06
Diluted earnings (loss) per share		0.06

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The above unaudited pro-forma financial information includes adjustments for the amortization and depreciation of identified assets.

NOTE 6. GOODWILL

	Software
	licensing and
	online
(in US$ thousands)	entertainment			Online game		Total
Balance as of December 31, 2004	$	29,607		$	—	$	29,607
Post-acquisition adjustment		(364	)		—		(364	)
Balance as of December 31, 2005		29,243			—		29,243
Acquisition		—			21,409		21,409
Post-acquisition adjustment		—			5,000		5,000
Translation adjustment		—			165		165
Balance as of December 31, 2006	$	29,243		$	26,574	$	55,817

Goodwill is tested annually for impairment using a fair value approach, at the “reporting unit” level. A reporting unit is an operating segment, or a component of an operating segment, as defined in FAS 142. No impairment of goodwill has been identified during 2004, 2005, and 2006.

NOTE 7. INTANGIBLE ASSETS — NET

The following table summarizes our Company’s intangible assets, by major asset class:

	December 31, 2005
	Gross carrying		Accumulated
(in US$ thousands)	amount		amortization			Net
Completed technology	$	1,300	$	(758	)	$	542
Trade name trademark and non-competition agreement		900		(193	)		707
Capitalized software cost		2,155		(753	)		1,402
Other		66		(13	)		53
Total	$	4,421	$	(1,717	)	$	2,704

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	December 31, 2006
	Gross carrying		Accumulated
(in US$ thousands)	amount		amortization			Net
Completed technology	$	3,619	$	(1,523	)	$	2,096
Trade name trademark and non-competition agreement		11,841		(307	)		11,534
Capitalized software cost		6,333		(1,910	)		4,423
Customer relationships		5,589		(621	)		4,968
Other		66		(20	)		46
Total	$	27,448	$	(4,381	)	$	23,067

We amortize the cost of intangible assets over their estimated useful lives. Intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows or appraised values. No impairment of intangible assets has been identified during any of the periods presented.

For the years ended December 31, 2004, 2005 and 2006, total amortization expense of intangible assets were $1.5 million, $1.8 million, and $2.7 million, respectively (including amounts of $941 thousand and $732 thousand reported in discontinued operations in 2004 and 2005, respectively), which included respective amortization of capitalized software costs of $191 thousand, $473 thousand, and $1.2 million. As of December 31, 2006, based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows:

	Amount
	(in US$ thousands)
2007	$	2,860
2008		2,321
2009		1,944
2010		1,637
2011		1,035
	$	9,797

NOTE 8. CASH AND CASH EQUIVALENTS

	December 31,
(in US$ thousands)	2005		2006
Checking and savings accounts	$	36,831	$	22,372
Time deposits		4,900		—
Total	$	41,731	$	22,372

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NOTE 9. MARKETABLE SECURITIES – CURRENT

	December 31,
	2005				2006
			Percentage				Percentage
(in US$ thousands)	Amount		held		Amount		held
Available-for-sale securities
Debt securities due within one year	$	4,957		—	$	—		—
Open-end funds		12,655		—		13,816		—
Equity Securities — Gamania Digital
Entertainment Co., Ltd. (“Gamania”)		2,792		3.34		—		—
Total	$	20,404			$	13,816

All of our Company’s marketable securities — current are classified as available-for-sale. As of December 31, 2005 and 2006, the balances of unrealized gains for marketable securities — current were $276 and $610 thousand, respectively. During 2004, 2005 and 2006, realized gains from disposal of marketable securities — current amounted to $351 thousand, $850 thousand, and $2.2 million, respectively. On December 31, 2004, the market price of Gamania shares had been below our carrying cost for an extended period of time; therefore, we recorded an other-than-temporary loss of $1.8 million.

There is no unrealized loss for marketable securities — current at December 31, 2006. The following table summarizes the unrealized losses and fair value of our investments with unrealized losses that were not deemed to be other-than-temporarily impaired at December 31, 2005:

	Less than 12 months
(in US$ thousands)	Fair Value		Unrealized Losses
Debt securities
Freddie Mac N1206	$	4,957	$	(36	)

The unrealized losses on the debt securities were primarily caused by an increase in interest rates, which were higher at December 31, 2005 than when we purchased the debt securities. We expected that these unrealized losses were not other-than-temporary, and had the intent and ability to hold these securities with unrealized losses until a recovery of fair value. In 2006, our debt securities matured, repayment was made at maturity value, and we recorded no loss.

On December 21, 2005, our Company entered into a put-call option agreement with an independent third party JSDWAY Digital Technology Co., Ltd., (“JSDWAY”) regarding the purchase and sale of shares of Gamania owned by us. From the period December 21, 2005 to December 21, 2006, we granted JSDWAY an option to buy, at NT$18.70 per share, a total of 4,905,000 common shares of Gamania owned by our Company, and JSDWAY granted us an option to sell to JSDWAY, at NT$18.70 per share, the Gamania shares owned by our Company. JSDWAY also provided a deposit to our Company to guarantee fulfillment of its payment obligations under the aforementioned agreement. Due to this arrangement with JSDWAY, the Gamania securities had been classified as marketable securities – current and marked to market at NT$18.70 per share.

On December 4, 2006, our Company entered into a termination agreement with JSDWAY to terminate the put-call option agreement regarding the purchase and sale of shares of Gamania. We then sold all of our Gamania shares in the public market in December 2006, which resulted in gains of $2.1 million. (See Note 21, “Related-Party Transactions,” for additional information.)

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NOTE 10. NOTES AND ACCOUNTS RECEIVABLE – NET

	December 31,
(in US$ thousands)	2005			2006
Notes and accounts receivable	$	8,127		$	16,971
Less: Allowance for doubtful accounts		(1,684	)		(1,895	)
Net	$	6,443		$	15,076

	For the years ended December 31,
(in US$ thousands)	2004			2005			2006
Allowance for doubtful accounts
Balance at beginning of year	$	1,731		$	2,050		$	1,684
Acquisition		—			—			163
Additions: Bad debt expenses		247			203			715
Less: Write-offs		(73	)		—			(681	)
Divestiture — Music distribution business		—			(489	)		—
Translation adjustment		145			(80	)		14
Balance at end of year	$	2,050		$	1,684		$	1,895

NOTE 11. INVENTORIES — NET

	December 31,
(in US$ thousands)	2005			2006
Cable modems	$	100		$	142
Merchandise		12			20
Subtotal		112			162
Less: Allowance for inventory market value decline and obsolescence		(54	)		(39	)
Total	$	58		$	123

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	For the years ended December 31,
(in US$ thousands)	2004			2005			2006
Allowance for inventory market value decline and obsolescence
Balance at beginning of year	$	2,080		$	1,912		$	54
Additions: Charges for (reversal of) obsolete items		(300	)		33			36
Reductions: Written-off allowance for inventory market value decline and obsolescence		—			(1,554	)		(53	)
Divestiture — Music distribution business		—			(298	)		—
Translation adjustment		132			(39	)		2
Balance at end of year	$	1,912		$	54		$	39

NOTE 12. MARKETABLE SECURITIES – NONCURRENT

	December 31,
	2005				2006
			Percentage				Percentage
(in US$ thousands)	Amount		held		Amount		held
Equity Securities:
T2CN Holding Limited (“T2CN”)	$	—		—	$	15,000		13.41
Infocomm Asia Holdings Pte Ltd. (“Infocomm Asia”)		—		—		10,000		32.26
Rock Mobile (Cayman) Corporation (“RMC”)		—		1.04		—		0.88
Total	$	—			$	25,000

All of our Company’s marketable securities — noncurrent are classified as available-for-sale. All of which are privately held companies and are accounted for using the cost method.

T2CN

On April 27, 2006, our Company entered into a strategic investment agreement with T2CN, an online casual sports game operator in China, pursuant to which GigaMedia made an investment of $15 million to acquire 7,500,000 voting preferred shares convertible into 7,500,000 common shares, or an approximately 19.02 percent interest in T2CN. We also obtained the right to elect one member to the board of directors and certain veto rights in the management of T2CN.

The convertible preferred shares have an initial liquidation preference equal to 1.2 times the original investment plus compound annual interest of 15 percent, are entitled to receive cumulative dividends, at 8 percent per annum on the aggregate nominal value of ordinary shares into which the preferred shares may be converted, and are redeemable at their original issue price starting December 31, 2009.

The preferred shares are convertible into T2CN common shares on 1:1 basis, subject to certain adjustments, and shall be automatically converted upon the closing of a qualified public offering or the election of the holders of at least 50 percent of the outstanding preferred shares. The embedded conversion options of the preferred shares do not meet the definition of derivative instruments under FAS 133 “Accounting for Derivatives Instruments and Hedging Activities,” (“FAS 133”) and are not bifurcated from the preferred share investment.

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In connection with the acquisition of T2CN preferred shares, our Company provided T2CN’s key shareholders, representing 52.92 percent ownership interest, an option to sell their common shares to us within two years from the closing of the strategic investment agreement. The agreed upon put price per share was equal to 8.65 times the net operating income per share, subject to certain adjustments. Such put price can be settled in cash or GigaMedia’s shares. We have evaluated the terms of the put option and determined that the fair value of such put option is immaterial. (See Note 22, “Commitments and Contingencies,” for related disclosure.)

We have applied the guidance provided in EITF 02-14 “Whether an Investor Should Apply the Equity Method of Accounting to Investment Other Than Common Stock,” (“EITF 02-14”) to determine whether our preferred share investments are in substance common shares which should be accounted for under the equity method. Given that our preferred shares have substantive liquidation preferences over those of T2CN’s common shares, we have accounted for our preferred share investment in T2CN under the cost method.

We assessed potential impairment of our T2CN investment, and concluded that no write-down was required as of December 31, 2006.

Infocomm Asia

On December 7, 2006, our Company entered into a subscription agreement with Infocomm Asia, an online game operator based in Singapore. Pursuant to the terms of the agreement, we have invested $10 million in Infocomm Asia and obtained 500,000 voting preferred shares convertible into an approximate 32.26 percent holding in Infocomm Asia’s common shares, making our Company the largest shareholder of Infocomm Asia on an as converted basis. We also obtained one board seat on Infocomm Asia’s board of directors.

The convertible preferred shares have an initial liquidation preference which equals the subscription price of $10 million, are entitled to receive cumulative dividends, at 8 percent per annum, and are redeemable within five years of their issuance date. The redemption amount is the preferred share issuing cost plus interest accrued at the rate of 10 percent per annum.

One preferred share is convertible into one common share of Infocomm Asia, subject to certain adjustments and limitations, and shall be automatically converted into the common shares of Infocomm Asia upon the closing of a qualified public offering or the election of the holders of at least 70 percent of the same class of outstanding preferred shares. The embedded conversion options of the preferred shares do not meet the definition of derivative instruments under FAS 133, and are not bifurcated from the preferred shares investment.

We have applied the guidance provided in EITF 02-14 to determine whether our preferred share investments are in substance common shares which should be accounted for under the equity method. Given that our preferred shares have substantive liquidation preferences over those of Infocomm Asia’s common shares, we have accounted for our preferred share investment in Infocomm Asia under the cost method.

We assessed potential impairment of our Infocomm Asia investment, and concluded that no write-down was required as of December 31, 2006.

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RMC

On December 31, 2005, we exchanged all of our 3,000,000 Rock Internet Corporation (“RIC”) shares for 646,859 ordinary shares, or a 1.04 percent shareholding of RMC, a company headquartered in Mainland China that provides music-related digital entertainment content and services through mobile networks and telecommunication devices. RIC had a 24.02 percent effective beneficial shareholding in RMC before the share exchange. As of December 31, 2006, we held an approximate 0.88 percent direct shareholding in RMC. Our shareholding in RMC was diluted in 2006 as a result of RMC’s new share issuance during the year. In 2002 and 2003, this investment was considered impaired due to the downturn in the music industry and the significant operating losses incurred by RIC, and the investment balance was written down to $0.

The share exchange was entered into without a change of interest in substance. In accordance with FASB Technical Bulletin No. 85-5, we account for our ownership in RMC after the exchange based on its existing carrying cost of $0.

NOTE 13. RESTRICTED CASH

Restricted cash recorded in current assets as of December 31, 2006 consisted of the following:

(in US$ thousands)
Restricted cash — current assets Time deposit pledged to China Trust Commercial Bank as a guarantee for bank loan	$	2,697

As of December 31, 2005, we had no restricted cash.

NOTE 14. SHORT-TERM LOANS

(in US$ thousands)		Range of				December 31,
Name	Nature	interest rate			Due Date	2006
China Trust Commercial Bank	Unsecured loans		2.35%~2.45	%	Mar. 10, 2007	$	6,135
China Trust Commercial Bank	Secured loans		1.735%~1.865	%	Mar. 10, 2007		2,117
Taishin International Bank	Secured loans		2.90%~2.95	%	Sept. 30, 2007		4,601
						$	12,853

* As of December 31, 2006, the weighted-average interest rate on total short-term loans was 2.48 percent.

We pledged time deposits of $2.7 million, and a net value of land and buildings of $1.7 million as collateral for secured bank loans as of December 31, 2006.

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NOTE 15. OTHER CURRENT LIABILITIES

	December 31,
(in US$ thousands)	2005		2006
Player account balances	$	2,087	$	9,527
Deferred revenue		2,434		3,222
Incentive payment for FunTown acquisition (See Note 5, “Acquisitions”)		—		5,000
Other		1,724		4,610
Total	$	6,245	$	22,359

NOTE 16. CONVERTIBLE NOTES

On January 1, 2006 we issued convertible notes, in relation to the acquisition of FunTown, to TWP Corporation in the aggregate principal amount of approximately NT$494 million ($15.0 million) with 50 percent maturing on January 1, 2008 and 50 percent maturing on January 1, 2009. These notes were convertible into 4,794,323 shares of our common stock at $3.1287 per share. (The conversion price is subject to adjustment for stock dividends, stock splits, reserve stock splits, recapitalizations, mergers, and other dilutions.) On January 1, 2006, we pledged our share holdings in Hoshin GigaMedia as collateral for the notes. Under the agreement, GigaMedia had an option to redeem the convertible notes, in whole or in part, within the first twelve months after the issue date, together with the accrued interest at 5 percent per annum.

On July 6, 2006, our Company repurchased a portion of convertible notes from TWP Corporation with an aggregate face value of NT$380 million (approximately $11.5 million) and related accrued interest, resulting in a gain of approximately $487 thousand. On September 4, 2006, we repurchased the remainder of our convertible notes, with an aggregate face value of approximately NT$113.7 million (approximately $3.5 million) and related accrued interest, resulting in a gain of approximately $138 thousand. The gain realized from the retirement of these convertible notes was included in other non-operating income. The pledge of our shareholdings in Hoshin GigaMedia was released upon the repurchase.

NOTE 17. PENSION BENEFITS

Our Company and our subsidiaries have defined benefit and defined contribution pension plans that cover substantially all of our employees.

Defined Benefit Pension Plan

Effective December 31, 2006, we adopted FAS 158. (See Note 1, “Business Overview, Basis of Presentation, and Summary of Significant Accounting Policies.”) The following table presents the incremental effect of applying FAS 158 on our Consolidated Balance Sheets:

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	Before						After
(in US$ thousands)	Application of						Application of
At December 31, 2006:	FAS No. 158			Adjustments*			FAS No. 158
Other assets	$	90		$	(58	)	$	32
Total assets		182,677			(58	)	$	182,619
Accrued pension liabilities		727			(293	)	$	434
Total liabilities		47,291			(293	)	$	46,998
Accumulated other comprehensive loss		(27,204	)		235		$	(26,969	)
Total stockholders’ equity		133,852			235		$	134,087

* Adjustments are primarily comprised of previously unrecognized gains/(losses) and transition obligations.

We have a defined benefit pension plan in accordance with the Labor Standards Law of the Republic of China for our employees located in Taiwan, covering substantially all full-time employees for services provided prior to July 1, 2005, and employees who have elected to remain in the defined benefit pension plan subsequent to the enactment of the Labor Pension Act on July 1, 2005. Under the defined benefit pension plan, employees are entitled to two base points for every year of service for the first 15 years and one base point for every additional year of service, up to a maximum of 45 base points. The pension payment to employees is computed based on years of service and average salaries or wages for the six months prior to approved retirement.

We use a December 31 measurement date for our defined benefit pension plan. The following tables set forth the actuarial assumptions of our defined benefit pension plan:

(in US$ thousands)	2005			2006
Change in benefit obligation
Benefit obligation at beginning of year	$	941		$	449
Divestitures of music distribution business		(328	)		—
Service cost		88			12
Interest cost		21			16
Plan participants’ contribution		—			—
Actuarial gain		(255	)		103
Curtailment		—			(42	)
Benefits paid		—			—
Exchange diff.		(18	)		3
Benefit obligation at end of year	$	449		$	541

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(in US$ thousands)	2005			2006
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	50
Actual return on plan assets		—			2
Employer contribution		—			83
Plan participants’ contributions		49			—
Benefit paid		—			—
Fair value of plan assets at end of year	$	49		$	135
Accumulated benefit obligation	$	(364	)	$	(443	)

(in US$ thousands)
Funded status	$	(399	)	$	(406	)
Unrecognized net actuarial gain		(461	)	NA
Unrecognized prior service cost		—		NA
Unrecognized transition obligation		82		NA
Net amount recognized	$	(778	)	NA

Amounts recognized in our Consolidated Balance Sheets consisted of the following:

	Pension Benefits
(in US$ thousands)	2005			2006
Accrued benefit cost	$	(811	)	$	(406	)
Deferred pension cost (other assets)		33		NA
Accumulated other comprehensive income		—			(235	)
Net amount recognized	$	(778	)	NA

Information for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2005 was as follows:

(in US$ thousands)
Projected benefit obligation	$	(449	)
Accumulated benefit obligation		(364	)
Fair value of plan assets		49

The net periodic benefit cost for the plans included the following components:

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(in US$ thousands)	2004			2005			2006
Service cost	$	249		$	88		$	12
Interest cost		39			21			16
Expected return on plan assets		—			—			(4	)
Amortization of transition obligation		8			4			4
Amortization of prior service cost		28			—			—
Amortization of net (gain) loss		(15	)		(20	)		(47	)
Net periodic benefit cost	$	309		$	93		$	(19	)
Curtailment loss (gain)	$	—		$	—		$	(42	)

Assumptions

Weighted-average assumptions used to determine benefit obligations and net periodic pension costs at December 31, 2004, 2005 and 2006 were as follows:

	2004			2005			2006
Discount rate		3.50	%		3.50	%		2.75	%
Rate of return on plan assets		N/A			3.50	%		2.75	%
Rate of compensation increase		3.00	%		1.00	%		1.00	%

Discount rate. The discount rate assumptions used for defined benefit plan accounting reflect the rates of return on high-quality, fixed income investments currently available and expected to be available during the period to maturity of the pension benefits. In countries where there is no deep market in such bonds, the market yields (at the balance sheet date) on government bonds are used. For our defined benefit plan in Taiwan, markets for high-quality, long-term bonds are not generally as well developed, and the government owned Central Trust of China is the only funding vehicle for statutory pension scheme. Therefore, the yield of government issued bonds and the interest rate from the Central Trust of China are often used as the benchmark for developing the discount rate, with adjustment made to take into consideration the differences in maturities.

Rate of return on plan assets. The rate of return on plan assets is determined by using the interest rate from the Central Trust of China as a base. All of our pension assets are deposited and managed by the government owned Central Trust of China. Under R.O.C. regulations, government authorities collect the cash contribution from companies as a Labor Retirement Fund and determine asset allocations and investment policy. Participants are guaranteed to receive a minimum rate of return not lower than the interest rate of two-year term time deposits from the Central Trust of China.

Rate of compensation increase. The rate of compensation increases is determined by our Company, based upon our actual rate of compensation increase during a year, and the long-term plans for such increases.

Starting July 1, 2005, we have contributed an amount equal to 2 percent of the salaries and wages paid to our employees located in Taiwan to a pension fund (the “Fund”). The Fund is administered by a pension fund monitoring committee (the “Committee”) and deposited in the Committee’s name in the Central Trust of China in Taiwan. Our Company makes pension payments from our account in the Fund unless the Fund is insufficient, in which case, we make payments from internal funds as payments become due. We maintain a normal, highly liquid working capital balance to ensure payments are made timely.

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We expect to make a contribution of $71 thousand to our pension fund in 2007. The benefits expected to be paid from 2007 through 2011 are $0, and in aggregate from 2012 to 2016 are $53 thousand.

Defined Contribution Pension Plan

Pursuant to the new “Labor Pension Act” enacted on July 1, 2005, our Company set up a defined contribution pension plan for our employees located in Taiwan. For eligible employees who elect to participate in the defined contribution pension plan, we contribute no less than 6 percent of the employees’ salaries and wages paid each month to the employees’ individual pension accounts at the Bureau of Labor Insurance. Benefits accrued are portable upon termination of service. Pension payments to employees are made either by monthly installments or in a lump sum from the accumulated contributions and earnings in employees’ individual accounts.

We have also provided a defined contribution plan for employees located in North America. Participants under the age of 50 are allowed to defer up to $10 thousand of their annual compensation to the plan, whereas participants over the age of 50 are allowed to defer up to $12.5 thousand annually. Our Company contributes an amount equal to the lesser of 3 percent of the participant’s compensation or 100 percent of the amount deferred by the employee.

The defined contribution expenses pursuant to the plans in Taiwan and North America for the years ended December 31, 2004, 2005, and 2006 were $42 thousand, $216 thousand, and $496 thousand, respectively.

NOTE 18. SHAREHOLDERS’ EQUITY

Effective January 30, 2006, Singapore law was amended to eliminate the concept of par value and authorized shares. As a result, our Balance Sheets and Shareholders’ Equity Statements presentation have been revised accordingly. As of December 31, 2006, our Company had 51,495,156 common shares issued and outstanding.

In accordance with R.O.C. law, an appropriation for legal reserve amounting to 10 percent of a company’s net profit is required until the reserve equals the aggregate par value of such Taiwan company’s issued capital stock. As of December 31, 2005 and 2006, the legal reserves of Hoshin GigaMedia, which represent a component of our accumulated deficits, were $339 thousand, and $526 thousand, respectively. The reserve can only be used to offset a deficit or be distributed as a stock dividend of up to 50 percent of the reserve balance when the reserve balance has reached 50 percent of the aggregate paid-in capital of Hoshin GigaMedia.

NOTE 19. SHARE-BASED COMPENSATION

Effective January 1, 2006, we adopted the fair value recognition provisions of FAS 123(R), using the modified prospective transition method and therefore we have not restated prior periods’ results. Under this transition method, stock-based compensation expense for 2006 included compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FAS 123. Stock-based compensation expense for all share-based payment awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R). FAS 123(R) requires companies to estimate the fair value of shared-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as

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expense over the requisite service periods. In connection with the adoption of FAS 123(R), we changed our method of attributing the value of stock-based compensation that we record to expense from the graded-vesting method to the straight-line method. Compensation expense for all share-based payment awards granted on or prior to December 31, 2005 will continue to be recognized using the graded-vesting method while compensation expense for all share-based payment awards granted subsequent to December 31, 2005 is recognized using the straight-line method. As share-based compensation expense is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. We estimated the forfeiture rate for 2006 based on our historical experience. In our Company’s pro-forma information required under FAS 123 for the years prior to 2006, our Company accounted for forfeitures as they occurred.

The following table summarizes the total stock-based compensation expense recognized in our Consolidated Statement of Operations:

(in US$ thousands)	2006
Cost of Internet access and services revenues	$	20
Product development & engineering expenses		127
Selling and marketing expenses		67
General and administrative expenses		96
Pre-tax stock-based compensation expense		310
Income tax benefit		60
Total stock-based compensation expense	$	250

There were no significant capitalized stock-based compensation costs at December 31, 2006.

Summarized below are the general terms of our stock-based compensation plans.

2002 Share Option Plan

At the June 2002 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2002 Employee Share Option Plan (the “2002 Plan”) under which up to three million common shares of our Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2002 Plan. The 2002 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, to determine which eligible individuals are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the maximum term for which any granted option is exercisable.

In August 2004, options to purchase three million shares of our common stock were granted and exercisable upon granting at an exercise price of $0.79 pursuant to the 2002 Plan. Through the end of 2006, no option had been exercised or cancelled. The maximum contractual term under the 2002 Plan is approximately 10 years. Termination of employment will not affect the rights to exercise vested options. The expiration date of the options is June 29, 2014.

2004 Share Purchase Plan

At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Purchase Plan (the “2004 ESPP”) under which up to two million common shares of our Company have been reserved for issuance. Pursuant to the 2004 ESPP, we have offered our shares to qualified employees at favorable conditions and established a restricted period

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of six months during which employees may not transfer the shares after purchasing them. To be eligible, employees must be employed by us or our subsidiaries and the customary employment shall be no less than 20 hours per week. Employees are also subject to certain restrictions on the amount that may be invested to purchase the shares and to other terms and conditions of the 2004 ESPP. The 2004 ESPP is a one-time plan and is administered by a committee designated by the board of directors. In March 2005, there were 189,642 shares subscribed by eligible employees at a purchase price of approximately $1.39 per share.

2004 Share Option Plan

At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to seven million common shares of our Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, to determine which eligible individuals are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the maximum term for which any granted option is exercisable.

In August 2004, options to purchase 5,462,530 shares of our Company’s common stock were granted at an exercise price of $0.79 pursuant to the 2004 Plan. These options were subject to two vesting schedules. In accordance with the terms of the first vesting schedule, 3,863,888 options were vested and exercisable upon granting. By the end of 2006, 95,000 options had been cancelled, 389,000 options had been exercised, and the number of outstanding options under the first vesting schedule was 3,379,888 options. In accordance with the terms of the second vesting schedule, 1,598,642 options were granted, of which 399,663 options were vested and exercisable upon granting. The remaining 1,198,979 options are vested 399,661 options per year from the grant date. By the end of 2006, 309,229 options had been cancelled, 559,655 options had been exercised, and the number of outstanding options under the second vesting schedule was 729,758 options.

In May 2005, options to purchase 100,000 shares of our Company’s common stock were granted at an exercise price of $1.45. In accordance with the terms of the vesting schedule, 25,000 options were vested and exercisable upon granting. The remaining 75,000 options are vested 25,000 options per year from the grant date. By the end of 2006, no such option had been exercised or cancelled.

In December 2005, options to purchase 1,805,655 shares of our Company’s common stock were granted at an exercise price of $2.55. These options were subject to two vesting schedules. In accordance with the terms of the first vesting schedule, 1,570,655 options were vested and exercisable upon granting. By the end of 2006, 23,000 options had been cancelled, 202,859 options had been exercised under the first vesting schedule. In accordance with the terms of the second vesting schedule, 94,000 options are vested and exercisable in December 2007. The remaining 141,000 options are vested and exercisable in December 2008. By the end of 2006, no such option under the second vesting schedule had been exercised or cancelled.

The maximum contractual term under the 2004 Plan is 10 years. Termination of employment will not affect the rights to exercise vested options. Unvested options will be cancelled upon termination of employment. All options granted under the 2004 Plan expire on June 29, 2014.

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2006 Equity Incentive Plan

At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to one million common shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2006 Plan.

In December 2006, we granted 115,000 restricted stock units (“RSUs”) to employees of our Company. These RSUs were subject to two schedules for the lapsing of restrictions on transfer. 25,000 RSUs are subject to the terms of the first lapsing schedule, under which the restrictions on transfer shall lapse with respect to the first 33 percent of the RSUs upon granting with the remaining 67 percent of the RSUs vesting over a two-year period so long as the employee is employed by or providing services to our Company. 90,000 RSUs are subject to the terms of the second lapsing schedule, under which the restrictions on transfer shall lapse over a three-year period, beginning April 1, 2007 so long as the employee is employed by or providing services to our Company.

The maximum contractual term under the 2006 Plan is 10 years. In the event that the employee’s employment with or service to our Company is terminated prior to the lapsing of restrictions with respect to any portion of the RSUs, such portion of the RSUs shall become forfeited.

All options and RSUs are expected to be settled by issuing new shares.

Options

No options were exercised before 2005. In 2006, 1,151,514 options were exercised, and cash received from the exercise of stock options was $1.3 million, which resulted in no significant tax benefit realized on a consolidated basis.

The impact resulting from our adoption of FAS 123(R) to our 2006 Consolidated Financial Statements for income before income taxes and net income was $(310) thousand, and $(250) thousand, respectively. The impact on basic and diluted earnings per share for 2006 was $(0.005) and $(0.004) per share, respectively.

There were no stock-based compensation expenses recorded in 2004 and 2005 as all options were granted to employees at prices in excess of the common stock market price at the date of grant.

Prior to adoption of SFAS 123(R), our Company used the Black-Scholes formula to estimate the value of stock options granted to employees. We continue to use this option valuation model following our adoption of FAS 123(R). There is no stock options granted in 2006 and the following summarizes the weighted-average assumptions in the model:

For the years ended December 31,	2004			2005			2006
Option term (years)		3.35			3.35			3.35
Volatility		92.94	%		85.74	%		85.74	%
Risk-free interest rate		2.92	%		3.17	%		3.17	%
Dividend yield		0	%		0	%		0	%
Weighted-average fair value of option granted		0.45			0.56			0.56

Option term. The expected term of the options granted represents the period of time that they are expected to be outstanding. Our Company estimates the expected term of options granted based on historical experience with grants and option exercises.

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Expected volatility rate. For options granted prior to December 31, 2004, an analysis of historical volatility was used to develop the estimate of expected volatility. However, with the divestiture of our land-based music distribution business in 2005, we do not believe historical stock price volatility is representative of our future stock trends. Therefore, for options granted during 2005, we applied the concept of “mean-reversion tendency” and excluded the period during which the divested business accounted for the majority of volatility for the estimate of expected volatility, which was calculated by weight-averaging the adjusted historical volatility of GigaMedia and the average mean volatility of our Company’s peer groups.

Risk-free interest rate. The risk-free interest rate is based on three-year U.S. Treasury bonds for the expected term of the options.

Expected dividend yield. The dividend yield is based on our Company’s current dividend yield.

Option and grant transactions during the last three years are summarized as follows:

	2004					2005					2006
																Weighted-		Aggregate
	Weighted		No.of			Weighted		No.of			Weighted		No.of			Average		Intrinsic
	Avg.		Shares			Avg.		Shares			Avg.		Shares			Remaining		Value
	Exercise		(in			Exercise		(in			Exercise		(in			Contractual		(in
	Price		thousands)			Price		thousands)			Price		thousands)			Term		thousands)
Balance at January 1,	$	23.50		473		$	2.00		8,844		$	1.11		10,000
Options granted		0.79		8,463			2.49		1,905			—		0
Options exercised		—		—			—		—			1		(1,152	)
Options Forfeited/canceled /expired		0.79		(92	)		15.13		(749	)		1.48		(59	)
Balance at December 31,	$	2.00		8,844		$	1.11		10,000		$	1.11		8,789			7.49	$	76,083
Exercisable at December 31,	$	2.18		7,737		$	1.09		9,170		$	1.08		8,318			7.49	$	72,285
Vested and expected to vest at December 31, 2006											$	1.11		8,783			7.49	$	76,029

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between GigaMedia’s closing stock price on the last trading day of 2006 and the fair value of the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders and all option holders had they exercised their options on December 31, 2006. This amount changes based on the fair market value of GigaMedia’s stock. The total intrinsic value of options exercised for the years ended December 31, 2004, 2005, and 2006 were $0, $0, and $8.8 million, respectively.

The following table sets forth information about stock options outstanding at December 31, 2006:

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	Options outstanding			Options currently exercisable
			Weighted average
Range of	No. of Shares		remaining	Weighted average		No. of Shares
exercise price	(in thousands)		contractual life	exercise price		(in thousands)
$0.79		7,109	7.49 years	$	0.79		6,910
$1.45		100	7.49 years	$	1.45		63
$2.55		1,580	7.49 years	$	2.55		1,345
		8,789					8,318

RSUs

Nonvested RSUs as of December 31, 2006 and unit movement during 2006 were as follows:

	Number of units			Weighted-average
	(in thousands)			grant date fair value
Nonvested at December 31, 2005		—			—
Granted		115		$	9.81
Vested		(8	)	$	9.81
Forfeited		—			—
Nonvested at December 31, 2006		107		$	9.81

The fair value of RSUs is determined and fixed on the grant date based on our stock price. The fair value of RSUs granted during the year ended December 31, 2006 was $1.1 million. The total fair value of RSUs vested during the year ended December 31, 2006 was $81 thousand.

As of December 31, 2006, there was $960 thousand of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted-average period of 2.25 years. Our Company received no cash from employees as a result of employees vesting and the release of RSUs.

NOTE 20. INCOME TAXES

	For the years ended December 31,
(in US$ thousands)	2004			2005		2006
Income (loss) from continuing operations before income taxes
U.S. operations	$	(4,392	)	$	516	$	865
Non-U.S. operations		5,724			6,560		31,789
Total income (loss) from continuing operations before income taxes	$	1,332		$	7,076	$	32,654

Income tax provision (benefit) from continuing operations by geographic operation is as follows:

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	For the years ended December 31,
(in US$ thousands)	2004			2005		2006
U.S. operations	$	(88	)	$	304	$	366
Non-U.S. operations		4			132		1,183
	$	(84	)	$	436	$	1,549

The components of income tax provision (benefit) from continuing operations by taxing jurisdiction are as follows:

	For the years ended December 31,
(in US$ thousands)	2004			2005			2006
U.S. federal
Current	$	7		$	233		$	266
Deferred		(19	)		17			8
		(12	)		250			274
U.S. state and local:
Current		12			60			90
Deferred		(88	)		(6	)		2
		(76	)		54			92
Non — U.S.:
Current		4			132			1,199
Deferred		—			—			(16	)
		4			132			1,183
Total income tax provisions (benefit)	$	(84	)	$	436		$	1,549

A reconciliation of our continuing operations effective tax rate to the statutory U.S. federal tax rate is as follows:

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	For the years ended December 31,
(in US$ thousands)	2004			2005			2006
Federal statutory rate		34.00	%		34.00	%		34.00	%
State and local — net of federal tax benefit		6.27	%		6.91	%		6.78	%
Foreign tax differential		(9.00	%)		(15.91	%)		(8.28	%)
Valuation allowance for deferred tax assets		(25.00	%)		(25.00	%)		(25.00	%)
Other		(12.58	%)		6.16	%		(2.76	%)
Effective rate		(6.31	%)		6.16	%		4.74	%

The provision for income taxes attributable to discontinued operations is as follows:

	For the years ended December 31,
(in US$ thousands)	2004		2005
Provision on income from discontinued operations	$	5	$	(1	)
Provision on gain on disposal of discontinued operations	$	—	$	—

Significant components of our deferred tax assets and liabilities consisted of the following:

	December 31,
(in US$ thousands)	2005			2006
Deferred tax assets:
Net operating loss carryforwards	$	9,458		$	3,082
Unrealized foreign exchange (gain) loss		3			(1	)
Allowance for inventory market value decline and obsolete items		14			10
Allowance for doubtful accounts		400			397
Pension expense		197			162
Investment credits		175			104
Property, plant & equipment		149			272
Others		—			21
		10,396			4,047
Less: valuation allowance	$	(10,396	)	$	(4,032	)
Deferred tax assets — net	$	—		$	15

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	December 31,
(in US$ thousands)	2005			2006
Deferred tax liabilities:
Depreciation and amortization	$	11		$	39
Others		(5	)		(43	)
Deferred tax liabilities — net	$	6		$	(4	)

	For the years ended December 31,
(in US$ thousands)	2004			2005			2006
Valuation allowance:
Balance at beginning of year	$	21,316		$	22,499		$	10,396
Additions: charged to (realization of) valuation allowance		(336	)		(5,863	)		(6,443	)
Divestiture		—			(5,405	)
Exchange difference		1,519			(835	)		79
Balance at end of year	$	22,499		$	10,396		$	4,032

We do not believe that sufficient objective, positive evidence currently exists to conclude that realization of deferred tax assets is more likely than not since our Internet access and service operations face slow market growth and strong market competition. As a result, we have provided a valuation allowance covering substantially all of the deferred tax assets arising from our Internet access and service operations in Taiwan.

In 2005 and 2006, we applied for investment tax credits and research and development tax credits.

As at December 31, 2006, we had net operating loss carryforwards of approximately $12.3 million and $84 thousand, arising from our Internet access and service operations in Taiwan and from our online games business in Hong Kong, respectively. Currently, net operating losses can be carried forward for five years in Taiwan and infinitely in Hong Kong. A breakdown of the expiration of GigaMedia’s net operating loss carryforwards is as follows:

(in US$ thousands)
Year incurred	Amount		Expiring year
2002	$	8,533		2007
2003		3,463		2008
2004		273		2009
2006		84	Infinity
Total	$	12,353

NOTE 21. RELATED-PARTY TRANSACTIONS

In the course of operating our business, we provide Internet access services to, or source services from, our Company’s business partners. These partners include companies in which we hold an interest, and

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companies with which members of our board, senior managers of our Company, and our major shareholders or beneficial owners are associated. Business with such companies was not material from the viewpoint of our Company.

Except for the following transactions, we were not a party to any transaction with any related party that did not arise in the ordinary course of business or that was material to us.

The former chairman of China Trust Commercial Bank, who resigned from China Trust Commercial Bank in 2006, was considered to be a beneficial owner of our Company stock in 2005 and 2006, and was a director in 2005. As of December 31, 2005 and 2006, we had deposits in China Trust Commercial Bank, in the amount of $31.7 million, and $4.0 million (including $2.7 million in restricted cash), respectively. As of December 31, 2006, we had short-term loans in the amount of $8.3 million, bearing interest ranging from 1.735 percent to 2.45 percent, due to China Trust Commercial Bank. (See Note 14, “Short-term Loans.”)

We own 500,000 voting preferred shares of Infocomm Asia and we are entitled to nominate one board member on Infocomm Asia’s board of directors. As of December 31, 2006, we had a receivable due from Cyber Gateway, which is 100 percent owned by Infocomm Asia, totalling $750 thousand. This receivable is associated with our joint venture with Cyber Gateway in Dragongate Enterprises, and is included in other receivables.

In December 2006, we resigned from the board of directors of Gamania. Following our resignation from such board, we sold in the public market all of our Gamania shares, which resulted in gains of $2.1 million. (See Note 9, “Marketable Securities – Current,” for additional information.)

NOTE 22. COMMITMENTS AND CONTINGENCIES

(a) Operating Leases

We lease certain offices under lease agreements that expire at various dates through 2011. One of the lease agreements, which expires in 2008, provides for a three-year renewal option; two of them, which both expire in 2010, provide for a 10-year renewal option. The following is a schedule of future minimum lease payments required under these operating leases, as of December 31, 2006:

	Amount
Year	(in US$ thousands)
2007	$	1,876
2008		873
2009		534
2010		538
2011		65

Rental expense for the above operating leases amounted to $7.1 million, $5.3 million and $2.5 million for the years ended December 31, 2004, 2005 and 2006, respectively (including rental expense amounts of $5.9 million, and $3.4 million reported in discontinued operations in 2004 and 2005, respectively).

(b) Webs-TV Services Related Commitment

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In May 2006, our Company entered into an assets purchase and sale agreement and a service agreement with Webs-TV to sell GigaMedia’s ADSL business and provide agreed upon services. The sale of the ADSL business was completed in 2006; consideration in the sale consisted of a cash payment of approximately $8.9 million. The payment term for the sale proceeds is from May 2006 to July 2007. (Please see Note 4, “Divestitures,” for additional information.) In addition to purchasing the ADSL business from GigaMedia, Webs-TV also purchased agreed upon services such as bandwidth, consulting, and other support services that run through December 31, 2007, as well as the right to use GigaMedia’s ADSL brand for five years. The sale of such services and the right to use our brand name was an all cash transaction with a total price of approximately $9.2 million. The payment term for fees derived from the agreed upon services and the right to use GigaMedia’s ADSL brand is from May 2006 to February 2008.

(c) HanbitSoft Inc. License and Distribution Agreement

In December 2006, our Company entered into a license and distribution agreement with HanbitSoft Inc. (“HBS”) to acquire a license to publish and distribute in certain territories in Asia an online game entitled “Hellgate: London.” In accordance with the agreement, we paid to HBS a non-recoupable license fee of $2.5 million in December 2006 and recorded current and non-current prepaid royalties in the amount of approximately $417 thousand and approximately $2.1 million, respectively. In addition, we are required to pay a non-refundable minimum guarantee against royalties in the amount of $6.5 million based on the following schedule:

(i)	$2.5 million during the 12-month period immediately following the commercial release date, which shall be paid to HBS on the earlier of either March 31, 2007 or the launch date in the territory (this amount was paid on March 30, 2007);
(ii)	$2 million during the second 12-month period following the commercial release date;
(iii)	$2 million during the third 12-month period following the commercial release date.

As of December 31, 2006, we recorded an initial payment of $2.5 million related to the minimum guarantee, as current and non-current prepaid royalties in the amounts of $1.25 million and $1.25 million respectively. The remaining payments totaling $4 million are contingent upon the commercial release in the territory and have not been recorded as of December 31, 2006.

GigaMedia has also committed to support related marketing, promotion and advertising activities. The minimum marketing expenditure shall be not less than $10 million based on the following schedule:

(i)	For the period from the agreement date to the commercial release date, a sum of not less than $5 million;
(ii)	For the remaining period after the commercial release date, a sum of not less than $5 million.

(d) World Series of MahJong Partnership Agreement

In December 2006, our Company entered into a partnership agreement with the World MahJong Organization to serve as the exclusive co-host of the World Series of MahJong for five years. GigaMedia and the World MahJong Organization will together establish and operate a series of regional qualifying tournaments in Asia, Europe and North America, culminating in the grand finale, the World MahJong Championship. Under the agreement, GigaMedia has agreed to spend no less than $1 million in sponsorship fees in 2007, of which $200 thousand are to be paid to the World MahJong Organization as licensing expense for the World Series of MahJong. As of December 31, 2006, we had paid $150 thousand to the World MahJong Organization, and recorded such payment in current prepaid expenses.

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Pursuant to the agreement, the World MahJong Organization authorizes GigaMedia as the exclusive software developer of online MahJong games that follow the International Mahjong Competition Rules. GigaMedia plans to construct an online platform to provide coaching tips on the International Mahjong Competition Rules and certification of official player rankings.

(e) T2CN Put Option

In connection with the acquisition of T2CN preferred shares on April 27, 2006, our Company provided T2CN’s key shareholders, representing 52.92 percent ownership interest, an option to sell their common shares to us within two years from the closing of the strategic investment agreement. The put price per share agreed upon was equal to 8.65 times the net operating income per share, subject to certain adjustments. Such put price can be settled in cash or GigaMedia’s shares. We have evaluated the terms of the put option and determined that the fair value of such put option is immaterial.

(f) Contingencies

We are subject to legal proceedings and claims that arise in the normal course of business. We believe the ultimate liabilities with respect to these actions will not have a material adverse effect on our financial condition, results of operations or cash flows. (See Note 23, “Litigation,” for additional information.)

NOTE 23. LITIGATION

In December 2001, a class action lawsuit was filed in the United States District Court for the Southern District of New York (“District Court”) against our Company in connection with the initial public offering of our stock.

The complaint alleged that we violated Section 11 and Section 15 of the Securities Exchange Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In October 2002, the plaintiffs voluntarily dismissed the individual defendants without prejudice. On February 19, 2003, the court issued an opinion and order on defendants’ motions to dismiss, which granted the motions in part and denied the motions in part. As to GigaMedia, the Rule 10b-5 claims were dismissed without prejudice while the Section 11 claims survived the motion. Discovery in the actions commenced.

In June 2004, the plaintiffs and issuer defendants, including our Company, presented the executed settlement agreement (the “Issuers’ Settlement”) to the judge during a court conference. Subsequently, the plaintiffs and issuer defendants made a motion for preliminary approval of the settlement agreement. The key terms of the Issuers’ Settlement include: 1) the insurers of the issuers will provide an undertaking to guarantee that plaintiffs will recover a total of $1 billion; 2) the insurers will pay up to $15 million for the notice costs arising from the settlement; 3) the issuers shall assign their interest in certain claims against the underwriters to a litigation trust, represented by plaintiffs’ counsel; and 4) the plaintiffs shall release all of the settling issuer defendants. That is, if plaintiffs are successful in recovering more than $1 billion from the underwriters, the issuer defendants will not be obligated to pay any additional amounts. If the plaintiffs recover less than $1 billion from the underwriters, the insurers will pay the deficit between $1 billion and the amount received from the underwriters.

On February 15, 2005, the judge issued an opinion and order granting preliminary approval to the settlement agreement subject to a narrowing of the proposed bar order as to only contribution claims. In July 2005, the settling parties reached agreement and submitted modifications to the settlement agreement in accordance with the court’s opinion.

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The underwriter defendants are not part of the settlement between the issuers and the plaintiffs. The underwriter defendants have continued to defend the action and discovery has proceeded. In April 2006, plaintiffs and JPMorgan Chase & Co., one of the underwriter defendants, announced that they had signed a memorandum of understanding (the “JPMorgan Chase MOU”) to settle the action for approximately $425 million. This proposed settlement does not include the other underwriter defendants.

On April 24, 2006, the court held a fairness hearing on the proposed Issuers’ Settlement, which is subject to the court’s approval. As of this date, the court has not issued its ruling.

On June 23, 2006 and October 12, 2006, the court held meetings with the legal counsels involved in the case to discuss the proposed settlement. Subsequent to these meetings, the parties submitted an amendment to the Issuers’ Settlement, which included the following terms: (1) waiving insurers’ rights under the settlement agreement to recoup notice and defense cost, which is likely to exceed $60 million; and (2) waiving 50 percent of the amount of the JPMorgan Chase MOU ($425 million) which would operate as an offset to the $1 billion guarantee. These changes were designed to address potential problems that the judge may have had with the proposed settlement.

On December 5, 2006, the United States Court of Appeals for the Second Circuit issued an opinion vacating the District Court’s class certification of a litigation class in that portion of the case between the plaintiffs and the underwriter defendants. Because the Second Circuit’s opinion was directed to the class certification by the District Court for the plaintiffs’ litigation against the underwriter defendants, the opinion’s effect on the proposed class to be certified by the District Court in connection with the Issuers’ Settlement is unclear.

On December 15, 2006, the District Court held a conference with all counsel in the IPO Securities Class Action to discuss the impact of the foregoing opinion. In the conference, the District Court agreed to stay all proceedings, including discovery and consideration of the Issuers’ Settlement and the JPMorganChase MOU, pending further decisions from the Second Circuit.

On January 5, 2007, plaintiffs filed a petition in the Second Circuit for rehearing and rehearing en banc regarding the decision on class certification (the “Petition”). On January 24, 2007, the Second Circuit entered an order instructing the underwriter defendants to submit a brief in response to the Petition. On February 7, 2007, the underwriter defendants filed a brief in opposition to the Petition. On April 6, 2007, the Second Circuit rendered its decision which denied the Petition. On April 23, 2007, the District Court held a conference in which the following issues were discussed: 1) Class Certification: The plaintiffs are considering a new class definition, which is regarded as a priority by the District Court. 2) Tolling Agreement: The plaintiffs requested tolling agreements for class members in the focus cases from the underwriters. If the underwriters do not agree to toll the plaintiffs’ claims, the plaintiffs may file individual actions. In such case, the underwriters may want to have these claims arbitrated. 3) Settlements: The District Court indicated that the issuers settlement cannot stand in its present form, and any further discussions on the settlement between the issuers and the plaintiffs should depend on the plaintiffs’ new proposed class definition. 4) Discovery: The stay of discovery is continuing and will be addressed by the District Court at the next conference.

Neither we, nor our legal counsel, are able to assess the likelihood of the outcome, nor can we determine the amount or range of potential loss, if any. We had an insurance policy with American Insurance Group with $10 million of liability coverage when the class action lawsuit was made. According to the insurance policy, our Company is required to pay a $500 thousand deductible. We recorded a provision of $500 thousand in 2003, representing our deductible amount, related to these claims. In 2005, our legal counsel advised that it is unlikely that we will have to pay any remaining, unused portion of our deductible with respect to the claims. Accordingly, we reversed the provision of $500 thousand in 2005. We believe that

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the insurance coverage is sufficient to cover the liability arising from the settlement and claim.

NOTE 24. SEGMENT INFORMATION

Segment data

Subsequent to the sale of the music distribution business in 2005, we realigned our reportable business segments. In compliance with FAS 131 “Disclosures about Segments of an Enterprise and Related Information,” we have identified reportable segments: a software licensing and online entertainment business segment, an online games business segment, and an Internet access and service business segment. The software licensing and online entertainment business segment mainly derives its revenues from developing and licensing online games of chance and skill. The online games business segment mainly derives its revenue from recognizing the usage of playing time or in-game items and services. The Internet access and service business segment mainly derives its revenues from providing Internet-related services.

Our management relies on an internal management reporting process that provides revenue and segment information for making financial decisions and allocating resources. The results are based on our method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the U.S. Management measures the performance of each segment based on several metrics, including revenues and income or loss from operations. The software licensing and online entertainment business segment includes the financial conditions and results of CESL and the operations of UIM, which was consolidated as a result of applying FIN 46(R). (See Note 3, “Variable-Interest Entity,” for additional information.) CESL develops, licenses and provides support services for software used within the online entertainment industry. UIM operates online entertainment activities. Revenues from the software licensing and online entertainment business segment are derived from online games of chance and skill and are presented net of end-user winnings.

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Financial information for each reportable segment was as follows as of and for the years ended December 31, 2004, 2005, and 2006:

				Software
	Internet			licensing and
	access and			online
(in US$ thousands)	service			entertainment			Total
2004:
Segment profit or loss:
Net revenue from external customers	$	21,390		$	11,454		$	32,844
Income from operations	$	959		$	2,777		$	3,736
Interest income	$	45		$	6		$	51
Interest expenses	$	—		$	4		$	4
Gain on sales of marketable securities	$	1,222		$	—		$	1,222
Foreign exchange gain (loss)	$	533		$	8		$	541
Other-than-temporary loss on marketable securities	$	(1,833	)	$	—		$	(1,833	)
Depreciation	$	3,895		$	267		$	4,162
Amortization, including intangible assets	$	1,060		$	521		$	1,581
Income tax expenses ( benefit )	$	—		$	(87	)	$	(87	)
Segment assets:
Additions to property, plant and equipment	$	1,866		$	567		$	2,433
Additions to intangible assets	$	—		$	3,327		$	3,327
Additions to goodwill	$	—		$	29,607		$	29,607
Total assets	$	29,861		$	38,476		$	68,337

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				Software
	Internet			licensing and
	access and			online
(in US$ thousands)	service			entertainment		Total
2005:
Segment profit or loss:
Net revenue from external customers	$	21,676		$	22,511	$	44,187
Income from operations	$	2,123		$	5,957	$	8,080
Interest income	$	5		$	92	$	97
Interest expenses	$	—		$	—	$	—
Gain on sales of marketable securities	$	466		$	—	$	466
Foreign exchange gain (loss)	$	(144	)	$	9	$	(135	)
Depreciation	$	3,651		$	266	$	3,917
Amortization, including intangible assets	$	413		$	1,023	$	1,436
Income tax expenses ( benefit )	$	110		$	325	$	435
Segment assets:
Additions to property, plant and equipment	$	1,782		$	474	$	2,256
Additions to intangible assets	$	—		$	1,005	$	1,005
Additions to goodwill	$	—		$	—	$	—
Total assets	$	31,344		$	45,413	$	76,757

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				Software
	Internet			licensing and
	access and			online
(in US$ thousands)	service			entertainment			Online game			Total
2006:
Segment profit or loss:
Net revenue from external customers	$	20,581		$	55,019		$	18,692		$	94,292
Income from operations	$	4,185		$	16,772		$	5,618		$	26,575
Share-based compensation	$	85		$	82		$	101		$	268
Gain on divestiture of business	$	7,668		$	—		$	—		$	7,668
Interest income	$	6		$	212		$	20		$	238
Interest expenses	$	154		$	—		$	1		$	155
Gain on sales of marketable securities	$	2,119		$	—		$	4		$	2,123
Foreign exchange gain (loss)	$	(39	)	$	(27	)	$	(1	)	$	(67	)
Depreciation	$	2,400		$	517		$	250		$	3,167
Amortization, including intangible assets	$	145		$	1,292		$	1,423		$	2,860
Income tax expenses ( benefit )	$	1,026		$	415		$	108		$	1,549
Segment assets:
Additions to property, plant and equipment	$	750		$	1,701		$	738		$	3,189
Additions to intangible assets	$	—		$	1,172		$	21,359		$	22,531
Additions to goodwill	$	—		$	—		$	26,409		$	26,409
Total assets	$	58,589		$	56,850		$	54,457		$	169,896

The reconciliations of segment information to GigaMedia’s consolidated totals were as follows:

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	2004			2005			2006
Income (loss) from operations:
Total segments	$	3,736		$	8,080		$	26,575
Adjustment*		(1,261	)		(3,714	)		(4,611	)
Total GigaMedia consolidated	$	2,475		$	4,366		$	21,964
Share-based compensation
Total segments	$	—		$	—		$	268
Adjustment*		—			—			42
Total GigaMedia consolidated	$	—		$	—		$	310
Interest income:
Total segments	$	51		$	97		$	238
Adjustment*		89			314			484
Total GigaMedia consolidated	$	140		$	411		$	722
Interest expense:
Total segments	$	4		$	—		$	155
Adjustment*		—			—			427
Total GigaMedia consolidated	$	4		$	—		$	582
Gain on sales of marketable securities:
Total segments	$	1,222		$	466		$	2,123
Adjustments*		8			384			66
Total GigaMedia consolidated	$	1,230		$	850		$	2,189
Foreign exchange gain (loss):
Total segments	$	541		$	(135	)	$	(67	)
Adjustments*		(1,306	)		286			(94	)
Total GigaMedia consolidated	$	(765	)	$	151		$	(161	)
Depreciation:
Total segments	$	4,162		$	3,917		$	3,167
Adjustments*		7			—			—
Total GigaMedia consolidated	$	4,169		$	3,917		$	3,167
Amortization:
Total segments	$	1,581		$	1,436		$	2,860
Adjustments*		—			—			16
Total GigaMedia consolidated	$	1,581		$	1,436		$	2,876
Income tax benefit (expense):
Total segments	$	87		$	(435	)	$	(1,549	)
Adjustments*		(3	)		(1	)		—
Total GigaMedia consolidated	$	84		$	(436	)	$	(1,549	)
Total assets:
Total segments	$	68,337		$	76,757		$	169,896
Adjustment**		57,640			36,762			12,723
Total GigaMedia consolidated	$	125,977		$	113,519		$	182,619

F-53

As discussed above, the reportable segments of our Company have been realigned subsequent to the divestiture of the music distribution business. The corresponding segment profit or loss information for 2004 has been restated to conform to the current year presentation. All income (loss) related to our divested music business has been excluded from the reconciliation of our segment totals to the GigaMedia consolidated totals.

*	Adjustment items include corporate and certain back-office costs and expenses not attributable to any specific segment.
**	Adjustment items include total corporate assets, the divested music distribution business segment and eliminations.

Major Customers

No single customer represented 10 percent or more of GigaMedia’s total net revenues in any period presented.

Geographic Information

Revenue from unaffiliated customers by geographic region is as follows:

(in US$ thousands)
Geographic region/country	2004		2005		2006
Taiwan	$	21,390	$	21,676	$	37,435
Canada		11,454		22,511		55,019
Hong Kong		—		—		1,831
Others		—		—		7

Net long-lived assets by geographic region are as follows:

(in US$ thousands)	December 31,
Geographic region	2004		2005		2006
Asia	$	14,672	$	10,156	$	55,378
North America		1,309		1,351		2,419
Europe		1,797		—		—
Latin America		35,257		31,187		31,185
Total	$	53,035	$	42,694	$	88,982

Note 25. SUBSEQUENT EVENTS

a. On December 12, 2006, our wholly-owned subsidiary Hoshin GigaMedia entered into an agreement with Wretch Co., Ltd. (“Wretch”) to terminate the subscription rights agreement we signed on March 10, 2006, as Wretch was in the process of being acquired by an independent third party. Under this termination agreement, we gave up the subscription rights to acquire up to a 20 percent equity stake in Wretch if and when Wretch increases its share capital within three years of the date of the subscription right agreement, and we will no longer be obligated to provide Wretch with certain free Internet services after December 31, 2006. Our right to acquire Wretch shares was terminated on May 8, 2007, the closing date of the acquisition of Wretch. Pursuant to the termination agreement, Hoshin GigaMedia obtained compensation from Wretch in the amount of approximately $613 thousand (NT$20 million) (including VAT tax).

F-54

b.	On February 12, 2007, our Company, through our wholly-owned subsidiary GigaMedia China Limited, acquired 18,118,926 common shares of T2CN at the following purchase price.
	(i) $1.05 per share if the adjusted net operating income of T2CN for the first half of 2007 is not more than $1 million;
	(ii) $1.25 per share if the adjusted net operating income of T2CN for the first half of 2007 is between $1.0 million and $1.5 million; or
	(iii) $1.45 per share if the adjusted net operating income of T2CN for the first half of 2007 is not less than $2.5 million.

     The first payment was paid on February 12, 2007, which consisted of $9.4 million in cash and 173,814 shares of common stock of GigaMedia. The remaining purchase price, ranging from US$7.8 million to US$15.0 million, is to be paid in cash on August 15, 2007.

     Pursuant to a shareholder agreement which we entered into with T2CN and certain of its shareholders in April 2006, which was amended and restated in November 2006, we were also granted rights to subscribe for additional convertible preferred shares of T2CN, based on the financial performance of T2CN during each of the twelve month periods ending March 31, 2007 and December 31, 2007. In May 2007, we acquired an additional 7,500,000 convertible preference shares in T2CN for an all-cash consideration of US$75 thousand, pursuant to our exercise of such rights.

     Effective June 1, 2007, we also entered into a voting trust agreement with a shareholder of T2CN, pursuant to which we obtained voting rights over an additional 1.28 percent of the outstanding voting rights of T2CN.

     As of June 1, 2007, we own 18,118,926 common shares and 15,000,000 convertible voting preferred shares of T2CN, and also control voting rights with respect to 850,000 common shares of T2CN, which in aggregate represents a controlling interest of 51.12 percent of the total outstanding voting rights of T2CN.

F-55

EX-1.3

Exhibit 1.3

THE COMPANIES ACT, CAP. 50

PUBLIC COMPANY LIMITED BY SHARES

MEMORANDUM OF ASSOCIATION

of

GIGAMEDIA LIMITED

     1. The name of the Company is “Gigamedia Limited”.

     2. The Registered Office of the Company will be situate in the Republic of Singapore.

     3. The objects for which the Company is established are:-

(1	)	To carry on the business of investment holding, and in particular to invest the moneys of the Company in or otherwise to acquire and hold shares, stocks, debentures, debenture stock, scrip, loans, bonds, obligations, notes, securities and investments issued or guaranteed by any company or trust constituted or carrying on business in any part of the world, and in the funds or loans or other securities and investments of or issued or guaranteed by any government, state, or dominion, public body or authority, supreme, municipal local or otherwise, in the Republic of Singapore or elsewhere.
(2	)	To acquire any such shares, stocks, debentures, debenture stock, scrip, loans, bonds, obligations, notes, securities and investments by original subscription, contract, tender, purchase exchange or otherwise, and whether or not fully paid up, and to make payments thereon as called up or in advance of calls or otherwise, and to subscribe for the same, either conditionally or otherwise, and to exercise and enforce all rights and powers conferred by or incident to the ownership thereof.
(3	)	To exercise and enforce all rights and powers conferred by or incident to the ownership of any such shares, stocks, obligations or other securities including without prejudice to the

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		generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some proportion of the issued or nominal amount thereof.
(4	)	To vary or transpose by sale, exchange or otherwise from time to time as may be considered expedient any of the Company’s investments for the time being.
(5	)	To acquire by purchase, lease, exchange or otherwise and hold by way of investment, land, buildings and immovable property of any tenure or description whatsoever in the Republic of Singapore or elsewhere, and to mortgage, lease or let out the property of the Company or any part thereof for such consideration as the Company may think fit.
(6	)	To provide on such terms as may be thought fit those services for the companies in which the Company has invested which are suitable and convenient to be provided by a holding company and in particular, and without prejudice to the generality of the foregoing, to provide managerial, executive, supervisory, financial and accounting, investment and administrative services and office accommodation and equipment facilities to any such company.
(7	)	To assist and participate in the privatisation of assets by the government of the Republic of Singapore.
(8	)	To carry on any other business which may seem to the Company capable of being conveniently carried on in connection with its business or calculated directly or indirectly to enhance the value of or render profitable any of the Company’s properties or rights.
(9	)	To acquire and undertake the whole or any part of the business, property, and liabilities of any person or company carrying on any business which the Company is authorized to carry on, or possessed of property suitable for the purposes of the Company.
(10	)	To apply for, purchase, or otherwise acquire any patents, patent rights, copyrights, trade marks, formulae, licences, concessions, and the like, conferring any exclusive or non-exclusive or limited right to use, or any secret or other information as to any invention which may seem capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit the Company; and to use, exercise, develop, or grant licences in respect of, or otherwise turn to account, the property, rights, or information so acquired.
(11	)	To amalgamate or enter into partnership or into any arrangement for sharing of profits, union of interest, co-operation, joint adventure, reciprocal concession, or otherwise, with any person or company

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		carrying on or engaged in or about to carry on or engage in any business or transaction which the Company is authorized to carry on or engage in, or any business or transaction capable of being conducted so as directly or indirectly to benefit the Company.
(12	)	To take, or otherwise acquire, and hold shares, debentures, or other securities of any other company.
(13	)	To enter into any arrangements with any government or authority, supreme, municipal, local, or otherwise, that may seem conducive to the Company’s objects, or any of them; and to obtain from any such government or authority any rights, privileges, and concessions which the Company may think it desirable to obtain; and to carry out, exercise, and comply with any such arrangements, rights, privileges, and concessions.
(14	)	To establish and support or aid in the establishment and support of associations, institutions, funds, trusts, and conveniences calculated to benefit employees or directors or past employees or directors of the Company or its predecessors in business, or the dependants or connections of any such persons; and to grant pensions and allowances, and to make payments towards insurance; and to subscribe or guarantee money for charitable or benevolent objects, or for any exhibition, or for any public, general, or useful object.
(15	)	To promote any other company or companies for the purpose of acquiring or taking over all or any of the property, rights, and liabilities of the Company, or for any other purpose which may seem directly or indirectly calculated to benefit the Company.
(16	)	To purchase, take on lease or in exchange, hire, or otherwise acquire any movable or immovable properties and any rights or privileges which the Company may think necessary or convenient for the purposes of its business, and in particular any land, buildings, easements, machinery, plant, and stock-in-trade.
(17	)	To construct, improve, maintain, develop, work, manage, carry out, or control any buildings, works, factories, mills, roads, ways, tram-ways, railways, branches or sidings, bridges, reservoirs, water-courses, wharves, warehouses, electric works, shops, stores, and other works, and conveniences which may seem calculated directly or indirectly to advance the Company’s interests; and to contribute to, subsidize, or otherwise assist or take part in the construction, improvement, maintenance, development, working, management, carrying out, or control thereof.
(18	)	To enter into any guarantee, contract of indemnity or suretyship and in particular (without prejudice

4

		to the generality of the foregoing) to guarantee, support or secure, with or without consideration, whether by personal obligation or by mortgaging or charging all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company or by both such methods or in any other manner, the performance of any obligations or commitments of, and the repayment or payment of the principal amounts of and any premiums, interest, dividends and other moneys payable on or in respect of any securities or liabilities of, any person, including (without prejudice to the generality of the foregoing) any company which is for the time being a subsidiary or a holding company of the Company or another subsidiary of a holding company of the Company or otherwise associated with the Company.
(19	)	To lend and advance money or give credit to any person or company and on such terms as may be considered expedient, and either with or without security; to secure or undertake in any way the repayment of moneys lent or advanced to or the liabilities incurred by any person or company, and otherwise to assist any person or company.
(20	)	To borrow or raise or secure the payment of money in such manner as the Company may think fit and to secure the same or the repayment or performance of any debt, liability, contract, guarantee or other engagement incurred or to be entered into by the Company in any way and in particular by the issue of debentures perpetual or otherwise, charged upon all or any of the Company’s property (both present and future), including its uncalled capital; and to purchase, redeem, or pay off any such securities.
(21	)	To invest and deal with the money of the Company not immediately required in such manner as may from time to time be thought fit.
(22	)	To enter into or to invest in any interest rate exchange contracts, currency exchange contracts, forward contracts, futures contracts, options (including, without limitation, interest rate or currency options) and other derivative or financial instruments or products, whether or not entered into or acquired for the purpose of hedging against or minimising any loss concerning the assets and business of the Company and in relation thereto, the Company may pay any margin or margin calls or other demands concerning any such contracts or instruments entered into or acquired by the Company.
(23	)	To remunerate any person or company for services rendered, or to be rendered, in placing or assisting to place or guaranteeing the placing of any of the shares in the Company’s capital or any debentures, or other securities of the Company, or in or about the organization, formation, or promotion of the Company or the conduct of its business.
(24	)	To draw, make, accept, endorse, discount, execute,

5

		and issue promissory notes, bills of exchange, bills of lading, and other negotiable or transferable instruments.
(25	)	To sell or dispose of the undertaking of the Company or any part thereof for such consideration as the Company may think fit, and in particular for shares, debentures, or securities of any other company having objects altogether or in part similar to those of the Company.
(26	)	To adopt such means of making known and advertising the business and products of the Company as may seem expedient.
(27	)	To apply for, secure, acquire by grant, legislative enactment, assignment, transfer, purchase, or otherwise, and to exercise, carry out, and enjoy any charter, licence, power, authority, franchise, concession, right, or privilege, which any Government or authority or any corporation or other public body may be empowered to grant; and to pay for, aid in, and contribute towards carrying the same into effect; and to appropriate any of the Company’s shares, debentures, or other securities and assets to defray the necessary costs, charges, and expenses thereof.
(28	)	To apply for, promote, and obtain any statute, order, regulation, or other authorization or enactment which may seem calculated directly or indirectly to benefit the Company; and to oppose any bills, proceedings, or applications which may seem calculated directly or indirectly to prejudice the Company’s interests.
(29	)	To procure the Company to be registered or recognized in any country or place outside the Republic of Singapore.
(30	)	To sell, improve, manage, develop, exchange, lease, dispose of, turn to account, or otherwise deal with all or any part of the property and rights of the Company.
(31	)	To issue and allot fully or partly paid shares in the capital of the Company in payment or part payment of any movable or immovable property purchased or otherwise acquired by the Company or any services rendered to the Company.
(32	)	To distribute any of the property of the Company among the members in kind or otherwise but so that no distribution amounting to a reduction of capital shall be made without the sanction required by law.
(33	)	To take or hold mortgages, liens, and charges to secure payment of the purchase price, or any unpaid balance of the purchase price, of any part of the Company’s property of whatsoever kind sold by the Company, or any money due to the Company from purchasers and others.

6

	(34	)	To undertake and transact all kinds of agency or secretarial business and also to undertake and execute any trusts, the undertaking whereof may seem desirable, and either gratuitously or otherwise.
	(35	)	To transact any lawful business in aid of the Republic of Singapore in the prosecution of any war or hostilities in which the Republic of Singapore is engaged.
	(36	)	To carry out all or any of the objects of the Company and do all or any of the above things in any part of the world and either as principal, agent, contractor, or trustee, or otherwise, and by or through trustees or agents or otherwise, and either alone or in conjunction with others.
	(37	)	To do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the Company.
			AND IT IS HEREBY DECLARED that the word “company” in this Memorandum when not referring to this Company shall be deemed to include any corporation partnership association club or other body of persons whether incorporated or not and wherever incorporated or domiciled and whether now existing or hereafter to be formed AND further that unless the context or subject matter is inconsistent therewith words signifying the singular number shall be deemed and taken to include the plural and vice versa AND further that the objects specified in each of the paragraphs in this Memorandum shall be regarded as independent objects, and accordingly, shall in no way be limited or restricted (except when otherwise expressed in such paragraph), by reference to the objects indicated in any other paragraph or the name of the Company, but may be carried out in as full and ample a manner and construed in as wide a sense as if each of the said paragraphs defined the objects of a separate, distinct and independent company.
4.			The liability of the members is limited.
5.			The capital of the Company is NT$1,000,000,000/- divided into 100,000,000 shares of NT$10/- each, and the Company shall have power to increase or reduce the capital to consolidate or subdivide the shares into shares of larger or smaller amounts, and to issue all or any part of the original or any additional capital as fully paid or partly paid shares and with any special or preferential rights or privileges or subject to any special terms or conditions, and either with or without any special designation, and also from time to time to alter, modify, commute, abrogate or deal with any such rights, privileges, terms, conditions or designations in accordance with the regulations for the time being of the Company.	Amended by Ordinary Resolution on 29.6.2005

7

     WE, the several persons whose names, addresses and descriptions are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association and respectively agree to take the number of shares in the capital of the Company set opposite our respective names:-

NAMES, ADDRESSES AND DESCRIPTIONS		Number of shares taken
OF SUBSCRIBERS		by each Subscriber
SGD	CHRISTINE CHAN MENG YOOK	ONE
	11C SWISS CLUB ROAD
	SINGAPORE 288103
	ADVOCATE & SOLICITOR
SGD	LIM MEI	ONE
	56 JALAN AMPANG
	SINGAPORE 268638
	ADVOCATE & SOLICITOR
TOTAL NUMBER OF SHARES TAKEN		TWO

          Dated this 11th day of September 1999.

          Witness to the above signatures:-

SGD	THEODORA LIM RERN SING
	Advocate & Solicitor
	c/o Allen & Gledhill
	Advocates & Solicitors
	36 Robinson Road
	#18-01 City House
	Singapore 068877

8

THE COMPANIES ACT, CAP. 50

PUBLIC COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

of

GIGAMEDIA LIMITED

PRELIMINARY

1. The regulations contained in Table “A” in the Fourth Schedule to the Companies Act, Cap. 50 shall not apply to the Company, but the following shall subject to repeal, addition and alteration as provided by the Act or these Articles be the regulations of the Company.		Table “A” not to apply.
2. In these Articles, if not inconsistent with the subject or context, the words standing in the first column of the Table next hereinafter contained shall bear the meanings set opposite to them respectively in the second column thereof:-		Interpretation. Amended by AGM held on 29.6.2006
WORDS	MEANINGS
“The Act”	The Companies Act, Cap. 50 or any statutory modification, amendment or re-enactment thereof for the time being in force or any and every other act for the time being in force concerning companies and affecting the Company and any reference to any provision of the Act is to that provision as so modified, amended or re-enacted or contained in any such subsequent Companies Act.
“These Articles”	These Articles of Association or other regulations of the Company for the time being in force.
“The Company”	The abovenamed Company by whatever name from time to time called.
“Directors”	The Directors for the time being of the Company or such number of them as have authority to act for the Company.
“Director”	Includes any person acting as a Director of the Company and includes any person duly appointed and acting for the time being as an Alternate Director.
“Dividend”	Includes bonus.

9

“Member”	A Member of the Company.
“Month”	Calendar month.
“Office”	The Registered Office of the Company for the time being.
“Paid Up”	Includes credited as paid up.
“Register”	The Register of Members.
“Seal”	The Common Seal of the Company or in appropriate cases the Official Seal or duplicate Common Seal.
“Secretary”	The Secretary or Secretaries appointed under these Articles and shall include any person entitled to perform the duties of Secretary temporarily.
“Singapore”	The Republic of Singapore.
“Treasury Shares”	Shall have the meaning ascribed to it respectively in the Act.
“Writing” and “Written”	Includes printing, lithography, typewriting and any other mode of representing or reproducing words in a visible form.
“Year”	Calendar Year.
References in these Articles to “member” or “holders” of shares or class of shares shall except where otherwise expressly provided in these Articles, exclude the Company where it is a member or holder of shares in relation to shares held by it as Treasury Shares.
Words denoting the singular number only shall include the plural and vice versa.
Words denoting the masculine gender only shall include the feminine gender.
Words denoting persons shall include corporations.
Save as aforesaid, any word or expression used in the Act and the Interpretation Act, Cap. 1 shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.
Any reference in these Articles to any enactment is a reference to that enactment as for the time being amended or re-enacted.
A Special Resolution shall be effective for any purpose for which an Ordinary Resolution is expressed to be required under any provision of these Articles.
The headnotes and marginal notes are inserted for convenience only and shall not affect the construction of these Articles.

10

BUSINESS
3. Subject to the provisions of the Act, any branch or kind of business which by the Memorandum of Association of the Company or these Articles is expressly or by implication authorised to be undertaken by the Company may be undertaken by the Directors at such time or times as they shall think fit, and further may be suffered by them to be in abeyance, whether such branch or kind of business may have been actually commenced or not, so long as the Directors may deem it expedient not to commence or proceed with such branch or kind of business.	Any branch of business either expressly or by implication authorised may be undertaken by Directors.
PUBLIC COMPANY
4. The Company is a public company.	Public Company.
TREASURY SHARES
5. The Company shall not exercise any right in respect of Treasury Shares other than as provided by the Act. Subject thereto, the Company may hold or deal with its Treasury Shares in the manner authorised by, or prescribed pursuant to, the Act.	Treasury Shares. Amended by AGM held on 29.6.2006
6. (a) Except as is otherwise expressly permitted by the Act, the Company shall not give, whether directly or indirectly and whether by means of the making of a loan, the giving of a guarantee, the provision of security, the release of an obligation or the release of a debt or otherwise, any financial assistance for the purpose of, or in connection with, the acquisition or proposed acquisition of shares or units of shares in the Company or its holding company.	Prohibition against financial assistance.
(b) The Company may, subject to and in accordance with the Act, purchase or otherwise acquire its issued ordinary shares on such terms and in such manner as the Company may from time to time think fit. If required by the Act, Aany share that is so purchased or acquired by the Company shall, unless held in treasury in accordance with the Act, be deemed to be cancelled immediately on purchase or acquisition by the Company. On the cancellation of a share as aforesaid, the rights and privileges attached to that share shall expire. In any other instance, the Company may hold or deal with any such share which is so purchased or acquired by it in such manner as may be permitted by, and in accordance with, the Act.	Company may acquire its own issued ordinary shares. Amended by AGM held on 29.6.2006
7. Save as provided by Section 161 of the Act, no shares may be issued by the Directors without the prior approval of the Company in General Meeting but subject thereto and to the provisions of these Articles, the Directors may allot or grant options over or otherwise dispose of the same to such persons on such terms and conditions and at such time as the Company in General Meeting may approve.	Issue of Shares. Amended by AGM held on 29.6.2006
8. The rights attached to shares issued upon special conditions shall be clearly defined in the Memorandum of Association or these Articles. Without prejudice to any special right previously conferred on the holders of any existing shares or class of shares but subject to the Act and these Articles, shares in the Company may be issued by the Directors and any such shares may be issued with such preferred, deferred, or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise as the Directors determine.	Special Rights.

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9. If at any time the share capital is divided into different classes, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may subject to the provisions of the Act, whether or not the Company is being wound up, be varied or abrogated with the sanction of a Special Resolution passed at a separate General Meeting of the holders of shares of the class and to every such Special Resolution the provisions of Section 184 of the Act shall with such adaptations as are necessary apply. To every such separate General Meeting the provisions of these Articles relating to General Meetings shall mutatis mutandis apply; but so that the necessary quorum shall be two persons at least holding or representing by proxy or by attorney one-third of the issued shares of the class Provided always that where the necessary majority for such a Special Resolution is not obtained at the Meeting, consent in writing if obtained from the holders of three-fourths of the issued shares of the class concerned, within two months of the Meeting shall be as valid and effectual as a Special Resolution, carried at the Meeting.	Variation of rights.
10. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class or by these Articles as are in force at the time of such issue, be deemed to be varied by the creation or issue of further shares ranking equally therewith.	Creation or issue of further shares with special rights.
11. The Company may pay commissions or brokerage on any issue of shares at such rate or amount and in such manner as the Directors may deem fit. Such commissions or brokerage may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other.	Power to pay commission and brokerage. Amended by AGM held on 29.6.2006
12. If any shares of the Company are issued for the purpose of raising money to defray the expenses of the construction of any works or the provisions of any plant which cannot be made profitable for a long period, the Company may, subject to the conditions and restrictions mentioned in the Act pay interest on so much of the share capital as is for the time being paid up and may charge the same to capital as part of the cost of the construction or provision.	Power to charge interest on capital.
13. Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Articles or by law otherwise provided) any other rights in respect of any share, except an absolute right to the entirety thereof in the registered holder.	Exclusion of equities.
14. If two or more persons are registered as joint holders of any share any one of such persons may give effectual receipts for any dividend payable in respect of such share and the joint holders of a share shall, subject to the provisions of the Act, be severally as well as jointly liable for the payment of all instalments and calls and interest due in respect of such shares. Such joint holders shall be deemed to be one Member and the delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders.	Joint holders.
15. No person shall be recognised by the Company as having title to a fractional part of a share or otherwise than	Fractional part of a

12

as the sole or a joint holder of the entirety of such share.	share.
16. If by the conditions of allotment of any shares the whole or any part of the amount of the issue price thereof shall be payable by instalments every such instalment shall, when due, be paid to the Company by the person who for the time being shall be the registered holder of the share or his personal representatives, but this provision shall not affect the liability of any allottee who may have agreed to pay the same.	Payment of instalments.
17. The certificate of title to shares in the capital of the Company shall be issued under the Seal in such form as the Directors shall from time to time prescribe and shall bear the autographic or facsimile signatures of at least one Director and the Secretary or some other person appointed by the Directors, and shall specify the number and class of shares to which it relates and the amounts paid and amounts (if any) unpaid thereon. The facsimile signatures may be reproduced by mechanical or other means provided the method or system of reproducing signatures has first been approved by the Auditors of the Company.	Share Certificates. Amended by AGM held on 29.6.2006
18. Every person whose name is entered as a Member in the Register shall be entitled within two months after allotment or within one month after the lodgment of any transfer to one certificate for all his shares of any one class or to several certificates in reasonable denominations each for a part of the shares so allotted or transferred. Where a Member transfers part only of the shares comprised in a certificate or where a Member requires the Company to cancel any certificate or certificates and issue new certificates for the purpose of subdividing his holding in a different manner the old certificate or certificates shall be cancelled and a new certificate or certificates for the balance of such shares issued in lieu thereof and the Member shall pay a fee not exceeding $2/- for each such new certificate as the Directors may determine.	Entitlement to certificates.
19. If any certificate or other document of title to shares or debentures be worn out or defaced, then upon production thereof to the Directors, they may order the same to be cancelled and may issue a new certificate in lieu thereof. For every certificate so issued there shall be paid to the Company a fee not exceeding $2/- as the Directors may determine. Subject to the provisions of the Act and the requirements of the Directors thereunder, if any certificate or document be lost or destroyed or stolen, then upon proof thereof to the satisfaction of the Directors and on such indemnity as the Directors deem adequate being given, and on the payment of a fee not exceeding $2/- as the Directors may determine, a new certificate or document in lieu thereof shall be given to the person entitled to such lost or destroyed or stolen certificate or document.	New certificates may be issued. Amended by AGM held on 29.6.2006
RESTRICTION ON TRANSFER OF SHARES
20. Subject to the restrictions of these Articles any Member may transfer all or any of his shares, but every transfer must be in writing and in the usual common form, or in any other form which the Directors may approve. The instrument of transfer of a share shall be signed both by the transferor and by the transferee, and by the witness or witnesses thereto and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. Shares of different classes shall not be comprised in the same instrument of transfer.	Form of Transfer.
21. All instruments of transfer which shall be registered shall be retained by the Company, but any instrument	Retention of

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of transfer which the Directors may refuse to register shall (except in any case of fraud) be returned to the party presenting the same.	Transfers.
22. No share shall in any circumstances be transferred to any infant or bankrupt or person of unsound mind.	Infant, bankrupt or unsound mind.
23. The Directors may, in their absolute discretion, decline to register any transfer of shares on which the Company has a lien or to a person of whom they do not approve but shall in such event, within one month after the date on which the transfer was lodged with the Company send to the transferor and transferee notice of the refusal. If the Directors refuse to register a transfer they shall within one month of the date of application for the transfer by notice in writing to the applicant state the facts which are considered to justify the refusal to register the transfer.	Directors’ power to decline to register.

24. The Directors may decline to register any instrument of transfer unless:-			Instrument of transfer.
	(a)	such fee not exceeding $2/- or such other sum as the Directors may from time to time require under the provisions of these Articles, is paid to the Company in respect thereof; and	Amended by AGM held on 29.6.2006
	(b)	the amount of proper duty (if any) with which each instrument of transfer is chargeable under any law for the time being in force relating to stamps is paid; and
	(c)	the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by a certificate of payment of stamp duty (if any), the certificates of the shares to which the transfer relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do.

25. The Company shall provide a book to be called “Register of Transfers” which shall be kept under the control of the Directors, and in which shall be entered the particulars of every transfer of shares.	Register of Transfers.
26. The Register may be closed at such times and for such periods as the Directors may from time to time determine not exceeding in the whole thirty days in any year.	Closure of Register.
TRANSMISSION OF SHARES
27. In case of the death of a Member, the survivor or survivors, where the deceased was a joint holder, and the executors or administrators of the deceased, where he was a sole or only surviving holder, shall be the only persons recognised by the Company as having any title to his interest in the shares, but nothing herein shall release the estate of a deceased Member (whether sole or joint) from any liability in respect of any share held by him.	Transmission on death.
28. Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may, upon producing such evidence of title as the Directors shall require,	Persons becoming entitled

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be registered himself as holder of the share upon giving to the Company notice in writing of such his desire or transfer such share to some other person. If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall testify his election by executing to that person a transfer of the share. All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of transfers shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the Member had not occurred and the notice or transfer were a transfer executed by such Member.	on death or bankruptcy of Member may be registered.
29. Save as otherwise provided by or in accordance with these Articles a person becoming entitled to a share in consequence of the death or bankruptcy of a Member shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share except that he shall not be entitled in respect thereof to exercise any right conferred by membership in relation to Meetings of the Company until he shall have been registered as a Member in respect of the share.	Rights of un- registered executors and trustees.
30. There shall be paid to the Company in respect of the registration of any probate, letters of administration, certificate of marriage or death, power of attorney or other document relating to or affecting the title to any shares, such fee not exceeding $2/- as the Directors may from time to time require or prescribe.	Fee for registra- tion of probate etc.
CALLS ON SHARES
31. The Directors may from time to time make such calls as they think fit upon the Members in respect of any moneys unpaid on their shares and not by the terms of the issue thereof made payable at fixed times, and each Member shall (subject to receiving at least fourteen days’ notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the Directors may determine.	Calls on shares. Amended by AGM held on 29.6.2006
32. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed and may be made payable by instalments.	Time when made.
33. If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum due from the day appointed for payment thereof to the time of actual payment at such rate not exceeding ten per cent per annum as the Directors determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part.	Interest on calls.
34. Any sum which by the terms of issue of a share becomes payable upon allotment or at any fixed date, shall for all purposes of these Articles be deemed to be a call duly made and payable on the date, on which, by the terms of issue, the same becomes payable, and in case of non-payment all the relevant provisions of the Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.	Sum due on allotment. Amended by AGM held on 29.6.2006
35. The Directors may on the issue of shares differentiate between the holders as to the amount of calls to be paid and the times of payments.	Power to differentiate.
36. The Directors may, if they think fit, receive from	Payment in

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any Member willing to advance the same all or any part of the moneys uncalled and unpaid upon the shares held by him and such payments in advance of calls shall extinguish, so far as the same shall extend, the liability upon the shares in respect of which it is made, and upon the moneys so received or so much thereof as from time to time exceeds the amount of the calls then made upon the shares concerned the Company may pay interest at such rate not exceeding ten per cent per annum as the Member paying such sum and the Directors agree upon.	advance of calls. Amended by AGM held on 29.6.2006
FORFEITURE AND LIEN
37. If any Member fails to pay in full any call or instalment of a call on the day appointed for payment thereof, the Directors may at any time thereafter serve a notice on such Member requiring payment of so much of the call or instalment as is unpaid together with any interest and expenses which may have accrued.	Notice requiring payment of calls.
38. The notice shall name a further day (not being less than fourteen days from the date of service of the notice) on or before which and the place where the payment required by the notice is to be made, and shall state that in the event of non-payment in accordance therewith the shares on which the call was made will be liable to be forfeited.	Notice to state time and place.
39. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls and interest and expenses due in respect thereof be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before the forfeiture. The Directors may accept a surrender of any share liable to be forfeited hereunder.	Forfeiture on non- compliance with notice.
40. A share so forfeited or surrendered shall become the property of the Company and may be sold, re-allotted or otherwise disposed of either to the person who was before such forfeiture or surrender the holder thereof or entitled thereto, or to any other person, upon such terms and in such manner as the Directors shall think fit, and at any time before a sale, re-allotment or disposition the forfeiture or surrender may be cancelled on such terms as the Directors think fit. To give effect to any such sale, the Directors may, if necessary, authorise some person to transfer a forfeited or surrendered share to any such person as aforesaid.	Sale of shares forfeited.
41. A Member whose shares have been forfeited or surrendered shall cease to be a Member in respect of the shares, but shall notwithstanding the forfeiture or surrender remain liable to pay to the Company all moneys which at the date of forfeiture or surrender were payable by him to the Company in respect of the shares with interest thereon at ten per cent per annum (or such lower rate as the Directors may approve) from the date of forfeiture or surrender until payment, but such liability shall cease if and when the Company receives payment in full of all such money in respect of the shares and the Directors may waive payment of such interest either wholly or in part.	Rights and liabilities of Members whose shares have been forfeited or surrendered.
42. The Company shall have a first and paramount lien and charge on every share (not being a fully paid share) registered in the name of each Member (whether solely or jointly with others) and on the dividends declared or payable in respect thereof for all calls and instalments due on any such share and interest and expenses thereon but such lien shall only be upon the specific shares in respect of which such calls or	Company’s lien.

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instalments are due and unpaid and on all dividends from time to time declared in respect of the shares. The Directors may resolve that any share shall for some specified period be exempt from the provisions of this Article.
43. The Company may sell in such manner as the Directors think fit any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after notice in writing stating and demanding payment of the sum payable and giving notice of intention to sell in default, shall have been given to the registered holder for the time being of the share or the person entitled thereto by reason of his death or bankruptcy. To give effect to any such sale, the Directors may authorise some person to transfer the shares sold to the purchaser thereof.	Sale of shares subject to lien.
44. The proceeds of the sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.	Application of proceeds of such sale.
45. A statutory declaration in writing that the declarant is a Director of the Company and that a share has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to the share, and such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof together with the certificate of proprietorship of the share under Seal delivered to a purchaser or allottee thereof shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, surrender, sale, re-allotment or disposal of the share.	Title to shares forfeited or surrendered or sold to satisfy a lien.
ALTERATION OF CAPITAL
46. (deleted by AGM held on 29.6.2006)
47. Subject to any special rights for the time being attached to any existing class of shares, the new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the General Meeting resolving upon the creation thereof shall direct and if no direction be given as the Directors shall determine subject to the provisions of these Articles and in particular (but without prejudice to the generality of the foregoing) such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company or otherwise.	Rights and privileges of new shares.
48. (deleted by AGM held on 29.6.2006)
49. Except so far as otherwise provided by the conditions of issue or by these Articles all new shares shall be subject to the provisions of these Articles with reference to allotments, payment of calls, lien, transfer, transmission, forfeiture and otherwise.	New shares otherwise subject to provisions of Articles.
50. The Company may by Ordinary Resolution:-	Power to

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(a)	consolidate and divide all or any of its shares;	consolidate, subdivide and convert shares.
(b)	subdivide its shares or any of them (subject nevertheless to the provisions of the Act) provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and	Amended by AGM held on 29.6.2006
(c)	subject to the provisions of these Articles and the Act, convert any class of shares into any other class of shares.

51. The Company may by Special Resolution reduce its share capital or any undistributable reserve in any manner and with and subject to any incident authorised and consent required by law. Without prejudice to the generality of the foregoing, upon cancellation of a share purchased or otherwise acquired by the Company pursuant to these Articles and the Act, the number of the issued shares of the Company shall be diminished by the number of the shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly.	Power to reduce capital. Amended by AGM held on 29.6.2006
STOCK
52. The Company may by Ordinary Resolution convert any paid up i shares into stock and may from time to time by like resolution reconvert any stock into paid up shares.	Power to convert into stock. Amended by AGM held on 29.6.2006
53. The holders of stock may transfer the same or any part thereof in the same manner and subject to the same Articles as and subject to which the shares from which the stock arose might previously to conversion have been transferred or as near thereto as circumstances admit but no stock shall be transferable except in such units as the Directors may from time to time determine.	Transfer of stock. Amended by AGM held on 29.6.2006
54. The holders of stock shall, according to the number of stock units held by them, have the same rights, privileges and advantages as regards dividend, return of capital, voting and other matters, as if they held the shares from which the stock arose; but no such privilege or advantage (except as regards dividend and return of capital and the assets on winding up) shall be conferred by the number of stock units which would not if existing in shares have conferred that privilege or advantage; and no such conversion shall affect or prejudice any preference or other special privileges attached to the shares so converted.	Rights of stockholders. Amended by AGM held on 29.6.2006
55. All such of the provisions of these Articles as are applicable to paid up shares shall apply to stock and the words “share” and “shareholder” or similar expressions herein shall include “stock” or “stockholder”.	Interpretation.

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GENERAL MEETINGS
56. (a) Subject to the provisions of the Act the Company shall in each year hold a general meeting as its Annual General Meeting in addition to any other meetings in that year and not more than fifteen months shall elapse between the date of one Annual General Meeting of the Company and that of the next. Provided that so long as the Company holds its First Annual General Meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year.	Annual General Meeting.
(b) All General Meetings other than Annual General Meetings shall be called Extraordinary General Meetings.	Extraordinary General Meetings.
(c) The time and place of any General Meeting shall be determined by the Directors.	Time and Place.
57. The Directors may, whenever they think fit, convene an Extraordinary General Meeting and Extraordinary General Meetings shall also be convened on such requisition or, in default, may be convened by such requisitionists, as provided by Section 176 of the Act. If at any time there are not within Singapore sufficient Directors capable of acting to form a quorum at a meeting of Directors, any Director may convene an Extraordinary General Meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors.	Calling Extraordinary General Meetings.
NOTICE OF GENERAL MEETINGS
58. Subject to the provisions of the Act as to Special Resolutions and special notice, at least fourteen days’ notice in writing (exclusive both of the day on which the notice is served or deemed to be served and of the day for which the notice is given) of every General Meeting shall be given in the manner hereinafter mentioned to such persons (including the Auditors) as are under the provisions herein contained entitled to receive notice from the Company. Provided that a General Meeting notwithstanding that it has been called by a shorter notice than that specified above shall be deemed to have been duly called if it is so agreed:-	Notice of Meetings.

(a)	in the case of an Annual General Meeting by all the Members entitled to attend and vote thereat; and
(b)	in the case of an Extraordinary General Meeting by that number or majority in number of the Members having a right to attend and vote thereat as is required by the Act.

Provided also that the accidental omission to give notice to, or the non-receipt by, any person entitled thereto shall not invalidate the proceedings at any General Meeting.
59. (a) Every notice calling a General Meeting shall specify the place and the day and hour of the Meeting, and there shall appear with reasonable prominence in every such notice a statement that a Member entitled to attend and vote is entitled to appoint a proxy to attend and to vote instead of him and that a proxy need not be a Member of the Company.	Contents of notice.
(b) In the case of an Annual General Meeting, the notice shall also specify the Meeting as such.

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(c) In the case of any General Meeting at which business other than routine business is to be transacted, the notice shall specify the general nature of the business; and if any resolution is to be proposed as a Special Resolution or as requiring special notice, the notice shall contain a statement to that effect.
60. Routine business shall mean and include only business transacted at an Annual General Meeting of the following classes, that is to say:-	Routine Business.

(a)	Declaring dividends;
(b)	Reading, considering and adopting the balance sheet, the reports of the Directors and Auditors, and other accounts and documents required to be annexed to the balance sheet;
(c)	Appointing Auditors and fixing the remuneration of Auditors or determining the manner in which such remuneration is to be fixed; and
(d)	Fixing the remuneration of the Directors proposed to be paid under Article 85.

61. No business shall be transacted at any General Meeting unless a quorum is present. Save as herein otherwise provided, the quorum at any General meeting shall be at least two members holding an aggregate not less than 33 1/3 per cent. of the total number of fully paid shares of the Company (excluding Treasury Shares) for the time being, present in person or by proxy. For the purpose of this Article, “Member” includes a person attending by proxy or by attorney or as representing a corporation which is a Member.	Quorum. Amended by AGM held on 29.6.2006
62. If within 30 minutes from the time appointed for a General Meeting (or such longer interval as the chairman of the meeting may think fit to allow) a quorum is not present, the meeting, if convened on the requisition of members, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week (or if that day is a public holiday then to the next business day following that public holiday) at the same time and place or such other day, time or place as the Directors may by not less than ten days’ notice appoint. At the adjourned meeting any one or more members present in person or by proxy shall be a quorum.	Adjournment if quorum not present. Amended by AGM held on 30.06.2004
63. Subject to the provisions of the Act, a resolution in writing signed by every Member of the Company entitled to vote or being a corporation by its duly authorised representative shall have the same effect and validity as an Ordinary Resolution of the Company passed at a General Meeting duly convened, held and constituted, and may consist of several documents in the like form, each signed by one or more of such Members.	Resolution in writing.
64. The Chairman of the Board of Directors shall preside as Chairman at every General Meeting. If there be no such Chairman or if at any Meeting he be not present within fifteen minutes after the time appointed for holding the Meeting or be unwilling to act, the Members present shall choose some Director to be Chairman of the Meeting or, if no Director be present or if all the Directors present decline to take the Chair, one of their number present, to be Chairman.	Chairman.

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65. The Chairman may, with the consent of any Meeting at which a quorum is present (and shall if so directed by the Meeting) adjourn the Meeting from time to time and from place to place, but no business shall be transacted at any adjourned Meeting except business which might lawfully have been transacted at the Meeting from which the adjournment took place. When a Meeting is adjourned for thirty days or more, notice of the adjourned Meeting shall be given as in the case of the original Meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned Meeting.	Adjournment.
66. At any General Meeting a resolution put to the vote of the Meeting shall be decided by a poll. No resolution put to the vote at any General Meeting shall be decided on a show of hands.	Method of voting.
67. A poll shall be taken in such manner (including the use of ballot or voting papers or tickets) as the Chairman may direct and the result of a poll shall be deemed to be the resolution of the Meeting at which the poll was taken. The Chairman may, and if so requested shall, appoint scrutineers and may adjourn the Meeting to some place and time fixed by him for the purpose of declaring the result of the poll.	Taking a poll.
68. If any votes be counted which ought not to have been counted or might have been rejected, the error shall not vitiate the result of the voting unless it be pointed out at the same Meeting or at any adjournment thereof and not in any case unless it shall in the opinion of the Chairman be of sufficient magnitude.	Votes counted in error.
69. In the case of equality of votes on a poll, the Chairman of the Meeting at which the poll is taken shall be entitled to a casting vote.	Chairman’s casting vote.
VOTES OF MEMBERS
70. Subject to these Articles and to any special rights or restrictions as to voting attached to any class of shares hereinafter issued on a poll every Member who is present in person or by proxy or attorney or in the case of a corporation by a representative shall have one vote for every share of which he is the holder.	Voting rights of Members.
71. Where there are joint registered holders of any share any one of such persons may vote and be reckoned in a quorum at any Meeting either personally or by proxy or by attorney or in the case of a corporation by a representative as if he were solely entitled thereto and if more than one of such joint holders be so present at any Meeting that one of such persons so present whose name stands first in the Register in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased Member in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof.	Voting rights of joint holders.
72. A Member of unsound mind or whose person or estate is liable to be dealt with in any way under the law relating to mental disorders may vote on a poll by his committee, curator bonis or such other person as properly has the management of his estate and any such committee, curator bonis or other person may vote by proxy or attorney, provided that such evidence as the Directors may require of the authority of the person claiming to vote shall have been deposited at the Office not less than forty eight hours before the time appointed for holding the Meeting.	Voting rights of Members of unsound mind.

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73. Subject to the provisions of these Articles every Member shall be entitled to be present and to vote at any General Meeting either personally or by proxy or by attorney or in the case of a corporation by a representative and to be reckoned in a quorum in respect of shares fully paid and in respect of partly paid shares where calls are not due and unpaid.	Right to vote.
74. No objection shall be raised to the qualification of any voter except at the Meeting or adjourned Meeting at which the vote objected to is given or tendered and every vote not disallowed at such Meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the Meeting whose decision shall be final and conclusive.	Objections.
75. On a poll votes may be given either personally or by proxy or by attorney or in the case of a corporation by its representative and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.	Votes on a poll.
76. An instrument appointing a proxy shall be in writing and:-	Appointment of proxies.
(a) in the case of an individual shall be signed by the appointor or by his attorney; and
(b) in the case of a corporation shall be either under the common seal or signed by its attorney or by an officer on behalf of the corporation.
The Directors may, but shall not be bound to, require evidence of the authority of any such attorney or officer.
76A. A Member shall be entitled to appoint more than two proxies to attend and vote at the same meeting, and any such proxies shall be entitled to nominate a person or persons other than himself as the proxy or proxies appointed by the Member.	Multiple proxies Amended by AGM held on 29.06.2005
77. A proxy need not be a Member of the Company.	Proxy need not be a Member.
78. An instrument appointing a proxy or the power of attorney or other authority, if any, must be left at the Office or such other place (if any) as is specified for the purpose in the notice convening the Meeting not less than forty-eight hours before the time appointed for the holding of the Meeting or adjourned Meeting (or in the case of a poll before the time appointed for the taking of the poll) at which it is to be used and in default shall not be treated as valid unless the Directors otherwise determine.	Deposit of proxies.
79. An instrument appointing a proxy shall be in such form as any Director may approve. An instrument appointing a proxy shall, unless the contrary is stated thereon, be valid as well for any adjournment of the Meeting as for the Meeting to which it relates and need not be witnessed.	Form of proxies. Amended by AGM held on 29.06.2005
80. A vote given in accordance with the terms of an instrument of proxy (which for the purposes of these Articles shall also include a power of attorney) shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy, or of the authority under which the proxy was executed or the transfer of the share in respect of which the proxy is given, provided that no intimation in writing of	Intervening death or insanity of principal not to revoke proxy.

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such death, insanity, revocation or transfer shall have been received by the Company at the Office (or such other place as may be specified for the deposit of instruments appointing proxies) before the commencement of the Meeting or adjourned Meeting (or in the case of a poll before the time appointed for the taking of the poll) at which the proxy is used.
81. Any corporation which is a Member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any Meeting of the Company or of any class of Members of the Company and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual Member of the Company and such corporation shall for the purposes of these Articles (but subject to the Act) be deemed to be present in person at any such meeting if a person so authorised is present thereat.	Corporations acting by representa- tives. Amended by AGM held on 29.6.2006
DIRECTORS
82. Subject to the other provisions of Section 145 of the Act the number of the Directors all of whom shall be natural persons shall not be less than two nor unless otherwise determined by a General Meeting more than fifteen.	Number of Directors.
83. The first Directors of the Company are:-	First Directors.
CHRISTINE CHAN MENG YOOK           LIM MEI
84. A Director need not be a Member and shall not be required to hold any share qualification unless and until otherwise determined by the Company in General Meeting but shall be entitled to attend and speak at General Meetings.	Qualification.
85. Subject to Section 169 of the Act, the remuneration of the Directors shall be determined from time to time by the Company in General Meeting, and shall be divisible among the Directors in such proportions and manner as they may agree and in default of agreement equally, except that in the latter event any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for the proportion of remuneration related to the period during which he has held office.	Remuneration of Directors.
86. The Directors shall be entitled to be repaid all travelling or such reasonable expenses as may be incurred in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise howsoever in or about the business of the Company in the course of the performance of their duties as Directors.	Travelling expenses.
87. Any Director who is appointed to any executive office or serves on any committee or who otherwise performs or renders services, which in the opinion of the Directors are outside his ordinary duties as a Director, may, subject to Section 169 of the Act, be paid such extra remuneration as the Directors may determine.	Extra Remuneration.
88. (a) Other than the office of Auditor, a Director may hold any other office or place of profit under the Company and he or any firm of which he is a member may act in a professional capacity for the Company in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine.	Power of Directors to hold office of profit and to

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Subject to the Act, no Director or intending Director shall be disqualified by his office from contracting or entering into any arrangement with the Company either as vendor, purchaser or otherwise nor shall such contract or arrangement or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or of the fiduciary relation thereby established.	contract with Company.
(b) Every Director shall observe the provisions of Section 156 of the Act relating to the disclosure of the interests of the Directors in contracts or proposed contracts with the Company or of any office or property held by a Director which might create duties or interests in conflict with his duties or interests as a Director. Subject to such disclosure, a Director shall be entitled to vote in respect of any contract or arrangement in which he is interested and he shall be taken into account in ascertaining whether a quorum is present.	Directors to observe Section 156 of the Act.
89. (a) A Director may be or become a director of or hold any office or place of profit (other than as Auditor) or be otherwise interested in any company in which the Company may be interested as vendor, purchaser, shareholder or otherwise and unless otherwise agreed shall not be accountable for any fees, remuneration or other benefits received by him as a director or officer of or by virtue of his interest in such other company.	Holding of office in other companies.
(b) The Directors may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Directors think fit in the interests of the Company (including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors of such company or voting or providing for the payment of remuneration to the directors of such company) and any such Director of the Company may vote in favour of the exercise of such voting powers in manner aforesaid notwithstanding that he may be or be about to be appointed a director of such other company.	Directors may exercise voting power conferred by Company’s shares in another company.
CHIEF EXECUTIVE OFFICERS
90. The Directors may from time to time appoint one or more of their body to be Chief Executive Officer or Chief Executive Officers of the Company and may from time to time (subject to the provisions of any contract between him or them and the Company) remove or dismiss him or them from office and appoint another or others in his or their places.	Appointment of Chief Executive Officers. Amended by AGM held on 30.06.2004
91. A Chief Executive Officer shall subject to the provisions of any contract between him and the Company be subject to the same provisions as to resignation and removal as the other Directors of the Company and if he ceases to hold the office of Director from any cause he shall ipso facto and immediately cease to be a Chief Executive Officer.	Resignation and removal of Chief Executive Officer. Amended by AGM held on 30.06.2004
92. The remuneration of a Chief Executive Officer shall from time to time be fixed by the Directors and may subject to these Articles be by way of salary or commission or participation in profits or by any or all of these modes.	Remuneration of Chief Executive Officer. Amended by AGM held on 30.06.2004

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93. The Directors may from time to time entrust to and confer upon a Chief Executive Officer for the time being such of the powers exercisable under these Articles by the Directors as they may think fit and may confer such powers for such time and to be exercised on such terms and conditions and with such restrictions as they think expedient and they may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the Directors in that behalf and may from time to time revoke withdraw alter or vary all or any of such powers.	Powers of Chief Executive Officer. Amended by AGM held on 30.06.2004
VACATION OF OFFICE OF DIRECTOR
94. The office of a Director shall be vacated in any one of the following events, namely:- (a) if he becomes prohibited from being a Director by reason of any order made under the Act;	Vacation of office of Director.
(b) if he ceases to be a Director by virtue of any of the provisions of the Act or these Articles;
(c) if he resigns by writing under his hand left at the Office;
(d) if he has a receiving order made against him or suspends payments or compounds with his creditors generally; or
(e) if he is found lunatic or becomes of unsound mind.
APPOINTMENT AND REMOVAL OF DIRECTORS
95. The Company may by Ordinary Resolution remove any Director before the expiration of his period of office, notwithstanding anything in these Articles or in any agreement between the Company and such Director.	Removal of Directors.
96. The Company may by Ordinary Resolution appoint another person in place of a Director removed from office under the immediately preceding Article.	Appointment in place of Director removed.
97. The Directors shall have power at any time and from time to time to appoint any person to be a Director either to fill a casual vacancy or as an additional Director but so that the total number of Directors shall not at any time exceed the maximum number fixed by or in accordance with these Articles.	Directors’ power to fill casual vacancies and to appoint additional Director.
ALTERNATE DIRECTORS
98. (a) Any Director may at any time by writing under his hand and deposited at the Office or by telefax, telex or by cable sent to the Secretary appoint any person to be his Alternate Director and may in like manner at any time terminate such appointment. Any appointment or removal by telefax, telex or cable shall be confirmed as soon as possible by letter, but may be acted upon by the Company meanwhile.	Appointment of Alternate Directors.
(b) A Director or any other person may act as an

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Alternate Director to represent more than one Director and such Alternate Director shall be entitled at Directors’ meetings to one vote for every Director whom he represents in addition to his own vote if he is a Director.
(c) The appointment of an Alternate Director shall ipso facto determine on the happening of any event which if he were a Director would render his office as a Director to be vacated and his appointment shall also determine ipso facto if his appointor ceases for any reason to be a Director.
(d) An Alternate Director shall be entitled to receive notices of meetings of the Directors and to attend and vote as a Director at any such meeting at which the Director appointing him is not personally present and generally, if his appointor is absent from Singapore or is otherwise unable to act as such Director, to perform all functions of his appointor as a Director (except the power to appoint an Alternate Director) and to sign any resolution in accordance with the provisions of Article 104.
(e) An Alternate Director shall not be taken into account in reckoning the minimum or maximum number of Directors allowed for the time being under these Articles but he shall be counted for the purpose of reckoning whether a quorum is present at any meeting of the Directors attended by him at which he is entitled to vote Provided that he shall not constitute a quorum under Article 101 if he is the only person present at the meeting notwithstanding that he may be an Alternate to more than one Director.
(f) An Alternate Director may be repaid by the Company such expenses as might properly be repaid to him if he were a Director and he shall be entitled to receive from the Company such proportion (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct, but save as aforesaid he shall not in respect of such appointment be entitled to receive any remuneration from the Company.
(g) An Alternate Director shall not be required to hold any share qualification.
PROCEEDINGS OF DIRECTORS
99. (a) The Directors may meet together for the despatch of business, adjourn or otherwise regulate their meetings as they think fit. Subject to the provisions of these Articles questions arising at any meeting shall be determined by a majority of votes and in case of an equality of votes the Chairman of the meeting shall have a second or casting vote.	Meetings of Directors.
(b) Any Director or his Alternate may participate at a meeting of the Directors by conference telephone or by means of a similar communication equipment whereby all persons participating in the meeting are able to hear each other in which event such Director or his Alternate shall be deemed to be present at the meeting. A Director or his Alternate participating in a meeting in the manner aforesaid may also be taken into account in ascertaining the presence of a quorum at the meeting. Such a meeting shall be deemed to take place where the largest group of Directors present for purposes of the meeting is assembled or, if there is no such group, where the Chairman is present.	Participation in a Meeting by conference telephone.
100. A Director may and the Secretary on the requisition of a Director shall at any time summon a meeting of the Directors but it shall not be necessary to give notice of a	Convening meetings of

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meeting of Directors to any Director for the time being absent from Singapore.	Directors.
101. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed at any other number shall be two. A meeting of the Directors at which a quorum is present shall be competent to exercise all the powers and discretions for the time being exercisable by the Directors.	Quorum.
102. The continuing Directors may act notwithstanding any vacancies in their body but if and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with these Articles the continuing Directors or Director may act for the purpose of filling up such vacancies or of summoning General Meetings of the Company but not for any other purpose. If there be no Directors or Director able or willing to act, then any two Members may summon a General Meeting for the purpose of appointing Directors.	Proceedings in case of vacancies.
103. The Directors may from time to time elect a Chairman and if desired a Deputy Chairman and determine the period for which he is or they are to hold office. The Deputy Chairman will perform the duties of the Chairman during the Chairman’s absence for any reason. The Chairman and in his absence the Deputy Chairman shall preside as Chairman at meetings of the Directors but if no such Chairman or Deputy Chairman be elected or if at any meeting the Chairman and the Deputy Chairman be not present within five minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting.	Chairman of Directors.
104. A resolution in writing signed by all the Directors for the time being and being not less than are sufficient to form a quorum shall be as effective as a resolution passed at a meeting of the Directors duly convened and held, and may consist of several documents in the like form each signed by one or more of the Directors. Provided that where a Director has appointed an Alternate Director, the Director or (in lieu of the Director) his Alternate Director may sign. The expressions “in writing” and “signed” include approval by any such Directors by telex, telefax, cable, telegram or any form of electronic communication approved by the Directors for such purpose from time to time incorporating, if the Directors deem necessary, the use of security and/or identification procedures and devices approved by the Directors.	Resolutions in writing. Amended by AGM held on 29.6.2006
105. The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the Directors.	Power to appoint committees.
AUDIT COMMITTEE OF THE BOARD OF DIRECTOR
105A. (a) PURPOSE	Audit Committee Amended by AGM held on 30.06.2000
The Audit Committee shall provide assistance to the corporate directors in fulfilling their responsibility to the shareholders, potential shareholders, and investment community relating to corporate accounting, reporting practices of the Company, and the quality and integrity of the financial reports of the Company. The Audit Committee primary duties and responsibilities are to:

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1. Oversee that management has maintained the reliability and integrity of the accounting policies and financial reporting and disclosure practices of the Company.

2. Oversee that management has established and maintained processes to assure that an adequate system of internal control is functioning with the Company.

3. Oversee that management has established and maintained processes to assure compliance by the Company with all applicable laws, regulations and corporate policy.

The Audit Committee will fulfill these responsibilities primarily by carrying out the activities enumerated in Section (d) of this Article.

(b) COMPOSITION

     On or before March 1, 2001, the Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be independent directors, and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. All members of the Audit Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Audit Committee shall have accounting or related financial management expertise. Audit Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or an outside consultant.

The members of the Audit Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chairperson is elected by the full Board, the members of the Audit Committee may designate a Chairperson by majority vote of the full Audit Committee membership.

(c) MEETINGS

     The Audit Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Audit Committee should meet at least annually with management, the director of the internal auditing department and the independent accountants separately to discuss any matters that the Audit Committee or each of these groups believe should be discussed privately. In addition, the Audit Committee or at least its Chairperson should meet with the independent accountants and management quarterly to review the Company’s financials consistent with Section (d)(3) below.

(d) RESPONSIBILITIES AND DUTIES

     To fulfill its responsibilities and duties the Audit Committee shall:

Documents/Reports Review

(1) Review and reassess, at least annually, the adequacy of this Article. Make recommendations to the Directors, as conditions dictate, to update this Article.

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(2) Review with management and the independent accountants the Company’s annual financial statements, including a discussion with the independent accountants of the matters required to be discussed by Statement of Auditing Standards No. 61 (“SAS No. 61”).
Independent Accountants
(3) Review the performance of the independent accountants and make recommendations to the Board regarding the appointment or termination of the independent accountants. The Audit Committee and the Board of Directors have the ultimate authority and responsibility to select, evaluate, and where appropriate, replace the outside auditor. The independent accountants are ultimately accountable to the Audit Committee and the entire Board of Directors for such accountant’s review of the financial statements and controls of the Company. On an annual basis, the Audit Committee should review and discuss with the accountants all significant relationships the accountants have with the Company to determine the accountants’ independence.
(4) Oversee independence of the accountants by:
• Receiving from the accountants, on a periodic basis, a formal written statement delineating all relationships between the accountants and the Company consistent with Independence Standards Board Standard 1 (“ISBS No. 1”);
• Reviewing, and actively discussing with the Board, if necessary, and the accountants, on a periodic basis, any disclosed relationships or services between the accountants and the Company or any other disclosed relationships or services that may impact the objectivity and independence of the accountants; and
• Recommending, if necessary, that the Board take certain action to satisfy itself of the auditors’ independence.
Financial Reporting Process
(5) In consultation with the independent accountants and the internal auditors, review the integrity of the Company’s financial reporting processes, both internal and external.
(6) Review any significant disagreement among management and the independent accountants or the internal auditing department in connection with the preparation of the financial statements. Legal Compliance/General
(7) Report through its Chairperson to the Board of Directors following meetings of the Audit Committee.
(8) Maintain minutes or other records of meetings and activities of the Audit Committee.
106. The meetings and proceedings of any such committee consisting of two or more members shall be governed by the provisions of these Articles regulating the meetings and proceedings of the Directors, so far as the same are applicable and are not superseded by any regulations made by the Directors under the last preceding Article.	Proceedings at committee meetings.

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107. All acts done by any meeting of Directors or of a committee of Directors or by any person acting as Director shall as regards all persons dealing in good faith with the Company, notwithstanding that there was some defect in the appointment of any such Director or person acting as aforesaid or that they or any of them were disqualified or had vacated office or were not entitled to vote be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director and had been entitled to vote.	Validity of acts of Directors in spite of some formal defect.
GENERAL POWERS OF THE DIRECTORS
108. The management of the business of the Company shall be vested in the Directors who (in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them) may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by the Act expressly directed or required to be exercised or done by the Company in General Meeting; provided that the Directors shall not carry into effect any proposals for disposing of the whole or substantially the whole of the Company’s undertaking or property unless those proposals have been approved by the Company in General Meeting. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Directors by any other Article.	General powers of Directors to manage Company’s business. Amended by AGM held on 29.6.2006
109. The Directors may from time to time by power of attorney appoint any company, firm or person or any fluctuating body of persons whether nominated directly or indirectly by the Directors to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with such attorney as the Directors may think fit and may also authorise any such attorney to subdelegate all or any of the powers, authorities and discretions vested in him.	Power to appoint attorneys.
110. All cheques, promissory notes, drafts, bills of exchange, and other negotiable or transferable instruments and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by Resolution determine.	Signature of cheques and bills.
BORROWING POWERS
111. The Directors may borrow or raise money from time to time for the purpose of the Company or secure the payment of such sums as they think fit and may secure the repayment or payment of such sums by mortgage or charge upon all or any of the property or assets of the Company or by the issue of debentures or otherwise as they may think fit.	Directors’ borrowing powers. Amended by AGM held on 29.6.2006
SECRETARY
112. The Secretary or Secretaries shall and a Deputy or Assistant Secretary or Secretaries may be appointed by the Directors for such term, at such remuneration and upon such	Secretary.

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conditions as they may think fit, and any Secretary, Deputy or Assistant Secretary so appointed may be removed by them, but without prejudice to any claim he may have for damages for breach of any contract of service between him and the Company. The appointment and duties of the Secretary or Secretaries shall not conflict with the provisions of the Act and in particular Section 171 thereof.
SEAL
113. (a) The Directors shall provide for the safe custody of the Seal, which shall only be used by the authority of the Directors or a committee of Directors authorised by the Directors in that behalf, and every instrument to which the Seal shall be affixed shall (subject to the provisions of these Articles as to certificates for shares) be signed by a Director and shall be countersigned by the Secretary or by a second Director or by some other person appointed by the Directors in place of the Secretary for the purpose.	Seal.
(b) The Company may exercise the powers conferred by the Act with regard to having an Official Seal for use abroad, and such powers shall be vested in the Directors.	Official Seal.
(c) The Company may have a duplicate Common Seal as referred to in Section 124 of the Act which shall be a facsimile of the Common Seal with the addition on its face of the words “Share Seal”.	Share Seal.
AUTHENTICATION OF DOCUMENTS
114. Any Director or the Secretary or any person appointed by the Directors for the purpose shall have power to authenticate any documents affecting the constitution of the Company and any resolutions passed by the Company or the Directors, and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts therefrom as true copies or extracts; and where any books, records, documents or accounts are elsewhere than at the Office, the local manager and other officer of the Company having the custody thereof shall be deemed to be a person appointed by the Directors as aforesaid.	Power to authenticate documents.
115. A document purporting to be a copy of a resolution of the Directors or an extract from the minutes of a meeting of Directors which is certified as such in accordance with the provisions of the last preceding Article shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed or, as the case may be, that such extract is a true and accurate record of a duly constituted meeting of the Directors. Any authentication or certification made pursuant to this Article and Article 114 above may be made by any electronic means approved by the Directors for such purpose from time to time incorporating, if the Directors deem necessary, the use of security and/or identification procedures and devices approved by the Directors.	Certified copies of resolution of the Directors. Amended by AGM held on 29.6.2006
DIVIDENDS AND RESERVES
116. The Company may by Ordinary Resolution declare dividends but (without prejudice to the powers of the Company to pay interest on share capital as hereinbefore provided) no dividend shall be payable except out of the profits of the Company, or in excess of the amount recommended by the Directors.	Payment of dividends.
117. Subject to any rights or restrictions attached to any shares or class of shares and except as otherwise permitted under the Act:	Apportionment of dividends.

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(a) all dividends in respect of shares must be paid in proportion to the number of shares held by a member but where shares are partly paid all dividends must be apportioned and paid proportionately to the amounts paid or credited as paid on the partly paid shares; and	Amended by AGM held on 29.6.2006
(b) all dividends must be apportioned and paid proportionately to the amounts so paid or credited as paid during any portion or portions of the period in respect of which the dividend is paid.
For the purposes of this Article, an amount paid or credited as paid on a share in advance of a call is to be ignored.
118. If and so far as in the opinion of the Directors the profits of the Company justify such payments, the Directors may pay the fixed preferential dividends on any class of shares carrying a fixed preferential dividend expressed to be payable on a fixed date on the half-yearly or other dates (if any) prescribed for the payment thereof by the terms of issue of the shares, and subject thereto may also from time to time pay to the holders of any other class of shares interim dividends thereon of such amounts and on such dates as they may think fit.	Payment of preference and interim dividends.
119. (deleted by AGM held on 29.6.2006)
120. No dividend or other moneys payable on or in respect of a share shall bear interest against the Company.	Dividends not to bear interest.
121. The Directors may deduct from any dividend or other moneys payable to any Member on or in respect of a share all sums of money (if any) presently payable by him to the Company on account of calls or in connection therewith.	Deduction of debts due to Company.
122. The Directors may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.	Retention of dividends on shares subject to lien.
123. The Directors may retain the dividends payable on shares in respect of which any person is under the provisions as to the transmission of shares hereinbefore contained entitled to become a Member or which any person under those provisions is entitled to transfer until such person shall become a Member in respect of such shares or shall duly transfer the same.	Retention of dividends on shares pending trans- mission.
124. The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All dividends unclaimed after being declared may be invested or otherwise made use of by the Directors for the benefit of the Company and any dividend unclaimed after a period of six years from the date of declaration of such dividend may be forfeited and if so shall revert to the Company but the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture.	Unclaimed dividends.

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125. The Company may, upon the recommendation of the Directors, by Ordinary Resolution direct payment of a dividend in whole or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company or in any one or more of such ways; and the Directors shall give effect to such Resolution and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors.	Payment of dividend in specie.
126. Any dividend or other moneys payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the Member or person entitled thereto, or, if several persons are registered as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder to any one of such persons or to such persons and such address as such persons may by writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and payment of the cheque if purporting to be endorsed or the receipt of any such person shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby.	Dividends payable by cheque.
127. A transfer of shares shall not pass the right to any dividend declared on such shares before the registration of the transfer.	Effect of transfer.
RESERVES
128. The Directors may from time to time set aside out of the profits of the Company and carry to reserve such sums as they think proper which, at the discretion of the Directors, shall be applicable for meeting contingencies or for the gradual liquidation of any debt or liability of the Company or for repairing or maintaining the works, plant and machinery of the Company or for special dividends or bonuses or for equalising dividends or for any other purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested. The Directors may divide the reserve into such special funds as they think fit and may consolidate into one fund any special funds or any parts of any special funds into which the reserve may have been divided. The Directors may also without placing the same to reserve carry forward any profits which they may think it not prudent to divide.	Power to carry profit to reserve.
BONUS ISSUES AND CAPITALISATION OF PROFITS AND RESERVES
129. (A) The Directors may, with the sanction of an Ordinary Resolution of the Company : (a) issue bonus shares for which no consideration is payable to the Company to the persons registered as holders of shares in the Register at the close of business on:	Power to issue free bonus shares and/or to capitalise reserves.
(i) the date of the Ordinary	Amended by AGM held on

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Resolution (or such other date as may be specified therein or determined as therein provided); or	29.6.2006
(ii) such other date as may be determined by the Directors,
in the proportion to their then holdings of shares; and/or
(b) capitalise any sum standing to the credit of any of the Company’s reserve accounts or other undistributable reserve) or any sum standing to the credit of profit and loss account by appropriating such sum to the persons registered as holders of shares in the Register of Members at the close of business on:
(i) the date of the Resolution (or such other date as may be specified therein or determined as therein provided); or
(ii) such other date as may be determined by the Directors,
in proportion to their then holdings of shares and applying such sum on their behalf in paying up in full new shares (or, subject to any special rights previously conferred on any shares or class of shares for the time being issued, new shares of any other class not being redeemable shares) for allotment and distribution credited as fully paid up to and amongst them as bonus shares in the proportion aforesaid.
(B) The Directors may do all acts and things considered necessary or expedient to give effect to any such bonus issue and/or capitalisation under Article 129(A), with full power to the Directors to make such provisions as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby fractional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the members concerned). The Directors may authorise any person to enter on behalf of all the members interested into an agreement with the Company providing for any such bonus issue and/or capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.	Power of Directors to give effect to bonus issues and/or capitalisations.
130. In addition and without prejudice to the powers provided for by Article 129, the Directors shall have power to issue shares for which no consideration is payable and/or to capitalise any undivided profits or other moneys of the Company not required for the payment or provision of any dividend on any shares entitled to cumulative or non-cumulative	Power to issue free shares and/or to capitalise reserves for

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preferential dividends (including profits or other moneys carried and standing to any reserve or reserves) and to apply such profits or other moneys in paying up in full new shares, in each case on terms that such shares shall, upon issue, be held by or for the benefit of participants of any share incentive or option scheme or plan implemented by the Company and approved by shareholders in General Meeting and on such terms as the Directors shall think fit.	employee share- based incentive plans Amended by AGM held on 29.6.2006
MINUTES AND BOOKS
131. The Directors shall cause minutes to be made in books to be provided for the purpose:-	Minutes.
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors present at each meeting of Directors and of any committee of Directors; and
(c) of all Resolutions and proceedings at all Meetings of the Company and of any class of Members, of the Directors and of committees of Directors.
132. The Directors shall duly comply with the provisions of the Act and in particular the provisions in regard to registration of charges created by or affecting property of the Company, in regard to keeping a Register of Directors, Managers, Secretaries and Auditors, the Register, a Register of Mortgages and Charges and a Register of Directors’ Share and Debenture Holdings and in regard to the production and furnishing of copies of such Registers and of any Register of Holders of Debentures of the Company.	Keeping of Registers, etc.
133. Any register, index, minute book, book of accounts or other book required by these Articles or by the Act to be kept by or on behalf of the Company may be kept either by making entries in bound books or by recording them in any other manner. In any case in which bound books are not used, the Directors shall take adequate precautions for guarding against falsification and for facilitating discovery.	Form of registers, etc.
ACCOUNTS
134. The Directors shall cause to be kept such accounting and other records as are necessary to comply with the provisions of the Act and shall cause those records to be kept in such manner as to enable them to be conveniently and properly audited.	Directors to keep proper accounts.
135. Subject to the provisions of Section 199 of the Act, the books of accounts shall be kept at the Office or at such other place or places as the Directors think fit within Singapore. No Member (other than a Director) shall have any right of inspecting any account or book or document or other recording of the Company except as is conferred by law or authorised by the Directors or by an Ordinary Resolution of the Company.	Location and inspection.
136. In accordance with the provisions of the Act the Directors shall cause to be prepared and to be laid before the Company in General Meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as may be necessary.	Presentation of accounts.
137. A copy of every balance sheet and profit and loss account which is to be laid before a General Meeting of the	Copies of accounts.

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Company (including every document required by the Act to be annexed thereto) together with a copy of every report of the Auditors relating thereto and of the Directors’ report shall not less than fourteen days before the date of the Meeting be sent to every Member of, and every holder of debentures (if any) of, the Company and to every other person who is entitled to receive notices from the Company under the provisions of the Act or of these Articles Provided that this Article shall not require a copy of these documents to be sent to any person of whose address the Company is not aware or to more than one of the joint holders of a share in the Company or the several persons entitled thereto in consequence of the death or bankruptcy of the holder or otherwise but any Member to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office.
AUDITORS
138. Auditors shall be appointed and their duties regulated in accordance with the provisions of the Act. Every Auditor of the Company shall have a right of access at all times to the accounting and other records of the Company and shall make his report as required by the Act.	Appointment of Auditors.
139. Subject to the provisions of the Act all acts done by any person acting as an Auditor shall, as regards all persons dealing in good faith with the Company, be valid, notwithstanding that there was some defect in his appointment or that he was at the time of his appointment not qualified for appointment.	Validity of acts of Auditors in spite of some formal defect.
140. The Auditors shall be entitled to attend any General Meeting and to receive all notices of and other communications relating to any General Meeting to which any Member is entitled and to be heard at any General Meeting on any part of the business of the Meeting which concerns them as Auditors.	Auditors’ right to receive notices of and attend at General Meetings.
NOTICES
141. (a) Any notice may be given by the Company to any Member in any of the following ways:-	Service of notice.
(i) by delivering the notice personally to him; or
(ii) by sending it by prepaid mail to him at his registered address in Singapore or where such address is outside Singapore by prepaid air-mail; or
(iii) by sending a cable or telex or telefax or by electronic mail containing the text of the notice to him at his registered address in Singapore or where such address is outside Singapore to such address or to any other address as might have been previously notified by the Member concerned to the Company.
(b) Any notice or other communication served under any of the provisions of these Articles on or by the Company or any officer of the Company may be tested or verified by telex or telefax or electronic mail or telephone or such other manner as may be convenient in the circumstances but the Company and its officers are under no obligation so to test or verify any such notice or communication.
141A. Without prejudice to the provisions of Article 141, any notice or document (including, without limitations, any accounts, balance-sheet or report) which is required or	Electronic communications.

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permitted to be given, sent or served under the Act or under these Articles by the Company, or by the Directors, to a member or an officer or Auditor of the Company may be given, sent or served using electronic communications to the current address of that person in accordance with the provisions of, or as otherwise provided by, the Act and/or any other applicable regulations or procedures. Such notice or document shall be deemed to have been duly given, sent or served upon transmission of the electronic communication to the current address of such person or as otherwise provided under the Act and/or any other applicable regulations or procedures.	Amended by AGM held on 29.6.2006
142. All notices and documents (including a share certificate) with respect to any shares to which persons are jointly entitled shall be given to whichever of such persons is named first on the Register and notice so given shall be sufficient notice to all the holders of such shares.	Service of notices in respect of joint holders.
143. Any Member with a registered address shall be entitled to have served upon him at such address any notice to which he is entitled under these Articles.	Members shall be served at registered address.
144. A person entitled to a share in consequence of the death or bankruptcy of a Member or otherwise upon supplying to the Company such evidence as the Directors may reasonably require to show his title to the share, and upon supplying also an address for the service of notice, shall be entitled to have served upon him at such address any notice or document to which the Member but for his death or bankruptcy or otherwise would be entitled and such service shall for all purposes be deemed a sufficient service of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. Save as aforesaid any notice or document delivered or sent by post to or left at the registered address of any Member or given, sent or served to any member using electronic communications in pursuance of these Articles shall (notwithstanding that such Member be then dead or bankrupt or otherwise not entitled to such share and whether or not the Company shall have notice of the same) be deemed to have been duly served in respect of any share registered in the name of such Member as sole or joint holder.	Service of notices after death etc. of a Member. Amended by AGM held on 29.6.2006
145. (a) Any notice given in conformity with Article 141 shall be deemed to have been given at any of the following times as may be appropriate:-	When service effected.
(i) when it is delivered personally to the Member, at the time when it is so delivered;
(ii) when it is sent by prepaid mail to an address in Singapore or by prepaid airmail to an address outside Singapore, on the day following that on which the notice was put into the post; and
(iii) when the notice is sent by cable or telex or telefax or electronic mail, the day it is so sent.
(b) In proving such service or sending, it shall be sufficient to prove that the letter containing the notice or document was properly addressed and put into the post office as a prepaid letter or airmail letter as the case may be or that a telex or telefax or electronic mail was properly addressed and transmitted or that a cable was properly addressed and handed to the relevant authority for despatch.

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146. Any notice on behalf of the Company or of the Directors shall be deemed effectual if it purports to bear the signature of the Secretary or other duly authorised officer of the Company, whether such signature is printed or written.	Signature on notice.
147. When a given number of days’ notice or notice extending over any other period is required to be given the day of service shall, unless it is otherwise provided or required by these Articles or by the Act, be not counted in such number of days or period.	Day of service not counted.
148. (a) Notice of every General Meeting shall be given in manner hereinbefore authorised to:-	Notice of General Meeting.
(i) every Member;
(ii) every person entitled to a share in consequence of the death or bankruptcy or otherwise of a Member who but for the same would be entitled to receive notice of the Meeting; and
(iii) the Auditor for the time being of the Company.
(b) No other person shall be entitled to receive notices of General Meetings.
149. The provisions of Articles 141, 145, 146 and 147 shall apply mutatis mutandis to notices of meetings of Directors or any committee of Directors.	Notice of meetings of Directors or any committee of Directors.
WINDING UP
150. If the Company is wound up (whether the liquidation is voluntary, under supervision, or by the Court) the Liquidator may, with the authority of a Special Resolution, divide among the Members in specie or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds and may for such purpose set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The Liquidator may, with the like authority, vest the whole or any part of the assets in trustees upon such trusts for the benefit of Members as the Liquidator with the like authority thinks fit and the liquidation of the Company may be closed and the Company dissolved but so that no Member shall be compelled to accept any shares or other securities in respect of which there is a liability.	Distribution of assets in specie.
INDEMNITY
151. Subject to the provisions of the Act, every Director, Auditor, Secretary or other officer of the Company shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities incurred by him in the execution and discharge of his duties or in relation thereto and in particular and without prejudice to the generality of the foregoing no Director, Manager, Secretary or other officer of the Company shall be liable for the acts, receipts, neglects or defaults of any other Director or officer or for joining in any receipt or other act for conformity or for	Indemnity of Directors and officers.

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any loss or expense happening to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same shall happen through his own negligence, wilful default, breach of duty or breach of trust.
SECRECY
152. No Member shall be entitled to require discovery of or any information respecting any detail of the Company’s trade or any matter which may be in the nature of a trade secret, mystery of trade or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interest of the Members of the Company to communicate to the public save as may be authorised by law.	Secrecy.
STOCK MARKET RULES
153. Upon listing of its shares on any stock market, the Company shall, to the extent permitted under Singapore law, comply with all rules of such stock market(s) as regarding corporate governance.	Stock Market Rules. Amended by EGM held on 15.11.1999

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NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS

/s/ CHRISTINE CHAN MENG YOOK

CHRISTINE CHAN MENG YOOK
11C SWISS CLUB ROAD
SINGAPORE 288103

ADVOCATE & SOLICITOR

/s/ LIM MEI

LIM MEI
56 JALAN AMPANG
SINGAPORE 268638

ADVOCATE & SOLICITOR

Dated this 11^th day of September 1999.

Witness to the above signatures:-

/s/ THEODORA LIM RERN SING

THEODORA LIM RERN SING
Advocate & Solicitor
c/o Allen & Gledhill
Advocates & Solicitors
36 Robinson Road
#18-01 City House
Singapore 068877

EX-4.42

Exhibit 4.42

AMENDED AND RESTATED

SHAREHOLDERS’ AGREEMENT

by and among

T2CN HOLDING LIMITED

GIGAMEDIA CHINA LIMITED

AND

INVESTORS,

THE SHAREHOLDERS LISTED ON
SCHEDULE 2 HERETO

- and -

Ant Bridge No. 2 Venture Capital Secondary Investment Limited Partnership

dated as of

November 25, 2006

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CONTENTS

Table of Contents

ARTICLE I. DEFINITIONS AND INTERPRETATION	6
SECTION 1.01 Definitions	6
SECTION 1.02 Interpretation	13
ARTICLE II. OBJECTIVES AND CERTAIN UNDERTAKINGS	13
SECTION 2.01 Objectives of the Company	13
SECTION 2.02 Principal Business	13
ARTICLE III. DIVIDEND RIGHTS	14
SECTION 3.01 Dividend Rights	14
ARTICLE IV. BOARD; SHAREHOLDERS’ MEETING	14
SECTION 4.01 Board of Directors	14
SECTION 4.02 Shareholders’ Meeting	17
ARTICLE V. PROTECTIVE PROVISIONS	17
SECTION 5.01 Protective Provisions for Preferred Shareholder	17
ARTICLE VI. CONVERSION RIGHTS	18
SECTION 6.01 Optional Conversion	18
SECTION 6.02 Automatic Conversion	19
SECTION 6.03 Preferred Share Conversion Price	20
SECTION 6.04 Fractional Shares	23
SECTION 6.05 Reservation of Shares Issuable Upon Conversion	23
SECTION 6.06 Notices	24
SECTION 6.07 Payment of Taxes	24
ARTICLE VII. LIQUIDATION RIGHTS	24
SECTION 7.01 Liquidation Preferences	24
SECTION 7.02 Liquidation on Sale or Merger	25
ARTICLE VIII. INFORMATION AND INSPECTION RIGHTS	25
SECTION 8.01 Delivery of Financial Statements to Preferred Shareholders	25
SECTION 8.02 Financial Statements	26
SECTION 8.03 Inspection	26
ARTICLE IX. RIGHTS OF FIRST REFUSAL; CO-SALE RIGHTS AND TRANSFER RESTRICTIONS	26
SECTION 9.01(a)	26
SECTION 9.02 Special Provisions in Relation to the Founders and Management	31
ARTICLE X. REGISTRATION RIGHTS	31
SECTION 10.01 Demand Registration	31
SECTION 10.02 Piggyback Registrations	33

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SECTION 10.03 Procedures	35
SECTION 10.04 Indemnification under Registration Rights	37
SECTION 10.05 Additional Undertakings	40
ARTICLE XI. PRE-EMPTIVE RIGHT	42
SECTION 11.01 Pre-emptive Right	42
ARTICLE XII. REDEMPTION RIGHT	44
SECTION 12.01 Redemption Rights of Preferred Shareholders	44
ARTICLE XIII. AFFILIATED TRANSACTION	44
SECTION 13.01 Affiliated Transactions	44
ARTICLE XIV. PUT OPTION	44
ARTICLE XV. ISSUANCE OF ADDITIONAL PREFERRED SHARES	47
SECTION 15.01 Issuance of Additional Shares based on 2006 Accounts	47
SECTION 15.02 Issuance of Additional Shares based on 2007 Accounts	48
SECTION 15.03 Exercise of Options	49
SECTION 15.04 Net Operating Income	49
ARTICLE XVI. MISCELLANEOUS	51
SECTION 16.01 Insurance	51
SECTION 16.02 Successors and Assigns	51
SECTION 16.03 Cumulative Rights	51
SECTION 16.04 Entire Agreement; Amendments	51
SECTION 16.05 Further Assurance	52
SECTION 16.06 Severability	52
SECTION 16.07 Non-waiver	52
SECTION 16.08 Counterparts	52
SECTION 16.09 Dispute Resolution; Governing Law	53
SECTION 16.10 Effectiveness	53

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THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (the “Agreement”) is made on November 25, 2006.

BY AND AMONG:

1.	T2CN HOLDING LTD., a limited liability company organized and existing under the laws of the British Virgin Islands (the “Company”),
2.	The shareholders of the Company listed on Schedule 2. hereof (“Key Shareholders”);
3.	GIGAMEDIA CHINA LIMITED, a limited liability company organized and existing under the laws of the British Virgin Islands (“Gigamedia”);
4.	MARVEL CITY INVESTMENTS LIMITED, a limited liability company organized and existing under the laws of British Virgin Islands (“MCI”)];
5.	PATRIOT CAPITAL LIMITED;
6.	TAE LLC;
	(the persons named in 4 to 6, each an “Investor” and collectively the “Investors”), and
7.	Ant Bridge No. 2 Venture Capital Secondary Investment Limited Partnership, a limited partnership formed and existing under the laws of Japan (“Antfactory”).

     The Company, the Key Shareholders, Gigamedia, the Investors and Antfactory may hereinafter, as appropriate, respectively be referred to as a “Party” and collectively be referred to as the “Parties”.

WHEREAS:

(A) The Company is a company incorporated in the British Virgin Islands and the details of the Company as at the date of this Agreement are set out in Schedule 1 hereof; and

(B) The Company, Gigamedia and the Key Shareholders are parties to a share purchase agreement dated April 27^th, 2006 (the “First Series A Share Purchase Agreement”), under which the Company has issued 7,500,000 Series A Preferred Shares to Gigamedia.

(C) The Company, the Investors and the Key Shareholders are parties to a share purchase agreement dated June 21, 2006 (the “ Second Series A Share Purchase Agreement”), under which the Company has issued 3,000,000 Series A Preferred Shares to the Investors.

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(D) Chengwei (China) Investment Company (“Chengwei”) and Antfactory are parties to a share transfer agreement dated October 23, 2006 (the “Chengwei SPA”), under which Chengwei has transferred to Antfactory a total of 2,700,000 Ordinary Shares.

In consideration of the premises set forth above, the mutual promises and covenants set forth herein and other good and valuable consideration,

IT IS AGREED as follows:

ARTICLE I. DEFINITIONS AND INTERPRETATION

SECTION 1.01 Definitions.

“Additional Shares”	as used in Section 6.03(e) hereof, means any Equity Securities to be issued by the Company in subsequent funding transactions, subject to restrictions as provided in Section 6.03(e);
“Additional Transfer Notice”	has the meaning set forth in Sub-Section 9.01(a)(iii);
“Applicable Securities Law”	means (i) with respect to any offering of securities in the United States of America, or any other act or omission within that jurisdiction, the securities law of the United States, as amended from time to time, including the Exchange Act and the Securities Act, and any applicable law of any state of the United States of America, and (ii) with respect to any offering of securities in any jurisdiction other than the United States of America, or any related act or omission in that jurisdiction, the applicable laws of that jurisdiction;
“Affiliate”	with regard to a given Person, means a Person that controls, is controlled by or is under common control with the given Person. For purposes of this Agreement, except as otherwise expressly provided, when used with respect to any Person, “control” means the power to direct the management and policies of such Person, directly or indirectly, whether

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through the ownership of voting securities, by contract or otherwise, and the terms “affiliated”, “controlling and “controlled” have meanings correlative to the foregoing;

“Big-Four Accounting Firm”	means KPMG, PWC, Deloitte&Touche and Ernst&Young LLP
“Board of Directors”	means the board of directors of the Company;
“Business”	has the meaning set forth in Section 2.01;
“Business Day”	means a day (other than a Saturday or Sunday or national holiday) on which licensed banks are generally open in the PRC for general banking business;
“Closing”	means the Closing as defined under the First Series A Share Purchase Agreement, being May 8, 2006;
“Commission”	means (i) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States of America or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States of America, the regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction;
“Company”	means T2CN Holding Limited, a company incorporated in British Virgin Islands, with its registered address at Trinity Chambers, P.O. Box 4301, Road Town, Tortola, BVI;
“Conversion Price”	has the meaning set forth in Section 6.03;
“Domestic Company”	means each of Shanghai T2 Entertainment Co., Ltd. and Shanghai T2 Advertisement Co., Ltd., each a limited liability company incorporated under the laws of the PRC in Shanghai, PRC;
“Effective Conversion Price”	means, with respect to any Ordinary Share

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	Equivalent at a given time, an amount equal to the quotient of (i) the sum of any consideration, if any, received by the Company with respect to the issuance of such Ordinary Share Equivalent and the consideration receivable by the Company, if any, upon the exercise, exchange or conversion of the Ordinary Share Equivalent over (ii) the number of Ordinary Shares issuable upon the exercise, conversion or exchange of the Ordinary Share Equivalent;
“Equity Securities”	means any Ordinary Shares and/or Ordinary Share Equivalents;
“First Series A Share Purchase Agreement”	has the meaning set forth in Recital (B) of this Agreement;
“Form F-3”	means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission. Form F-3, as applied in this Agreement, could be either Form F-3, if the Company is deemed a foreign private issuer under the Securities Exchange Act of 1934, as amended, or Form S-3, if the Company is deemed a domestic issuer under such Act;
“Founder”	means such Key Shareholders as listed on Schedule 2-1 hereof;
“GAAP”	means generally accepted accounting principles in the United States of America;
“Group”	means the Company and its Subsidiaries and Affiliate(s);
“Happy Digital”	means a company established in Chengdu City with the Chinese name of
“Happy Digital Transaction”	means the purchase by the Company of the equity interest in Happy Digital owned by the shareholders of Happy Digital.

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“HKIAC”	means Hong Kong International Arbitration Center;
“Holder” or “Holders”	means any Person or Persons owning or have the right to acquire Registrable Securities including but not limited to the Founders and the Key Shareholders.
“Initiating Holder”	means, with respect to a request duly made under Section 10.01 or Section 10.02 to register any Registrable Securities, the Holder owning at least twenty five percent (25%) of the Registrable Securities including any Preferred Shareholder holding more than fifty percent (50%) of the Preferred Shares on an as-converted basis initiating such request;
“Issuance Notice”	has the meaning set forth in Section 11.01(b);
“Key Shareholder”	means a Person listed in Schedule 2, including the Founders, the Management and other shareholders listed on Schedule 2 hereof;
“Listing”	means the admission or quotation of the Shares (including the Shares into which any Securities may convert) to the list of a quotation system of a stock exchange;
“Management”	means such management staff of the Company as listed on Schedule 2-2 hereof;
“New Securities”	means any Equity Securities of the Company issued after the closing of the transactions contemplated by the Second Series A Share Purchase Agreement; provided the term “New Securities” does not include (i) securities issued upon conversion of the Preferred Shares; (ii) securities issued under the Stock Option Pool; (iii) securities issued in a Qualified Public Offering; (iv) securities issued pursuant to the acquisition of another corporation by the Company by merger or by purchase,(v) securities issued pursuant to the conversion, exercise or exchange of Ordinary Share Equivalents provided that the initial issuance of such Ordinary Share Equivalents

8

	shall have complied with the procedures set out in Section 11.01 or been exempted from such procedures pursuant to the terms set out in Section 11.01, or (vi) securities issued in connection with any stock split, stock dividend or re-capitalization of the Company;
“Offered Shares”	has the meaning set forth in Section 9.01(a);
“Ordinary Shareholder”	means any Person registered in the Company’s register of members as the holder of Ordinary Shares (including but not limited to the Key Shareholders), and the permitted transferees and assigns of such Person;
“Ordinary Shares”	means the ordinary shares of the Company
	with par value of US$0.01 per share as at the date hereof;
“Ordinary Share Equivalents”	means warrants, options and rights exercisable into Ordinary Shares and instruments, preferred shares and other securities ultimately convertible or exercisable into or exchangeable for Ordinary Shares;
“Original Issue Price”	means, as to any Preferred Shares issued or to be issued, whether pursuant to Section 15.01 or 15.02 or otherwise, US$2.00 each;
“Person”	means any individual, person corporate, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or enterprise or entity;
“PRC”	means the People’s Republic of China, for the purpose of this Agreement, excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan;
“Preferred Shares”	means the Company’s Series A Preferred Shares with par value of US$0.01 each as at the date hereof with the rights and privileges as set forth in the Restated Memorandum and Articles;

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“Preferred Shareholder”	means any Person registered in the Company’s register of members as the holder of Preferred Shares, and the permitted transferees and assigns of any Preferred Shareholder;
“Qualified Public Offering”	means a firm commitment public offering of Ordinary Shares that has been registered under the relevant securities act and jurisdiction with gross proceeds to the Company of at least US$40,000,000, and in which situation the price of each Share shall be at least 2.4 times the Original Issue Price;
“Registrable Securities”	means (i) the Preferred Shares, (ii) the Ordinary Shares issuable or issued upon conversion of the Preferred Shares and (iii) any other Ordinary Shares now or later held by any holder of Ordinary Shares including the Key Shareholders;
“Registration”	means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of that Registration Statement; and the terms “Register” and “Registered” have meanings concomitant with the foregoing;
“Registration Statement”	means a registration statement prepared on Form F-1, F-2 or F-3 under the Securities Act, or on any comparable form in connection with registration in a jurisdiction other than the United States;
“Remaining Shares”	has the meaning set forth in Section 9.01(a)(iii);
“Restated Memorandum and Articles”	means the Restated Memorandum and Articles of Association of the Company, the form of which is attached as Exhibit 1 hereto;
“Second Series A Share Purchase Agreement”	has the meaning set forth in Recital (C) of this Agreement;
“Securities”	means shares, equity interests, debentures, stocks, bonds, notes, units, warrants, options, derivative instruments or any other instrument

10

	of whatsoever nature which may be converted into and/or give rise to any rights in respect of or relating to shares or any equity interest or any other interests or securities, in or of the Company (or, where applicable, the holding company of the Company);
“Securities Act”	means the United States Securities Act of 1933, as amended;
“Selling Expenses”	means all underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to this Agreement;
“Share”	means a share in the issued share capital of the Company (of whatever class) and includes, without limitation, the Ordinary Shares and the Preferred Shares;
“Shareholder”	means a holder of Share(s) from time to time;
“Stock Option Pool”	means up to 5,500,000 Ordinary Shares that the Company shall reserve for the issuance of stock option to certain directors, officers, employees, consultants and/or advisors of the Company as the Board of Directors of the Company may approve from time to time;
“Subsidiaries”	means the subsidiaries of the Company from time to time (and each a “Subsidiary”);
“Transfer”	has the meaning set forth in Section 9.01(a);
“Transfer Notice”	has the meaning set forth in Section 9.01(a);
“Transferor”	has the meaning set forth in Section 9.01(a);
“US and United States”	means the United States of America;
“United States Dollars and US$”	means the lawful currency of the US;
“Violation”	has the meaning set forth in Section 10.04(a)(i);

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“35% J-Town Stock” J-Town Information Technolgoy Co., Ltd. is a joint venture established by the Company and JC Entertainment Corporation. (“JCE”) with the registered captial of USD 1.5 million, in which the Company and JCE hold 65% and 35% of equity interests respectively. The Company intends to purchase from JCE the 35% equity interests of J-Town.

SECTION 1.02 Interpretation. For all purposes of this Agreement, except as otherwise expressly provided:

(i)	the terms defined in this Section 1 shall have the meanings assigned to them in this Section 1 and include the plural as well as the singular;
(ii)	references to a Shareholder shall include references to his successors or permitted assignees;
(iii)	all accounting terms not otherwise defined herein have the meanings assigned under US GAAP;
(iv)	all references in this Agreement to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement;
(v)	pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms;
(vi)	the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision; and
(vii)	all references in this Agreement to designated Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes attached to this Agreement unless explicitly stated otherwise.

     ARTICLE II. OBJECTIVES AND CERTAIN UNDERTAKINGS

     SECTION 2.01 Objectives of the Company. Subject to the provisions of the Restated Memorandum and Articles, the objectives of the Company are, to directly or indirectly engage in the Internet online gaming and other related services (the “Business”)

     SECTION 2.02 Principal Business. The principal business of the Group shall be the Business, unless it is changed in accordance with the provisions herein.

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     ARTICLE III. DIVIDEND RIGHTS

     SECTION 3.01 Dividend Rights. No dividend shall be paid out unless approved by an unanimous resolution by all the members of the Board of Directors. Each Preferred Shareholder shall be entitled to receive, out of funds legally available therefor, cumulative dividends accrued at the rate of 8% per annum on the aggregate nominal value of the Ordinary Shares into which the Preferred Shares held by such Preferred Shareholder may be converted from time to time, prior and in preference to the Ordinary Shareholders or any other class of shareholders of the Company. Accrued dividends shall be payable in cash or, at the election of a Preferred Shareholder, be converted into Ordinary Shares at the then effective Conversion Price for the Preferred Shares.

     ARTICLE IV. BOARD; SHAREHOLDERS’ MEETING

     SECTION 4.01 Board of Directors.

          (a) The number of Persons comprising the Board of Directors shall be up to ten (10). The authorized number of directors may not be changed except by an amendment to the Restated Memorandum and Articles. Immediately following the Closing, the members of the Board shall be six (6). The appointment of the remaining members (i.e. the directors other than the said six directors) of the Board shall be subject to the approval of unanimous vote of the members of the Board of Directors. So long as Gigamedia holds at least 1.5 million of Preferred Shares, Gigamedia shall be entitled to elect one (1) director to the Board and, so long as MCI holds at least 1.5 million of Preferred Shares, MCI shall be entitled to elect one (1) director to the Board of Directors. Board quorum shall consist of 50% of the then board members.

          (b) Any Board resolutions shall require a simple majority vote of the directors present at a duly convened Board meeting, except that the following matters shall require the affirmative vote of the director appointed by Gigamedia together with the simple majority vote of all directors present at the meeting:

          (i) establishment of any subsidiary or investment in any other company except for investment in operating or developing online Mahjong, chess and poker game;

          (ii) making of any distribution of profits amongst the Shareholders by way of dividend, capitalization of reserves, bonus share, special distribution or otherwise;

          (iii) Approval of any transfer of shares in any Subsidiary and/or the Domestic Company;

          (iv) making of any alteration or amendment to the Memorandum and/or Articles of Association of the Company, or any equivalent constitutional documents of any Subsidiary and/or the Domestic Company;

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          (v) appointment or settlement of the terms of appointment of the chief executive officer and chief financial officer;

          (vi) settlement of or alteration of the terms of any bonus or profit sharing scheme or any share option plan (including but not limited to employee share option) or share participation schemes;

          (vii) sale, transferring, licensing, charging, encumbering or otherwise disposition of any trademarks, patents or other intellectual property owned by the Company, any Subsidiary and/or the Domestic Company;

          (viii) formulation of the preparation plan for the Qualified Public Offering and any amendment or modification thereof;

          (ix) incurrence of indebtedness in any form by the Company or any of its Subsidiaries and/or the Domestic Company in excess of US$50,000 in one transaction other than the trade debts incurred in the ordinary and usual course of the Business;

          (x) creation of, allowing to arise, or issuance of any debenture or undertaking constituting a pledge, lien or charge (whether by way of fixed or floating charge, mortgage encumbrance or other security) on all or any of the undertaking, shares, other equity interests, assets or rights of the Company, any Subsidiary and/or the Domestic Company, or provision of a guarantee by the Company, any Subsidiary or the Domestic Company to any third party;

          (xi) approval of or making of adjustments or modifications to terms of transactions involving the interest of any director, officers, employees or shareholder of the Company or any Subsidiary and/or the Domestic Company, or other insiders or any of their family members or affiliates, including but not limited to the making of any loans or advances, whether directly or indirectly, or the provision of any guarantee, indemnity or security for or in connection with any indebtedness or liabilities of any director or shareholder of the Company or any Subsidiary and/or the Domestic Company, other than on an arms-length basis and upon full disclosure to shareholders;

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          (xii) entering into an affiliated transaction with an Affiliate of any of the Key Shareholders or management or directors of the Company, other than on an arms-length basis and upon full disclosure to the Preferred Shareholders;

          (xiii) change to the previously adopted accounting policies and change to the financial year of the Company or any Subsidiary;

          (xv) appointment or removal of the auditors of the Company or any Subsidiary and/or the Domestic Company;

          (xvi) approval of annual financial budget and the establishment of annual milestones;

          (xvii) commencement or settlement of any litigation or arbitration by the Company or any Subsidiary and/or the Domestic Company;

          (xviii) any adjustment in compensation of the annual remuneration of the five (5) most highly compensated employees of the Company;

          (xix) any change in the important corporate or financial policy or milestones of the Company or any Subsidiary and/or the Domestic Company; and

          (xx) entering into or changing any commercial arrangements between the Domestic Company and the Company, any Subsidiary, or Key Shareholders.

          (c) The Board of Directors shall convene a meeting at least once during each quarter of a year.

          (d) When convening a meeting of the Board of Directors, a director shall be given (i) a written notice of meeting; (ii) a meeting agenda for the meeting; and (iii) documents to be reported and distributed to the directors at the meeting, at least seven (7) Business Days before the convention of the meeting. Any meeting held without seven (7) Business Days’ written notice having been given to all directors shall be valid if all the directors entitled to vote at the meeting waive the notice of the meeting in writing; and for this purpose, the presence of a director at a meeting shall be deemed to constitute a waiver on his part in respect of such meeting.

          (e) The Company shall reimburse the directors for reasonable costs incurred in relation to attending meetings of the Board of Directors, including without limitation, travel and accommodation expenses, and other reasonable costs incurred for the benefit of the Company and deemed acceptable to the Board of Directors.

          (f) Any member of the Board of Directors may participate in a meeting by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

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          (g) Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting by taking the form of one or more documents in writing or by telefax or other written or electronic communication; provided, however, that a written board resolution shall have been made for such action and been signed by the director appointed by Gigamedia, except for matters related to the Happy Digital Transaction whereas the signature from the director appointed by Gigamedia is not required.

     SECTION 4.02 Shareholders’ Meeting. (a) The Board of Directors shall give no less than fourteen (14) Business Days’ notice of meetings of Shareholders to those persons whose names on the date the notice is given appear as Shareholders in the register of members of the Company and are entitled to vote at the meeting.

          (b) Each Preferred Shareholder shall be entitled to such number of votes as equal to the whole number of Ordinary Shares into which such Preferred Shareholder’s aggregate number of Preferred Shares are convertible immediately after the close of business on the record date of the determination of the Company’s shareholders entitlement to vote, or if no such record date is established, at the date such vote is taken or any written consent of the Company’s shareholders is first solicited. Except for the matters provided in Section 5 hereof or in the Restated Memorandum and Articles, all Preferred Shareholders shall vote together with the holders of Ordinary Shares as if they were the same classes of shareholders, and not as a separate class or series, on all matters put before the Shareholders.

          (c) The Company shall take all steps as are necessary to cause the provisions of this Section 4 and Section 5 below to apply mutatis mutandis to the governance of any Subsidiary, including without limitation, formulating the board of directors with the same constitution, function, convention, quorum, and voting rights same as those of the Company, without contradicting applicable laws of the jurisdiction where the Subsidiary is situated.

     ARTICLE V. PROTECTIVE PROVISIONS

     SECTION 5.01 Protective Provisions for Preferred Shareholder. For so long as at least 50% of the Preferred Shares remain outstanding, in addition to any other vote or consent required herein or by law, an approval by the holders of at least 50% of the Preferred Shares shall be necessary to effect the following actions:

          (1) authorization or issuance or creation of any class of stock, or securities exchangeable for or convertible into shares of the Company, any Subsidiary and/or the Domestic Company;

          (2) Increasing, reduction or cancellation of the authorized or issued share capital, or split or combination of shares of the Company, any Subsidiary and/or the Domestic Company;

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          (3) ceasing to conduct or carry on or changing the business of the Company, any Subsidiary and/or the Domestic Company substantially as now conducted or change any part of such business activities;

          (4) reclassification of the issued Shares or any adjustment of the preferences, privileges, powers, rights or interest or the restrictions attached to any class of Shares;

          (5) Passing of any resolution for the winding up of the Company or any Subsidiary and/or the Domestic Company or undertaking of any merger, sale, consolidation, reconstruction, dissolution or liquidation exercise concerning the Company, any Subsidiary and/or the Domestic Company or apply for the appointment of a receiver, manager or judicial manager or like officer;

          (6) Sale, transfer or disposition or purchase of the whole or a substantial part of the undertaking goodwill or the assets of the Company or any Subsidiary and/or the Domestic Company or any of their respective intellectual property rights; and

          (7) Any repurchase or redemption of shares of the Company other than pursuant to restricted share agreements with employees with redemption provisions in the Restated Memorandum and Articles, provided that this Section 5.01 does not apply to any repurchase of the shares owned by either Zhigang Li or Ye Jin;

     ARTICLE VI. CONVERSION RIGHTS

          The Preferred Shareholders shall have the following rights described below with respect to the conversion of the Preferred Shares into Ordinary Shares:

     SECTION 6.01 Optional Conversion.

          (a) Subject to and in compliance with the provisions of this Section 6, each Preferred Share may, at the option of a Preferred Shareholder, be converted at any time into such number of fully-paid and non-assessable Ordinary Shares as is determined by dividing the then applicable Conversion Price, determined as hereinafter provided, in effect at the time of conversion and in accordance with Section 6.01(b) below. Upon such conversion, all preference rights attached to such Preferred Shares shall be automatically terminated, save that no conversion shall prejudice the right of the holder of such Preferred Shares to receive dividends or other distributions accrued on such Preferred Shares but unpaid as at the date of conversion.

          (b) A Preferred Shareholder who desires to convert its Preferred Shares into Ordinary Shares shall surrender the certificate or certificates therefor, duly endorsed, at the Shanghai office of the Company or any transfer agent for the Preferred Shares, and shall give written notice to the Company at such office that such

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Preferred Shareholder has elected to convert such Preferred Shares. Such notice shall state the number of Preferred Shares being converted. Thereupon, the Company shall promptly issue and deliver to such Preferred Shareholder at such office a certificate or certificates for the number of Ordinary Shares to which the Preferred Shareholder is entitled and shall promptly pay (i) in cash or, to the extent sufficient funds are not then legally available therefor, in Ordinary Shares at the fair market value of an Ordinary Share determined by the Board of Directors as of the date of such conversion, any declared and unpaid dividends on the Preferred Shares being converted and (ii) in cash at the fair market value of an Ordinary Share determined by the Board of Directors as of the date of conversion the value of any fractional Ordinary Shares to which the Preferred Shareholder would otherwise be entitled. Such conversion shall be deemed to have been made at the close of business on the date of the surrender of the certificates representing the Preferred Shares to be converted, and the person entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Ordinary Shares on such date.

     SECTION 6.02 Automatic Conversion. (a) Each Preferred Share shall automatically be converted, based on the then-effective Conversion Price, immediately upon the earlier of (i) the closing of a Qualified Public Offering, or (ii) the election of the holders of at least 50% of the outstanding Preferred Shares, pursuant to Section 6.02(b) below.

          (b) The Company shall not be obligated to issue certificates for any Ordinary Shares issuable upon the automatic conversion of any Preferred Shares unless the certificate or certificates evidencing such Preferred Shares is either delivered as provided below to the Company or any transfer agent for the Preferred Shares, or any Preferred Shareholder notifies the Company or its transfer agent that such certificate has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificate. The Company shall, as soon as practicable after receipt of certificates for Preferred Shares, or satisfactory agreement for indemnification in the case of a lost certificate, promptly issue and deliver at its Shanghai office to the Preferred Shareholder thereof a certificate or certificates for the number of Ordinary Shares to which such Preferred Shareholder is entitled and shall promptly pay (i) in cash or, to the extent sufficient funds are not then legally available therefor, in Ordinary Shares at the fare market value for a Ordinary Share determined by the Board of Directors as of the date of such conversion, any declared and unpaid dividends on the Preferred Share being converted and (ii) in cash at the fare market value of an Ordinary Share determined by the Board of Directors as of the date of such conversion the value of any fractional Ordinary Shares to which such Preferred Shareholder would otherwise be entitled. Any person entitled to receive Ordinary Shares issuable upon the automatic conversion of the Preferred Shares shall be treated for all purposes as the record holder of such Ordinary Shares on the date of such conversion.

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     SECTION 6.03 Preferred Share Conversion Price. The price at which Ordinary Shares shall be deliverable upon conversion of the Preferred Shares (the “Conversion Price”) shall initially equal the Original Issue Price and shall be adjusted from time to time as provided below:

          (a) Adjustment for Share Splits and Combinations. If the Company shall at any time, or from time to time, effect a subdivision of the outstanding Ordinary Shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately decreased. Conversely, if the Company shall at any time, or from time to time, combine the outstanding Ordinary Shares into a smaller number of shares, the Conversion Price in effect immediately prior to the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

          (b) Adjustment for Ordinary Share Dividends and Distributions. If the Company at any time, or from time to time, makes (or fixes a record date for the determination of holders of Ordinary Shares entitled to receive) a dividend or other distribution to the holders of Ordinary Shares payable in Ordinary Shares, in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance (or in the event such record date is fixed, as of the close of business on such record date) by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Ordinary Shares issuable in payment of such dividend or distribution.

          (c) Adjustments for Other Dividends. If the Company at any time, or from time to time, makes (or fixes a record date for the determination of holders of Ordinary Shares entitled to receive) a dividend or other distribution payable in Securities other than Ordinary Shares, then, and in each such event, upon conversion of any Preferred Share thereafter, the Preferred Shareholder thereof shall receive, in addition to the number of Ordinary Shares issuable thereon, the amount of Securities which the Preferred Shareholder of such share would have received had the Preferred Shares been converted into Ordinary Shares immediately prior to such event, all subject to further adjustment as provided herein.

          (d) Reorganizations, Mergers, Consolidations, Reclassifications, Exchanges, Substitutions. If at any time, or from time to time, any capital reorganization or reclassification of the Ordinary Shares (other than as a result of a share dividend, subdivision, split or combination otherwise treated above) occurs or the Company is consolidated, merged or reorganized with or into another Person (other than a consolidation, merger or reorganization treated in Section 7.02), then in

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any such event, upon conversion of any Preferred Share thereafter, the Preferred Shareholder thereof shall receive the kind and amount of shares and other securities and property which the Preferred Shareholder of such share would have received had the Preferred Shares been converted into Ordinary Shares on the date of such event, all subject to further adjustment as provided herein, or with respect to such other securities or property, in accordance with any terms applicable thereto.

          (e) Sale of Shares Below the Conversion Price. (A) If at any time, or from time to time, the Company shall issue or sell Additional Shares (other than (i) as a subdivision or combination of Ordinary Shares provided for in Section 6.03 (a) above, (ii) as a dividend or other distribution provided for in Section 6.03 (b) above, (iii) the issuance of Additional Shares under the Stock Option Pool or upon the exercise of options thereof, (iv) the conversion of Preferred Shares into Ordinary Shares, (v) the issuance of any Equity Securities upon exercise of any rights or options to acquire such Equity Securities where the Conversion Price in effect immediately prior to the issuance of such rights or options has been adjusted as a result of and in accordance with this Section 6.03,or (vi) the issuance of Additional Shares in a Qualified Public Offering) for a consideration per share less than the Conversion Price in force immediately prior to such issue, then, and in each such case, the Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to the price per share received or receivable by the Company for the Additional Shares newly issued or sold by the Company.

               (B) For the purpose of making any adjustment in the Conversion Price as provided above:

     (i) To the extent it consists of cash, the consideration received by the Company for any issue or sale of Additional Shares shall be computed on the gross amount basis;

     (ii) To the extent it consists of property other than cash, consideration other than cash received by the Company for any issue or sale of Additional Shares shall be computed on the gross amount basis at the fair market value thereof, as determined in good faith by the Board of Directors as of the date of the adoption of the resolution specifically authorizing such issue or sale, irrespective of any accounting treatment of such property ; and

     (iii) If Additional Shares are issued or sold together with other stock or securities or other assets of the Company for consideration which covers both, the consideration received for the Additional Shares shall be computed as that portion of the consideration received which is reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares.

     (C) For the purpose of making any adjustment in the Conversion Price provided in this Section 6.03(e), if at any time, or from time to time, the Company issues any Additional Shares that comprise any Ordinary Share Equivalents and the Effective Conversion Price of such Ordinary Share Equivalents is less than the

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Conversion Price in effect immediately prior to such issuance, then, in each such case, at the time of such issuance, the Company shall be deemed to have issued the maximum number of Additional Shares issuable upon the exercise, conversion or exchange of such Ordinary Share Equivalents and to have received in consideration for each such Additional Share deemed issued an amount equal to the Effective Conversion Price, and the Conversion Price shall be reduced as provided above to reflect such issuance accordingly.

(i)	In the event of any increase in the number of Ordinary Shares deliverable or any reduction in consideration payable upon exercise, conversion or exchange of any Ordinary Share Equivalents where the resulting Effective Conversion Price is less than the Conversion Price at such date, including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Price, shall be re-computed to reflect such change as if, at the time of issue for such Ordinary Share Equivalents, such Effective Conversion Price applied.
(ii)	If any right to exercise, convert or exchange any Ordinary Share Equivalents shall expire without having been fully exercised, the Conversion Price as adjusted upon the issuance of such Ordinary Share Equivalents shall be readjusted to the Conversion Price which would have been in effect had such adjustment been made on the basis that (A) the only Additional Shares deemed issued or such Ordinary Share Equivalents were such Additional Shares, if any, as were actually issued upon the exercise, conversion or exchange of any part of such Ordinary Share Equivalents prior to the expiration thereof and (B) such Additional Shares, if any, were deemed issued for (x) the consideration actually received by the Company upon such exercise, conversion or exchange, plus (y) where the Ordinary Share Equivalents consist of options, warrants or rights to purchase Ordinary Shares, the consideration, if any, actually received by the Company for the grant of such Ordinary Share Equivalents as were actually exercised, plus (z) where the Ordinary Share Equivalents consist of shares or securities convertible or exchangeable for Additional Shares, the consideration received for the issue or sale of Ordinary Share Equivalents actually converted.
(iii)	For any Ordinary Share Equivalent with respect to which the Conversion Price has been adjusted under this Sub-Section (c), no further adjustment of the Conversion Price shall be made solely as a result of the actual issuance of Ordinary Shares upon the actual exercise or conversion of such Ordinary Share Equivalent.

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          (f) Certificate of Adjustment. In the case of any adjustment or readjustment of the Conversion Price, the Company, at its sole expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each Preferred Shareholder at the holder’s address as shown in the Company’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares issued or sold or deemed to have been issued or sold, (ii) the number of Additional Shares issued or sold or deemed to be issued or sold, (iii) particulars of share splits or combination, if any; (iv) particulars of the dividend or other distribution to holders of Ordinary Shares, if any; (v) the Conversion Price in effect after such adjustment or readjustment, and (vi) the number of Ordinary Shares and the type and amount, if any, of other property which would be received upon conversion of the Preferred Shares after such adjustment or readjustment.

          (g) Notice of Record Date. In the event the Company shall propose to take any action of the type or types requiring an adjustment to the Conversion Price or the number or character of the Preferred Shares as set forth herein, the Company shall give notice to the Preferred Shareholders, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon the occurrence of such action or deliverable upon the conversion of Preferred Shares. In the case of any action which would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in the case of all other actions, such notice shall be given at least 15 days prior to the taking of such proposed action.

     SECTION 6.04 Fractional Shares. No fractional Ordinary Shares shall be issued upon conversion of any Preferred Share. All Ordinary Shares (including fractions thereof) issuable upon conversion of more than one Preferred Share by a Preferred Shareholder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after such aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the fair market value of a Ordinary Share (as determined by the Board of Directors) on the date of conversion.

     SECTION 6.05 Reservation of Shares Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares, solely for the purpose of effecting the conversion of the

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Preferred Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Shares (after taking into account any reasonably anticipated adjustment in the Conversion Price). If at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then outstanding Preferred Shares, the Company will take all necessary actions to increase its authorized but unissued Ordinary Shares to such number of Shares as shall be sufficient for such purpose.

     SECTION 6.06 Notices. Any notice required by the provisions of this Section 6 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each Preferred Shareholder of record at the address of such Preferred Shareholder appearing on the books of the Company.

     SECTION 6.07 Payment of Taxes. The Company will pay all taxes (other than taxes based upon income and withholding taxes) and other governmental charges that may be imposed with respect to the issue or delivery of Ordinary Shares upon conversion of Preferred Shares, excluding any tax or other charges imposed in connection with any transfer involved in the issuance and delivery of Ordinary Shares in a name other than that in which the Preferred Shares so converted were registered.

     ARTICLE VII. LIQUIDATION RIGHTS

     SECTION 7.01 Liquidation Preferences. In the event of a liquidation of the Company, each Preferred Shareholder shall first be paid, prior and in preference to any distribution to any and all holders holding any shares or Ordinary Share Equivalents of the Company (other than Preferred Shareholders), an amount equal to 1.2 times the Original Issue Price for each Preferred Share then held by it plus a compound annual interest of 15% of such amount for each such Preferred Share from the date of the payment of the Original Issue Price. The preferential amount payable as aforesaid shall be proportionally adjusted for combinations, consolidations, subdivisions, share splits or the like with respect to such share. If the assets and funds to be distributed among the Preferred Shareholders shall be insufficient to permit the payment to such holders of the full preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution shall be distributed rateably among such holders in proportion to the number of Preferred Shares owned by each such holder. Thereafter, the Preferred Shareholders shall be entitled to participate ratably with the holders of other Shares in the residue (if any) of such surplus assets as shall remain after paying out the capital paid up on other Shares, and for such purpose, all Preferred Shares then held by each Preferred Shareholder

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shall be deemed to represent such number of Ordinary Shares into which such Preferred Shares may be converted at the time.

     SECTION 7.02 Liquidation on Sale or Merger. The following events shall be treated as a liquidation under this Section 7:

(1)

any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the Company’s voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company’s voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company; or

(2)

a sale, lease or other disposition of all or substantially all of the assets of the Company;

and upon any such event, any proceeds resulting to the Shareholders of the Company therefrom shall be distributed in accordance with the terms of Section 7.01.

     ARTICLE VIII. INFORMATION AND INSPECTION RIGHTS

     SECTION 8.01 Delivery of Financial Statements to Preferred Shareholders. The Company shall deliver to each Preferred Shareholder:

          (a) within 90 days after the end of each fiscal year of the Company, annual operational reports and financial statements as of the end of the fiscal year, and audited and certified by independent certified public accountants of recognized international standing and reputation selected by the Company;

          (b) unaudited quarterly consolidated financial statements and the quarterly operational report within forty-five (45) days of the end of each quarter;

          (c) unaudited monthly consolidated financial statements within thirty (30) days of the end of each month; and

          (d) at least forty-five (45) days prior to the end of each fiscal year, a budget for the succeeding fiscal year, setting forth for each month during such succeeding fiscal year projected balance sheets, income statements and statements of cash flows.

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     SECTION 8.02 Financial Statements. For the purpose of this Section 8, the term “financial statements” shall be construed to include a balance sheet, statements of income and loss and cash flows for the applicable period, prepared in accordance with GAAP and compared against the Company’s annual operating plan and budget.

     SECTION 8.03 Inspection. The Company shall permit each Preferred Shareholder, at such Preferred Shareholder’s expense, to visit and inspect any of the properties and examine the books of account and records of the Company and its Subsidiaries and discuss the affairs, finances and accounts of the Company and its Subsidiaries with the directors, officers, employees, accountants, legal counsel and investment bankers of the Company, all at business hours as may be requested by such Preferred Shareholder by delivering three (3) days written notice to the Company, provided that such inspection rights shall terminate upon a Qualified Public Offering.

     ARTICLE IX. RIGHTS OF FIRST REFUSAL; CO-SALE RIGHTS AND TRANSFER RESTRICTIONS

     SECTION 9.01 (a) Right of First Refusal for Preferred Shareholders. (i) If at any time an Ordinary Shareholder who is a Key Shareholder of the Company or any Person (including but not limited to Antfactory) who directly or indirectly obtains, either before or after the execution of this Agreement, any Equity Securities originally owned by any such Ordinary Shareholder (a “Transferor”) proposes to transfer Equity Securities to one or more third parties (a “Transfer”), then the Transferor shall give each Preferred Shareholder and the Company written notice of the Transferor’s intention to make the Transfer (the “Transfer Notice”), which shall include (A) a description of the Equity Securities to be transferred (“Offered Shares”), (B) the identity of the prospective transferee(s) and (C) the consideration and the material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall certify that the Transferor has received a firm offer from the prospective transferee(s) and in good faith believes a binding agreement for the Transfer is obtainable on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer.

(ii) Preferred Shareholders’ Option:

(1)	Each Preferred Shareholder shall have an option for a period of thirty (30) days from the receipt of the Transfer Notice to elect to purchase its respective pro rata share (including any re-allocation contemplated below) of the Offered Shares at the same price and subject to the same material terms and conditions as described in the Transfer Notice, subject to Section 9.01(a)(v).
(2)	A Preferred Shareholder (an “Exercising Shareholder”) may exercise such purchase option and, thereby, purchase all or a

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part of its respective pro rata share (including any re-allocatiion as provided below) of the Offered Shares, by notifying Transferor and the Company in writing, before expiration of the thirty (30) day period as to the number of such shares which it will purchase (including any re-allocation) (the “Exercise Amount”).

(3)	The Offered Shares shall first be allocated among each Exercising Shareholder (with rounding to avoid fractional shares) in proportion to its respective pro rata share provided that in no event shall an amount greater than such Exercising Shareholder’s Exercise Amount be allocated to such Exercising Shareholder.
(4)	Any Offered Shares not yet purchased by any Exercising Shareholder in accordance with sub-paragraph (3) above or any Affiliate of such Exercising Shareholder in accordance with sub-paragraph (7) below (“Excess Shares”) shall be re-allocated among all the other Exercising Shareholders in proportion to each such Exercising Shareholder’s respective pro rata share (with rounding to avoid fractional shares), and such procedure shall be employed until the Exercise Amounts of all Exercising Shareholders shall have been satisfied.
(5)	In the context contemplated under sub-paragraph (3) above, an Exercising Shareholder’s “pro rata share” is equal to the product of (x) the total number of Offered Shares, and (y) a fraction, the numerator of which shall be the aggregate number of all Preferred Shares owned by such Exercising Shareholder on the date of the Transfer Notice and the denominator of which shall be the aggregate number of all Preferred Shares owned by all the Exercising Shareholders on the date of the Transfer Notice.
(6)	In the context of a re-allocation of the Excess Shares referred to in sub-paragraph (4) above, an Exercising Shareholder’s “pro rata share” is equal to the product of (x) the total number of Excess Shares, and (y) a fraction, the numerator of which shall be the number of all Preferred Shares owned by such Exercising Shareholder on the date of the Transfer Notice and the denominator of which shall be the aggregate number of all Preferred Shares owned by all the Exercising Shareholders (except for the Preferred Shareholder whose shares are subject to such re-allocation) on the date of the Transfer Notice.

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(7)

A Preferred Shareholder shall be entitled to apportion the Offered Shares to be purchased among its Affiliates, provided that such Preferred Shareholder notifies the Transferor of such allocation and upon receipt of written consent of the Transferor.

(8)

Payment for the Offered Shares which have been allocated to any Exercising Shareholder as provided above shall be by check or wire transfer, against delivery of such Offered Shares to such Exercising Shareholder at a place agreed by the relevant Parties and at the time of the scheduled closing therefor, which shall be no later than forty-five (45) days after the Preferred Shareholders’ receipt of the Transfer Notice, unless the Transfer Notice contemplated a later closing with the prospective third party transferee(s) or unless the value of the purchase price has not yet been established pursuant to Section 9.01(a)(v).

          (iii) Additional Transfer Notice from Ordinary Shareholder. If there shall remain any Offered Shares not purchased or to be purchased by the Preferred Shareholders as provided above, the Transferor shall give the Company an “Additional Transfer Notice” which shall include all of the information and certifications required in a Transfer Notice and shall additionally identify the Offered Shares which the Preferred Shareholders have declined to purchase (the “Remaining Shares”) and briefly describe the Company’s rights of first refusal and co-sale rights with respect to the proposed Transfer.

          (iv) Company’s Option to Buy the Remaining Shares. The Company shall have an option for a period of ten (10) days from receipt of the Additional Transfer Notice to elect to purchase the Remaining Shares at the same price and subject to the same material terms and conditions as are described in the Additional Transfer Notice, all of which shall be the same (except for the number of such Equity Securities) as these stated in the Transfer Notice with respect to such shares, subject nevertheless to Section 9.01(a)(v). The Company may exercise such purchase option and, thereby, purchase all or a portion of the Remaining Shares by notifying the Transferor in writing before expiration of the ten day period as to the number of such shares which it wishes to purchase. If the Company gives the Transferor notice that it desires to purchase such shares, then payment for the Remaining Shares shall be by check or wire transfer, against delivery of the Remaining Shares to be purchased, at a place agreed by the parties and at the time of the scheduled closing therefor, which shall be no later than sixty (60) days after the Company’s receipt of the Transfer Notice, unless the Transfer Notice contemplated a later closing with the prospective third party transferee(s) or unless the value of the purchase price has not yet been established pursuant to Section 9.01(a)(v).

          (v) Valuation of Property.

(1) Should the purchase price specified in the Transfer Notice or Additional Transfer Notice be payable in property other than cash or evidences of indebtedness, the Preferred Shareholders (or the Company) shall have the right, upon receipt of the Transferor’s written consent, to pay the

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purchase price in the form of cash equal in amount to the value of such property.

(2)	Subject to the paragraph above, if the Transferor and any Preferred Shareholder (or the Company) cannot agree on such cash value within ten days after the Preferred Shareholders’ receipt of the Transfer Notice (or the Company’s receipt of the Additional Transfer Notice), the valuation shall be made by an appraiser of recognized standing (acting as expert and not as an arbitrator) selected by the Transferor and such Preferred Shareholders (or the Company) or, if they cannot agree on an appraiser within twenty (20) days after the Preferred Shareholders’ receipt of the Transfer Notice (or the Company’s receipt of the Additional Transfer Notice), each shall select an appraiser of recognized standing and the two appraisers shall designate a third appraiser of recognized standing, who shall act as expert and not as an arbitrator and whose appraisal shall be determinative of such value.
(3)	The cost of such appraisal shall be borne by such Preferred Shareholders and/or the Company (if applicable) and shall be shared pro rata by them based on the number of Offered Shares each such Preferred Shareholder and/or the Company (if applicable) is to purchase.
(4)	If the time for the closing of the Preferred Shareholder’s purchase or the Company’s purchase has expired but for the determination of the value of the purchase price offered by the prospective transferee, such closing shall be held on or prior to the fifth business day after such valuation shall have been made pursuant to this sub-Section.

          (b) Preferred Shareholder’s Right of Co-Sale. (i) To the extent the Preferred Shareholder(s) and the Company do not exercise their respective rights of first refusal to purchase all of the Offered Shares pursuant to Section 9.01(a), each Preferred Shareholder shall have the right to participate in such sale of Equity Securities by the Transferor to any third party transferee(s) under a Transfer on the same terms and conditions (except for the number of Equity Securities to be sold) as specified in the Transfer Notice.

          (ii) Each Preferred Shareholder may elect to sell up to such number of Equity Securities (on a fully converted basis) equal to the product obtained by multiplying (i) the aggregate number of Equity Securities covered by the Transfer Notice (with all Ordinary Share Equivalents treated as Ordinary Shares on a fully converted basis) by (ii) a fraction, the numerator of which is the number of Preferred Shares owned by such Preferred Shareholder on the date of the Transfer Notice and the denominator of which is the total number of Equity Securities (with all Ordinary Share Equivalents treated as Ordinary Shares on a fully converted basis) owned by the Transferor plus the total Preferred Shares held by the Preferred Shareholders who

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elect to effect its participation in the sale (individually “Selling Preferred Shareholder” and collectively “Selling Preferred Shareholders”) on the date of the Transfer Notice.

          (iii) Each Selling Preferred Shareholder shall effect its participation in the sale by delivering to the Transferor for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the type and number of Equity Securities which such Selling Preferred Shareholder elects to sell; provided, however that if the prospective third-party purchaser objects to the delivery of Ordinary Share Equivalents in lieu of Ordinary Shares, the Selling Preferred Shareholder shall convert such Ordinary Share Equivalents into Ordinary Shares and deliver certificates corresponding to such Ordinary Shares. The Company agrees to make any such conversion concurrent with the actual transfer of such shares to the purchaser and contingent on such transfer.

          (iv) The share certificate or certificates that a Selling Preferred Shareholder delivers to the Transferor pursuant to Section 9.01(b)(iii) shall be transferred to the prospective purchaser in consummation of the sale of the Equity Securities pursuant to the terms and conditions specified in the Transfer Notice, and the Transferor shall concurrently therewith remit to such Selling Preferred Shareholder that portion of the sale proceeds to which such Selling Preferred Shareholder is entitled by reason of its participation in such sale.

          (v) To the extent that any prospective purchaser prohibits the participation by a Selling Preferred Shareholder exercising its co-sale rights hereunder in a proposed Transfer or otherwise refuses to purchase shares or other securities from a Selling Preferred Shareholder exercising its co-sale rights hereunder, the Transferor shall not sell to such prospective purchaser any Equity Securities unless and until, simultaneously with such sale, the Transferor shall purchase such shares or other securities from such Selling Preferred Shareholder for the same consideration and on the same terms and conditions as the proposed transfer described in the Transfer Notice.

          (vi) The rights provided in this Section 9.01 shall terminate upon a Qualified Public Offering.

          (c) Limitations to Rights of First Refusal and Co-Sale. Notwithstanding the provisions of this Section 9.01, this Section 9.01 shall not apply to the followings: an Ordinary Shareholder may sell or otherwise assign, with or without consideration, Equity Securities to any spouse or member of such Ordinary Shareholder’s immediate family, or to a custodian, trustee, executor, or other fiduciary for the account of the Ordinary Shareholder’s spouse or members of the Ordinary Shareholder’s immediate family, or to a trust for the Ordinary Shareholders’ own self, or a charitable remainder trust, provided that each such transferee or assignee, prior to the completion of the sale, transfer, or assignment, shall have executed documents assuming the obligations of the transferring Ordinary Shareholder under this Agreement with respect to the transferred securities.

          (d) Accession of Subsequent Shareholders. Prior to a Qualified Public Offering, no Ordinary Shareholder shall sell, assign, transfer, or

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hypothecate any Ordinary Shares (whether now owned or hereafter acquired) unless the transferee thereof shall agree in writing in form reasonably acceptable to the Company to be bound by this Section 9.01, as if such transferee were an Ordinary Shareholder.

     SECTION 9.02 Special Provisions in Relation to the Founders and Management.

          (a) Unless otherwise approved by the holders of at least 50% of the total issued and outstanding Preferred Shares, the Founders and the Management shall not sell or transfer, or dispose of any Ordinary Shares during the three-year period from the Closing.

          (b) Each Founder and Management undertake not to compete with any member of the Group (including but not limited to directly or indirectly engaging in any business or conducting any activities that are same with or similar to those engaged in or conducted by any member of the Group) or solicit any employees of any member of the Group for a period of one year following the termination of such Founder or Management’s employment relationship with the Company.

     SECTION 9.03 Right of First Refusal for Key Shareholders and Antfactory. If at any time a Preferred Shareholder proposes to transfer 50% or more of the Preferred Shares to any third parties, each Key Shareholder and Antfactory shall have an option for a period of thirty (30) days from the receipt of a written notice for such transfer to elect to purchase their respective pro rata shares of all (but not a portion) of the Preferred Shares offered at the same price and subject to the same material terms and conditions as described in the said notice. If the Key Shareholders and Antfactory fail to exercise the option to purchase all the Preferred Shares offered, the Preferred Shareholder may sell the Preferred Shares to the said third parties. Unless otherwise provided in this Section 9.03, other provisions regarding the Right of First Refusal for Preferred Shareholder in this Article IX shall apply to the Right of First Refusal for Key Shareholders and Antfactory herein, to the extent such provisions are applicable.

     ARTICLE X. REGISTRATION RIGHTS

     SECTION 10.01 Demand Registration. (a) Registration Other Than on Form F-3. (i) Subject to the terms of this Agreement, at any time after a Qualified Public Offering, an Initiating Holder may request the Company in writing to effect the Registration of Registrable Securities for which the reasonably anticipated aggregate price to the public, would exceed US$15,000,000. Upon receipt of such a request, the Company shall (a) promptly give written notice of the proposed Registration to all other Holders and (b) as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause Registrable Securities specified in the request, to be Registered and/or qualified for sale and distribution in such jurisdictions as the Initiating Holder may reasonably request. The Company shall be obligated to effect only three (3) such Registrations.

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          (b) Registration on Form F-3. Subject to the terms of this Agreement, at any time after a Qualified Public Offering, an Initiating Holder may request the Company in writing to file a Registration Statement on Form F-3 (or any successor form to Form F-3, or any comparable form for Registration in a jurisdiction other than the United States) for a public offering of Registrable Securities for which the reasonably anticipated aggregate price to the public, would exceed US$15,000,000, and the Company is entitled to use Form F-3 or a comparable form to Register the requested Registrable Securities. Upon receipt of such a request the Company shall, as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities specified in the request, to be Registered and qualified for sale and distribution in such jurisdictions as the Initiating Holder may reasonably request. The Company’s obligation to effect registrations pursuant to this Section 10.01(b) is unlimited.

          (c) Right of Deferral. (i) The Company shall not be obligated to Register or qualify Registrable Securities pursuant to this Section 10.01:

(1)	in any jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration or qualification, unless the Company is already subject to service of process in such jurisdiction;
(2)	if, within ten (10) days of the receipt of any request of the Initiating Holder to Register any Registrable Securities under Section 10.01(a) or Section 10.01(b), the Company gives notice to the Initiating Holder of its bona fide intention to effect the filing for its own account of a Registration Statement with the Commission within sixty (60) days of receipt of that request (other than a registration of securities in a transaction under Rule 145 of the Securities Act or an offering solely to employees), provided that the Company is actively employing in good faith all reasonable efforts to cause that Registration Statement to become effective; or
(3)	within six (6) months immediately following the effective date of any Registration Statement pertaining to the securities of the Company (other than a registration of securities in a transaction under Rule 145 of the Securities Act or with respect to an employee benefit plan).

          (ii) if, after receiving a request from the Initiating Holder pursuant to Section 10.01(a) or Section 10.01(b), the Company furnishes to the Initiating Holder a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company or its shareholders for a Registration Statement to be filed in the near future, the Company’s obligation to use its commercially

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reasonable efforts to file a Registration Statement shall be deferred for a period not to exceed 120 days from the receipt of any request duly submitted by the Initiating Holder under Section 10.01(a) or 10.01(b) to Register Registrable Securities; provided that the Company shall not exercise the right contained in this Section 10.1(c)(ii) more than twice in any twelve (12) month period.

          (d) Underwritten Offerings. If, in connection with a request to Register Registrable Securities under Section 10.01(a) or Section 10.01(b), the Initiating Holder seek to distribute such Registrable Securities in an underwriting, they has the right to so advise the Company as a part of the request, and the Company shall include such information in the written notice to the other Holders described in Sections 10.01(a) and 10.01(b). In such event, the right of any Holders to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by the Initiating Holder representing a majority in voting power of the Registrable Securities held by the Initiating Holder) to the extent provided herein. The Initiating Holder proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (which underwriter or underwriters shall be reasonably acceptable to Initiating Holder representing a majority in voting power of the Registrable Securities held by the Initiating Holder). Notwithstanding any other provision of this Agreement, if the managing underwriter advises the Company that marketing factors (including the aggregate number of securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Equity Securities to be underwritten, the underwriters may exclude some of the Registrable Securities from the underwriting if so justified after excluding any other Equity Securities from the underwriting, provided that any Registration must include at lease 25% of the Shares requested to be included by the holders of Registrable Securities. If a limitation of the number of Registrable Securities is required pursuant to this Section 10.01(d), the number of Registrable Securities that may be included in the underwriting by selling Holders shall be allocated among such Holders, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders would otherwise be entitled to include in the Registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the Registration. If shares of the Company are offered in an underwritten public offering (whether or not a Qualified Public Offering) for the account of any shareholder, each Preferred Shareholder shall have the right to include a pro rata number of shares in the offering on terms and conditions no less favorable to the Preferred Shareholders than to any other selling shareholders.

     SECTION 10.02 Piggyback Registrations. (a) Registration of the Company’s Securities. Subject to Section 10.02(c), if the Company proposes to Register for its own account any of its Equity Securities in connection with the public

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offering of such securities, the Company shall promptly give the Holders written notice of such Registration and, upon the written request of the Holders given within twenty (20) days after delivery of such notice, the Company shall use commercially reasonable efforts to include in such Registration any Registrable Securities thereby requested by the Holders.

          (b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any Registration initiated by it under Section 10.02(a) prior to the effectiveness of such Registration, whether or not the Holders have elected to participate therein. The expenses of such withdrawn Registration shall be borne by the Company in accordance with Section 10.03(c).

          (c) Underwriting Requirements. (i) In connection with any offering involving an underwriting of the Company’s Equity Securities, the Company shall not be required to Register the Registrable Securities of any Holder under this Section 10.02 unless such Holder’s Registrable Securities are included in the underwriting and such Holder enters into an underwriting agreement in customary form with the underwriters selected by the Company and setting forth such terms for the underwriting as have been agreed upon between the Company and the underwriters. In the event the underwriters advise the Holders seeking Registration of Registrable Securities pursuant to this Section 10.02 in writing that market factors (including the aggregate number of Registrable Securities requested to be Registered, the general condition of the market, and the status of the persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Equity Securities to be underwritten, the underwriters may exclude some or all Registrable Securities from the Registration and underwriting if so justified after excluding any other Equity Securities (except for securities to be offered by the Company) from the Registration and underwriting, provided that any Registration must include at lease 25% of the Shares requested to be included by the Holders.

          (ii) If a limitation of the number of Registrable Securities is required pursuant to Section 10.2(c)(i) the number of Registrable Securities that may be included in the Registration and underwriting by selling Holders shall be allocated among such Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders would otherwise be entitled to include in the Registration.

          (iii) If the Holder disapproves of the terms of any underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least seven (7) days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from the underwriting shall be withdrawn from the Registration.

          (d) Exempt Transactions. The Company shall have no obligation to Register any Registrable Securities under this Section 10.02 in connection with a Registration by the Company (i) relating solely to the sale of securities to participants

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in a Company stock plan, (ii) relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act (or comparable provision under the laws of another jurisdiction, as applicable), or (iii) on any form that does not include substantially the same information as would be required to be included in a Registration Statement covering the sale of the Registrable Securities.

     SECTION 10.03 Procedures. (a) Registration Procedures and Obligations. Whenever required under this Agreement to effect the Registration of any Registrable Securities, the Company shall, as expeditiously as possible:

(i)	Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and use its reasonable best efforts to cause that Registration Statement to become effective, and, upon the request of the Holders holding a majority of the Registrable Securities Registered thereunder, keep the Registration Statement effective for up to 120 days;
(ii)	Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Law with respect to the disposition of all securities covered by the Registration Statement;
(iii)	Furnish to the Holders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Law, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
(iv)	Use its reasonable best efforts to Register and qualify the securities covered by the Registration Statement under the securities laws of any jurisdiction, as reasonably requested by the Holders, provided that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdictions, and provided further that in the event any jurisdiction in which the securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the qualification of the securities be borne by selling shareholders, those expenses shall be payable pro rata by selling shareholders;
(v)	In the event of any underwritten public offering, entering into and performing its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of the offering. Each shareholder participating in the underwriting shall also enter into and perform its obligations under such an agreement;

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(vi)	Notify the Holders of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Law or of the happening of any event as a result of which any prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(vii)	Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration;
(viii)	Furnish, at the request of any Initiating Holder requesting Registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this Agreement, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters; and
(ix)	Take all reasonable action necessary to list the Registrable Securities on the primary exchange upon which the Company’s securities are then traded.

          (b) Information From Holders. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of the selling Holders that the selling Holders shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the Registration of such Holders’ Registrable Securities.

          (c) Expenses of Registration. All expenses, other than Selling Expenses, incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including (without limitation) all Registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and underwriters but excluding any underwriting discounts and commissions, shall be borne by the Company. The Company shall not, however, be required to pay for any expenses of any Registration proceeding begun pursuant to this Agreement if the Registration request is subsequently withdrawn at the request of the Holders.

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     SECTION 10.04 Indemnification under Registration Rights.

(a)	Company Indemnity.
(i)	To the extent permitted by law, the Company will indemnify and hold harmless the Holder, its officers, directors, shareholders, legal counsel and accountants, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls (as defined in the Securities Act) the Holder or underwriter against any losses, claims, damages or liabilities (joint or several) to which they may become subject under laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration, qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws. The Company will reimburse the Holders, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action.
(ii)	The indemnity agreement contained in this Section 10.04(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such Registration by any such Holder, underwriter or controlling person of the Company.
(iii)	With respect to any preliminary prospectus, the foregoing indemnity shall not inure to the benefit of the Holders or

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underwriter, or any Person controlling (within the meaning of the Securities Act) the Holders or underwriter, from whom the Person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of the Holders or underwriter to such Person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.

(b)	Holders Indemnity.
(i)	To the extent permitted by law, the selling Holder will indemnify and hold harmless the Company, its directors, officers, legal counsel and accountants, any underwriter, and each Person, if any, who controls (within the meaning of the Securities Act) the Company or such underwriter, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holders expressly for use in connection with such Registration; and the Holders will reimburse any person intended to be indemnified pursuant to this Section 10.04(b), for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action.
(ii)	The indemnity contained in this Section 10.04(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holders (which consent shall not be unreasonably withheld), and in no event shall any indemnity under this Section 10.04(b) exceed the gross proceeds from the offering received by such Holders.

          (c) Notice of Indemnification Claim. Promptly after receipt by an indemnified party under Section 10.04(a) or Section 10.04(b) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under Section 10.04(a) or Section 10.04(b), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the

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right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnifying parties. An indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 10.04, but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 10.04.

          (d) Contribution. If any indemnification provided for in Section 10.04(a) or Section 10.04(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

          (e) Underwriting Agreement. To the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

          (f) Survival. The obligations of the Company and the Holders under this Section 10.04 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, and otherwise.

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     SECTION 10.05 Additional Undertakings. (a) Reports Under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Law that may at any time permit a Holder to sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 (or any comparable form in a jurisdiction other than the United States), the Company agrees to:

(i)	make and keep public information available, as those terms are understood and defined in Commission Rule 144 (or comparable provision under Applicable Securities Laws in any jurisdiction where the Company’s securities are listed), at all times following ninety (90) days after the effective date of a Qualified Public Offering;
(ii)	file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and
(iii)	at any time following 90 days after the effective date of the Qualified Public Offering, promptly furnish to the Holders, upon request (i) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s securities are listed), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as may be filed by the Company with the Commission, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits the selling of any such securities without Registration or pursuant to such form.

          (b) Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holder, enter into any agreement with any holder or prospective holder of any Equity Securities of the Company that would allow such holder or prospective holder (a) to include such securities in any Registration filed under Section 10.02, unless under the terms of such agreement such holder or prospective holder may include such Equity Securities in any such Registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holder that are included, (b) to demand Registration of their securities, or (c) to enjoy registration rights otherwise superior to or in parity with the Preferred Shareholders except that this sentence will not apply in the situation where the Company issues no more than 3 million new shares which has the right, preference or priority on a parity with the Preferred Shares.

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          (c) “Market Stand-Off” Agreement. Each Holder agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Company’s initial public offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed l80 days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Registrable Securities or other shares of the Company (whether then owned or thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares of the Company, whether any such transaction described in Section (i) or (ii) above is to be settled by delivery of Equity Securities or such other securities, in cash or otherwise. The underwriters in connection with the Company’s initial public offering are intended third party beneficiaries of this Section 10.05(c) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

          (d) Termination of Registration Rights. Notwithstanding anything to the contrary in this Agreement, if: (i) the Company obtains from the Commission a “no-action” letter in which the Commission indicated that it will take no action if, without Registration under the Securities Act or other Applicable Securities Laws, any Holder disposes of Registrable Securities covered by any request for Registration made under this Agreement in the specific manner in which such Holder proposes to dispose of Registrable Securities included in that request (including, without limitation, inclusion of the Registrable Securities in an underwriting initiated by either the Company or the Holders) and that the Registrable Securities may be sold to the public without Registration or (ii) in the opinion of counsel for the Company , no Registration under the Securities Act (or other Applicable Securities Law) is required in connection with the disposition and that the Registrable Securities may be sold to the public without Registration, then the Registrable Securities included in the request for Registration, shall not be eligible for Registration under Section 10.01 with respect to the proposed disposition. Any Registrable Securities not so disposed of shall be eligible for Registration in accordance with the terms of this Agreement with respect to other proposed dispositions to which this Section 10.05(d) does not apply. In any event, these registration rights shall terminate on the fifth anniversary of a Qualified Public Offering.

          (e) Assignment of Registration Rights. The right to cause the Company to Register Registrable Securities pursuant to this Agreement may be assigned by a Holder to a transferee or assignee of such securities [that (i) is an Affiliate of the Holder, or (ii) after such assignment or transfer, holds Registrable Securities representing at least 100,000 Ordinary Shares (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations)], provided that: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being

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assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; (c) such transfer or assignment shall be effective only if immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under Applicable Securities Law; (e) the transfer is in connection with a transfer of all securities of the Company; and (f) the transfer is to constituent partners or shareholders who agree to act through a single representative. In the event of a transfer or assignment of Registrable Securities which does not satisfy the conditions set forth above, such securities shall no longer be deemed to constitute “Registrable Securities” for purposes of this Agreement.

          (f) Exercise of Preferred Shares. Notwithstanding anything to the contrary provided in this Agreement, the Company shall have no obligation to Register Registrable Securities which, if constituting Ordinary Share Equivalents, have not been exercised, converted or exchanged, as applicable, for Ordinary Shares.

     ARTICLE XI. PRE-EMPTIVE RIGHT

     SECTION 11.01 Pre-emptive Right. (a) General. The Company hereby grants to each Preferred Shareholder a right of first refusal to purchase up to its pro rata share of the entirety of any New Securities which the Company may, from time to time, propose to sell and issue.

          (b) Issuance Notice. In the event the Company proposes to undertake an issuance of New Securities, it shall give each Preferred Shareholder a written notice (an “Issuance Notice”) of such intention, describing the number and type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Preferred Shareholder (a “Pre-emptive Shareholder”) shall have thirty (30) days after any such notice is received by it to agree to purchase any such New Securities for the price and upon the terms specified in the Issuance Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (the “Pre-emptive Amount”). For the avoidance of doubt, each Pre-emptive Shareholder may specify in its notice a Pre-emptive Amount higher or lower than its pro rata share.

          (c) Allocation of New Securities. The New Securities shall first be allocated among each Pre-emptive Shareholder (with rounding to avoid fractional shares) in proportion to its respective pro-rata share provided that in no event shall an amount greater than such Pre-emptive Shareholder’s Pre-emptive Amount be allocated to such Pre-emptive Shareholder.

          (d) Allocation of Excess New Securities. Any excess New Securities not yet allocated by any Pre-emptive Shareholder in accordance with Section 11.01(c) (“Excess New Securities”) shall be allocated among all the Pre-emptive Shareholders in proportion to each such Pre-emptive Shareholder’s respective pro-rata share (with rounding to avoid fractional shares), and such procedure shall be employed until the Pre-emptive Amounts of all Pre-emptive Shareholders have been satisfied.

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          (e) Pro rata share of New Securities. In the context contemplated under Section 11.01(c), a Pre-emptive Shareholder’s “pro rata share” is equal to the product of (x) the total number of New Securities, and (y) a fraction, the numerator of which shall be the aggregate number of Preferred Shares owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all the Preferred Shares owned by all the Pre-emptive Shareholders on the date of the Issuance Notice.

          (f) Pro rata share of Excess New Securities. In the context of an allocation of Excess New Securities referred to in Section 11.01(d), a Pre-emptive Shareholder’s “pro rata share” is equal to the product of (x) the total number of Excess New Securities, and (y) a fraction, the numerator of which shall be the aggregate number of all Preferred Shares owned by such Pre-emptive Shareholder on the date of the Issuance Notice and the denominator of which shall be the aggregate number of all Preferred Shares owned by all the Pre-emptive Shareholders other than the Preferred Shareholders whose shares are subject to the re-allocation on the date of the Issuance Notice.

          (g) Sales by the Company. Upon the expiration of the thirty (30) days period following receipt of the Issuance Notice, the Company may sell any New Securities with respect to which the Preferred Shareholders’ right of first refusal under this Section 11.01 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Issuance Notice. In the event the Company has not sold such New Securities within a 90-day period following the issue of the Issuance Notice, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Preferred Shareholders in the manner provided in this Section 11.01 above.

          (h) Assignments and Transfers; No Third Party Beneficiaries. This Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives, but shall not otherwise be for the benefit of any third party. The rights of a Preferred Shareholder hereunder are only assignable (i) by such Preferred Shareholder to any other Preferred Shareholder (ii) to a partner or Affiliate of such Preferred Shareholder or (iii) to an assignee or transferee who has acquired all or any part of the Equity Securities held by the Preferred Shareholder. This Agreement and the rights and obligations of any party hereunder shall not otherwise be assigned without the mutual written consent of the other parties.

          (i) Legend. Each existing or replacement certificate for Shares now owned or hereafter acquired by any Ordinary Shareholder shall prior to closing of the Qualified Public Offering, to the extent applicable, bear the following legend upon its face:

“THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF RIGHT OF FIRST REFUSAL, CO-SALE AGREEMENT AND/OR OTHER

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TRANSFER RESTRICTIONS, AS APPLICABLE, BY AND BETWEEN THE ORDINARY SHAREHOLDERS, THE COMPANY AND CERTAIN PREFERRED SHAREHOLDERS OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY OTHER COUNTRY”

          (f) Termination. This Article XI shall terminate upon a Qualified Public Offering.

     ARTICLE XII. REDEMPTION RIGHT

     SECTION 12.01 Redemption Rights of Preferred Shareholders. Subject to the terms and conditions of this Agreement and to the extent permitted by applicable laws, at any time and from time to time after December 31, 2009, upon request by the holders of at least 50% of the then total issued and outstanding Preferred Shares (except that request by the holders of at least 15% of the then total issued and outstanding Preferred Shares shall be sufficient after June 30, 2011), the Company shall redeem all of the outstanding Preferred Shares. The amount payable to the redeeming party shall on the date of redemption be converted into a debt payable over 12 months or on a payment schedule mutually agreed by the Company and the redeeming party. The redemption amount payable on each Preferred Share shall be equal to the Original Issue Price, plus a compound annual interest of 10% of such amount over the repayment period. The redemption amount shall be proportionally adjusted for share splits, share dividends, recapitalizations and similar events.

     ARTICLE XIII. AFFILIATED TRANSACTION

     SECTION 13.01 Affiliated Transactions. For any affiliated transaction that is to be entered into by the Company with any of its Affiliates or Affiliates of the Founders, the terms, conditions and consideration for such transaction shall be comparable to a normal arms-length transaction that is to be conducted in the market at the time such transaction is conducted. However, the transactions between the Domestic Company and the Group shall not be construed as affiliated transactions for the purpose of this Section 13.

     ARTICLE XIV. PUT OPTION

          SECTION 14.01 Put Right. Within two (2) years from the date of the Closing, but subject in any event to Section 14.01(k), the Key Shareholders shall have the right to sell to Gigamedia the entire Shares held by such Key Shareholders pursuant to and in compliance with the terms hereof (“Put Option”). Such sale shall be made on the following terms and conditions:

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          (a) A Key Shareholder may exercise the Put Option only if all the Shares held by such Key Shareholder will be sold to Gigamedia, and a Key Shareholder is not allowed to only sell part of its/his Shares in exercising the Put Option;

          (b) Put Option enjoyed by Key Shareholders is not transferable, and no purchaser or assignee of the Shares (including but not limited to Antfactory) has the right to exercise the Put Option;

          (c) The price per share at which the Shares are to be sold to Gigamedia shall be equal to eight point six five (8.65) times of the Net Operating Income (as defined in Section 14.02) per Share in the complete fiscal year preceding the notice as mentioned in sub-paragraph (f) hereafter as reflected in the consolidated financial statements of the Company audited by a Big-Four Accounting Firm. Any and all reasonable fees and expenses, including legal fees and out-of-pocket expenses, incurred pursuant to the exercise or the attempted exercise of such Put Option under this Agreement shall be deducted from the price payable by Gigamedia to such Key Shareholder.

          (d) A Key Shareholder is only entitled to exercise Put Option once a year, subject to each sale of a minimum of 500,000 shares, within the two years of the Closing, and shall deliver a written notice (as specified in the subsection (f) below) within 10 days from the first and second anniversaries respectively for the purpose of exercising the Put Option;

          (e) The Company shall have Net Operating Income for the first year of the Closing for exercising the first-year Put Option by a Key Shareholder, and shall have a higher amount of Net Operating Income for the second year than for the first year for exercising the second-year Put Option by the Key Shareholder;

          (f) A Key Shareholder shall, if exercising the right created hereby, deliver to the Preferred Shareholder a written notice of selling all the Shares it/he holds in the Company to Gigamedia (“Put Option Notice”).

          (g) Gigamedia shall purchase the Shares specified to be sold under the Put Option Notice. The payment of the purchase price can be made in cash or shares issued by Gigamedia (“Consideration Shares”);

          (h) At least 50% of the purchase price for the Shares shall be paid in cash up to USD 4,800,000 in aggregate for total annual exercise; provided, however, that (i) if Gigamedia and exercising Key Shareholders mutually desire, the cash portion of the purchase price can be lower than 50%; or (ii) at the choice of Gigamedia, the total annual cash payment can be higher than USD4,800,000. Gigamedia shall, within forty-five (45) days upon receipt of the Put Option Notice, elect to pay the purchase price in cash or the Consideration Shares, after deducting the amount of reimbursable fees and expenses, as specified above. The price of the Consideration Shares shall be the average weighted trading price of the shares of Gigamedia in the past thirty (30) trading days prior to the date of the Put Option Notice.

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          (i) The payment of the purchase price pursuant to paragraph (g) above shall be made against delivery of the certificate or certificates representing Shares to be sold, together with a transfer form signed by the Key Shareholder(s) transferring such Shares to Gigamedia.

          (j) The Consideration Shares obtained by the Key Shareholder(s) shall be subject to lock-up for a period of two (2) years. A Key Shareholder can only dispose of one half (1/2) of the Consideration Shares it received in every year during such lock-up period.

     (k) The Put Option will terminate upon the earliest to occur of (i) immediately prior to the effectiveness of the Registration Statement for the Company’s Qualified Public Offering, (ii) the effectiveness of any reorganization, consolidation, merger, sale or transfer of the Company’s outstanding Shares or similar transaction (excluding a sale of shares by the Company for capital raising purposes) in which (A) the members of the Company immediately prior to such reorganization, merger or consolidation, sale or transfer of shares or similar transaction do not (by virtue of their ownership of securities of the Company immediately prior to such transaction) beneficially own shares possessing a majority of the voting power of the surviving company or companies immediately following such transaction and (B) the consideration received in such transaction by members of the Company (by virtue of their ownership of securities of the Company immediately prior to such transaction) consists solely of cash and/or securities of any entity for which such class of securities has been and continues to be traded on an internationally-recognized securities exchange, and (iii) immediately prior to the effectiveness of the sale, lease or disposition by the Company of all or substantially all of the Company’s assets in which (A) the members of the Company immediately prior to such sale, lease or disposition do not (by virtue of their ownership of securities of the Company immediately prior to such transaction) beneficially own shares possessing a majority of the voting power of the purchasing entity and (B) the consideration received in such transaction by the Company consists solely of cash and/or securities of any entity for which such class of securities has been and continues to be traded on an internationally-recognized securities exchange.

          (l) Notwithstanding other provisions of this Section, put right contemplated herein does not apply to any and all Ordinary Shares issued for the purpose of and as a result of the Happy Digital Transactions and Gigamedia is not obliged under this Section to purchase any such Ordinary Shares from any Key Shareholder.

SECTION 14.02 Net Operating Income. For the purpose of this Clause, the “Net Operating Income” as used in this Section shall mean Net Income less Non-Operating Income / loss excluding Interest Income and Dividend Income (the terms “Net Income”, “Non-Operating Income/loss”, “Interest Income” and “Dividend Income” are defined in GAAP).

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In calculating the “Net Operating Income”:

          (a) No provision shall be made for revenues recognized but not collected for less than 3 months unless the customer in question has entered voluntary or involuntary bankruptcy proceeding, is under financial distress or is otherwise in a condition which the Board of Directors shall reasonably believe will impact its ability to perform its payment obligations to the Company;

          (b) Provisions shall be made for revenues recognized but not collected for 3 months or longer in the following percentages:

          (i) 30%, if more than 3 months but less than 4 months,

          (ii) 70%, if more than 4 months but less than 5 months, and

          (iii) 100%, if more than 5 months;

which provisions shall be deducted from the Net Operating Income of the relevant fiscal year.

          (c) Notwithstanding anything to the contrary, the Net Operating Income for 2006 Accounts shall be calculated as if the Company did not acquire from JCE the 35% equity interests as mentioned in the relevant definition of Section 1.01 Definitions (“35% J-Town Stock”), i.e. no proceeds, revenue, income, or costs or expenses incurred by the Company due to such acquisition shall be counted in calculating the Net Operating Income for 2006 Accounts. Notwithstanding anything to the contrary, USD 1.5 million shall be deducted from the Net Operating Income for 2007 Accounts to remove the whole impact of the Company’s acquisition of the 35% J-Town stock. The said proceeds, revenue, incomes, costs and expenses shall be ascertained by the Big-Four Accounting Firm as specified in Section 14.01 (c).

     ARTICLE XV. ISSUANCE OF ADDITIONAL PREFERRED SHARES

     SECTION 15.01 Issuance of Additional Shares based on 2006 Accounts. Upon the delivery by the Company of the Company’s audited consolidated financial statements for the 12 month period ending March 31, 2007 prepared in accordance with the GAAP and audited by a Big-Four Accounting Firm mutually selected by the Company and Gigamedia (the “2006 Accounts”):

If the Net Operating Income reflected in the 2006 Accounts (“2006N”) is less than US$10,000,000, each Preferred Shareholder shall be entitled to purchase its respective pro rata additional Preferred Shares from the Company at a consideration per share equal to its par value. The aggregate number of such additional Preferred Shares as entitled to be

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purchased by the Preferred Shareholders shall be calculated as follows:

     ANP = NP X (10,000,000/2006N* ISR2006 — 1)

     For the purpose of this Section 15.01:

     NP = The number of Preferred Shares issued on Closing

     ANP = Additional number of Preferred Shares to be issued

     ISR 2006 = (Number of issued Shares and warrants as of March 31, 2007 – Ordinary Shares issued under the Stock Option Pool – Shares and warrants issued for the acquisition of the 35% J-Town Stock)/ (number of issued Shares and warrants as of the Closing + Ordinary Shares actually issued for the purpose of and as the result of the Happy Digital Transactions).

If 2006N is less than USD 5 million, each Preferred Shareholder has the option to further buy its respective pro rata additional Preferred Shares of the total additional 6 million Preferred Shares at the price of higher of 8.65 times of the Net Operating Income per Share or $1 per share.

Notwithstanding anything to the contrary in this Section 15.01, in no event should ANP exceed the total number of preferred shares outstanding prior to the issue of new preferred shares under this provision.

     SECTION 15.02 Issuance of Additional Shares based on 2007 Accounts. Upon the delivery by the Company of the Company’s audited consolidated financial statements for the fiscal year ending on December 31, 2007 prepared in accordance with the US GAAP and audited by a Big-Four Accounting Firm mutually selected by the Company and Gigamedia (the “2007 Accounts”):

If the Net Operating Income reflected in the 2007 accounts (“2007N”) is less than US$17,000,000, each Preferred Shareholder shall be entitled to purchase its respective pro rata additional Preferred Shares from the Company at a consideration equal to their par value. The number of such additional Preferred Shares as entitled to be purchased by the Preferred Shares shall be calculated as follows:

ANP = NP X (17,000,000/2007N*ISR2007 — 1)

For the purpose of this Section 15.02:

NP = the number of Preferred Shares issued on Closing

ANP = Additional number of Preferred Shares to be issued

ISR 2007 = (Number of issued Shares and warrants as of March 31, 2007 – Ordinary Shares issued under the Stock Option Pool — Shares and warrants

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issued for the acquisition of the 35% J-Town Stock) / (number of issued Shares and warrants as of the Closing + Ordinary Shares actually issued for Happy Digital).

In case additional Preferred Shares have been already issued to the Preferred Shareholders according to Section 15.01, then the additional Preferred Shares issued under this Section 15.02 shall be calculated as follows:

ANP = NP X(17,000,000/2007N*ISR2007 —1) —ANP1

ANP1 = The number of additional Preferred Shares already issued according to Section 15.01

Notwithstanding anything to the contrary in this Section 15.02, in no event should ANP plus ANP1 exceed the total number of preferred shares outstanding prior to the issue of new preferred shares under this provision.

     SECTION 15.03 Exercise of Options. A Preferred Shareholder’s option to purchase the additional shares under this Article XV shall expire after the closing of a Qualified Public Offering. Prior to such expiry, a Preferred Shareholder may assign its right under the option to a non-competing third party.

     SECTION 15.04 Net Operating Income. For the purpose of this Section, the “Net Operating Income” as used in this Section shall mean Net Income less (Non-Operating Income/loss excluding Interest Income and Dividend Income) plus Stock Based Compensation plus amortization expenses related to the 3 million shares issued pursuant to exercise of warrants issued to JCE to the extent that the valuation of such warrants exceeds $1 per share ( the terms “Net Income”, “Non-Operating Income/loss”, “Interest Income”, “Dividend Income” and “Stock Based Compensation” are defined in GAAP). If the Net Operating Income is negative in either 2006 or 2007, then it will be 0 in calculating the formula set forth in Sections 15.01 and 15.02.

          In calculation of the Net Operating Income:

   (a) No provision shall be made for revenues recognized but not collected for less than 3 months unless the customer in question has entered voluntary or involuntary bankruptcy proceeding, is under financial distress or is otherwise in a condition which the Board of Directors shall reasonably believe will impact its ability to perform its payment obligations to the Company;

   (b) Provisions shall be made for revenues recognized but not collected for 3 months or longer in the following percentages:

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          (i) 30%, if more than 3 months but less than 4 months,

          (ii) 70%, if more than 4 months but less than 5 months, and

          (iii) 100%, if more than 5 months;

which provisions shall be deducted from the Net Operating Income of fiscal year 2006 or 2007, as the case may be, unless such provisions have already been reflected in the 2006 Accounts or 2007 Accounts, as the case may be.

   (c) Upon actual collection in cash of revenues for which provisions have been made hereunder, such collected revenues less collection expenses shall be deducted from the provisions account and reflected in the Net Operating Income for 2006 or 2007, as the case may be; provided, however, that the cash collection period shall not exceed 12 months following the date on which the revenue is first recognized.

   (d) The calculation of Net Operating Income as provided in this Section 15 shall be based on accounts closed on (A) March 31, 2007, in the case of the 2006 Accounts, and December 31, 2007, in the case of the 2007 Accounts, or (B) three months prior to a planned Qualified Public Offering, whichever is earlier. A Preferred Shareholder shall have the right to retain an auditor at its own expense to validate the actual revenue collection for the purpose of the adjustment to the Net Operating Income as provided hererin. Such adjustments to the calculation of Net Operating Income for the purpose of determining the number of additional Preferred Shares to be issued shall be deemed to be effected immediately prior to the closing of the Qualified Public Offering.

   (e) Notwithstanding anything to the contrary, the Net Operating Income for 2006 Accounts shall be calculated as if the Company did not acquire 35% J-Town stock from JCE, i.e. no proceeds, revenue, income or costs or expenses incurred or reduced by the Company due to such acquisition shall be counted in calculating the Net Operating Income for 2006 Accounts. Notwithstanding anything to the contrary, any and all amortization expenses related to all kinds of the purchase proceeds paid by the Company to JCE for such purchase should be added back, and USD 1.5 million shall be further deducted from the Net Operating Income for 2007 Accounts to remove the whole impact of the Company’s acquisition of the 35% J-Town stock. The said proceeds, revenue, incomes, costs and expenses shall be ascertained by the Big-Four Accounting Firm specified in the Section 15.01.

Section 15.05 (a) Pro rata additional Preferred Shares. In the context contemplated under Section 15.01 and 15.02 hereof and this Section 15.05, a Preferred Shareholder’s “pro rata additional Preferred Shares” is equal to the product of (x) the total number of the additional Preferred Shares to be issued in accordance with

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Section 15.01 or Section 15.02 (as the case may be), and (y) a fraction, the numerator of which shall be the aggregate number of the Preferred Shares owned by such Preferred Shareholder on the relevant date of the delivery by the Company of the Company’s audited consolidated financial statements and the denominator of which shall be the aggregate number of all the Preferred Shares owned by all the Preferred Shareholders on the date thereof.

          (c) Any additional Preferred Shares not yet purchased by any Preferred Shareholder or its Affiliates in accordance with this Article XV (“Excess Additional Preferred Shares”) shall be allocated among all the other Preferred Shareholders in proportion to each such Preferred Shareholder’s respective pro rata share (with rounding to avoid fractional shares). The term “pro rata share” mentioned in this paragraph is equal to the product of (x) the total number of Excess Additional Preferred Shares, and (y) a fraction, the numerator of which shall be the aggregate number of all Preferred Shares owned by such Preferred Shareholder on the relevant date of the delivery by the Company of the Company’s audited consolidated financial statements and the denominator of which shall be the aggregate number of all Preferred Shares owned by all such other Preferred Shareholders (except for the Preferred Shareholder whose shares is subject to such re-allocation) on the date thereof.

     ARTICLE XVI. MISCELLANEOUS

     SECTION 16.01 Insurance. The Company shall procure Directors’ Personal Liability Insurance for each of its Directors at least six months before a Qualified Public Offering or liquidation.

     SECTION 16.02 Successors and Assigns. (a) This Agreement is personal to the Parties hereto and saved as expressly provided herein, none of them may assign, mortgage, charge or sub-license any of their respective rights herein, or sub-contract or otherwise delegate any of its obligations herein, except with the prior written consent of the other Parties hereto.

               (b) Subject to sub-Section (a) above, this Agreement shall be binding on and inure for the benefit of the successors, permitted assigns and personal representatives (as the case may be) of each of the Parties hereto.

     SECTION 16.03 Cumulative Rights. Unless otherwise provided in this Agreement, any remedy conferred on any Party hereto for breach of this Agreement shall be in addition and without prejudice to all other rights and remedies available to it.

     SECTION 16.04 Entire Agreement; Amendments. (a) Entire Agreement. This Agreement shall supersede all and any previous agreements (including the shareholders’ agreement dated 27 April 2006 among Gigamedia, the Company, the Key Shareholders and certain other Ordinary Shareholders), understandings or

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arrangements (if any) between and among the parties hereto or any of them in relation to the subject matter hereof and all or any such previous agreements (including the shareholders’ agreement as aforesaid), understandings or arrangements (if any) shall cease and determine with effect from the date hereof. This Agreement constitutes the whole agreement between and among the Parties hereto or any of them in relation to the subject matter hereof (no Party having relied on any representation, warranty or undertaking made by any other party which is not a term of this Agreement).

          (b) Amendment. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of (i) the Company, (ii) the Preferred Shareholders, and (iii) Ordinary Shareholders representing 50% of the Equity Securities (on as-converted basis) held by all the Ordinary Shareholders. Any amendment or waiver effected in accordance with this paragraph shall be binding upon the parties and their respective successors and assigns.

     SECTION 16.05 Further Assurance. Each of the Parties hereto undertakes with each of the other Parties that it shall do, or shall procure to be done, all such acts and things and shall execute, or shall procure to be executed, all such documents as may be necessary or appropriate to implement the provisions of this Agreement or otherwise to give full legal force and effect thereof.

     SECTION 16.06 Severability. The Parties hereto intended that the provisions of this Agreement shall be enforced to the maximum extent permissible under the laws applied in each jurisdiction in which enforcement of any provisions of this Agreement is sought. If any particular provision or part of this Agreement shall be held to be invalid or unenforceable, this Agreement shall be deemed to be amended by the deletion of the provision or part held to be invalid or unenforceable or, to the extent permissible by the applicable laws of the relevant jurisdiction in which such enforcement is sought, such provision or part shall be deemed to be varied in such a way as to achieve most closely the purpose of the original provision or part in a manner which is valid and enforceable, provided that for the avoidance of doubt, such amendments shall apply only with respect to the operation of this Agreement in the particular jurisdiction in which the decision as to invalidity or unenforceability is made.

     SECTION 16.07 Non-waiver. No delay or omission on the part of any Party hereto in exercising any right, power or privilege shall operate to impair such right, power or privilege or be construed as a waiver by such Party of the same and no single or partial exercise or non-exercise or delay in exercising any right, power or privilege by any Party hereto shall in any circumstances preclude any other or further exercise by such Party of such right, power or privilege or the exercise of any other right, power or privilege by such Party.

     SECTION 16.08 Counterparts. This Agreement may be executed in

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counterparts and by different Parties hereto on separate copies or counterparts and which taken together shall constitute one and the same agreement. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any Party hereto, the other Parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.

     SECTION 16.09 Dispute Resolution; Governing Law. (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through consultation. Such consultation shall begin immediately after one Party hereto has delivered to the other Parties hereto a written request for such consultation. If within thirty (30) days following the date on which such notice is given the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any Party with notice to the others.

          (b) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (“HKIAC”) in accordance with its arbitration rules. There shall be a single arbitrator. If the parties do not agree to appoint an arbitrator who has consented to participate within thirty (30) days after a notice of arbitration, the relevant appointment shall be made by HKIAC.

          (c) The arbitration proceedings shall be conducted in English.

          (d) Each Party hereto shall cooperate with the other(s) in making full disclosure of and providing complete access to all information and documents requested by the other in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such party.

          (e) The award of the arbitration tribunal shall be final and binding upon the disputing parties, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

          (f) Any Party in dispute with another shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

          (g) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to provisions regarding choice of laws or conflict of laws.

     SECTION 16.10 Effectiveness. This Agreement shall take effect, after being duly executed and delivered by all the Parties hereto.

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     SECTION 16.11 Discrepancy. In case of any discrepancy or conflict between this Agreement and Amended and Restated Memorandum and Articles, the relevant provisions of this Agreement shall prevail.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date herein above first written.

T2CN HOLDINGS LIMITED
By:	/s/ Greg Ye
Name:	Greg Ye
Title:	Chief Financial Officer
GIGAMEDIA CHINA LIMITED
By:	/s/ Hsiang-Jen Chiang
Name:	Hsiang-Jen Chiang
Title:	Managing Director
MARVEL CITY INVESTMENTS LIMITED
By:	/s/ Yip Chi Chiu
Name:	Yip Chi Chiu
Title:	Director
TAE LLC
By:	/s/ Vincent Xie
Name:	Vincent Xie
Title:	Partner
PATRIOT CAPITAL LIMITED
By:	/s/ Mang-Yin Ma
Name:	Mang-Yin Ma
Title:	Director
CHENGWEI (CHINA) INVESTMENT COMPANY
By:	/s/ Feng Bo
Name:	Feng Bo
Title:

54

Ji WANG
Signed:	/s/ Ji Wang
Yanqing LI
Signed:	/s/ Yanqing Li
Jun-Tse TENG
Signed:	/s/ Jun-Tse Teng
William ZHU
Signed:	/s/ William Zhu
Yu-Chia LEE
Signed:	/s/ Yu-Chia Lee
Weigang YE
Signed:	/s/ Weigang Ye
NEWMARGIN T2CN INVESTMENT LTD
By:	/s/ Feng Tao
Name:	Feng Tao
Title:

55

KINGLAND OVERSEAS DEVELOPMENT INC
By:	/s/ Jun Tse Teng
Name:
Title:
OTHER ORDINARY SHAREHOLDERS
CALNEVA FINANCIAL GROUP
By:	/s/ Bryan M. Dear
Name:	Bryan M. Dear
Title:
BRYAN M. DEAR
Signed:	/s/ Bryan M. Dear
D. BRUCE HORTON
Signed:	/s/ D. Bruce Horton
BRADLEY N. SCHARFE
Signed:	/s/ Bradley N. Scharfe
GUY PECKHAM
Signed:	/s/ Guy Peckham
MICHELLE COTE-DEAR
Signed:	/s/ Michelle Cote-Dear

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T. ROBERT HORTON
Signed:	/s/ T. Robert Horton
NEWMARGIN HAPPYDIGITAL INVESTMENT PARTNERS INC.
By:	/s/ Jun Tse Teng
Name:
Title:
ANT BRIDGE NO. 2 VENTURE CAPITAL SECONDARY INVESTMENT LIMITED PARTERSHIP
By:	/s/ Kasunori Osaki
Name:	Kasunori Osaki
Title:	President and CEO

57

SCHEDULE 1

Particulars of the Company
as of the date of this Agreement

1. Name:	T2CN Holding LTD.
2. Date of Incorporation:	May 7, 2004
3. Country of incorporation and status of company:	British Virgin Islands, International Business Company
4. Registered number:	Business Company No. 1029668
5. Registered office:	offices of Trinity Chambers P.O. Box 4301, Road Tow, Tortola, British Virgin Islands
6. Total Issued and outstanding shares:	52,103,001
7. Directors:	TAO FENG, BO FENG, JI WANG, JUN-TSE TENG, HSIANG-JEN CHIANG and YIP CHI CHIU
8. Secretary:	N/A
9. Financial year end:	December 31

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SCHEDULE 2

List of Key Shareholders

2-1 List of Founders

Ji Wang
Yanqing Li
Jun-Tse Teng

2-2 List of Management

William Zhu
Yu-Chia Lee
Weigang YE

2-3 List of Other Key Shareholders

Chengwei (China) Investment Company
Michelle Cote-Dear
D Bruce Horton
T. Robert Horton
Bradley N. Scharfe
Guy Peckham
Newmargin T2CN Investment Ltd.
Kingland Overseas Development Inc.
Bryan M. Dear
Calneva Financial Group
Newmargin Happydigital Investment Partners Inc

59

EX-4.43

Exhibit 4.43

SPA for NewMargin T2CN – Execution Copy

SHARE PURCHASE AGREEMENT

by and among

NEWMARGIN T2CN INVESTMENT LTD.

SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.

- and -

GIGAMEDIA CHINA LIMITED

January 1, 2007

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), dated as of January 1, 2007, is entered into and made by and among the following parties:

     NEWMARGIN T2CN INVESTMENT LTD, a company organized and existing under the laws of the British Virgin Islands (the “Selling Shareholder”);

     SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD., a company organized and existing under the laws of the People’s Republic of China (, “NewMargin Parent”); and

     GIGAMEDIA CHINA LIMITED, a company organized and existing under the laws of the British Virgin Islands (the “Purchaser”).

     WHEREAS,

     (i) T2CN Holding Limited (the “Company”) is a company duly organized and existing under the laws of the British Virgin Islands, and has issued 45,448,001 Ordinary Shares (as hereinafter defined) and 10,500,000 preferred shares;

     (ii) the Selling Shareholder holds 5,836,018 Ordinary Shares of the Company, representing 10.431% of the total issued and outstanding shares of the Company;

     (iii) NewMargin Parent is the ultimate beneficiary of the Selling Shareholder, which was indirectly established by NewMargin Parent only for the purpose of holding shares of the Company; and

     (iv) the Selling Shareholder wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Selling Shareholder, a total of 5,836,018 Ordinary Shares (collectively the “Purchase Shares” and individually “Purchase Share”) subject to the terms and conditions set forth herein; and

     NOW, THEREFORE, in consideration of the premises set forth above, the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1 DEFINITIONS

     Unless otherwise defined in this Agreement or the November 25, 2006 Shareholders’ Agreement, capitalized terms used herein shall have the following meanings:

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     “Domestic ICP Enterprise” means Shanghai T2 Entertainment Co., Ltd (), a domestic Chinese limited liability company registered in Shanghai to engage in value-added telecommunications services.

     “GIGAMEDIA” means GigaMedia Limited, a company listed on the NASDAQ and the parent company of the Purchaser.

     “Happy Digital” means a company established in Chengdu City with the Chinese name of “”.

     “MAA” means the Amended and Restated Memorandum and Articles of Association of the Company dated on November 12, 2006.

     “New Articles” means the Amended and Restated Memorandum and Articles of Association of the Company, in form and substance to be agreed upon by the Company, the Purchaser, the Selling Shareholder, other existing shareholders (together with the Selling Shareholder, the “Existing Shareholders”) of the Company and certain other parties thereto.

     “New Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, among the Company, the Purchaser, other Existing Shareholders and certain other parties thereto, in form and substance to be agreed upon by the parties thereto.

     “Net Operating Income” as used in this agreement shall mean the Company’s net income in U.S. dollars as defined in U.S. GAAP, with the following adjustments: (1) adding back non-cash option based compensation to employees and executives of the Company; (2) normalizing the game license fee for the online game Aeronaut paid by the Company to JC Entertainment Corporation during the 1st half of 2007, as if such license fees were all capitalized and amortized over the duration of the relevant license agreement; and (3) the sum of the net income so calculated after taking account of the foregoing items (1) and (2) multiplying by a fraction, the numerator of which shall be the total number of the issued and outstanding Ordinary Shares and preferred shares of the Company as at the execution date of this Agreement and the denominator of which shall be the aggregate number of the issued and outstanding Ordinary Shares and preferred shares of the Company on June 30, 2007 excluding (i) 300,000 shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA; (ii) any additional preferred shares issued based on 2006 Accounts (as defined therein) of the Company as agreed upon in Article XV of the November 25, 2006 Shareholders’ Agreement; and (iii) all share issuance approved by all the board members of the Company appointed by the Purchaser without the written consent of the Selling Shareholder or NewMargin Parent during the 1st half of 2007 provided, however, that no share issuance shall be excluded if such share issuance does not constitute a net downward adjustment on the Net Operating Income.

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     “November 25, 2006 Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, dated November 25, 2006, among the Company, the Existing Shareholders and certain other parties thereto.

     “Ordinary Shares” means the ordinary shares of the Company, par value US$0.01 per share.

SECTION 2 AGREEMENT TO PURCHASE AND SALE

     2.1 Agreement to Purchase and Sale. Subject to the terms and conditions hereof, at the Closing (as defined below), the Selling Shareholder shall sell to the Purchaser, and the Purchaser shall purchase from the Selling Shareholder, the Purchase Shares, for a price to be ascertained as below (the “Purchase Price”).

     2.2 Purchase Price. The Purchase Price per Purchase Share shall be

     (i) US$1.05 if the Net Operating Income for the first half of 2007 is not more than US$ 1,000,000;

     (ii) US$1.25 if the Net Operating Income for the first half of 2007 is US$ 1,500,000; or

     (iii) US$1.45 if the Net Operating Income for the first half of 2007 is not less than US$ 2,500,000.

     The Purchase Price per Purchase Share should be adjusted on a pro rata basis if the Net Operating Income for the first half of 2007 falls between the above 3 threshold amounts. By way of example, if the Net Operating Income for the first half of 2007 is more than US$ 1,000,000 but less than US$ 1,500,000, the Purchase Price per Purchase Share shall be the sum of (0.4 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.65; if the Net Operating Income for the first half of 2007 is more than US$ 1,500,000 but less than US$ 2,500,000, the Purchase Price per Purchase Share shall be the sum of (0.2 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.95.

     2.3 Payment of the Purchase Price. The Purchase Price shall be paid by the Purchaser in the following two installments to an account designated by the Selling Shareholder in writing, which designation shall be instructed to the Purchaser fourteen (14) days prior to the respective dates of payment specified herein:

     (i) Subject to the terms and conditions under this Agreement, the first payment of US$ 3,647,511.25 (“First Installment”) shall be paid at the Closing, of which US$ 1,823,755.625 shall be in cash and US$ 1,823,755.625 shall be in GIGAMEDIA shares. The calculation price per such GIGAMEDIA share shall be the average

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volume weighted daily closing price of a GIGAMEDIA share during the period of the execution date of this Agreement through January 31, 2007.

     (ii) Subject to the terms and conditions under this Agreement, the remaining Purchase Price (“Second Installment”) shall be paid in cash on August 15, 2007 after the Closing.

SECTION 3 CLOSING; DELIVERY

     3.1 Closing. The transfer of the Purchase Shares (the “Closing”) shall take place at the offices of the Company, 12^th Floor, Xingyuan Technology Plaza, No. 418 Guiping Road, Shanghai 200233, China, on February 12, 2007 (“Closing Date”) or at such other place and time as the parties hereto may mutually agree. Upon the Closing, all the rights and benefits attached to and in relation to the Purchase Shares (including but not limited to the dividends attributable to the Selling Shareholder in respect of any and all Purchase Shares if any) shall be transferred from the Selling Shareholder to the Purchaser.

     3.2 Delivery at the Closing. At the Closing, the Selling Shareholder shall deliver the following items to the Purchaser:

     (i) The total Purchase Shares, together with duly issued share certificates of the total Purchase Shares in the name of the Purchaser;

     (ii) A compliance certificate, dated as of the Closing signed by the duly authorized representative of the Selling Shareholder certifying that all the representations and warranties set forth in Section 4 are true, correct and complete, and all the conditions hereunder have been fulfilled; and

     (iii) An unaudited financial balance sheet, cash flow statement and profit and loss statement of the Company for the full year of 2006 and an unaudited balance sheet, and profit and loss statement of the Company dated as of January 31, 2007, which shall be satisfactory in form and substance to the Purchaser.

     At the Closing, the Purchaser shall pay the First Installment to the Selling Shareholder against receipt of all deliverables under items (i) through (iii) of Section 3.2 hereof. On the date of receipt of the First Installment, the Selling Shareholder shall issue a written receipt acknowledging such receipt to the Purchaser.

SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER AND NEWMARGIN PARENT

     The Selling Shareholder and NewMargin Parent hereby, jointly and severally, represent and warrant to the Purchaser that the statements in this Section 4 are all true,

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correct and complete as of the date hereof, as of the Closing Date and, to the best of their knowledge, as of the payment date of the Second Installment:

     4.1 Organization, Good Standing and Qualification. The Company is duly organized, validly existing and in good standing under, and by virtue of, the laws of the British Virgin Islands and has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company is qualified to do business and is in good standing in each jurisdiction where failure to be so qualified would have an adverse effect on its financial condition, business, prospects or operations, or otherwise.

     4.2 Capitalization. Immediately prior to the Closing, the authorized shares of the Company shall consist of the following:

     (i) Ordinary Shares. A total of 55,000,000 authorized Ordinary Shares of which 45,448,001 shares are issued and outstanding.

     (ii) Preferred Shares. A total of 25,000,000 authorized preferred shares, of which 10,500,000 shares are issued and outstanding.

     (iii) Options, Warrants, Reserved Shares. Except for (a) the conversion privileges of such Preferred Shares, (b) the preemptive rights provided in the November 25, 2006 Shareholders’ Agreement, and (c) 5,180,000 Ordinary Shares reserved for the Company’s employee stock ownership plans approved by the Board of directors of the Company, (d) 300,000 Ordinary shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA, there are no options, warrants, conversions privileges or other rights or agreements outstanding or under which the Company is or may become obliged to issue any securities of any class or series except as set forth above. Apart from the exceptions noted in this Section 4.2, none of the Company’s outstanding shares, and no shares issuable upon exercise, conversion, or exchange of any outstanding options or other shares issuable by the Company, are subject to any and outstanding liens, security interests, adverse claims, charges or encumbrances (collectively “Liens”), preemptive rights, rights of first refusal, or other rights to purchase such shares (whether in favor of the Company or any other person).

     4.3 Valid Issuance of Purchase Shares. The Purchase Shares have been duly authorized and validly issued and are fully paid and non-assessable, accounting for 10.431% of the total issued and outstanding shares of the Company and free and clear of any and all Liens. The Selling Shareholder is the true and lawful owner of the Purchase Shares with and the full and valid title to any and all Purchase Shares.

     4.4 Due Authorization. All corporate actions by the Company and the Selling Shareholder and, as applicable, their respective officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all obligations of the Company and the Selling Shareholder under this Agreement and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby (the “Ancillary

5

Agreements”), has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Selling Shareholder, are valid and legally binding obligations of the Selling Shareholder, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     4.5 No Conflicts. The execution and delivery of this Agreement and any and all Ancillary Agreements by the Selling Shareholder and NewMargin Parent and the performance of their respective obligations hereunder and thereunder will not result in (i) any conflict with the memorandum and articles of association of the Selling Shareholder or NewMargin Parent or the Company, (ii) any breach or violation of, conflict with or default under any law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization or any mortgage, lease, agreement, deed of trust, indenture or any other agreements or instrument to which the Selling Shareholder or NewMargin Parent or the Company is a party or by which the Selling Shareholder or NewMargin Parent or the Company or their respective properties or assets are bound, or (iii) the creation or imposition of any Liens against the Company.

     4.6 Financial Statements. Exhibit A hereto sets forth an unaudited combined balance sheet and income statements of the Company (the forgoing financial statements and any notes thereto are hereinafter referred to as the “Financial Statements”) as of November 30, 2006 (the “Balance Sheet Date”). Such Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition of the Company as of the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with US generally accepted accounting principles applied on a consistent basis. Other than expressly disclosed in the Financial Statements, the Company does not have, directly or indirectly, material actual or contingent liabilities in any nature whatsoever.

     4.7 Activities Since Balance Sheet Date. Since the Balance Sheet Date, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     4.8 Disclosure. The Selling Shareholder has provided the Purchaser with all information needed for the Purchaser to decide whether to purchase the Purchase Shares. There has been no omission of any material facts or misrepresentation of any statement herein.

SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents and warrants to the Selling Shareholder that the statements in this Section 5 are all true, correct and complete as of the date hereof and as of the Closing Date:

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     5.1 Authorization. All corporate actions by the Purchaser and, as applicable, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all of its obligations under this Agreement and the Ancillary Agreements has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Purchaser, constitute valid and legally binding obligations of the Purchaser, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     5.2 No Conflicts; Consents and Approvals, etc. The execution and delivery of this Agreement by the Purchaser and the performance of its obligations hereunder will not result in (i) any conflict with the certificate of incorporation, by-laws or other constitutive documents of the Purchaser, or (ii) any breach or violation of, conflict with or default under any applicable law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization.

SECTION 6 ADDITIONAL COVENANTS

     6.1 Filing of the New Articles. The Selling Shareholder shall cause the New Articles to be filed by the Company with the British Virgin Islands Registrar of Companies as soon as practicable following the Closing.

     6.2 Lock-up Period of GIGAMEDIA Shares. The Selling Shareholder undertakes that, within one (1) year upon receipt of the GIGAMEDIA shares as part of the First Installment, the Selling Shareholder shall not directly or indirectly sell any or all of such GIGAMEDIA shares to any person without obtaining the prior written consent of the Purchaser. The Selling Shareholder further acknowledges that any and all share certificates representing such GIGAMEDIA shares to the Selling Shareholder shall be stamped or otherwise imprinted with a restrict legend to reflect the said lock-up restriction. Nonetheless, the Selling Shareholder shall be entitled to one piggyback registration to the effect that the GIGAMEDIA shares held by the Selling Shareholder can, upon its request, be registered for sale in combination with registration of shares of GIGAMEDIA.

     6.3 Operation in Ordinary Course. The Selling Shareholder and NewMargin Parent undertake, jointly and severally, that the Company will be operated in the ordinary course of business, consistent with past practice, and as reasonably directed by the Purchaser, from the date hereof through the Closing Date.

SECTION 7 CONDITIONS TO CLOSING BY PURCHASER

     The obligations of the Purchaser to complete the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions by the Selling

7

Shareholder and NewMargin Parent, any one or more of which may be waived by the Purchaser in writing:

     7.1 Representations and Warranties True and Correct. Any and all the representations and warranties made by the Selling Shareholder and NewMargin Parent in Section 4 hereof shall be true and correct and complete when made, and shall be true and correct and complete as of the Closing Date and, to the best of their knowledge, as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such dates.

     7.2 Performance of Obligations. The Selling Shareholder shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

     7.3 New Articles. The New Articles shall have been duly adopted by the Company by all necessary corporate actions of its Board of Directors and its shareholders.

     7.4 Execution of New Shareholders’ Agreement. The New Shareholders’ Agreement in a form and having a content satisfactory to the Purchaser shall have been duly executed and delivered by all parties thereto (other than the Purchaser), and shall be in full force and effect.

     7.5 Consents, Approvals and Waivers under the November 25, 2006 Shareholders’ Agreement. All the prior written consents and approvals contained in the November 25, 2006 Shareholders’ Agreement shall have been duly obtained. Each other Existing Shareholders of the Company shall have delivered a written waiver, in form and substance satisfactory to the Purchaser, waiving any right such shareholder may have to notice of the transactions contemplated hereunder and under any ancillary agreement entered pursuant thereto, waiving any right of first refusal or co-sale right such shareholder may enjoy with respect to the sale of the Purchase Shares hereunder and waiving any restrictions on the transfer or other disposition of the shares in the Company by Selling Shareholder under the November 25, 2006 Shareholders’ Agreement. The Execution of the New Shareholders’ Agreement by an Existing Shareholder of the Company shall be deemed a waiver by such Existing Shareholder of its/his rights aforesaid.

     7.6 No Material Adverse Change. Since the date hereof, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     7.7 Replacement of Directors. Prior to the Closing, any and all directors of the Company appointed and/or nominated by the Selling Shareholder shall have been removed from office and replaced with those appointed and/or nominated by the Purchaser.

8

     7.8 Successful Transfer of Local ICP Enterprise. Prior to the Closing, any and all nominee shareholders of the Domestic ICP Enterprise that have been designated by the Selling Shareholder shall be replaced with the persons designated by the Purchaser and that all the agreements and documents in relation to the original nominees shall be terminated and replaced with those between new nominees and related parties.

     7.9 Selling Shareholder’s Deliverables. The Selling Shareholder shall have delivered to the Purchaser the deliverables specified in Section 3.2 prior to or on the Closing Date.

     7.10 Provision of Information and Materials. The Selling Shareholder shall have provided, in the timely manner, all necessary documents, information and statements to GIGAMEDIA for issuance of the GIGAMEDIA shares to the Selling Shareholder.

SECTION 8 CONDITIONS TO PAYMENT OF SECOND INSTALLMENT

     8.1 Conditions to Payment. The obligations of the Purchaser to pay the Second Installment are subject to the precondition (unless otherwise waived by the Purchaser in writing) that any and all the representations and warranties made by the Selling Shareholder and NewMargin Parent in Section 4 hereof shall be true and correct and complete as of both the execution date hereof and the Closing Date, and shall be true and correct and complete to the best of their knowledge as of the payment of the Second Installment with the same force and effect as if they had been made on and as of such date.

SECTION 9 TERMINATION

     9.1 Termination of Agreement. This Agreement and the transactions contemplated by this Agreement shall terminate:

          (i) upon the mutual consent in writing of the parties hereto; or

          (ii) in the event of any breach of this Agreement which materially affects any other party hereto, such breach is not remedied within thirty (30) days after written notice thereof is given to the breaching party by the affected party; provided, however, that in the case of any breach by any of the Selling Shareholder and/or NewMargin Parent, only the Purchaser has the right to early terminate this Agreement.

     9.2 Effect of Termination. In the event this Agreement is terminated pursuant to Section 9.1, this Agreement shall become void and have no further effect,

9

provided that no party shall be relieved of any liability for a breach of this Agreement or for any misrepresentation hereunder, nor shall such termination be deemed to constitute a waiver of any available remedy (including specific performance and other injunctive relieves) for any such breach or misrepresentation.

     9.3 Survival. Sections 9, 10, 11.2 and 11.3 shall survive the expiration or early termination of this Agreement.

SECTION 10 CONFIDENTIALITY

     10.1 Confidential Information. For purpose of this Section 10, the term “Confidential Information” shall mean the execution, delivery and performance of this Agreement and any and all information delivered by a party hereto to any of the other party hereto in connection with the transactions contemplated hereby.

     10.2 Non-Disclosure.

          (i) Without the prior written consent of the disclosing party, any party receiving the Confidential Information (a) may not use or disclose to any person any Confidential Information; and (b) shall make every effort to prevent the use or disclosure of Confidential Information. The said provisions do not apply to (a) disclosure of Confidential Information to a director or employee of the receiving party whose function requires him to have the Confidential Information, (b) disclosure of Confidential Information to a professional adviser for the purpose of advising the Purchaser, the Selling Shareholder, or NewMargin Parent, (c) Confidential Information which has become public knowledge other than, directly or indirectly, through the receiving party’s breach of this Section 10.2, or (d) disclosure of Confidential Information required by law or regulation or any competent authorities (and then if and to the extent practicable only after consulting and taking into account the reasonable requirements of the Purchaser, or the Selling Shareholder or NewMargin, where applicable); provided, however, that in the above situations (a) and (b) the persons receiving the Confidential Information have undertaken the confidentiality obligations herein.

          (ii) Without the prior written consents of the Purchaser and the Company, neither the Selling Shareholder nor NewMargin Parent may disclose to any third party any confidential information about the Company that it has received.

SECTION 11 MISCELLANEOUS

     11.1 Binding Effect; Assignment. This Agreement shall be binding upon and shall be enforceable by each party, its successors and permitted assigns. No party may assign any of its rights or obligations hereunder without the prior written consent of the other parties.

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     11.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflict of law rules thereof to the extent such rules would require or permit the application of the laws of another jurisdiction.

     11.3 Dispute Resolution. Any dispute relating to or arising from the performance of this Agreement shall be settled through consultations among the Parties, and if the parties hereto cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to the Hong Kong International Arbitration Center for arbitration in accordance with the UNCIRTAL Arbitration Rules then in force.

     11.4 Costs and Expenses. Each of the parties hereto shall pay all its own costs and expenses incident to its negotiation and entry into this Agreement and any other related agreements or instruments contemplated hereunder or thereunder and to its performance of and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of any counsel and/or accountants that it may have retained.

     11.5 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and delivered in person, by courier or by facsimile (along with a copy by certified or registered mail) to the following addresses:

(a) If to the Selling Shareholder, to:

NEWMARGIN T2CN INVESTMENT LTD
Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Feng Tao

(b) If to NewMargin Parent, to:

SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.
Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Feng Tao

(c) If to the Purchaser, to:

GIGAMEDIA CHINA LIMITED
Address: 14th Floor, 122 Tunhwa North Road, Taipei 10595, Taiwan R.O.C.

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Facsimile: 886-2-8770-7576
Telephone: 886-2-8770-7966
Attention: Ms. Jennifer Tseng, General Counsel

or, in each case, at such other address as may be specified in writing to the other parties in accordance with the requirements of this Section 11.5. All such notices, requests, demands, waivers and other communications shall be deemed to have been received (x) if by personal delivery or courier, on the day delivered, or (y) if by facsimile, (A) if during business hours on a Business Day, on the day on which such facsimile was sent, or (B) otherwise on the Business Day immediately following the day on which such facsimile was sent, provided that a copy is also sent by certified or registered mail.

11.6 Counterparts. This Agreement may be executed in counterparts and by different parties hereto on separate copies or counterparts and which taken together shall constitute one and the same instrument. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.

[SIGNATURE PAGE FOLLOWS]

12

(Signature Page)

     IN WITNESS WHEREOF the parties hereto have caused their duly authorized representatives to execute this Agreement as of the date first written above.

NEWMARGIN T2CN INVESTMENT LTD
By:	/s/ Feng Tao
Name: Feng Tao
Title: Director
SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.
By:	/s/ Feng Tao
Name: Feng Tao
Title: President
GIGAMEDIA CHINA LIMITED
By:	/s/ Arthur Wang
Name: Arthur Wang
Title: CEO

Accepted and agreed as of the date first set forth above.

T2CN Holding Limited

By:	/s/ Feng Tao
Name: Chairman
Title: Feng Tao

Exhibit A
Financial Statements

EX-4.44

Exhibit 4.44

SPA for Chengwei/Greg/Wan- Execution Copy

SHARE PURCHASE AGREEMENT

CHENGWEI (CHINA) INVESTMENT COMPANY

MR. GREG. WEI GANG YE

MS. JIA YI WAN

- and -

GIGAMEDIA CHINA LIMITED

January 1, 2007

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), dated as of January 1, 2007, is entered into and made by and among the following parties:

     CHENGWEI (CHINA) INVESTMENT COMPANY, a private company limited by shares organized and existing under the laws of the Cayman Islands (“CHENGWEI”);

     GREG. WEI GANG YE (, hereinafter referred to as “GREG”), a permanent resident of the United States of America;

     JIA YI WAN (, hereinafter referred to as “WAN”), a citizen of the People’s Republic of China; and

     GIGAMEDIA CHINA LIMITED, a limited liability company organized and existing under the laws of the British Virgin Islands (the “Purchaser”).

     (CHENGWEI, GREG and WAN shall be referred to collectively as the “Selling Shareholders”, and individually as “Selling Shareholder”).

     WHEREAS,

     (i) T2CN Holding Limited (the “Company”) is a limited liability company duly organized and existing under the laws of the British Virgin Islands, and has issued 45,448,001 Ordinary Shares (as hereinafter defined) and 10,500,000 preferred shares;

     (ii) The Selling Shareholders totally hold 2,374,000 Ordinary Shares, representing 4.243% of the total issued and outstanding shares of the Company; Of 2,374,000 Ordinary Shares, Chengwei, GREG, WAN holds 2,074,000, 200,000 and 100,000 Ordinary Shares, respectively; and

     (iii) The Selling Shareholders wish to sell to the Purchaser, and the Purchaser wishes to purchase from the Selling Shareholders, a total of 2,374,000 Ordinary Shares (the “Purchase Shares”), subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises set forth above, the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

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SECTION 1 DEFINITIONS

     Unless otherwise defined in this Agreement or the November 25, 2006 Shareholders’ Agreement, capitalized terms used herein shall have the following meanings:

     “Domestic ICP Enterprise” means Shanghai T2 Entertainment Co., Ltd. (), a domestic Chinese limited liability company registered in Shanghai to engage in value-added telecommunications services.

     “GIGAMEDIA” means GigaMedia Limited, a company listed on the NASDAQ and the parent company of the Purchaser.

     “Happy Digital” means a company established in Chengdu City with the Chinese name of
“”.

     “MAA” means the Amended and Restated Memorandum and Articles of Association of the Company dated on November 12, 2006.

     “New Articles” means the Amended and Restated Memorandum and Articles of Association of the Company, in form and substance to be agreed upon by the Company, the Purchaser, the Selling Shareholders, other existing shareholders (together with the Selling Shareholders, the “Existing Shareholders”) of the Company and certain other parties thereto.

     “New Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, among the Company, the Purchaser, other Existing Shareholders and certain other parties thereto, in form and substance to be agreed upon by the parties thereto.

     “Net Operating Income” as used in this agreement shall mean the Company’s net income in U.S. dollars as defined in U.S. GAAP, with the following adjustments: (1) adding back non-cash option based compensation to employees and executives of the Company; (2) normalizing the game license fee for the online game Aeronaut paid by the Company to JC Entertainment Corporation during the 1st half of 2007, as if such license fees were all capitalized and amortized over the duration of the relevant license agreement; and (3) the sum of the net income so calculated after taking account of the above items (1) and (2) multiplying by a fraction, the numerator of which shall be the total number of the issued and outstanding Ordinary Shares and preferred shares of the Company as at the execution date of this Agreement and the denominator of which shall be the aggregate number of the issued and outstanding Ordinary Shares and preferred shares of the Company on June 30, 2007 excluding (i) 300,000 shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA; (ii) any additional preferred shares issued based on 2006 Accounts (as defined therein) of the Company as agreed upon in Article XV of the November 25, 2006 Shareholders’ Agreement; and (iii) all share issuance approved by all the board members appointed by the

2

Purchaser without the written consent of the Selling Shareholder during the 1^st half of 2007 provided, however, that no share issuance shall be excluded if such share issuance does not constitute a net downward adjustment on the Net Operating Income.

     “November 25, 2006 Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, dated November 25, 2006, among the Company, the Existing Shareholders and certain other parties thereto.

     “Ordinary Shares” means the ordinary shares of the Company, par value US$0.01 per share.

SECTION 2 AGREEMENT TO PURCHASE AND SALE

     2.1 Agreement to Purchase and Sale. Subject to the terms and conditions of this Agreement, the Purchaser shall purchase for a price as ascertained in Section 2.2 hereof

(i)	2,074,000 Purchase Shares from CHENGWEI;
(ii)	200,000 Purchase Shares from GREG; and
(iii)	100,000 Purchase Shares from WAN.

     2.2 Purchase Price. The total purchase price for each of the Selling Shareholders (“Purchase Price”) shall be the purchase price per Purchase Share multiplying by the number of the Purchase Shares to be sold by such Selling Shareholder, and the purchase price per Purchase Share shall be

          (i) US$1.05 if the Net Operating Income for the first half of 2007 is not more than US$ 1,000,000;

          (ii) US$1.25 if the Net Operating Income for the first half of 2007 is US$ 1,500,000; or

          (iii) US$1.45 if the Net Operating Income for the first half of 2007 is not less than US$ 2,500,000.

          The Purchase Price per Purchase Share should be adjusted on a pro rata basis if the Net Operating Income for the first half of 2007 falls between the above 3 threshold amounts. By way of example, if the Net Operating Income for the first half of 2007 is more than US$ 1,000,000 but less than US$ 1,500,000, the Purchase Price per Purchase Share shall be the sum of (0.4 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.65; if the Net Operating Income for the first half of 2007 is more than US$ 1,500,000 but less than US$ 2,500,000, the Purchase Price per Purchase Share shall be the sum of (0.2 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.95.

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     2.3 Payment of the Purchase Price. The Purchase Price shall be paid by the Purchaser in the following two installments to the relevant accounts designated by the Selling Shareholders in writing, which designation shall be instructed to the Purchaser fourteen (14) days prior to the respective dates of payment specified herein:

          (i) Subject to the terms and conditions under this Agreement, US$ 1,296,250, US$ 62,500 and US$ 62,500 shall be paid in cash at the Closing to CHENGWEI, GREG and WAN, respectively (“First Installment”).

          (ii) Subject to the terms and conditions under this Agreement, the remaining Purchase Price (“Second Installment”) for each of the Selling Shareholders shall be paid in cash to such Selling Shareholder on August 15, 2007.

SECTION 3 CLOSING; DELIVERY

     3.1 Closing. The transfer of the Purchase Shares (the “Closing”) shall take place at the offices of the Company, 12^th Floor, Xingyuan Technology Plaza, No. 418 Guiping Road, Shanghai 200233, China, on February 12, 2007 (the “Closing Date”), or at such other place and time as the parties hereto may mutually agree. Upon the Closing, all the rights and benefits attached to and in relation to the Purchase Shares (including but not limited to the dividends attributable to the Selling Shareholders in respect of any and all Purchase Shares if any) shall be transferred from the Selling Shareholders to the Purchaser.

     3.2 Delivery at the Closing. At the Closing, each of the Selling shareholders shall deliver the following items to the Purchaser:

          (i) The total Purchase Shares, together with duly issued share certificates of the total Purchase Shares in the name of the Purchaser;

          (ii) A compliance certificate, signed by the director of such Selling Shareholder (applicable to CHENGWEI) or such Selling Shareholder (applicable to GREG and WAN), certifying that all the representations and warranties of the Selling Shareholders hereunder are true, correct and complete, and all the conditions hereunder have been fulfilled;

          (iii) An unaudited financial balance sheet, cash flow statement and profit and loss statement of the Company for the full year of 2006 and an unaudited balance sheet, and profit and loss statement of the Company dated as of January 31, 2007, which shall be satisfactory in form and substance to the Purchaser.

          At the Closing, the Purchaser shall pay the First Installment to each of the Selling Shareholders against receipt of all deliverables under items (i) through (iii) of Section 3.2 hereof. On the date of receipt of the First Installment, each of the Selling Shareholders shall issue a written receipt acknowledging such receipt to the Purchaser.

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SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS

     The Selling Shareholders hereby jointly and severally represent and warrant to the Purchaser that the statements in this Section 4 are all true, correct and complete as of the date hereof, as of the Closing Date and, to the best of their knowledge, as of the payment date of the Second Installment:

     4.1 Organization, Good Standing and Qualification. The Company is duly organized, validly existing and in good standing under, and by virtue of, the laws of the British Virgin Islands and has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company is qualified to do business and is in good standing in each jurisdiction where failure to be so qualified would have an adverse effect on its financial condition, business, prospects or operations, or otherwise.

     4.2 Capitalization. Immediately prior to the Closing, the authorized shares of the Company shall consist of the following:

     (i) Ordinary Shares. A total of 55,000,000 authorized Ordinary Shares of which 45,448,001 shares are issued and outstanding.

     (ii) Preferred Shares. A total of 25,000,000 authorized preferred shares, of which 10,500,000 shares are issued and outstanding.

     (iii) Options, Warrants, Reserved Shares. Except for (a) the conversion privileges of such Preferred Shares, (b) the preemptive rights provided in the November 25, 2006 Shareholders’ Agreement, and (c) 5,180,000 Ordinary Shares reserved for the Company’s employee ownership plans approved by the Board of directors of the Company, (d) 300,000 Ordinary shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA, there are no options, warrants, conversions privileges or other rights or agreements outstanding or under which the Company is or may become obliged to issue any securities of any class or series except as set forth above. Apart from the exceptions noted in this Section 4.2, none of the Company’s outstanding shares, and no shares issuable upon exercise, conversion, or exchange of any outstanding options or other shares issuable by the Company, are subject to any and all liens, security interests, adverse claims, charges or encumbrances (collectively “Liens”), preemptive rights, rights of first refusal, or other rights to purchase such shares (whether in favor of the Company or any other person).

     4.3 Valid Issuance of Purchase Shares. The Purchase Shares have been duly authorized and validly issued and are fully paid and non-assessable, accounting for 4.243% of the total issued and outstanding shares of the Company and free and clear of any and all Liens. The Selling Shareholders are the true and lawful owners of the Purchase Shares with and the full and valid title to any and all Purchase Shares.

5

     4.4 Due Authorization. All corporate actions by the Company and the Selling Shareholders and, as applicable, their respective officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all obligations of the Company and the Selling Shareholders under this Agreement and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby (the “Ancillary Agreements”), has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Selling Shareholders, are valid and legally binding obligations of the Selling Shareholders, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     4.5 No Conflicts. The execution and delivery of this Agreement and any and all Ancillary Agreements by the Selling Shareholders and the performance of its obligations hereunder and thereunder will not result in (i) any conflict with the memorandum and articles of association of the Selling Shareholders and the Company, (ii) any breach or violation of, conflict with or default under any law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization or any mortgage, lease, agreement, deed of trust, indenture or any other instrument to which any of the Selling Shareholders or the Company is a party or by which any of the Selling Shareholders or the Company or their respective properties or assets are bound, or (iii) the creation or imposition of any Liens against the Company.

     4.6 Financial Statements. Exhibit A hereto sets forth an unaudited combined balance sheet and income statements of the Company (the foregoing financial statements and any notes thereto are hereinafter referred to as the “Financial Statements”) as of November 30, 2006 (the “Balance Sheet Date”). Such Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition of the Company as of the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with US generally accepted accounting principles applied on a consistent basis. Other than expressly disclosed in the Financial Statements, the Company does not have, directly or indirectly, material actual or contingent liabilities in any nature whatsoever.

     4.7 Activities since Balance Sheet Date. Since the Balance Sheet Date, there has been no material change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     4.8 Disclosure. The Selling Shareholders have provided the Purchaser with all information needed for the Purchaser to decide whether to purchase the Purchase Shares. There has been no omission of any material facts or misrepresentation of any statement herein.

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SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents and warrants to the Selling Shareholders that the statements in this Section 5 are all true, correct and complete as of the date hereof and as of the Closing Date:

     5.1 Authorization. All corporate actions by the Purchaser and, as applicable, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all of its obligations under this Agreement and the Ancillary Agreements has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Purchaser, constitute valid and legally binding obligations of the Purchaser, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     5.2 No Conflicts; Consents and Approvals, etc. The execution and delivery of this Agreement by the Purchaser and the performance of its obligations hereunder will not result in (i) any conflict with the certificate of incorporation, by-laws or other constitutive documents of the Purchaser, or (ii) any breach or violation of, conflict with or default under any applicable law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization.

SECTION 6 ADDITIONAL COVENANTS

     6.1 Filing of the New Articles. Each of the Selling Shareholders shall cause the New Articles to be filed by the Company with the British Virgin Islands Registrar of Companies as soon as practicable following the Closing.

     6.2 Operation in Ordinary Course. The Selling Shareholders undertake, jointly and severally, that the Company will be operated in the ordinary course of business, consistent with past practice, and as reasonably directed by the Purchaser, from the date hereof through the Closing Date.

SECTION 7 CONDITIONS TO CLOSING BY PURCHASER

     The obligations of the Purchaser to complete the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions by each of the Selling Shareholders, any one or more of which may be waived by the Purchaser in writing:

     7.1 Representations and Warranties True and Correct. Any and all the representations and warranties made by the Selling Shareholders in Section 4 hereof

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shall be true and correct and complete when made, and shall be true and correct and complete as of the Closing Date and to the best of their knowledge, as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such dates.

     7.2 Performance of Obligations. The Selling Shareholders shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

     7.3 New Articles. The New Articles shall have been duly adopted by the Company by all necessary corporate actions of its Board of Directors and its shareholders.

     7.4 Execution of New Shareholders’ Agreement. The New Shareholders’ Agreement in a form and having a content satisfactory to the Purchaser shall have been duly executed and delivered by all parties thereto (other than the Purchaser), and shall be in full force and effect.

     7.5 Consents, Approvals and Waivers under the November 25, 2006 Shareholders’ Agreement. All the prior written consents and approvals contained in the November 25, 2006 Shareholders’ Agreement shall have been obtained. Each other Existing Shareholders of the Company shall have delivered a written waiver, in form and substance satisfactory to the Purchaser, waiving any right such shareholder may have to notice of the transactions contemplated hereunder and under any ancillary agreement entered pursuant thereto, waiving any right of first refusal or co-sale right such shareholder may enjoy with respect to the sale of the Purchase Shares hereunder and waiving any restrictions on the transfer or other disposition of the shares in the Company by Selling Shareholders under the November 25, 2006 Shareholders’ Agreement. The Execution of the New Shareholders’ Agreement by an Existing Shareholder of the Company shall be deemed a waiver by such Existing Shareholder of its/his rights aforesaid.

     7.6 No Material Adverse Change. Since the date hereof, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     7.7 Replacement of Directors. Prior to the Closing, any and all directors of the Company appointed and/or nominated by the Selling Shareholder shall have been removed from office and replaced with those appointed and/or nominated by the Purchaser.

     7.8 Successful Transfer of Local ICP Enterprise. Prior to the Closing, any and all nominee shareholders of the Domestic ICP Enterprise that have been designated by the Selling Shareholder shall be replaced with the persons designated by the Purchaser and that all the agreements and documents in relation to the original nominees shall be terminated and replaced with those between new nominees and related parties.

8

     7.9 Facilitating Management Transition of the Company. GREG shall have made his best efforts to facilitate the management transition arising from or in connection with the equity transfer herein and to assist the new management of the Company to minimize relevant costs and expenses incurred in relation to the initial public offering of the Company.

     7.10 Selling Shareholders’ Deliverables. The Selling Shareholders shall have delivered to the Purchaser the deliverables specified in Section 3.2 prior to or on the Closing Date.

     7.11 Provision of Information and Materials. The Selling Shareholders shall have provided, in a timely manner, all necessary documents, information and statements to GIGAMEDIA for issuance of the GIGAMEDIA shares to the Selling Shareholders.

SECTION 8 CONDITIONS TO PAYMENT OF SECOND INSTALLMENT

     8.1 Conditions to Payment. The obligations of the Purchaser to pay the Second Installment to any of the Selling Shareholders are subject to the fulfillment of the preconditions (unless otherwise waived by the Purchaser in writing) that any and all the representations and warranties made by the Selling Shareholders in Section 4 hereof shall be true and correct and complete as of both the execution date hereof and the Closing Date and shall be true and correct and complete to the best of their knowledge as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such date.

SECTION 9 TERMINATION

     9.1 Termination of Agreement. This Agreement and the transactions contemplated by this Agreement shall terminate:

          (a) upon the mutual consent in writing of the parties hereto; or

          (b) in the event of any breach of this Agreement which materially affects any other party hereto, such breach is not remedied within thirty (30) days after written notice thereof is given to the breaching party by the affected party; provided, however, that in the case of any breach by any of the Selling Shareholders, only the Purchaser has the right to early terminate this Agreement.

     9.2 Effect of Termination. In the event this Agreement is terminated pursuant to Section 9.1, this Agreement shall become void and have no further effect, provided that no party shall be relieved of any liability for a breach of this Agreement or for any misrepresentation hereunder, nor shall such termination be deemed to

9

constitute a waiver of any available remedy (including specific performance and other injunctive relieves) for any such breach or misrepresentation.

     9.3 Survival. Sections 9, 10, 11.2 and 11.3 shall survive the expiration or early termination of this Agreement.

SECTION 10 CONFIDENTIALITY

     10.1 Confidential Information. For purpose of this Section 10, the term “Confidential Information” shall mean the execution, delivery and performance of this Agreement and any and all information delivered by a party hereto to any of the other party hereto in connection with the transactions contemplated hereby.

     10.2 Non-Disclosure.

          (i) Without the prior written consent of the disclosing party, any party receiving the Confidential Information (a) may not use or disclose to any person any Confidential Information; and (b) shall make every effort to prevent the use or disclosure of Confidential Information. The said provisions do not apply to (a) disclosure of Confidential Information to a director or employee of the receiving party whose function requires him to have the Confidential Information, (b) disclosure of Confidential Information to a professional adviser for the purpose of advising the Purchaser and the Selling Shareholders, (c) Confidential Information which has become public knowledge other than, directly or indirectly, through the receiving party’s breach of this Section 10.2, or (d) disclosure of Confidential Information required by law or regulation or any competent authorities (and then if and to the extent practicable only after consulting and taking into account the reasonable requirements of the Purchaser and the Selling Shareholders); provided, however, that in the above situations (a) and (b) the persons receiving the Confidential Information have undertaken the confidentiality obligations herein.

          (ii) Without the prior written consents of the Purchaser and the Company, none of the Selling Shareholders may disclose to any third party any confidential information about the Company that it/he has received.

SECTION 11 MISCELLANEOUS

     11.1 Binding Effect; Assignment. This Agreement shall be binding upon and shall be enforceable by each party, its successors and permitted assigns. No party may assign any of its rights or obligations hereunder without the prior written consent of the other parties.

     11.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the

10

conflict of law rules thereof to the extent such rules would require or permit the application of the laws of another jurisdiction.

     11.3 Dispute Resolution. Any dispute relating to or arising from the performance of this Agreement shall be settled through consultations among the Parties, and if the parties hereto cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to the Hong Kong International Arbitration Center for arbitration in accordance with the UNCIRTAL Arbitration Rules then in force.

     11.4 Costs and Expenses. Each of the parties hereto shall pay all its own costs and expenses incident to its negotiation and entry into this Agreement and any other related agreements or instruments contemplated hereunder or thereunder and to its performance of and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of any counsel and/or accountants that it may have retained.

     11.5 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and delivered in person, by courier or by facsimile (along with a copy by certified or registered mail) to the following addresses:

(a) If to the Selling Shareholders,

to:

CHENGWEI (CHINA) INVESTMENT COMPANY
Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Feng Tao

to:

GREG. WEI GANG YE
Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Greg Ye

to:

JIA YI WAN

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Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Ms. Vivian Yuan

(d) If to the Purchaser, to:

GIGAMEDIA CHINA LIMITED
Address: 14th Floor, 122 Tunhwa North Road, Taipei 10595, Taiwan R.O.C.

Facsimile: 886-2-8770-7576
Telephone: 886-2-8770-7966
Attention: Ms. Jennifer Tseng, General Counsel

or, in each case, at such other address as may be specified in writing to the other parties in accordance with the requirements of this Section 10.5. All such notices, requests, demands, waivers and other communications shall be deemed to have been received (x) if by personal delivery or courier, on the day delivered, or (y) if by facsimile, (A) if during business hours on a Business Day, on the day on which such facsimile was sent, or (B) otherwise on the Business Day immediately following the day on which such facsimile was sent, provided that a copy is also sent by certified or registered mail.

     11.6 Counterparts. This Agreement may be executed in counterparts and by different parties hereto on separate copies or counterparts and which taken together shall constitute one and the same instrument. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.

[SIGNATURE PAGE FOLLOWS]

12

(Signature Page)

     IN WITNESS WHEREOF the parties hereto have caused their duly authorized representatives to execute this Agreement as of the date first written above.

CHENGWEI (CHINA) INVESTMENT COMPANY
By:	/s/ Feng Bo
Name: Feng Bo
Title: Director
GREG. WEI GANG YE
By:	/s/ Greg. Wei Gang Ye
JIA YI WAN
By:	/s/ Jia Yi Wan
GIGAMEDIA CHINA LIMITED
By:	/s/ Arthur Wang
Name: Arthur Wang
Title: CEO

Accepted and agreed as of the date first set forth above.

T2CN Holding Limited

By:	/s/ Feng Tao
Name: Chairman
Title: Feng Tao

Exhibit A
Financial Statements

EX-4.45

Exhibit 4.45

SPA for Canadian Investors

SHARE PURCHASE AGREEMENT

CERTAIN SHAREHOLDERS

(as listed in Exhibit A hereto)

- and -

GIGAMEDIA CHINA LIMITED

January 17, 2007

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), dated as of January 17, 2007, is entered into and made by and among

     Certain shareholders of T2CN Holding Limited (“Company”) as identified in Exhibit A hereto, and

     GIGAMEDIA CHINA LIMITED, a limited liability company organized and existing under the laws of the British Virgin Islands (the “Purchaser”), and

     (The above shareholders shall be referred to collectively as the “Selling Shareholders”, and individually as “Selling Shareholder”).

     WHEREAS,

     (i) The Company is a limited liability company duly organized and existing under the laws of the British Virgin Islands, and has issued 45,448,001 Ordinary Shares (as hereinafter defined) and 10,500,000 preferred shares;

     (ii) Each of the Selling Shareholders holds the number of Ordinary Shares of the Company as specified in Exhibit A on the date hereof and wishes to sell all such shares (the “Purchase Shares”) to the Purchaser, and the Purchaser wishes to purchase from each of the Selling Shareholders the Purchase Shares, subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises set forth above, the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1 DEFINITIONS

     Unless otherwise defined in this Agreement or the November 25, 2006 Shareholders’ Agreement, capitalized terms used herein shall have the following meanings:

     “Domestic ICP Enterprise” means Shanghai T2 Entertainment Co., Ltd. (), a domestic Chinese limited liability company registered in Shanghai to engage in value-added telecommunications services.

     “GIGAMEDIA” means GigaMedia Limited, a company listed on the NASDAQ and the parent company of the Purchaser.

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     “Happy Digital” means a company established in Chengdu City with the Chinese name of
“”.

     “MAA” means the Amended and Restated Memorandum and Articles of Association of the Company dated on November 12, 2006.

     “New Articles” means the Amended and Restated Memorandum and Articles of Association of the Company, in form and substance to be agreed upon by the Company, the Purchaser, the Selling Shareholders, other existing shareholders (together with the Selling Shareholders, the “Existing Shareholders”) of the Company and certain other parties thereto.

     “New Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, among the Company, the Purchaser, other Existing Shareholders and certain other parties thereto, in form and substance to be agreed upon by the parties thereto.

     “Net Operating Income” as used in this agreement shall mean the Company’s net income in U.S. dollars as defined in U.S. GAAP and ascertained by the Purchaser, with the following adjustments: (1) adding back non-cash option based compensation to employees and executives of the Company; (2) normalizing the game license fee for the online game Aeronaut paid by the Company to JC Entertainment Corporation during the 1st half of 2007, as if such license fees were all capitalized and amortized over the duration of the relevant license agreement; and (3) the sum of the net income so calculated after taking account of the above items (1) and (2) multiplying by a fraction, the numerator of which shall be the total number of the issued and outstanding Ordinary Shares and preferred shares of the Company as at the execution date of this Agreement and the denominator of which shall be the aggregate number of the issued and outstanding Ordinary Shares and preferred shares of the Company on June 30, 2007 excluding (i) 300,000 shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA; and (ii) any additional preferred shares issued based on 2006 Accounts (as defined therein) of the Company as agreed upon in Article XV of the November 25, 2006 Shareholders’ Agreement.

     “November 25, 2006 Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, dated November 25, 2006, among the Company, the Existing Shareholders and certain other parties thereto.

     “Ordinary Shares” means the ordinary shares of the Company, par value US$0.01 per share.

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SECTION 2 AGREEMENT TO PURCHASE AND SALE

     2.1 Agreement to Purchase and Sale. Subject to the terms and conditions of this Agreement, the Purchaser shall purchase the Purchase Shares from each of the Selling Shareholders for a price as ascertained in Section 2.2 hereof.

     2.2 Purchase Price. The total purchase price for each of the Selling Shareholders (“Purchase Price”) shall be the purchase price per Purchase Share multiplying by the number of the Purchase Shares to be sold by such Selling Shareholder, and the purchase price per Purchase Share shall be

          (i) US$1.05 if the Net Operating Income for the first half of 2007 is not more than US$ 1,000,000;

          (ii) US$1.25 if the Net Operating Income for the first half of 2007 is US$ 1,500,000; or

          (iii) US$1.45 if the Net Operating Income for the first half of 2007 is not less than US$ 2,500,000.

          The Purchase Price per Purchase Share should be adjusted on a pro rata basis if the Net Operating Income for the first half of 2007 falls between the above 3 threshold amounts. By way of example, if the Net Operating Income for the first half of 2007 is more than US$ 1,000,000 but less than US$ 1,500,000, the Purchase Price per Purchase Share shall be the sum of (0.4 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.65; if the Net Operating Income for the first half of 2007 is more than US$ 1,500,000 but less than US$ 2,500,000, the Purchase Price per Purchase Share shall be the sum of (0.2 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.95.

     2.3 Payment of the Purchase Price. The Purchase Price payable to each of the Selling Shareholders by the Purchaser shall be paid in the following two installments:

          (i) Subject to the terms and conditions under this Agreement, the first installment of the Purchaser Price (as specified in Exhibit A attached hereto) payable to each of the Selling Shareholders (“First Installment”) shall be paid in cash by the Purchaser at the Closing.

          (ii) Subject to the terms and conditions under this Agreement, the remaining Purchase Price payable to each of the Selling Shareholders (“Second Installment”) shall be paid in cash on August 15, 2007.

          The Selling Shareholders hereby authorize [Mr. Bryan M. Dear] to receive any and all Purchase Price payable to it/him by the Purchaser. Upon remittance of the Purchase Price due and payable to a Selling Shareholder to an account designated by [Bryan M. Dear] in writing, which designation shall be instructed to the Purchaser fourteen (14) days prior to the respective dates of payment,

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the Purchaser shall be deemed having performed its payment obligation to such Selling Shareholder.

SECTION 3 CLOSING; DELIVERY

     3.1 Closing. The transfer of the Purchase Shares (the “Closing”) shall take place at the offices of the Company, 12^th Floor, Xingyuan Technology Plaza, No. 418 Guiping Road, Shanghai 200233, China, on February 12, 2007 (the “Closing Date”), or at such other place and time as the parties hereto may mutually agree. Upon the Closing, all the rights and benefits attached to and in relation to the Purchase Shares (including but not limited to the dividends attributable to the Selling Shareholders in respect of any and all Purchase Shares if any) shall be transferred from the Selling Shareholders to the Purchaser.

     3.2 Delivery at the Closing. At the Closing, each of the Selling shareholders shall, through their representative Mr. Bryan M. Dear, deliver the following items to the Purchaser:

          (i) The total Purchase Shares, together with duly issued share certificates of the total Purchase Shares in the name of the Purchaser;

          (ii) A compliance certificate, signed by such Selling Shareholder, certifying that all the representations and warranties of such Selling Shareholder hereunder are true, correct and complete, and all the conditions hereunder have been fulfilled;

          (iii) An unaudited financial balance sheet, cash flow statement and profit and loss statement of the Company for the full year of 2006 and an unaudited balance sheet, and profit and loss statement of the Company dated as of January 31, 2007, which shall be satisfactory in form and substance to the Purchaser.

          At the Closing, the Purchaser shall pay the First Installment to [Mr. Bryan M. Dear] against receipt of all deliverables under items (i) through (iii) of Section 3.2 hereof. On the date of receipt of the First Installment, Mr. Bryan Mr. Dear shall, on behalf of each of the Selling Shareholders, issue a written receipt acknowledging such receipt to the Purchaser.

SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS

     Each of the Selling Shareholders hereby represent and warrant to the Purchaser that the statements in this Section 4 are all true, correct and complete as of the date hereof, as of the Closing Date and, to the best of it/hisknowledge, as of the payment date of the Second Installment:

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     4.1 Organization, Good Standing and Qualification. The Company is duly organized, validly existing and in good standing under, and by virtue of, the laws of the British Virgin Islands and has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company is qualified to do business and is in good standing in each jurisdiction where failure to be so qualified would have an adverse effect on its financial condition, business, prospects or operations, or otherwise.

     4.2 Capitalization. Immediately prior to the Closing, the authorized shares of the Company shall consist of the following:

     (i) Ordinary Shares. A total of 55,000,000 authorized Ordinary Shares of which 45,448,001 shares are issued and outstanding.

     (ii) Preferred Shares. A total of 25,000,000 authorized preferred shares, of which 10,500,000 shares are issued and outstanding.

     (iii) Options, Warrants, Reserved Shares. Except for (a) the conversion privileges of the said Preferred Shares, (b) the preemptive rights provided in the November 25, 2006 Shareholders’ Agreement, and (c) 5,180,000 Ordinary Shares reserved for the Company’s employee ownership plans approved by the Board of directors of the Company, (d) 300,000 Ordinary shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA, there are no options, warrants, conversions privileges or other rights or agreements outstanding or under which the Company is or may become obliged to issue any securities of any class or series except as set forth above. Apart from the exceptions noted in this Section 4.2, none of the Company’s outstanding shares, and no shares issuable upon exercise, conversion, or exchange of any outstanding options or other shares issuable by the Company, are subject to any and all liens, security interests, adverse claims, charges or encumbrances (collectively “Liens”), preemptive rights, rights of first refusal, or other rights to purchase such shares (whether in favor of the Company or any other person).

     4.3 Valid Issuance of Purchase Shares. The Purchase Shares have been duly authorized and validly issued and are fully paid and non-assessable, accounting for respective percentages of the total issued and outstanding shares of the Company as specified in Exhibit A hereto and free and clear of any and all Liens. The Selling Shareholder is the true and lawful owner of the Purchase Shares with the full and valid title to any and all Purchase Shares.

     4.4 Due Authorization. All actions by the Company and such Selling Shareholder and, as applicable, their respective officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all obligations of the Company and such Selling Shareholder under this Agreement and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby (the “Ancillary Agreements”), has been taken or will be taken prior to the Closing. This Agreement

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and the Ancillary Agreements, when executed and delivered by such Selling Shareholder, are valid and legally binding obligations of such Selling Shareholder, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     4.5 No Conflicts. The execution and delivery of this Agreement and any and all Ancillary Agreements by such Selling Shareholder and the performance of its/his obligations hereunder and thereunder will not result in (i) any conflict with the memorandum and articles of association of such Selling Shareholder (if any) and the Company, (ii) any breach or violation of, conflict with or default under any law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization or any mortgage, lease, agreement, deed of trust, indenture or any other instrument to which any of the Selling Shareholder or the Company is a party or by which such Selling Shareholder or the Company or their respective properties or assets are bound, or (iii) the creation or imposition of any Liens against the Company.

     4.6 Financial Statements. Exhibit B hereto sets forth an unaudited combined balance sheet and income statements of the Company (the foregoing financial statements and any notes thereto are hereinafter referred to as the “Financial Statements”) as of November 30, 2006 (the “Balance Sheet Date”). Such Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition of the Company as of the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with US generally accepted accounting principles applied on a consistent basis. Other than expressly disclosed in the Financial Statements, the Company does not have, directly or indirectly, material actual or contingent liabilities in any nature whatsoever.

     4.7 Activities since Balance Sheet Date. Since the Balance Sheet Date, there has been no material change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     4.8 Disclosure. The Selling Shareholder has provided the Purchaser with all information needed for the Purchaser to decide whether to purchase the Purchase Shares. There has been no omission of any material facts or misrepresentation of any statement herein.

SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents and warrants to the Selling Shareholders that the statements in this Section 5 are all true, correct and complete as of the date hereof and as of the Closing Date:

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     5.1 Authorization. All corporate actions by the Purchaser and, as applicable, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all of its obligations under this Agreement and the Ancillary Agreements has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Purchaser, constitute valid and legally binding obligations of the Purchaser, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     5.2 No Conflicts; Consents and Approvals, etc. The execution and delivery of this Agreement by the Purchaser and the performance of its obligations hereunder will not result in (i) any conflict with the certificate of incorporation, by-laws or other constitutive documents of the Purchaser, or (ii) any breach or violation of, conflict with or default under any applicable law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization.

SECTION 6 ADDITIONAL COVENANTS

     6.1 Filing of the New Articles. Each of the Selling Shareholders shall cause the New Articles to be filed by the Company with the British Virgin Islands Registrar of Companies as soon as practicable following the Closing.

     6.2 Operation in Ordinary Course. Each of the Selling Shareholders undertake that the Company will be operated in the ordinary course of business, consistent with past practice, and as reasonably directed by the Purchaser, from the date hereof through the Closing Date.

SECTION 7 CONDITIONS TO CLOSING BY PURCHASER

     The obligations of the Purchaser to complete the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions by the Selling Shareholder, any one or more of which may be waived by the Purchaser in writing:

     7.1 Representations and Warranties True and Correct. Any and all the representations and warranties made by the Selling Shareholder in Section 4 hereof shall be true and correct and complete when made, and shall be true and correct and complete as of the Closing Date and to the best of its/his knowledge, as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such dates.

     7.2 Performance of Obligations. The Selling Shareholder shall have performed and complied with all agreements, obligations and conditions contained in

7

this Agreement that are required to be performed or complied with by it on or before the Closing.

     7.3 New Articles. The New Articles shall have been duly adopted by the Company by all necessary corporate actions of its Board of Directors and its shareholders.

     7.4 Execution of New Shareholders’ Agreement. The New Shareholders’ Agreement in a form and having a content satisfactory to the Purchaser shall have been duly executed and delivered by all parties thereto (other than the Purchaser), and shall be in full force and effect.

     7.5 Consents, Approvals and Waivers under the November 25, 2006 Shareholders’ Agreement. All the prior written consents and approvals contained in the November 25, 2006 Shareholders’ Agreement shall have been obtained. Each other Existing Shareholders of the Company shall have delivered a written waiver, in form and substance satisfactory to the Purchaser, waiving any right such shareholder may have to notice of the transactions contemplated hereunder and under any ancillary agreement entered pursuant thereto, waiving any right of first refusal or co-sale right such shareholder may enjoy with respect to the sale of the Purchase Shares hereunder and waiving any restrictions on the transfer or other disposition of the shares in the Company by Selling Shareholders under the November 25, 2006 Shareholders’ Agreement. The Execution of the New Shareholders’ Agreement by an Existing Shareholder of the Company shall be deemed a waiver by such Existing Shareholder of its/his rights aforesaid.

     7.6 No Material Adverse Change. Since the date hereof, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     7.7 Replacement of Directors. Prior to the Closing, any and all directors of the Company appointed and/or nominated by the Selling Shareholder shall have been removed from office and replaced with those appointed and/or nominated by the Purchaser.

     7.8 Successful Transfer of Local ICP Enterprise. Prior to the Closing, any and all nominee shareholders of the Domestic ICP Enterprise that have been designated by any shareholder of the Company shall be replaced with the persons designated by the Purchaser and that all the agreements and documents in relation to the original nominees shall be terminated and replaced with those between new nominees and related parties.

     7.9 Selling Shareholders’ Deliverables. The Selling Shareholder‘s deliverables specified in Section 3.2 has been delivered to the Purchaser prior to or on the Closing Date.

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SECTION 8 CONDITIONS TO PAYMENT OF SECOND INSTALLMENT

     8.1 Conditions to Payment. The obligations of the Purchaser to pay the Second Installment to any of the Selling Shareholders are subject to the fulfillment of the preconditions (unless otherwise waived by the Purchaser in writing) that any and all the representations and warranties made by such Selling Shareholder in Section 4 hereof shall be true and correct and complete as of both the execution date hereof and the Closing Date and shall be true and correct and complete to the best of its/his knowledge as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such date.

SECTION 9 TERMINATION

     9.1 Termination of Agreement. This Agreement and the transactions contemplated by this Agreement shall terminate:

          (a) between the Purchaser and any of the Selling Shareholders upon the mutual consent in writing thereof ; or

          (b) in the event of any breach of this Agreement which materially affects any other party hereto, such breach is not remedied within thirty (30) days after written notice thereof is given to the breaching party by the affected party; provided, however, that in the case of any breach by any of the Selling Shareholders, only the Purchaser has the right to early terminate this Agreement to the extent between the Purchaser and the Selling Shareholder in breach.

     9.2 Effect of Termination. In the event this Agreement is terminated between the Purchaser and any of the Selling Shareholders pursuant to Section 9.1, this Agreement shall become void and have no further effect between such Parties, provided that no such party shall be relieved of any liability for a breach of this Agreement or for any misrepresentation hereunder, nor shall such termination be deemed to constitute a waiver of any available remedy (including specific performance and other injunctive relieves) for any such breach or misrepresentation.

     9.3 Survival. Sections 9, 10, 11.2 and 11.3 shall survive the expiration or early termination of this Agreement.

SECTION 10 CONFIDENTIALITY

     10.1 Confidential Information. For purpose of this Section 10, the term “Confidential Information” shall mean the execution, delivery and performance of this Agreement and any and all information delivered by a party hereto to any of the other party hereto in connection with the transactions contemplated hereby.

9

     10.2 Non-Disclosure.

          (i) Without the prior written consent of the disclosing party, any party receiving the Confidential Information (a) may not use or disclose to any person any Confidential Information; and (b) shall make every effort to prevent the use or disclosure of Confidential Information. The said provisions do not apply to (a) disclosure of Confidential Information to a director or employee of the receiving party whose function requires him to have the Confidential Information, (b) disclosure of Confidential Information to a professional adviser for the purpose of advising the Purchaser and the Selling Shareholders, (c) Confidential Information which has become public knowledge other than, directly or indirectly, through the receiving party’s breach of this Section 10.2, or (d) disclosure of Confidential Information required by law or regulation or any competent authorities (and then if and to the extent practicable only after consulting and taking into account the reasonable requirements of the Purchaser and the Selling Shareholders); provided, however, that in the above situations (a) and (b) the persons receiving the Confidential Information have undertaken the confidentiality obligations herein.

          (ii) Without the prior written consents of the Purchaser and the Company, none of the Selling Shareholders may disclose to any third party any confidential information about the Company that it/he has received.

SECTION 11 MISCELLANEOUS

     11.1 Binding Effect; Assignment. This Agreement shall be binding upon and shall be enforceable against each party, its successors and permitted assigns. In the event that only some of the Selling Shareholders sign this Agreement, this Agreement shall be considered binding upon and enforceable against the Purchaser and those signed Selling Shareholders, their respective successors and permitted assigns. The fact that the remaining Selling Shareholders do not sign this Agreement shall not affect the binding effect upon or enforceability against any signed Selling Shareholder or its/his successors and permitted assigns.

     11.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflict of law rules thereof to the extent such rules would require or permit the application of the laws of another jurisdiction.

     11.3 Dispute Resolution. Any dispute relating to or arising from the performance of this Agreement shall be settled through consultations among the Parties, and if the parties hereto cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to the Hong Kong International Arbitration Center for arbitration in accordance with the UNCIRTAL Arbitration Rules then in force.

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     11.4 Costs and Expenses. Each of the parties hereto shall pay all its own costs and expenses incident to its negotiation and entry into this Agreement and any other related agreements or instruments contemplated hereunder or thereunder and to its performance of and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of any counsel and/or accountants that it may have retained.

     11.5 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and delivered in person, by courier or by facsimile (along with a copy by certified or registered mail) to the following addresses:

(a) If to the Selling Shareholders,

to Mr. Bryan M. Dear:

Bryan M. Dear
Address:
Facsimile:
Telephone:
Attention: Mr. Bryan M. Dear

(b) If to the Purchaser, to:

GIGAMEDIA CHINA LIMITED
Address: 14th Floor, 122 Tunhwa North Road, Taipei 10595, Taiwan R.O.C.

Facsimile: 886-2-8770-7576
Telephone: 886-2-8770-7966
Attention: Ms. Jennifer Tseng, General Counsel

or, in each case, at such other address as may be specified in writing by the Purchaser or Mr. Bryan M. Dear in accordance with the requirements of this Section 11.5. For the purpose of this Section 11.5, each of the Selling Shareholders hereby authorizes Mr. Bryan. M. Dear to receive and deliver all notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement on it/his behalf. All such notices, requests, demands, waivers and other communications shall be deemed to have been received (x) if by personal delivery or courier, on the day delivered, or (y) if by facsimile, (A) if during business hours on a Business Day, on the day on which such facsimile was sent, or (B) otherwise on the Business Day immediately following the day on which such facsimile was sent, provided that a copy is also sent by certified or registered mail.

     11.6 Counterparts. This Agreement may be executed in counterparts and by different parties hereto on separate copies or counterparts and which taken together

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shall constitute one and the same instrument. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.

[SIGNATURE PAGE FOLLOWS]

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(Signature Page)

     IN WITNESS WHEREOF the parties hereto have caused their duly authorized representatives to execute this Agreement as of the date first written above.

		SELLING SHAREHOLDERS
		[Their names and signatures are set forth on the following pages]
		GIGAMEDIA CHINA LIMITED
		By:	/s/ Arthur Wang
		Name: Arthur Wang
		Title: CEO
Accepted and agreed as of the date first set forth above.
T2CN Holding Limited
By:	/s/ Feng Tao
Name: Chairman
Title: Feng Tao

(Signature Page)

     IN WITNESS WHEREOF the parties hereto have caused their duly authorized representatives to execute this Agreement as of the date first written above.

	Authorized	Title
Name	Party	(applicable to a company)	Signature
Kyung W. Lee, Trustee			/s/ Kyung W. Lee, Trustee
Martin S. Rood			/s/ Martin S. Rood
Mon Szeto			/s/ Mon Szeto
Bixbie Financial Corp.	Allan Merteen	President	/s/ Allan Meiteen
Deane Williams			/s/ Deane Williams
Caroline Farrell			/s/ Caroline Farrell
TROY EDWARD LEIGHTON			/s/ Troy Edward Leighton
KERRI LERELTON LEIGHTON			/s/ Kerri Lerelton Leighton
Calneva Financial Partners, Ltd.	D. BRUCE HORTON	Chief Financial Officer & Director	/s/ D. BRUCE HORTON
The Calneva Financial Group Ltd.	D. Bruce Horton	Chief Financial Officer & Director	/s/ D. Bruce Horton
Bruno Benedet			/s/ Bruno Benedet
D. BRUCE HORTON			/s/ D. BRUCE HORTON
Bryan M. DEAR			/s/ Bryan M. DEAR
Michelle Cote-Dear			/s/ Michelle Cote-Dear
GUARDSMART LIMITED	JUSTIN KWEI	PRESIDENT	/s/ Justin Kwei
Jacqueline J. McClure			/s/ Jacqueline J. McClure
DR. KEITH LIM, INC.	DR. KEITH LIM	PRESIDENT	/s/ DR. KEITH LIM
T. Robert Horton			/s/ T. Robert Horton
Bradley N. Scharfe			/s/ Bradley N. Scharfe
RICHARD DOUGLAS STEWART			/s/ Richard Douglas Stewart
622416 Alberta Ltd.	PEG PECKHAM	President	/s/ Peg Peckham
GEORGH ROBERTSON			/s/ Georgh Robertson
ROBCAGC BARTON			/s/ Robcagc Barton
Steve Thackray			/s/ Steve Thackray
Don MACSorley			/s/ Don MacSorley
JAMES BARTON			/s/ James Barton
Ronnie Steiner Travel Tours Inc.	Ron Steiner	President	/s/ Ron Steiner
The MacLachlan Investments Corporation	PETER M. BROWN	PRESIDENT	/s/ Peter M. Brown
ROM M. JONES LTD.	ROM M. JONES	PRESIDENT	/s/ Rom M. Jones
JASON SCHARFE			/s/ JASON SCHARFE
GUY PECKHAM			/s/ Guy Peckham
Daryl Turner			/s/ Daryl Turner
ERIC K. STEWART			/s/ Eric K. Stewart
VERONA CAPITAL INTERNATIONAL	PHILIPPE MAST	DIRECTOR	/s/ Philippe Mast
MATRIX PARTNERS INC	KEITH A. EBERIT	PARTNER	/s/ Keith A. Eberit
HUGH COOPER			/s/ Hugh Cooper
LEONARD CLOUGH			/s/ Leonard Clough
K C GLOBAL HOLDINGS INC.	KEN CARTER	DIRECTOR	/s/ Ken Carter
K C GLOBAL HOLDINGS INC.	Kimberly Sulatyski	PRESIDENT & DIRECTOR	/s/ Kimberly Sulatyski
R.J. LABONTE & CO. LTD	REG LABONTE	PRESIDENT & DIRECTOR	/s/ Reg Labonte
RICK GRIFFITHS			/s/ RICK GRIFFITHS
JEFFREY SHEAR			/s/ Jeffrey Shear
MICHAEL SHEAR			/s/ Michael Shear
Wally Marcolin			/s/ Wally Marcolin
Brad Shackman			/s/ Brad Shackman
Richard Jeffrey			/s/ Richard Jeffrey
David L. Dreyer			/s/ David L. Dreyer
Brendan G. Murray			/s/ Brendan G. Murray
Graham Watson			/s/ Graham Watson
Dean Roosdahl			/s/ Dean Roosdahl
Rocky Paolo			/s/ Rocky Paolo
John Michael Keegan			/s/ John Michael Keegan
ERNEST S. POUNDER			/s/ Ernest S. Pounder
Terry Bonnes Chranz			/s/ Terry Bonnes Chranz
BRENDA LEIGHTON			/s/ Brenda Leighton
HAROLD LEIGHTON			/s/ Harold Leighton
MARVIN KRISTOFF			/s/ Marvin Kristoff
JOHN MICHAEL KEEGAN			/s/ John Michael Keegan
REMO POMPONIO			/s/ Remo Pomponio
CALVIN THOMPSON			/s/ Calvin Thompson
Conrad Lacker			/s/ Conrad Lacker
Robert Sali			/s/ Robert Sali
ROBERT J. CHARLETON			/s/ Robert J. Charleton
BYRON HAMPTON			/s/ Byron Hampton
JETCO HOLDINGS LTD.	KEITH BURANT	DIRECTOR	/s/ Keith Burant
Michael R. Muzos			/s/ Michael R. Muzos
JAMES PALEOLOGOS			/s/ James Paleologos
Evan S. Ho			/s/ Evan S. Ho
ELLIOTT LIPSEY		INVESTOR	/s/ ELLIOTT LIPSEY
Winton Capital Holdings Ltd.	Andrew Meode	Director	/s/ Andrew Meode
DR. BRANDT MILES INC.	BRANDT MILES	PRESIDENT & DIRECTOR	/s/ BRANDT MILES
GERALD B. CAUL			/s/ Gerald B. Caul
Beltring Limited	Robert Simth	Director	/s/ Robert Simth
Kathleen Wright	KW		/s/ KW
United Triumph Inc.			/s/ United Triumph Inc.
SHEAR HOLDINGS LIMITED			/s/ Shear Holdings Limited
HAMPTON ASSOCIATES LIMITED			/s/ Hampton Associates Limited
Valeurs Mobilieres Desjardins Inc. ITF ROXY AND BEAR INVESTMENT			/s/ Valeurs Mobilieres Desjardins Inc. ITF ROXY AND BEAR INVESTMENT
Cancettina Amante			/s/ Canie Amante
Rosa Marie Amante			/s/ Rosa Marie Amante
Eastside Pinnacle LLC			/s/ Eastside Pinnacle LLC

Exhibit A

	Ordinary		Shareholding			First Installment
Name of Selling Shareholders	Shares		Percentage			in US$
BRYAN M. DEAR		700,002		1.251	%		437,501
MICHELLE COTE-DEAR		200,000		0.357	%		125,000
GUARDSMART LIMITED		200,000		0.357	%		125,000
JACQUELINE J. McCLURE		300,000		0.536	%		187,500
KEITH LIM INC.		100,000		0.179	%		62,500
D. BRUCE HORTON		850,000		1.519	%		531,250
T. ROBERT HORTON		150,000		0.268	%		93,750
BRADLEY N. SCHARFE		850,000		1.519	%		531,250
JASON SCHARFE		49,999		0.089	%		31,249
GUY PECKHAM		500,000		0.894	%		312,500
BELTRING LIMITED		300,000		0.536	%		187,500
CALNEVA FINANCIAL PARTNERS, LTD.		40,000		0.071	%		25,000
THE CALNEVA FINANCIAL GROUP, LTD.		242,497		0.433	%		151,561
HAMPTON ASSOCIATES LIMITED		500,000		0.894	%		312,500
JETCO HOLDINGS LTD.		300,000		0.536	%		187,500
RICHARD DOUGLAS STEWART		100,000		0.179	%		62,500
622416 ALBERTA LTD.		28,000		0.050	%		17,500
GEORGE C. ROBERTSON		65,000		0.116	%		40,625
ROBERT C. BARTON		100,000		0.179	%		62,500
STEVE THACKRAY		10,000		0.018	%		6,250
DONALD R. MACSORLEY		26,667		0.048	%		16,667
JAMES S. BARTON		100,000		0.179	%		62,500
RONNIE STEINER TRAVEL TOURS INC.		10,000		0.018	%		6,250
THE MACLACHLAN INVESTMENTS CORPORATION		133,333		0.238	%		83,333
RON JONES LTD.		50,000		0.089	%		31,250
JOHN MICHAEL KEEGAN		15,000		0.027	%		9,375
BRUNO BENEDET JR.		40,000		0.071	%		25,000
DARYL TURNER		40,000		0.071	%		25,000
ELLIOTT J. LIPSEY		33,333		0.060	%		20,833
ERIC K. STEWART		6,666		0.012	%		4,166
VERONA CAPITAL INTERNATIONAL		66,667		0.119	%		41,667
MATRIX PARTNERS, INC.		133,333		0.238	%		83,333
HUGH COOPER		66,667		0.119	%		41,667
LEONARD CLOUGH		28,533		0.051	%		17,833
KYUNG W. LEE, TRUSTEE		20,000		0.036	%		12,500

	Ordinary		Shareholding			First Installment
Name of Selling Shareholders	Shares		Percentage			in US$
EASTSIDE PINNACLE, LLC		26,667		0.048	%		16,667
MICHEAL R. MUZOS		6,000		0.011	%		3,750
MARTIN S. ROOD		20,000		0.036	%		12,500
MON SZETO		6,000		0.011	%		3,750
KATHLEEN WRIGHT		6,667		0.012	%		4,167
KATHLEEN WRIGHT ROTH IRA		6,667		0.012	%		4,167
KC GLOBAL HOLDINGS INC.		53,333		0.095	%		33,333
ROBERT J. CHARLETON		50,000		0.089	%		31,250
DR. BRANDT MILES INC.		10,000		0.018	%		6,250
R.J. LABONTE & CO. LTD.		12,000		0.021	%		7,500
UNITED TRIUMP INC.		53,334		0.095	%		33,334
DEAN WILLIAMS		26,667		0.048	%		16,667
RICK GRIFFITHS		13,333		0.024	%		8,333
JAMES PALEOLOGOS		80,000		0.143	%		50,000
VALEURS MOBILIERES DEJARDINS INC. ITF ROXY AND BEAR INVESTMENT		200,000		0.357	%		125,000
JEFFREY SHEAR		366,667		0.655	%		229,167
MICHAEL SHEAR		166,667		0.298	%		104,167
SHEAR HOLDINGS LIMITED		133,334		0.238	%		83,334
BIXBIE FINANCIAL CORP.		267,000		0.477	%		166,875
WALLY MARCOLIN		10,000		0.018	%		6,250
BRAD SHACKMAN		10,000		0.018	%		6,250
RICHARD JEFFREY		10,000		0.018	%		6,250
WINTON CAPITAL HOLDINGS LTD.		250,000		0.447	%		156,250
DAVID L. DREYER		10,000		0.018	%		6,250
BRENDAN G. MURRAY		10,000		0.018	%		6,250
EVAN S. HO		10,000		0.018	%		6,250
GRAHAM WATSON		15,000		0.027	%		9,375
DEAN ROOSDAHL		15,000		0.027	%		9,375
OCKY J. PAOLO		25,000		0.045	%		15,625
JOHN MICHAEL KEEGAN		13,334		0.024	%		8,334
ERNEST S. POUNDER		13,334		0.024	%		8,334
TERRY BONNESCHRANZ		1,000		0.002	%		625
BRENDA LEIGHTON		2,500		0.004	%		1,563
HAROLD LEIGHTON		2,500		0.004	%		1,563
MARVIN D. KRISTOFF		500		0.001	%		313
CAROLINE FARRELL		1,000		0.002	%		625
TROY LEIGHTON		1,000		0.002	%		625
KERRI LEIGHTON		1,000		0.002	%		625
CONCETTINA AMANTE		1,700		0.003	%		1,063
ROSA MARIE AMANTE		500		0.001	%		313

	Ordinary		Shareholding			First Installment
Name of Selling Shareholders	Shares		Percentage			in US$
REMO POMPONIO		500		0.001	%		313
CALVIN THOMPSON		1,500		0.003	%		938
CONRAD LACKER		1,000		0.002	%		625
GERRY CAUL		5,000		0.009	%		3,125
DUNDEE SECURITIES CORP. IN TRUST FOR ROBERT SALI		35,000		0.063	%		21,875
BYRON HAMPTON		1,000		0.002	%		625
TOTAL		8,307,401		14.85	%		5,192,130

Exhibit B
Financial Statements

EX-4.46

Exhibit 4.46

SPA for NewMargin Happydigital – Execution Copy

SHARE PURCHASE AGREEMENT

by and among

NEWMARGIN HAPPYDIGITAL INVESTMENT PARTNERS INC.

SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.

- and -

GIGAMEDIA CHINA LIMITED

January 1, 2007

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”), dated as of January 1, 2007, is entered into and made by and among the following parties:

     NEWMARGIN HAPPYDIGITAL INVESTMENT PARTNERS INC., a company organized and existing under the laws of the British Virgin Islands (the “Selling Shareholder”);

     SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD., a company organized and existing under the laws of the People’s Republic of China (, “NewMargin Parent”); and

     GIGAMEDIA CHINA LIMITED, a company organized and existing under the laws of the British Virgin Islands (the “Purchaser”).

WHEREAS,

     (i) T2CN Holding Limited (the “Company”) is a company duly organized and existing under the laws of the British Virgin Islands, and has issued 45,448,001 Ordinary Shares (as hereinafter defined) and 10,500,000 preferred shares;

     (ii) the Selling Shareholder holds 1,601,507 Ordinary Shares of the Company, representing 2.862% of the total issued and outstanding shares of the Company;

     (iii) NewMargin Parent is one of the ultimate beneficiaries of the Selling Shareholder, which was indirectly established by NewMargin Parent only for the purpose of holding shares of the Company; and

     (iv) the Selling Shareholder wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Selling Shareholder, a total of 1,601,507 Ordinary Shares (collectively the “Purchase Shares” and individually “Purchase Share”) subject to the terms and conditions set forth herein; and

     NOW, THEREFORE, in consideration of the premises set forth above, the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

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SECTION 1 DEFINITIONS

     Unless otherwise defined in this Agreement or the November 25, 2006 Shareholders’ Agreement, capitalized terms used herein shall have the following meanings:

     “Domestic ICP Enterprise” means Shanghai T2 Entertainment Co., Ltd (), a domestic Chinese limited liability company registered in Shanghai to engage in value-added telecommunications services.

     “GIGAMEDIA” means GigaMedia Limited, a company listed on the NASDAQ and the parent company of the Purchaser.

     “Happy Digital” means a company established in Chengdu City with the Chinese name of
“”

     “MAA” means the Amended and Restated Memorandum and Articles of Association of the Company dated on November 12, 2006.

     “New Articles” means the Amended and Restated Memorandum and Articles of Association of the Company, in form and substance to be agreed upon by the Company, the Purchaser, the Selling Shareholder, other existing shareholders (together with the Selling Shareholder, the “Existing Shareholders”) of the Company and certain other parties thereto.

     “New Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, among the Company, the Purchaser, other Existing Shareholders and certain other parties thereto, in form and substance to be agreed upon by the parties thereto.

     “Net Operating Income” as used in this agreement shall mean the Company’s net income in U.S. dollars as defined in U.S. GAAP, with the following adjustments: (1) adding back non-cash option based compensation to employees and executives of the Company; (2) normalizing the game license fee for the online game Aeronaut paid by the Company to JC Entertainment Corporation during the 1st half of 2007, as if such license fees were all capitalized and amortized over the duration of the relevant license agreement; and (3) the sum of the net income so calculated after taking account of the foregoing items (1) and (2) multiplying by a fraction, the numerator of which shall be the total number of the issued and outstanding Ordinary Shares and preferred shares of the Company as at the execution date of this Agreement and the denominator of which shall be the aggregate number of the issued and outstanding Ordinary Shares and preferred shares of the Company on June 30, 2007 excluding (i) 300,000 shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA; (ii) any additional preferred shares issued based on 2006 Accounts (as defined therein) of the Company as agreed upon in Article XV of the November 25, 2006 Shareholders’ Agreement; and (iii) all share issuance approved by all the board members of the

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Company appointed by the Purchaser without the written consent of the Selling Shareholder during the 1^st half of 2007 provided, however, that no share issuance shall be excluded if such share issuance does not constitute a net downward adjustment on the Net Operating Income.

     “November 25, 2006 Shareholders’ Agreement” means the Amended and Restated Shareholders’ Agreement of the Company, dated November 25, 2006, among the Company, the Existing Shareholders and certain other parties thereto.

     “Ordinary Shares” means the ordinary shares of the Company, par value US$0.01 per share.

SECTION 2 AGREEMENT TO PURCHASE AND SALE

     2.1 Agreement to Purchase and Sale. Subject to the terms and conditions hereof, at the Closing (as defined below), the Selling Shareholder shall sell to the Purchaser, and the Purchaser shall purchase from the Selling Shareholder, the Purchase Shares, for a price to be ascertained as below (the “Purchase Price”).

     2.2 Purchase Price. The Purchase Price per Purchase Share shall be

     (i) US$1.05 if the Net Operating Income for the first half of 2007 is not more than US$ 1,000,000;

     (ii) US$1.25 if the Net Operating Income for the first half of 2007 is US$ 1,500,000; or

     (iii) US$1.45 if the Net Operating Income for the first half of 2007 is not less than US$ 2,500,000.

     The Purchase Price per Purchase Share should be adjusted on a pro rata basis if the Net Operating Income for the first half of 2007 falls between the above 3 threshold amounts. By way of example, if the Net Operating Income for the first half of 2007 is more than US$ 1,000,000 but less than US$ 1,500,000, the Purchase Price per Purchase Share shall be the sum of (0.4 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.65; if the Net Operating Income for the first half of 2007 is more than US$ 1,500,000 but less than US$ 2,500,000, the Purchase Price per Purchase Share shall be the sum of (0.2 multiplying by the amount of the Net Operating Income for the first half of 2007 and then divided by 1,000,000) and US$ 0.95.

     2.3 Payment of the Purchase Price. The Purchase Price shall be paid by the Purchaser in the following two installments to an account designated by the Selling Shareholder in writing, which designation shall be instructed to the Purchaser fourteen (14) days prior to the respective dates of payment specified herein:

3

     (i) Subject to the terms and conditions under this Agreement, the first payment of US$ 1,000,942 (“First Installment”) shall be paid in cash at the Closing.

     (ii) Subject to the terms and conditions under this Agreement, the remaining Purchase Price (“Second Installment”) shall be paid in cash on August 15, 2007 after the Closing.

SECTION 3 CLOSING; DELIVERY

     3.1 Closing. The transfer of the Purchase Shares (the “Closing”) shall take place at the offices of the Company, 12^th Floor, Xingyuan Technology Plaza, No. 418 Guiping Road, Shanghai 200233, China, on February 12, 2007 (“Closing Date”) or at such other place and time as the parties hereto may mutually agree. Upon the Closing, all the rights and benefits attached to and in relation to the Purchase Shares (including but not limited to the dividends attributable to the Selling Shareholder in respect of any and all Purchase Shares if any) shall be transferred from the Selling Shareholder to the Purchaser.

     3.2 Delivery at the Closing. At the Closing, the Selling Shareholder shall deliver the following items to the Purchaser:

     (i) The total Purchase Shares, together with duly issued share certificates of the total Purchase Shares in the name of the Purchaser;

     (ii) A compliance certificate, dated as of the Closing signed by the duly authorized representative of the Selling Shareholder certifying that all the representations and warranties set forth in Section 4 are true, correct and complete, and all the conditions hereunder have been fulfilled; and

     (iii) An unaudited financial balance sheet, cash flow statement and profit and loss statement of the Company for the full year of 2006 and an unaudited balance sheet, and profit and loss statement of the Company dated as of January 31, 2007, which shall be satisfactory in form and substance to the Purchaser.

     At the Closing, the Purchaser shall pay the First Installment to the Selling Shareholder against receipt of all deliverables under items (i) through (iii) of Section 3.2 hereof. On the date of receipt of the First Installment, the Selling Shareholder shall issue a written receipt acknowledging such receipt to the Purchaser.

SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER AND NEWMARGIN PARENT

     The Selling Shareholder and NewMargin Parent hereby, jointly and severally, represent and warrant to the Purchaser that the statements in this Section 4 are all true, correct and complete as of the date hereof, as of the Closing Date and, to the best of their knowledge, as of the payment date of the Second Installment:

4

     4.1 Organization, Good Standing and Qualification. The Company is duly organized, validly existing and in good standing under, and by virtue of, the laws of the British Virgin Islands and has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company is qualified to do business and is in good standing in each jurisdiction where failure to be so qualified would have an adverse effect on its financial condition, business, prospects or operations, or otherwise.

     4.2 Capitalization. Immediately prior to the Closing, the authorized shares of the Company shall consist of the following:

     (i) Ordinary Shares. A total of 55,000,000 authorized Ordinary Shares of which 45,448,001 shares are issued and outstanding.

     (ii) Preferred Shares. A total of 25,000,000 authorized preferred shares, of which 10,500,000 shares are issued and outstanding.

     (iii) Options, Warrants, Reserved Shares. Except for (a) the conversion privileges of such Preferred Shares, (b) the preemptive rights provided in the November 25, 2006 Shareholders’ Agreement, and (c) 5,180,000 Ordinary Shares reserved for the Company’s employee stock ownership plans approved by the Board of directors of the Company, (d) 300,000 Ordinary shares reserved for the acquisition of Happy Digital as agreed upon in the November 25, 2006 Shareholders’ Agreement and the MAA, there are no options, warrants, conversions privileges or other rights or agreements outstanding or under which the Company is or may become obliged to issue any securities of any class or series except as set forth above. Apart from the exceptions noted in this Section 4.2, none of the Company’s outstanding shares, and no shares issuable upon exercise, conversion, or exchange of any outstanding options or other shares issuable by the Company, are subject to any and outstanding liens, security interests, adverse claims, charges or encumbrances (collectively “Liens”), preemptive rights, rights of first refusal, or other rights to purchase such shares (whether in favor of the Company or any other person).

     4.3 Valid Issuance of Purchase Shares. The Purchase Shares have been duly authorized and validly issued and are fully paid and non-assessable, accounting for 2.862% of the total issued and outstanding shares of the Company and free and clear of any and all Liens. The Selling Shareholder is the true and lawful owner of the Purchase Shares with and the full and valid title to any and all Purchase Shares.

     4.4 Due Authorization. All corporate actions by the Company and the Selling Shareholder and, as applicable, their respective officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all obligations of the Company and the Selling Shareholder under this Agreement and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby (the “Ancillary Agreements”), has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Selling

5

Shareholder, are valid and legally binding obligations of the Selling Shareholder, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     4.5 No Conflicts. The execution and delivery of this Agreement and any and all Ancillary Agreements by the Selling Shareholder and NewMargin Parent and the performance of their respective obligations hereunder and thereunder will not result in (i) any conflict with the memorandum and articles of association of the Selling Shareholder or NewMargin Parent or the Company, (ii) any breach or violation of, conflict with or default under any law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization or any mortgage, lease, agreement, deed of trust, indenture or any other agreements or instrument to which the Selling Shareholder or NewMargin Parent or the Company is a party or by which the Selling Shareholder or NewMargin Parent or the Company or their respective properties or assets are bound, or (iii) the creation or imposition of any Liens against the Company.

     4.6 Financial Statements. Exhibit A hereto sets forth an unaudited combined balance sheet and income statements of the Company (the forgoing financial statements and any notes thereto are hereinafter referred to as the “Financial Statements”) as of November 30, 2006 (the “Balance Sheet Date”). Such Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition of the Company as of the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with US generally accepted accounting principles applied on a consistent basis. Other than expressly disclosed in the Financial Statements, the Company does not have, directly or indirectly, material actual or contingent liabilities in any nature whatsoever.

     4.7 Activities Since Balance Sheet Date. Since the Balance Sheet Date, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     4.8 Disclosure. The Selling Shareholder has provided the Purchaser with all information needed for the Purchaser to decide whether to purchase the Purchase Shares. There has been no omission of any material facts or misrepresentation of any statement herein.

SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents and warrants to the Selling Shareholder that the statements in this Section 5 are all true, correct and complete as of the date hereof and as of the Closing Date:

6

     5.1 Authorization. All corporate actions by the Purchaser and, as applicable, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of any and all of its obligations under this Agreement and the Ancillary Agreements has been taken or will be taken prior to the Closing. This Agreement and the Ancillary Agreements, when executed and delivered by the Purchaser, constitute valid and legally binding obligations of the Purchaser, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

     5.2 No Conflicts; Consents and Approvals, etc. The execution and delivery of this Agreement by the Purchaser and the performance of its obligations hereunder will not result in (i) any conflict with the certificate of incorporation, by-laws or other constitutive documents of the Purchaser, or (ii) any breach or violation of, conflict with or default under any applicable law, statute, regulation, judgment, order, decree, license, permit or other governmental authorization.

SECTION 6 ADDITIONAL COVENANTS

     6.1 Filing of the New Articles. The Selling Shareholder shall cause the New Articles to be filed by the Company with the British Virgin Islands Registrar of Companies as soon as practicable following the Closing.

     6.2 Operation in Ordinary Course. The Selling Shareholder and NewMargin Parent undertake, jointly and severally, that the Company will be operated in the ordinary course of business, consistent with past practice, and as reasonably directed by the Purchaser, from the date hereof through the Closing Date.

SECTION 7 CONDITIONS TO CLOSING BY PURCHASER

     The obligations of the Purchaser to complete the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions by the Selling Shareholder and NewMargin Parent, any one or more of which may be waived by the Purchaser in writing:

     7.1 Representations and Warranties True and Correct. Any and all the representations and warranties made by the Selling Shareholder and NewMargin Parent in Section 4 hereof shall be true and correct and complete when made, and shall be true and correct and complete as of the Closing Date and, to the best of their knowledge, as of the date of payment of the Second Installment with the same force and effect as if they had been made on and as of such dates.

     7.2 Performance of Obligations. The Selling Shareholder shall have performed and complied with all agreements, obligations and conditions contained in

7

this Agreement that are required to be performed or complied with by it on or before the Closing.

     7.3 New Articles. The New Articles shall have been duly adopted by the Company by all necessary corporate actions of its Board of Directors and its shareholders.

     7.4 Execution of New Shareholders’ Agreement. The New Shareholders’ Agreement in a form and having a content satisfactory to the Purchaser shall have been duly executed and delivered by all parties thereto (other than the Purchaser), and shall be in full force and effect.

     7.5 Consents, Approvals and Waivers under the November 25, 2006 Shareholders’ Agreement. All the prior written consents and approvals contained in the November 25, 2006 Shareholders’ Agreement shall have been duly obtained. Each other Existing Shareholders of the Company shall have delivered a written waiver, in form and substance satisfactory to the Purchaser, waiving any right such shareholder may have to notice of the transactions contemplated hereunder and under any ancillary agreement entered pursuant thereto, waiving any right of first refusal or co-sale right such shareholder may enjoy with respect to the sale of the Purchase Shares hereunder and waiving any restrictions on the transfer or other disposition of the shares in the Company by Selling Shareholder under the November 25, 2006 Shareholders’ Agreement. The Execution of the New Shareholders’ Agreement by an Existing Shareholder of the Company shall be deemed a waiver by such Existing Shareholder of its/his rights aforesaid.

     7.6 No Material Adverse Change. Since the date hereof, there has been no material adverse change in the Company, including but not limited to its assets, liabilities, financial condition and operating results.

     7.7 Replacement of Directors. Prior to the Closing, any and all directors of the Company appointed and/or nominated by the Selling Shareholder shall have been removed from office and replaced with those appointed and/or nominated by the Purchaser.

     7.8 Successful Transfer of Local ICP Enterprise. Prior to the Closing, any and all nominee shareholders of the Domestic ICP Enterprise that have been designated by the Selling Shareholder shall be replaced with the persons designated by the Purchaser and that all the agreements and documents in relation to the original nominees shall be terminated and replaced with those between new nominees and related parties.

     7.9 Selling Shareholder’s Deliverables. The Selling Shareholder shall have delivered to the Purchaser the deliverables specified in Section 3.2 prior to or on the Closing Date.

     7.10 Provision of Information and Materials. The Selling Shareholder shall have provided, in the timely manner, all necessary documents, information and

8

statements to GIGAMEDIA for issuance of the GIGAMEDIA shares to the Selling Shareholder.

SECTION 8 CONDITIONS TO PAYMENT OF SECOND INSTALLMENT

     8.1 Conditions to Payment. The obligations of the Purchaser to pay the Second Installment are subject to the precondition (unless otherwise waived by the Purchaser in writing) that any and all the representations and warranties made by the Selling Shareholder and NewMargin Parent in Section 4 hereof shall be true and correct and complete as of both the execution date hereof and the Closing Date, and shall be true and correct and complete to the best of their knowledge as of the payment of the Second Installment with the same force and effect as if they had been made on and as of such date.

SECTION 9 TERMINATION

     9.1 Termination of Agreement. This Agreement and the transactions contemplated by this Agreement shall terminate:

          (i) upon the mutual consent in writing of the parties hereto; or

          (ii) in the event of any breach of this Agreement which materially affects any other party hereto, such breach is not remedied within thirty (30) days after written notice thereof is given to the breaching party by the affected party; provided, however, that in the case of any breach by any of the Selling Shareholder and/or NewMargin Parent, only the Purchaser has the right to early terminate this Agreement.

     9.2 Effect of Termination. In the event this Agreement is terminated pursuant to Section 9.1, this Agreement shall become void and have no further effect, provided that no party shall be relieved of any liability for a breach of this Agreement or for any misrepresentation hereunder, nor shall such termination be deemed to constitute a waiver of any available remedy (including specific performance and other injunctive relieves) for any such breach or misrepresentation.

     9.3 Survival. Sections 9, 10, 11.2 and 11.3 shall survive the expiration or early termination of this Agreement.

9

SECTION 10 CONFIDENTIALITY

     10.1 Confidential Information. For purpose of this Section 10, the term “Confidential Information” shall mean the execution, delivery and performance of this Agreement and any and all information delivered by a party hereto to any of the other party hereto in connection with the transactions contemplated hereby.

     10.2 Non-Disclosure.

          (i) Without the prior written consent of the disclosing party, any party receiving the Confidential Information (a) may not use or disclose to any person any Confidential Information; and (b) shall make every effort to prevent the use or disclosure of Confidential Information. The said provisions do not apply to (a) disclosure of Confidential Information to a director or employee of the receiving party whose function requires him to have the Confidential Information, (b) disclosure of Confidential Information to a professional adviser for the purpose of advising the Purchaser, the Selling Shareholder, or NewMargin Parent, (c) Confidential Information which has become public knowledge other than, directly or indirectly, through the receiving party’s breach of this Section 10.2, or (d) disclosure of Confidential Information required by law or regulation or any competent authorities (and then if and to the extent practicable only after consulting and taking into account the reasonable requirements of the Purchaser, or the Selling Shareholder or NewMargin, where applicable); provided, however, that in the above situations (a) and (b) the persons receiving the Confidential Information have undertaken the confidentiality obligations herein.

          (ii) Without the prior written consents of the Purchaser and the Company, neither the Selling Shareholder nor NewMargin Parent may disclose to any third party any confidential information about the Company that it has received.

SECTION 11 MISCELLANEOUS

     11.1 Binding Effect; Assignment. This Agreement shall be binding upon and shall be enforceable by each party, its successors and permitted assigns. No party may assign any of its rights or obligations hereunder without the prior written consent of the other parties.

     11.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflict of law rules thereof to the extent such rules would require or permit the application of the laws of another jurisdiction.

     11.3 Dispute Resolution. Any dispute relating to or arising from the performance of this Agreement shall be settled through consultations among the Parties, and if the parties hereto cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to the

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Hong Kong International Arbitration Center for arbitration in accordance with the UNCIRTAL Arbitration Rules then in force.

     11.4 Costs and Expenses. Each of the parties hereto shall pay all its own costs and expenses incident to its negotiation and entry into this Agreement and any other related agreements or instruments contemplated hereunder or thereunder and to its performance of and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of any counsel and/or accountants that it may have retained.

     11.5 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and delivered in person, by courier or by facsimile (along with a copy by certified or registered mail) to the following addresses:

(a) If to the Selling Shareholder, to:

NEWMARGIN HAPPYDIGITAL INVESTMENT PARTNERS INC.

Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China

Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Greg Ye

(b) If to NewMargin Parent, to:

SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.
Address: 76 Xing Guo Road, Radisson Plaza Hotel, Villa 3, Shanghai, China
Facsimile: 86-21-6213-7000
Telephone: 86-21-6213-8000
Attention: Mr. Feng Tao

(c) If to the Purchaser, to:

GIGAMEDIA CHINA LIMITED
Address: 14th Floor, 122 Tunhwa North Road, Taipei 10595, Taiwan R.O.C.
Facsimile: 886-2-8770-7576
Telephone: 886-2-8770-7966
Attention: Ms. Jennifer Tseng, General Counsel

or, in each case, at such other address as may be specified in writing to the other parties in accordance with the requirements of this Section 11.5. All such notices, requests, demands, waivers and other communications shall be deemed to have been received (x) if by personal delivery or courier, on the day delivered, or (y) if by

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facsimile, (A) if during business hours on a Business Day, on the day on which such facsimile was sent, or (B) otherwise on the Business Day immediately following the day on which such facsimile was sent, provided that a copy is also sent by certified or registered mail.

     11.6 Counterparts. This Agreement may be executed in counterparts and by different parties hereto on separate copies or counterparts and which taken together shall constitute one and the same instrument. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.

[SIGNATURE PAGE FOLLOWS]

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(Signature Page)

     IN WITNESS WHEREOF the parties hereto have caused their duly authorized representatives to execute this Agreement as of the date first written above.

NEWMARGIN HAPPYDIGITAL INVESTMENT PARTNERS INC.
By:	/s/ Wu Xin
Name:	Wu Xin
Title:	Director
SHANGHAI NEWMARGIN VENTURE CAPITAL
CO., LTD.
By:	/s/ Feng Tao
Name:	Feng Tao
Title:	President
GIGAMEDIA CHINA LIMITED
By:	/s/ Arthur Wang
Name:	Arthur Wang
Title:	CEO

Accepted and agreed as of the date first set forth above.

T2CN Holding Limited

By:	/s/ Feng Tao
Name:	Chairman
Title:	Feng Tao

Exhibit A
Financial Statements

EX-4.47

Exhibit 4.47EXECUTION COPY

DATED THIS 7 DAY OF DECEMBER 2006

SUBSCRIPTION AGREEMENT

TABLE OF CONTENTS

CLAUSE HEADING		PAGE NO
1.	INTERPRETATION		3
2.	THE SUBSCRIPTION		5
3.	COMPLETION		5
4.	CONDITIONS		6
5.	WARRANTIES AND UNDERTAKINGS BY THE COMPANY		7
6.	WARRANTIES AND UNDERTAKINGS BY THE SUBSCRIBER TO THE COMPANY		12
7.	TERMINATION		12
8.	INDEMNITIES		13
9.	COSTS AND EXPENSES		13
9A.	CONFIDENTIALITY AND NON-DISCLOSURE		13
10.	GENERAL PROVISIONS		14
11.	NOTICES		14
12.	TIME OF ESSENCE		15
13.	SEVERABILITY		15
14.	GOVERNING LAW AND JURISDICTION		15
15.	COUNTERPARTS		16
ANNEX A			18
ANNEX B			19

SUBSCRIPTION AGREEMENT

THIS AGREEMENT is made on the 7 day of December 2006

BETWEEN:

(1)	GigaMedia Asia Pacific Limited (IBC Number 1068168), a company incorporated in the British Virgin Islands and having its registered office at Overseas Management Company Trust (B.V.I.) Ltd., OMC Chambers, P.O. Box 3152, Road Town, Tortola, British Virgin Islands (the “Subscriber”);
(2)	Infocomm Asia Holdings Pte. Ltd. (Company Registration Number 200414772H), a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (the “Company”);

All the parties above shall be referred to individually as a “Party” and collectively as the “Parties”.

WHEREAS

(A) The Company is a private company limited by shares incorporated in Singapore under the Companies Act and will at the Completion Date have an issued share capital as follows:

		Number of Ordinary
	Type of Shares	Shares on a
Name of Shareholder	held	Converted Basis
Management Capital International Limited	Ordinary Shares	150,000
Infocomm Investments Pte Ltd	Class A Shares	300,000
Commerzbank Infocomm Segregated Portfolio	Class A Shares	300,000
Global Star International Development Limited	Class A Shares	200,000
Gigamedia Limited	Class B Shares	500,000
Total number of Shares		1,450,000

(B) It is anticipated that Etherfast Pte Ltd will subscribe for 100,000 new Ordinary Shares (as defined below) to be issued by the Company, following which the shareholding structure of the Company will be as follows:

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		Number of Ordinary
	Type of Shares	Shares on a
Name of Shareholder	held	Converted Basis
Management Capital International Limited	Ordinary Shares	150,000
Etherfast Pte Ltd	Ordinary Shares	100,000
Infocomm Investments Pte Ltd	Class A Shares	300,000
Commerzbank Infocomm Segregated Portfolio	Class A Shares	300,000
Global Star International Development Limited	Class A Shares	200,000
Gigamedia Limited	Class B Shares	500,000
Total number of Shares		1,550,000

(C)	Management Capital International Ltd is a company incorporated in the British Virgin Islands and having its registered office at Portcullis Trustnet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands (“MCIL”);
(D)	Etherfast Pte Ltd (Company Registration Number 200604316G), is a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (“Etherfast”);
(E)	Infocomm Investments Pte Ltd (Company Registration Number 199608120R) is a company incorporated in Singapore and having its registered office at 6 Temasek Boulevard #29-00 Suntec Tower 4 Singapore 038986 (“IIPL”);
(F)	Commerzbank Infocomm Segregated Portfolios, a specific segregated portfolio within Commerz Asia Best SPC (Company Registration Number CB-142661), is a segregated portfolio company incorporated in the Cayman Islands and having its registered office at Coconut Villa 2 Jennifer Drive P.O. Box 10211 APO Grand Cayman BW1 (“CISP”);
(G)	Global Star International Development Limited (Company Registration Number 1032166), a wholly owned subsidiary of The9 Limited, is a company incorporated in Hong Kong Special Administrative Region and having its registered office at 34/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong (“Global Star”);
(H)	The Company is a business operating and distributing online games by way of securing the exclusive distribution rights for online internet games or mobile games for distribution in the South Asia region and to make strategic investments in operating hubs; and
(I)	The Subscriber proposes to subscribe for 500,000 Class B Shares at the Issue Price as hereinafter defined from the Company on the terms and subject to the conditions set out in this Agreement.

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IT IS AGREED as follows:-

1. INTERPRETATION

1.1	In this Agreement, unless the context otherwise requires:-
	“Articles” means the articles of association of the Company, as amended to incorporate the amendments set out in Annex A and as may be further amended from time to time;
	“Board of Directors” means board of Directors of the Company which shall be elected according to the Shareholders’ Agreement;
	“Business Day” means any day in Taipei, New York and Singapore (other than Saturdays and Sundays) on which licensed banks are open for business in Taipei, New York and Singapore;
	“Class A Shares” means such number of redeemable, convertible, participating, preference shares in the capital of the Company, each bearing the terms and conditions as set out in the Articles;
	“Class B Shares” means such number of redeemable, convertible, participating, preference shares in the capital of the Company, each bearing the terms and conditions as set out in Annex A;
	“Companies Act” means the Companies Act, Chapter 50 of the Statutes of the Republic of Singapore;
	“Completion” means the completion of the subscription of the Subscription Shares pursuant to clause 3;
	“Completion Date” means the date falling three (3) Business Days after all the conditions set out in clause 4.1 are satisfied or otherwise waived in writing by the relevant parties hereto, which shall be no later than 15 December 2006, or such later date as the parties hereto may agree;
	“Converted Basis” means such number of Ordinary Shares held as a result of the conversion of Preference Shares into Ordinary Shares of the Company at the Class A Conversion Rate or the Class B Conversion Rate (as the case may be), pursuant to the terms and conditions set out in the relevant Subscription Agreements;
	“Directors” means the directors of the Company for the time being;
	“Investment Budget” means the investment budget to be approved by the Investment Committee that will be in line with the Use of Funds;
	“Investment Committee” means the committee that shall be appointed by the Board of Directors according to the Shareholders’ Agreement;
	“Issue Price” means US$20.00 for each Subscription Share;

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“Intellectual Property Rights” means any and all legal rights or interests evidenced by or embodied in (1) any idea, design, concept, method, process, techniques, apparatus, software, invention, discovery, or improvement, including any patents, patent applications, trade secrets and know-how; (2) any work of authorship, including any copyrights or industrial designs; (3) any trademarks, trade names, service marks, trade designations and associated goodwill; and (4) any other proprietary technology or material in which similar rights exist by virtue of or pursuant to any law in force in any part of the world at any time or from time to time;

“Management” means the management team of the Company as set out in Schedule 1 of the Shareholders’ Agreement;

“Material Adverse Change” means any change, event or effect that may be materially adverse to the general affairs, business, operations, assets, condition (financial or otherwise), or results of operations of the Company taken as a whole;

“Ordinary Shares” means the ordinary shares in the capital of the Company;

“Shareholders” means existing shareholders of the Company including MCIL, CISP, IIPL and Global Star;

“Shareholders’ Agreement” means the agreement substantially in the form set out in Annex B to be entered into between, inter alia, the Subscriber, MCIL, CISP, IIPL, Global Star, Etherfast and the Company to regulate the affairs of the Company and the relationship of the shareholders of the Company;

“Shareholder Proportions” means, in relation to a Shareholder, the proportion which the number of Ordinary Shares (on a Converted Basis) set against the name of each Shareholder in the tables as set out in Recitals A and B (the “Tables”), as the case may be, bears to the total number of Ordinary Shares in the Company (on a Converted Basis) as set out in the Tables, subject to changes in share capital of the Company as permitted by the terms and conditions of this Agreement, the Subscription Agreement and the Articles;

“South Asia Region” includes Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and other territories as agreed by the Parties from time to time.

“Shares” means the Class A Shares, the Class B Shares and the Ordinary Shares;

“Subscription Shares” means such number of Class B Shares to be allotted by the Company to the Subscriber which forms the subject of the subscription under the terms and conditions set out in this Agreement and “Subscription Share” means each of the Subscription Shares;

“Record Date” means in relation to any dividend, right, allotment or other distributions, the date as at the close of business, on which members of the Company must be registered in order to participate in such dividend, right, allotment or other distributions;

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	“Registrar” has the meaning ascribed to it by Section 4 of the Companies Act; and
	“US Dollars” or “US$” means the lawful currency of the United States of America.
1.2	The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. Unless the context otherwise requires, words (including words defined herein) denoting the singular number only shall include the plural and vice versa. The words “written” and “in writing” include any means of visible reproduction. References to the “Appendix”, “clauses” and “Recitals” are to be construed as references to the appendix, to clauses and recitals of this Agreement. Any reference to a sub-clause or a paragraph is to a sub-clause or paragraph of the clause in which such reference appears. Any reference to a time of the day is to be construed as Singapore time unless otherwise stated.

2. THE SUBSCRIPTION

2.1	On the terms and subject to the conditions of this Agreement, the Company agrees to allot and issue an aggregate of 500,000 Subscription Shares, and the Subscriber agrees to subscribe and pay for such number of Subscription Shares, at the Issue Price for each Subscription Share, making an aggregate Issue Price of US Dollars Ten Million (US$10,000,000) (the “Issue Consideration”).
2.2	Subject to full payment by the Subscriber in accordance with clause 3.1(a), the Subscription Shares shall be issued free from all claims, charges, liens and other encumbrances whatsoever and shall carry such rights as set out in Annex A to this Agreement, except that they will not rank for any dividend, right, allotment or other distributions, the Record Date for which falls before the issue of such Subscription Shares.
2.3	The Parties agree that the Issue Consideration received from the issue of Subscription Shares shall be used for the following purposes (“Use of Funds”):

(a)	securing of online game content in for the South Asia region;
(b)	investments in online game hub operators in countries in South Asia including Singapore, Malaysia, Indonesia and Philippines;
(c)	operating expenses of the Company as approved by the Board of Directors; and
(d)	any other investments approved by the Investment Committee.

3. COMPLETION

3.1 Subject to the terms and conditions of this Agreement, Completion shall take place on Completion Date in Singapore at the office of the Company (or at such other place as may be agreed between the parties) where all of the events described below shall occur:

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(a) The Subscriber shall make a payment of the Issue Consideration to the Company by bank transfer to the following bank account:

Beneficiary Bank:	Citibank Singapore Limited
Swift Code:	CITISGSG
Address:	23 Church Street #02-01 Capital Square, Singapore 049481
Bank code:	7214
Branch code:	011
Bank account number:	0-437486-034

(b) the Company shall, against payment by the Subscriber of the amount referred to in clause 3.1(a):

(i)	allot and issue 500,000 Subscription Shares to the Subscriber;
(ii)	issue new share certificates in respect of the Subscription Shares referred to in clause 3.1(b)(i) in favour of the Subscriber; and
(iii)	enter the name of the Subscriber as holder of the Subscription Shares in the register of members of the Company pursuant to clause 3.1(b)(i).

4. CONDITIONS

4.1 Completion of the subscription of the Subscription Shares under this Agreement is conditional upon:

(a)	the approval of the Shareholders in a general meeting of the Company having been obtained for (i) the amendment of the Articles to incorporate the amendments in Annex A to this Agreement and (ii) the allotment and issue of the Subscription Shares to the Subscriber;
(b)	the approval of the Board of Directors of the Company having been obtained for the allotment and issue of the Subscription Shares to the Subscriber;
(c)	the approval of the Board of Directors of the Company having been obtained to enter the name of the Subscriber as holder of the Subscription Shares in the register of members of the Company pursuant to clause 3.1(b)(i);
(d)	the Company shall have obtained (i) any and all approvals, consents and waivers necessary for consummation of the transactions contemplated by this Agreement, including, without limitation, all permits, authorizations, approvals, consents or permits of any governmental authority or regulatory body, (ii) waivers by the existing shareholders of the Company of any anti-dilution rights, rights of first refusal, right of first offer, pre-emptive rights and all similar rights that may exist in connection with the issuance of the Class B Shares;

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(e)	as at the Completion Date, approval of any licensors with which the Company has entered into a licence agreement with for the consummation of the transaction contemplated hereunder, if such approval is required as provided in the licence agreement;
(f)	the issue and subscription of the Subscription Shares not being prohibited by any statute, order, rule or regulation by any legislative, executive or regulatory body or authority of Singapore which is applicable to the Company;
(g)	there having been, as at the Completion Date, no occurrence of any event nor the existence of any fact rendering untrue or incorrect in any respect any of the warranties contained in clauses 5 and/or 6 of this Agreement if they were repeated on and as of the Completion Date;
(h)	the due execution and delivery of the Shareholders’ Agreement by all parties thereto;
(i)	completion by the Subscriber of its legal, financial, technical and business due diligence investigation of the Company to its satisfaction;
(j)	there shall have been no Material Adverse Change as at the Completion Date since the date of this Agreement; and
(k)	the due execution and delivery of undertakings by the Founders (as defined in the Shareholders Agreement) and members of the Management (as defined in the Shareholders Agreement) in favour of the Subscriber, on such terms as set out in clause 19 of the Shareholders Agreement.

4.2

The Subscriber may, and upon such terms as it thinks fit, waive compliance with any of the conditions set forth in clause 4.1 and any condition so waived shall be deemed to have been satisfied.

4.3

If any of the conditions set forth in clause 4.1 is not satisfied by Completion Date, the obligations of the Subscriber to subscribe for the Subscription Shares and the obligation of the Company to issue the Subscription Shares shall ipso facto cease and determine thereafter, neither the Subscriber nor the Company shall have any claim against the other for costs, expenses, damages, losses, compensation or otherwise in respect of the Subscription, save as expressly provided in this Agreement.

5. WARRANTIES AND UNDERTAKINGS BY THE COMPANY

5.1 The Company represents, warrants and undertakes to the Subscriber that:

(a)	it shall comply with or procure that its Directors comply with all relevant statutory and regulatory requirements pertaining to the allotment and issue of the Subscription Shares;
(b)	it will not, prior to Completion without the prior written consent of the

7

	Subscriber undertake any capital reduction, bonus issue, stock split or do anything to its share capital or reserve or allot any shares or enter into any agreement or undertaking to do the same (otherwise than in accordance with this Agreement);
(c)	it shall do all other things and sign or execute such documents as may be required by law in order to complete the issue of the Subscription Shares;
(d)	the issue of the Subscription Shares, the execution and delivery, and the compliance by the Company with the terms of this Agreement:

(i)	do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, the Memorandum and Articles of Association of the Company or any existing law or regulation applying to or affecting the Company; and
(ii)	do not and will not infringe the terms of, or constitute a default under or caused to be exceeded any limit imposed by any trust deed, agreement or other instrument or obligation to which the Company or any of its undertakings, assets, property or revenues are bound;

(e)	the performance of the obligations to be assumed by the Company hereunder and the issue of the Subscription Shares and the execution and issue by the Company of share certificates for the Subscription Shares have been or will be duly authorised by all necessary corporate actions of the Company on or before the Completion Date;
(f)	this Agreement constitutes valid, binding and enforceable obligations of the Company in accordance with its terms and the execution by the Company of this Agreement has been duly authorised by all necessary corporate actions of the Company;
(g)	its entry into, and/or performance of its obligations under, this Agreement do not and will not violate any law, regulation or agreement binding on or applicable to it;
(h)	as at Completion Date:

(i)	it is not or will not be in violation of any applicable statute, rule, regulation, order or restriction or any instrumentality or agency thereof in respect of the conduct of its business as currently conducted and as proposed to be conducted or the ownership or in respect of the use of or leasehold interest in its properties;
(ii)	all consents, permits, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings by or with any governmental authority and any third party which are required to be obtained or made by it in connection with the consummation of the transactions contemplated hereunder has been obtained or made prior to and be effective as of Completion; and

8

(iii) it has and will maintain all franchises, permits, licenses and any similar authority necessary for the conduct of its business as currently conducted and as proposed to be conducted and is not in default under any of such franchises, permits, licenses or other similar authority;

(i)	as at Completion Date, no outstanding material indebtedness of the Company has become payable by reason of default by the Company and no material event of default has occurred or is, so far as the Company is aware, impending which with the lapse of time or the fulfillment of any condition or the giving of notice may result in any such indebtedness becoming so payable;
(j)	as at Completion Date, the records, statutory books and books of account of the Company are duly entered upon and maintained in accordance with all legal requirements applicable thereto and in all material respects contain true and complete records of all matters required to be dealt with therein and all such books and all records and documents (including documents of title) which are its property are in its possession or under its control and all returns, particulars, resolutions and other documents required to be filed with or delivered to the Registrar by the Company have been correctly and properly prepared and so filed or delivered;
(k)	as at Completion Date, no step has been taken by the Company or the Shareholders nor have any legal proceedings been started or threatened for the dissolution of the Company or for the appointment of a receiver, judicial manager, trustee or similar officer of the Company;
(l)	as at Completion Date, the Company is not engaged in any prosecution, litigation or arbitration which will have a Material Adverse Change and there are, to the best knowledge of the Company, no circumstances which would give rise to any such prosecution, litigation or arbitration;
(m)	as at Completion Date, it is duly organized, validly existing and in good standing under, and by virtue of, the laws of the place of its incorporation or establishment and has all requisite power and authority to own, lease and use its properties and assets and to carry on its business as now conducted and as proposed to be conducted, and to perform each of its obligations hereunder and under any agreement contemplated hereunder to which it is a party;
(n)	all the Shares in the Company, including the Ordinary Shares and Class A Preference Shares in the capital of the Company are or will on issue be duly authorised, validly issued, fully paid-up, free from encumbrances and transferable in accordance with the Articles of Association of the Company and the Shareholders’ Agreement;
(o)	the names of the Shareholders and the number of Shares held by each such Shareholder as set out in the table disclosed in Part A of the Recitals of this Agreement is true, complete and accurate as at the Completion Date;

9

(p)	as at the Completion Date, save for the Class A Shares, there are no outstanding options, warrants or other rights convertible into Shares or any agreements or arrangements to issue options, warrants or other rights convertible into Shares;
(q)	the Class B Shares, when issued, sold and delivered in accordance with the terms of this Agreement and following receipt of the Issue Consideration owing to the Company, will be duly and validly authorised and issued, fully paid-up, free from encumbrances and freely transferable;
(r)	the Class B Shares will on issue carry the rights, benefits and privileges and be subject to the restrictions as set out in the Articles of Association of the Company;
(s)	all the Shares are and will on issue be liable to be repurchased or be redeemable in accordance with the Articles and the terms of the resolutions approving the issuance thereof (subject to all applicable laws and regulations);
(t)	it does not own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association or other entity which competes with the Subscriber or its affiliates;
(u)	as at Completion Date, it has good and marketable title to its properties and assets held free and clear of any mortgage, pledge, lien, encumbrance, security interest or charge of any kind. With respect to the property and assets it leases, as at Completion Date, the Company is in compliance with such leases and, to the best of its knowledge, it holds valid leasehold interests in such assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets;
(v)	as at Completion Date, it has sufficient title and ownership of or licenses to the Intellectual Property Rights necessary for its business as now conducted or proposed to be conducted without any conflict with or infringement of the rights of others. It has taken all commercially reasonable security measures to protect the secrecy, confidentiality, and value of all such Intellectual Property Rights required to conduct its business. It has not received any written communications alleging that the Company has violated or, by conducting its business (including as proposed to be conducted by it), would violate any of the Intellectual Property Rights of any other person or entity. As at Completion Date, the conduct of business of the Company as currently conducted or proposed to be conducted has not violated or will not violate any Intellectual Property Rights of any third party;
(w)	it taken as a whole, does not have any material liability or obligation, absolute or contingent;
(x)	as at Completion Date, it has complied in all material aspects with all applicable employment and labour laws;
(y)	as at Completion Date, all material agreements, contracts, leases, licenses, instruments, commitments, indebtedness, liabilities and other obligations to

10

	which the Company is a party or by which it is bound and which (i) are material to the conduct and operations of its business and properties, (ii) involve any of the officers, consultants, directors, employees or shareholders of the Company; or (iii) obligate the Company to share, license or develop any product or technology (except licenses granted in the ordinary course of business), other than agreements entered into by or on behalf of the Company in the ordinary course of business, have been provided to the Subscriber;
(z)	as at Completion Date there is no Material Adverse Change in the assets, liabilities, financial condition or operating results of the Company, , from that reflected in the most recent financial statements given to the Subscriber, if applicable, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse to the Company;
(aa)	as at Completion Date, there is no material change in the contingent obligations of the Company whether by the giving of any guarantee, endorsement, indemnity, warranty or otherwise from the date of the most recent financial results given to the Subscriber;
(bb)	the Use of Funds shall be in accordance with clause 2.3;
(cc)	the Company has never given any corporate guarantee in favor of any third party; and
(dd)	the audited financial statements of the Company for the year ended 31 December 2005 and the unaudited financial statements of the Company for the period ended 31 August 2006 (a) have been prepared in accordance with all applicable laws and the Singapore Financial Reporting Standards, (b) where audited, are unqualified by the external auditors of the Company, and (c) present and true and fair view, in all material respects, of the financial condition, results of operations, shareholders equity and cash flow of the Company and the Group as of, and for the periods ended 31 December 2005 and 31 August 2006.

5.2	Each of the representations, warranties and undertakings above shall be separate and independent and shall not be limited by anything in this Agreement. The representations, warranties and undertakings given under or pursuant to this clause 5 shall not in any respect be extinguished or affected by Completion except by a specific and duly authorised waiver or release in writing by all relevant persons.
5.3	If prior to Completion, it shall be found that any of the representations, warranties or undertakings on the part of the Company under this Agreement have not in any material aspects been carried out or complied with or are otherwise untrue, inaccurate, incorrect or incomplete, the Subscriber shall, in addition to and without prejudice to any other rights or remedies available to the Subscriber, be entitled by notice in writing to the Company to rescind this Agreement.
5.4	Rescission of this Agreement under clause 5.3 shall not extinguish any right to damages which the Subscriber may be entitled in respect of any breach of this Agreement.

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6. WARRANTIES AND UNDERTAKINGS BY THE SUBSCRIBER TO THE COMPANY

6.1 The Subscriber hereby represents, warrants and undertakes to the Company that:

(a)	it has taken all necessary action to enable it to enter into this Agreement;
(b)	its obligations under this Agreement are valid, binding and enforceable in accordance with its terms and the execution by the Subscriber of this Agreement has been duly authorised by all necessary corporate actions of the Subscriber;
(c)	its entry into, and/or performance of its obligations under, this Agreement do not and will not violate any law or regulation binding on or applicable to it;
(d)	it has or will have all the necessary licenses and consents to carry out its obligations under this Agreement; and
(e)	it is duly organized, validly existing and in good standing under, and by virtue of, the laws of the place of its incorporation or establishment and has all requisite power and authority to own, lease and use its properties and assets and to carry on its business as now conducted, and to perform each of its obligations hereunder and under any agreement contemplated hereunder to which it is a party.

6.2 Each of the representations, warranties and undertakings above shall be separate and independent and shall not be limited by anything in this Agreement. The representations, warranties and undertakings given under or pursuant to this clause 6.1 above shall not in any respect be extinguished or affected by Completion except by a specific and duly authorised waiver or release in writing by the Company.

7. TERMINATION

7.1

If there shall have come to the notice of a party (the “non-defaulting party”) of any breach of the warranties and undertakings contained in clauses 5 and/or 6 by the other party as the case may be (the “defaulting party”) which is not remedied (to the satisfaction of the non-defaulting party) within seven (7) days of the receipt of a written notice by the defaulting party from the non-defaulting party notifying of such breach, the non-defaulting party may thereafter at any time prior to Completion Date by notice in writing to the defaulting party terminate this Agreement and thereupon no party shall have any claim against the other save as provided for under this Agreement.

7.2

Upon such notice referred to in clause 7.1 being given, this Agreement shall terminate forthwith and the parties hereto shall be released and discharged of their obligations, but shall be without prejudice to any liability which at the time of termination has already accrued to the other party or any liability arising or maturing after such termination as a result of any breach, omission committed or omitted prior to such

12

termination.Subject to the aforesaid, this Agreement shall be of no further effect and neither party hereto shall be under any liability to other in respect of this Agreement.

8.

INDEMNITIES

Each Party (“indemnifying party”) hereby irrevocably undertakes to keep the other Party (“indemnified party”) fully and effectively indemnified against all losses, costs, damages, claims, demands, actions, proceedings, liabilities and expenses whatsoever (including but not limited to all legal costs or attorney’s fees on a solicitor and client basis) that the indemnified party may incur or suffer in connection with or arising from any material breach by the indemnifying party of its warranties under this Agreement. Any liability to the indemnified party hereunder may in whole or in part be released, compounded or compromised or time or indulgence given by the indemnified party in its absolute discretion without in any way prejudicing or affecting its rights against the indemnifying party. Any release or waiver or compromises shall be in writing and shall not be deemed to be a release, waiver or compromise of similar conditions in future. The representations and warranties set forth in clause 5 shall survive completion of the transactions contemplated by this Agreement.

9.	COSTS AND EXPENSES
	The Company agrees to bear and pay all costs and expenses in connection with the allotment and issue of the Subscription Shares including, without limitation, the preparation, printing and execution of this Agreement and all other documents relating to the issue of the Subscription Shares but subject to a cap of US$80,000.

9A. CONFIDENTIALITY AND NON-DISCLOSURE

9A.1	The terms and conditions of this Agreement and the Shareholders’ Agreement, and all exhibits and schedules attached thereto (collectively, the “Subscription Terms”) (including their existence) shall be considered confidential information and unless the prior written consent of the other Party is obtained, shall not be disclosed by any Party hereto to any third party except in accordance with the provisions set forth below; provided, however, that such confidential information shall not include any information that is in the public domain other than caused by the breach of the confidentiality obligations hereunder.
9A.2	Any press release issued by any Party shall not disclose any of the Subscription Terms and the final form of such press release shall be approved in advance in writing by the other Party, Global Star and IIPL. No other announcement regarding any of the Subscription Terms in a press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to the general public may be made without the prior written consent of the Parties, Global Star and IIPL.
9A.3	After Completion, any Party shall be entitled to disclose its investment in the Company

13

and the terms thereof to third parties or to the public. In such event, the party disclosing the information shall furnish the other parties such information with prompt written notice of the fact. Without limiting the generality of the foregoing, the Subscriber and the Company directors designated by the Subscriber shall be entitled to disclose the Subscription Terms and other information related to the Company for the purposes of fund reporting or inter-fund reporting or to their fund manager, other funds managed by their fund manager or to their respective auditors, professional advisers, directors, officers, employees, shareholders or investors.

10. GENERAL PROVISIONS

10.1	This Agreement (together with any documents referred to herein) contains the entire agreement and understanding of the parties and supersedes all prior agreements, understandings or arrangements (both oral and written) relating to the subject matter of this Agreement.
10.2	This Agreement shall not be capable of assignment without the prior consent in writing of all the parties hereto but, subject hereto, shall be binding on and shall enure to the benefit of each party’s successors and permitted assigns.
10.3	This Agreement and the Shareholders’ Agreement, and the schedules and exhibits hereto and thereto, which are hereby expressly incorporated herein by reference constitute the entire understanding and agreement between the parties with regard to the subject matter hereof and thereof.

11. NOTICES

11.1 Any notice or other communication to be given under this Agreement shall be in writing, shall be deemed to have been duly served on, given to or made in relation to a party if it is left at the authorised address of that party, posted by pre-paid airmail/first-class/registered post addressed to that party at such address, or sent by facsimile transmission to a machine situated at such address and shall if:

(a)	personally delivered, be deemed to have been received at the time of delivery;
(b)	sent by post, be deemed to have been received on the seventh (7th) Business Day after posting; and
(c)	sent by facsimile transmission, be deemed to have been received upon receipt by the sender of a facsimile transmission report (or other appropriate evidence) that the facsimile has been transmitted to the addressee,

	PROVIDED that where, in the case of delivery by hand or post or facsimile transmission, delivery or transmission occurs after 6.00 pm on a Business Day or on a day which is not a Business Day, receipt shall be deemed to occur at 9.00 am on the next following Business Day.
11.2	For the purposes of this clause the authorised address of each party shall be the address

14

set out below (including the details of the facsimile number and person for whose attention a notice or communication is to be addressed) or such other address (and details) as that party may notify to the other in writing from time to time in accordance with the requirements of this clause:

The Company

INFOCOMM ASIA HOLDINGS PTE. LTD.

Address:	28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120
Facsimile No:	(65) 6294 9345
Attention:	Ong Toon Wah

The Subscriber

GIGAMEDIA ASIA PACIFIC LIMITED

Address:	14 Floor, 122 TunHwa North Road, Taipei, Taiwan ROC
Facsimile No:	+8862-8770-7576
Attention:	Chief Executive Officer, Arthur Wang and General Counsel, Jennifer Tseng

12.	TIME OF ESSENCE
	Any time or period mentioned in any provision of this Agreement may be extended by mutual agreement between the parties but as regards any time, date or period originally fixed or any time, date or period so extended as aforesaid time shall be of the essence.

13.

SEVERABILITY

If at any time any one or more of the provisions hereof is or becomes illegal, invalid or unenforceable in any respect under the applicable laws of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof, nor the legality, validity or enforceability of such provision under the applicable laws of any other jurisdiction, shall in any way be affected or impaired thereby.

14. GOVERNING LAW AND JURISDICTION

14.1	This Agreement shall be governed by, and construed in accordance with, the laws of Singapore.
14.2	The parties hereto agree to be subject to the non-exclusive jurisdiction of the Courts of Singapore.

15

15.	COUNTERPARTS
	This Agreement may be signed in any number of counterparts each of which shall together constitute one and the same agreement. Any party may enter into this Agreement by signing any such counterpart. Each counterpart may be signed and executed by the parties and transmitted by facsimile transmission and shall be as valid and effectual as if executed as an original.

16

IN WITNESS whereof this Agreement has been entered into the day and year first above written.

Signed by	)
for and on behalf of	)
GIGAMEDIA ASIA PACIFIC	)
LIMITED
in the presence of:	)
Address	:	14 Floor, 122 TunHwa North Road, Taipei,
		Taiwan ROC
Facsimile No.	:	+8862-8770-7576
Contact Person	:	Chief Executive Officer, Arthur Wang and
		General Counsel, Jennifer Tseng
Signed by	)
for and on behalf of	)
INFOCOMM ASIA HOLDINGS PTE.	)
LTD.
in the presence of:	)
Address	:	28 Maxwell Road Red Dot Traffic #04-01
		Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Ong Toon Wah

17

ANNEX A

Terms and conditions of the Class B Shares

18

ANNEX B

Shareholders’ Agreement

19

EX-4.48

Exhibit 4.48

Agreement

This Agreement is made and entered on 12 December 2006, by and among:

1. Wretch Co. Ltd. (“Party A”), a corporation duly organized and existing under the laws of the Republic of China, having its principal office at 2^nd Floor, No. 310, Section 4, Zhongxiao East Road, Taipei City;

2. Shareholders listed in Exhibit 1 (“Party A’s Shareholders”).

3. Hoshin GigaMedia Center Inc. (“Party B”), a corporation duly organized and existing under the laws of the Republic of China, having its principal office at 14^th Floor, No. 122, TunHwa North Road, Taipei City;

4. Koos Broadband Telecom Co., Ltd. (“Party C”), a corporation duly organized and existing under the laws of the Republic of China, a wholly owned subsidiary of Party B, having its principal office at 14^th Floor, No. 122, TunHwa North Road, Taipei City.

Whereas, Party A and Party C executed a Strategic Alliance Cooperation Agreement on March 4, 2005 (Exhibit 2, the “Cooperation Agreement”), which was expired on March 3, 2006 and neither party renewed the Cooperation Agreement.

Whereas, Party A, Party B and Party A’s Shareholders executed a Subscription Rights Agreement on March 10, 2006 (Exhibit 3, the “Subscription Rights Agreement”), under which Party B agrees to provide Party A with free internet service for 3 years. Party A and Party A’s Shareholders agree that Party B has the right of first refusal to acquire 20% of the issued shares in Party A when Party A conducts the first capital increment.

Whereas, Party A and/or Party A’s Shareholders are engaging negotiations with a specific investor (the “Specific Investor”) for the acquisition of Party A’s shares (the “Share Acquisition”), which may influence Party B’s rights under the Subscription Rights Agreement. All Parties agree by executing this Agreement to confirm the rights and obligations in the Cooperation Agreement

and Subscription Rights Agreement.

Accordingly, all Parties agree as follows:

1. Expiration of Cooperation Agreement

(1)	Party A and Party C confirm that the Cooperation Agreement expired on March 3, 2006 (the “Expiration Date”). All the rights and obligations under the Cooperation Agreement were completely fulfilled before the Expiration Date.
(2)	From the execution date of the Cooperation Agreement to December 31, 2006, Party A agrees to pay Party C the amount of NT$1,500,000 (tax inclusive) by cash, check or wire transfer, within 5 days after the execution date of this Agreement, for the use of internet bandwidth and equipment above the quota stipulated in the Cooperation Agreement.
(3)	Party A and Party C agree that from the date Party A fulfills the obligations stated in the foregoing paragraph (2), neither party shall make any request or claim to the other party for the expiration of the Cooperation Agreement or the related matters in the Cooperation Agreement. If Party A continues to use Party C’s internet bandwidth and equipment after January 1, 2007, both parties shall discuss and agree on the service terms and fees separately.

2. Termination of Subscription Rights Agreement

(1) Party A, Party B and Party A’s Shareholders agree that, on the condition that Party A fulfills its obligations in paying the Indemnification to Party B in accordance with Section 3(1), the closing date of the Share Acquisition shall be the termination date of the Subscription Rights Agreement (the “Termination Date”). However, the termination of Subscription Rights Agreement shall be effective prior to the closing of the Share Acquisition. When Party A pays the Indemnification to Party B, Party B shall provide Party A and Party A’s Shareholders with a confirmation letter as the format set forth in Exhibit 4 to confirm the receipt of the Indemnification and the termination of the Subscription Rights Agreement.

(2) Party A, Party B and Party A’s Shareholders agree that after the Termination Date, all the rights and obligations in the Subscription Rights Agreement, including but not limited to Party B’s subscription right and Party B’s other rights and interest against Party A and Party A’s Shareholders, shall cease to be effective. None of the Parties may make any request or claim to the other parties for the termination of the Subscription Rights Agreement or the related matters in the Subscription Rights Agreement.

3. Indemnification and Service Fee for the Above Quota Use of Internet Service

(1) Party A agrees to pay by itself or make the Specific Investor pay by check or wire transfer to Party B the following Indemnification as the condition of Party B’s consent to terminate the Subscription Rights Agreement.

(i)	Basic Indemnification: NT$20,000,000 (tax inclusive);
(ii)	Extra Indemnification: as stated in Section 3(2). (Basic Indemnification and Extra Indemnification are collectively referred to as Indemnification)

(2)	The Calculation of Extra Indemnification
	After execution of this Agreement, if Party A and/or Party A’s Shareholders execute any agreement with the Specific Investor in connection with the Share Acquisition, Party A and Party A’s Shareholders shall send a statement to Party B confirming that the price range of the Specific Investor’s acquisition of all the shares of Party A as soon as the closing procedures is completed on the closing date of the Share Acquisition for the calculation of Extra Indemnification. Party B agrees to keep the disclosed information confidential and execute a non-disclosure agreement (Exhibit 5), and then deliver to Party A.
	If the purchase price of all the shares of Party A exceeds US$24,000,000 (if only a portion of the shares of Party A is purchased, the purchase price shall be the total numbers of outstanding shares of

Party A multiplied by the purchase price for each share), Party B is entitled to the following Extra Indemnification in addition to the Basic Indemnification:

(i)	If the purchase price exceeds US$24,000,000 but is less than or equal to US$36,000,000, the Extra Indemnification shall be (the purchase price- US$24,000,000)*18%; or
(ii)	If the purchase price exceeds US$36,000,000 but is less than or equal to US$48,000,000, the Extra Indemnification shall be US$2,160,000 plus (the purchase price- US$36,000,000)*16%;
(iii)	If the purchase price exceeds US$48,000,000, the Extra Indemnification shall be US$4,080,000 plus (the purchase price- US$48,000,000)*14%

If the purchase price in the agreement for the Share Acquisition is in New Taiwan Dollars, for the purpose of the abovementioned Extra Indemnification, Party A, Party A’s Shareholders, and Party B agree that the exchange rate shall be the average of closing spot buying and selling rates published by the Bank of Taiwan as of the closing date of the Share Acquisition.

If the Specific Investor carries out the Share Acquisition by subscription of new shares or share swap, the purchase price shall be the subscription price of each new share or the fair market value of each of the swapped share multiplied by the total numbers of outstanding shares of Party A. If the Specific Investor carries out the Share Acquisition by purchase of shares, the purchase price shall be the price for filing of securities transaction tax. Party A and Party A’s Shareholders jointly guarantee that they will not make any arrangement to lower the purchase price paid by the Specific Investor.

Party A understands that Party B’s consent to the calculation of Extra Indemnification is based on its reliance on the financial reports provided by Party A up to September 30, 2006 (Exhibit 6). Party A and Party A’s Shareholders guarantee that the contents of the financial reports reflect

the real financial status of Party A, and there is no hidden, untrue, or misleading facts.

(3) From the execution date of the Subscription Rights Agreement to December 31, 2006, Party A agrees to pay Party B the amount of NT$1,500,000 (tax inclusive) by cash, check or wire transfer, within 5 days after the execution date of this Agreement, for the use of internet bandwidth and equipment above the quota stipulated in the Subscription Rights Agreement. If Party A continues to use Party B’s internet bandwidth and equipment after January 1, 2007, both parties shall discuss and agree on the service terms and fees separately.

4.	The Liabilities of Party A and Party A’s Shareholders
	Party B and Party C agree that if there is any dispute or lawsuit with Party B or Party C due to the reason which attribute to Party A and/or Party A’s Shareholders, Party A agrees to defend for Party A’s Shareholders and bear all the legal liabilities and costs. However, before all the obligations in this Agreement is fulfilled by Party A for itself or for Party A’s Shareholders, the obligations and liabilities of Party A’s Shareholders shall not be released, and Party B or Party C reserves the rights to claim or sue Party A and/or Party A’s Shareholders.
5.	Confidentiality
	All Parties agree that except Party A and Party A’s Shareholders may disclose this Agreement and the contents to the Specific Investor, other Parties shall strictly keep in confidential all contents and discussion process of this Agreement. None of the Parties may disclose to any third party, without the other Parties’ prior written approval, the contents and the provisions of this Agreement, except the following situations:

(1)	The disclosure to a Party’s individually appointed attorneys, accountants or senior managers within the most conservative and necessary scope for the purpose of fulfillment of the provisions of this Agreement.
(2)	The limited disclosure on specific object and scope required by law or

the orders of competent government authorities.

6.	Announcement and Press releases
	All Parties promise and agree that none of the Parties may make any announcement, press release or public declaration to reveal the existence of this Agreement or publicly disclose the provisions of this Agreement without the other Parties’ prior written approval on the contents, timings and the press media for public disclosure. Nevertheless, if any Party is required by law to make any disclosure, admittance or public announcement about the aforesaid things, such disclosing Party shall not be regarded as default on this Agreement. However, such disclosing party shall inform the other Parties about the contents of disclosure in reasonable and possible extent.
7.	Effect of this Agreement

(1)	This Agreement will be effective upon execution by the representatives of Party A, Party B, and Party C, and Party A’s Shareholders. All Parties agree that if closing of the Share Acquisition cannot be completed before 30 June 2007, this Agreement shall cease to be effective.
(2)	None of the Parties may assign, in whole or in part, the rights or obligations under this Agreement to any third party, unless prior written approval is obtained from all the other Parties.
(3)	If any provision of this Agreement shall be held invalid or unenforceable by the court which has jurisdiction over this Agreement, the validity, interpretation, and enforceability of the other provisions of this Agreement shall not be affected thereby.
(4)	This Agreement contains the complete agreement among the Parties and supersedes any prior agreements and representations in connection with this Agreement by or among the Parties, written or oral.
(5)	No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in writing and

	signed by all Parties.
(6)	Any Party who fails to pursue or delay in pursuing any rights or remedies shall not influence or exclude such Party to further pursue such rights. All the rights or remedies shall continue to be effective until the Party involved clearly abandons such rights or remedies in writing.

8.	Governing Law and Jurisdiction
	This Agreement shall be governed by and construed in accordance with the laws of the Republic of China. If any dispute or litigation arises from this Agreement, the Parties agree that the Taiwan Taipei District Court shall be the court in the first instance.

9.	Counterparts
	This Agreement is executed in ten (10) counterparts, with each party to hold one as evidence. Each of it shall be deemed an original,

Exhibits
Exhibit 1: List of Party A’s Shareholders
Exhibit 2: Copy of the Strategic Alliance Cooperation Agreement between Party A and Party C
Exhibit 3: Copy of the Subscription Rights Agreement among Party A, Party A’s Shareholders, and Party B
Exhibit 4: Confirmation Letter
Exhibit 5: Non-Disclosure Agreement
Exhibit 6: Financial Reports of Party A as of September 30, 2006

Party A: Wretch Co. Ltd.
By: (seal)
Lin Hung Quan
Title: Chairman

Party B: Hoshin GigaMedia Center Inc.
By: (seal)
Arthur M. Wang
Title: Chairman

Party C: Koos Broadband Telecom Co., Ltd.

By: (seal)
Arthur M. Wang
Title: Chairman

Party A’s Shareholders:

(seal)
Jian Zhi Yu
ID: G121439679

(seal)
Qiu Jian Xi
ID: R123185761

(seal)
Wu Wei Kai
ID: G121262893

(seal)
Pan Wei Chen
ID: E12337212

(seal)
Lin Hung Quan
ID: F125198294

(seal)
Chen Xuan Jun
ID: L122999873

(seal)
Hue Tung Digital Services Co. Ltd.
Representative: Liu Te Long

EX-4.49

Exhibit 4.49

LICENSE AND DISTRIBUTION AGREEMENT

This license and distribution agreement (the “Agreement”) is made and entered into upon the 13 day of Dec. 2006 (the “Effective Date”), by and between HanbitSoft Inc., a corporation duly organized and existing under the laws of the Republic of Korea, having its principal office at Specialty Construction Center 25F, 395-70, Shindaebang-2dong, Dongjak-gu, Seoul, Republic of Korea; (“HBS”) and DRAGONGATE ENTERPRISES LIMITED, a company incorporated, organized and existing under the laws of British Virgin Islands, having its principal office at Akara Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands (“Licensee”).

RECITALS

WHEREAS, HBS has acquired a license to publish and distribute in certain territories in Asia an OLMMP game entitled Hellgate: London, developed and owned by Flagship Studios, Inc. (“Flagship”); and HBS is duly authorized and has the right to sublicense the same; and

WHEREAS, Licensee has previously published an OLMMP game and represents that it has the desire, capability and capacity to market, host, and operate the Game (defined below) and perform the other rights and obligations of Licensee described herein in a high-quality manner within and throughout the Territory; and

WHEREAS, HBS is willing to license the Game (defined below) to Licensee in accordance with the terms and conditions contained herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants and agreements hereinafter set forth, HBS and Licensee agree as follows:

1. Definitions. In addition to the capitalized terms defined elsewhere in this Agreement, whenever used in this Agreement, the following terms shall have the following specified meanings:

1.1.	“Account” means the collection of database records which describes a user of the Localized Client software who connects to the Local Server for the purpose of playing the Localized Game as well as the user’s associated character records. The Account includes all information pertaining to the user as collected in setting up an Account for the Game as determined by HBS, which may include, but not be limited to, full name, address, e-mail address, phone number, game card number, unique account ID and associated usage statistics such as time played.
1.2.	“Alpha” means the first playable form of a software application with at least 75% of the final functionality, graphics, sound, video and text of the completed application.
1.3.	“Anti-Cheating Software” means software developed by Flagship, HBS, the Licensee, or licensed from a third party provider that is distributed with the Client software and which detects, on the user’s computer running the Game Client, the presence of any unauthorized software or hardware which modifies or monitors the hardware, Client software, the network stream, or the operating system with the effect of altering the game experience or providing an advantage to the user in any way not intended by Flagship/HBS.
1.4.	“Approved” or “Approval” means consent provided by an authorized representative of HBS, and/or Flagship as the case may be.
1.5.	“Beta” means a version of a software application ready for testing in complete form (ninety percent (90%) functionality, graphics, content, sound, video, and text). “Closed Beta” means the secured and non-public testing of the Beta version of the Localized Game by a group of end users,selected by Licensee in consultation with HBS, and subject to a “clickthrough” Beta End User

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	License Agreement to be provided by HBS (“Beta License Agreement”) prior to Open Beta, “Open Beta” means a secure testing by public applicants to the beta testing program, subject to the Beta License Agreement and subject to HBS’s and Flagship’s approval, of a follow up and new Beta version of the Localized Game prior to Commercial Release.
1.6.	“Billing System” means the collection of software, hardware and data utilized by the Licensee that associates Accounts with revenue generation methods set forth in Section 6.1 and Exhibit D and is responsible for the accurate tracking and billing of those revenue generation methods. HBS, at its discretion, may require reasonable minimum functionality and technical specifications of the Billing System from time to time.
1.7.	“Client” means: (i) object code which may be acquired and installed by a User either on some form of tangible media (e.g., a CD-ROM, DVD-ROM, etc.) or by means of a “download” or transmission via an online connection, or which is pre-installed on (i.e., bundled with) a computer which, when installed on a User’s computer which is connected to the Internet, allows access to and communication with the Server Software; and (ii) any and all manuals, specifications, user guides and other documentation related thereto.
1.8.	“Commercial Release” or “Commercially Released” means the license, sale or making available for sale, use or download of a Game able to connect to Server Software, except for any Closed or Open Beta testing, or similar quality control testing by a limited number of Users, who are not charged for the use or operation of the Game. “Commercial Release Date” means the date on which the Localized Game is officially announced to be launched on the Local Server and commercially made available to the general public in the Territory.
1.9.	“Concurrency” means the number of users connected to the Local Server at any given time. “Peak Concurrency” means the maximum number of users connected to the Local Server at any one time, as measured over a period of time such as a day, week, or month. “Average Concurrency” means the average of the number of users connected to the Local Server as measured over a given period of time such as a day, week, or month.
1.10.	“Copyrights” means all copyright rights, neighboring and derivative rights, and all other literary property and author rights and all right, title and interest in all design rights, copyrights, copyright registrations, certificates of copyright and copyrighted interests throughout the world.
1.11.	“EULA” means the end user license for the Game, as may be modified by HBS or by Licensee following written approval by HBS (which approval may be withheld in HBS’s sole discretion),from time to time, which shall be included in the set up of a User Account and/or installation of the Localized Game.
1.12.	“Expansion” means additional content for the Game that is sold and/or licensed as a separate product and/or separate SKU from the Game, including, without limitation, as a “bundle” with the Game as a separate SKU from the Game, but upon installation to a personal computer, is incorporated into the Game and requires the Game to be installed on the same personal computer to be played. For purposes of clarification, an Expansion does not include an incremental update or upgrade to the Game which corrects errors and bugs in the Game and may, in addition to such corrections provide incremental new content.
1.13.	“Exploit” or the “Exploitation” means to exercise the rights granted to Licensee in Section 2 below.
1.14.	“Flagship Trademarks” means the titles, Trademarks, and/or trade names of Hellgate: London™, Flagship Studios™, and their associated logos, the names of any characters or persons that appear or are described in the Game, the names of the places, scenes, things and events described in the Game, and short phrases, short sayings and the like that are set forth in the Game, as well as any translations, foreign language equivalents and combinations of the foregoing belonging to Flagship as the case may be.
1.15.	“Flagship/HBS” means either Flagship or HBS, or both, acting collectively.

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1.16.	“Game” means the initial version of the Client (i.e. Client v. 1.0) for the video game entitled Hellgate: London as designed to function on a personal computer utilizing Microsoft Windows NT, 2000, XP and Vista operating systems, and any updates and upgrades thereto that may be provided (but are not obligated to be provided) by HBS to Licensee. For purposes of clarification, as licensed under this Agreement, the Game does not include any sequels, prequels, derivative works (other than Expansions) and/or “ports” to the Game which are sold and/or licensed as a separate product and/or separate SKU (each, a “Sequel”), regardless of whether any such Sequels use the names “Hellgate” or “Hellgate: London” in their titles. Unless specified otherwise in this Agreement reference to the Game shall also refer to Expansions.
1.17.	“Game Card” shall mean the tangible card containing a unique code (or other unique mark) of which shall be generated by HBS, corresponding to a fixed length of play time for a single Account to connect to the Game Local Servers. Users may only access the Local Servers by using valid Game Cards generated by the Licensee. All Game Cards shall expire after their fixed length of play time has passed and in any event all Game Cards will expire upon the expiration or earlier termination of this Agreement. Expiration of all Game Cards terminates HBS’s support obligations. Unless specified otherwise in this Agreement reference to Game Cards shall also refer to Online Virtual Game Cards.
1.18.	“Game Data” means the data that the Server Software accesses to store the permanent and persistent information about the state of the Realms including, but not limited to, characters, Accounts, logs, items, quests, monsters, guilds and other game and player information. HBS shall have access to Game Data at all times.
1.19.	“Game Unit Commerce” means the trading in Virtual Property in exchange for real-world value (e.g., money or bartering for goods and services outside of the Game).
1.20.	“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental authority or the regulations stipulated by any administrative authority of a stock exchange market.
1.21.	“Gross Sales” means all revenues received or recognized by Licensee, its agents or any sublicensees preapproved by HBS in writing, under International Accounting Standards arising out of or resulting from the Commercial Release or other Exploitation of the licenses granted under this Agreement, including without limitation both Retail Sales Revenue and Online Revenue.
1.22.	“Hacking” means any unauthorized access, programming or modification of computer code, or other action related to any Game component, including without limitation, the Server Software, Client, Billing System, Game Data, any database, or other component of the Game, and including without limitation, any cheats, any activity that may be construed as fraud and related activity in connection with computers under 18 U.S.C. 1030, or any illegal activity under the Digital Millennium Copyright Act (“DMCA”).
1.23.	“Hardware” means the physical computers, networking equipment, support equipment, wiring and associated equipment required to run the Game Server Software and databases.
1.24.	“HBS Contractor” means a Person hired by HBS to provide service related to the implementation of the Localized Game, including without limitation, Licensee’s exploitation or implementation of its rights or obligations hereunder.
1.25.	“Implementation Plan” means the project deliverables, milestones and dates for the implementation of the Game set out in Exhibit B, which shall include, without limitation, the Localization schedule, employee hiring plan and schedule, Hardware acquisition, implementation and testing schedule, and Billing System development, implementation and testing schedule.
1.26.	“Instructional Guide” means a work of authorship based on text and graphic elements that accompanies the Localized Game or Game Cards, and is designed for the primary purpose of instructing or guiding the player of the Localized Game in the game play embodied therein.

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1.27.	“Integration” means the process of merging a Localization into a software application. The past tense of Integration is “Integrated” which definition shall also mean that such software application has passed quality assurance testing.
1.28.	“Intellectual Property Rights” means, collectively, worldwide Patents, Trade Secrets, Copyrights,moral rights (moral rights include the right of an author to be known as the author of a work; to prevent others from being named as the author of a work; to prevent others from falsely attributing to an author the authorship of a work which he/she has not in fact created; to prevent others from making deforming changes in an author’s work; to withdraw a published work from distribution if it no longer represents the views of the author; and to prevent others from using the work or the author’s name in such a way as to reflect on his/her professional standing), trade names, Trademarks,rights in trade dress and all other intellectual property rights and proprietary rights, whether arising under the laws of the United States or any other state, country or jurisdiction, including all rights or causes of action for infringement or misappropriation of any of the foregoing.
1.29.	“International Accounting Standards” means for purposes of revenue recognition, revenue is recognized when online game playtime has been used or otherwise consumed by players; prepaid subscription fees and royalty fees are deferred in B/S, hardware depreciation = straight line; and,card expiration dates, if any, and accounting differences between flat-rate monthly cards and stored-value, hourly cards.
1.30.	“Law” means any federal, state, foreign or local law, common law, statute, ordinance, rule,regulation, code or Governmental Order.
1.31.	“Localize or Localization” means the modification of English materials to meet the needs of the Chinese-speaking users in the Territory. This may include code changes, additions and alterations to the feature set, changes in the text, data, music, voices, sounds or new art. The intent being to provide a more culturally acceptable product. “Localized” means the state of such material after it has completed Localization and been approved by HBS. To the extent that HBS determines that the Traditional Chinese language version of the Game will be published in a country within the Territory, the English materials provided by HBS shall be “Localized” by Licensee and will be approved by HBS to publish such materials in such country.
1.32.	“Local Server” means the dedicated servers hosting the Localized Server Software in the Territory,
1.33.	“Marketing Materials” means any items that have been preapproved by HBS and Flagship in the following categories: advertising, marketing, promotional, packaging materials, Promotional Merchandise or other similar materials (including without limitation any product specific Internet sites), or anything created by or on behalf of Licensee and preapproved by HBS and Flagship for use in connection with the advertising, marketing, promotion or distribution of the Localized Game.
1.34.	“Marketing Plan” means a marketing plan prepared by Licensee in accordance with the guidelines set forth in Exhibit C which Licensee shall act upon pursuant to Section 5.
1.35.	“OLMMP” means a type of interactive game software that is generally known in the industry as an “online massively-multiplayer game”, and includes server software that operates on one or more network servers, but that may also include client software distributed to end-users for use or operation on a computing platform which nonetheless must be online to enable the use of any or most of the game software’s features or functions.
1.36.	“Online Revenue” means revenue received or recognized by Licensee under International Accounting Standards arising out of or resulting from the Commercial Release or operation of a Localized Game and/or Localized Server Software, which may come from, but is not limited to, charging the end user for use of the Server Software or collecting advertising or other revenues from any third parties in connection with the Localized Game.
1.37.	“Online Services” means certain of the services and support of the Localized Game network infrastructure, to be provided by Licensee as set out in this Agreement including but not limited to

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	hosting, billing, publicly displaying (for marketing purposes only), marketing, operating, maintaining and granting User access to the Localized Website in relation to the provision of the Localized Game.
1.38.	“Online Virtual Game Cards” means the functional and operational equivalent of the Game Cards in digital, electronic or such non-physical media, as the case may be.
1.39.	“Original Artwork” means any pictorial, graphic works and other audiovisual works created by or on behalf of Licensee for the purpose of being incorporated into any component of the Localized Game, Game Cards, Marketing Materials, Packaging Materials or Instructional Guide.
1.40.	“Packaging Materials” means all packaging and other materials used in connection with distributing the Localized Game and providing the Online Services to the User.
1.41.	“Patents” means all patent rights and all right, title and interest in all letters patent or equivalent rights and applications for letters patent or rights and any reissuing division, continuation or continuation in part application throughout the world.
1.42.	“Person” means and includes any individual, partnership, joint venture, corporation, company, association, joint stock company, trust, unincorporated organization or similar entity.
1.43.	“Promotional Events” means the promotional activities set forth in the Marketing Plan subject to HBS’s prior Approval.
1.44.	“Promotional Merchandise” means the Approved merchandise items created by or on behalf of Licensee that are sold at cost or near cost, given away for free or otherwise used for the purpose of increasing the sale, marketing, promoting or publicizing the Game.
1.45.	“Quarter” means a period of time commencing on a particular day of a calendar month and continuing through the two immediately following consecutive calendar months thereafter, regardless of whether the beginning of the Quarter occurs on the first day of the initial calendar month. For purposes of clarification, a Quarter will not necessarily be tied to a calendar quarter, such as the time period between January 1 and March 31, By way of example, a Quarter may begin on February 15 and, in such event, will end on April 30.
1.46.	“Realm” shall mean a single, complete instance of a game world, its persistent data, server software, and hardware required to run said software.
1.47.	“Retail Sales Revenue” means Gross Sales, other than Online Revenue, received or recognized by Licensee under International Accounting Standards arising out of or resulting from the Commercial Release or other Exploitation of Game Software or Game Cards, which may take the form of, but is not limited to, either retail revenues collected directly from the end-user of the Localized Server Software or wholesale revenues collected by Licensee from any Person involved in the distribution of the Game Cards and/or Localized Game.
1.48.	“Section” means a section of this Agreement.
1.49.	“Server Software” means the initial version (i.e., v. 1.0) of the collection of software that the Localized Game connects to (whether directly or indirectly) comprising the interface between the Localized Game and the Localized Online Services and any and all manuals, specifications, user guides and other documentation regarding such software.
1.50.	“SKU” means an alphanumeric stock keeping unit.
1.51.	“Specifications” means the technical and operational requirements and/or specifications for the hosting and operation of Game as set out in Exhibit A and which may be unilaterally amended by HBS at any time during the Term. Licensee shall bear the cost of any changes to the Specifications. The Specifications may include dates by which certain milestones must be met by Licensee.

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1.52.	“Term” means the duration of this Agreement which shall be a period commencing on the Effective Date and expiring on the third anniversary of the Commercial Release Date, subject to early termination as set forth herein.
1.53.	“Terms of Use” or “TOU” means the terms of use applicable to the Localized Game, as may be modified by HBS or Licensee upon prior written approval by HBS, from time to time.
1.54.	“Territory” means, singly and collectively, Taiwan, Hong Kong and Macau. For purposes of clarification, reference to the “Territory” in this Agreement refers to each country and city within the Territory individually and the country and all the cities within the Territory as a group.
1.55.	“Trademarks” means all trademark, tradename, business name, domain names and service mark rights arising under the common law, state law, U.S. federal law and laws of foreign countries and all right, title and interest in all trademarks, tradenames, service marks, trademark and service mark applications and registrations and trademark and service mark interests throughout the world, whether registered or not.
1.56.	“Trade Secrets” means all right, title and interest in all trade secrets and trade secret rights arising under the common law, state law, U.S. federal law or laws of foreign countries.
1.57.	“User” means an end-user of the Localized Game, including without limitation, one who connects to the Localized Server Software for the purpose of downloading the Localized Game, patching, playing the Localized Game, or in any other way establishing a connection to the Game servers or databases.
1.58.	“Virtual Property” means in-game digital items used by a User while playing the Game which have value within the Game.
1.59.	“Website” means the dedicated Game website as maintained by Licensee, which is regularly updated and localized by Licensee as set out in the Specifications below.
1.60.	“Work Product” shall have the meaning set forth in Section 3.3.
1.61.	All references in this Agreement to the “sale” or “selling” of the Localized Game shall mean the sale of a license to use the Localized Game. All references in this Agreement to the “purchase” of the Localized Game shall mean the purchase of a license to use the Localized Game. All references to “HBS” shall also refer to Flagship, where appropriate, as Flagship is the licensor of the Game to HBS.

2. Appointment as Exclusive Licensee within the Territory.

2.1.

Exclusive Appointment. Subject to the terms and conditions of this Agreement, HBS hereby appoints Licensee as an independent, exclusive licensee of the Localized Game version 1 (including all updates, upgrades and Expansions, if any) solely within the Territory during the Term, and Licensee hereby accepts such appointment. All rights not expressly granted to Licensee hereunder are reserved by HBS. The appointment of Licensee only grants to Licensee the licenses set forth in Sections 2.2 through 2.5 below, and does not grant any other right, title or interest in or to any other HBS or Flagship product or property, in whole or in part, to Licensee. Notwithstanding anything else in this Agreement, all rights and licenses granted to Licensee in this Agreement will be subject to the exceptions, restrictions, limitations and conditions herein set forth, including without limitation the approval rights of HBS.

Further notwithstanding any other provision herein, the appointment and the rights and licenses granted hereunder shall be subject to Licensee’s written receipt of any and all applicable and/or required government approvals, including but not limited to any government or other regulatory authorities which may have jurisdiction over Licensee, the Localized Game, the manufacture, distribution, sale, and advertising or use of the Localized Game or Game Cards, or relating to or pertaining the performance of any obligation of Licensee under this Agreement. Licensee shall

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	obtain the foregoing required, necessary government approvals as soon as possible prior to any distribution or sale of the Localized Game or Game Cards and in any case no later than one (I) month prior to Commercial Launch. Upon any failure by Licensee to obtain any necessary government approvals by the aforesaid time period, HBS shall have the right to immediately terminate this Agreement without any liability to Licensee whatsoever. Without prejudice to the foregoing, Licensee agrees that it shall provide all reasonable assistance to enable HBS to secure any registration with the relevant government authorities as may be appropriate to secure its rights hereunder (for example, registration of this Agreement with the copyright and/or trademark authorities).
2.2.	Grant of License: Localization. Upon delivery of the English language Game and Server Software to Licensee, HBS shall grant to Licensee a non-assignable, non-sublicensable, non-transferable license only within the Territory for the duration of the Term to Localize such Game and Server Software.
2.3.	Grant of License: Game. Upon delivery of the Integrated Game to Licensee, HBS shall grant to Licensee an exclusive, royalty-bearing, non-assignable, non-sublicensable, non-transferable license only within the Territory for the duration of the Term to publicly display (for marketing purposes only), market, manufacture, distribute (through both tangible and electronic methods) and sell the Localized Game, as more specifically set forth in Exhibit D.
2.4.	Grant of License: Server Software. Upon delivery of the Integrated Server Software to Licensee, HBS shall grant to Licensee an exclusive, royalty-bearing, non-assignable, non-sublicensable, nontransferable license only within the Territory for the duration of the Term to publicly display (for marketing purposes only), market, operate, maintain, and grant User access to the Localized Server Software. Licensee is prohibited from granting any third party access to any component of the Server Software, except Users as contemplated hereunder.
2.5.	Grant of License: HBS Trademarks/Flagship Trademarks. HBS hereby grants to Licensee a nonexclusive, royalty-free, non-assignable, non-sublicensable, non-transferable license only within the Territory for the duration of the Term to publicly display (for marketing purposes only), use, reproduce and distribute the HBS Trademarks and Flagship Trademarks solely regarding Approved Marketing Materials, Promotional Merchandise, Game Cards, Promotional Events and the Website.
2.6.	Grant of License: Online Services. Upon delivery of the Integrated Website to Licensee, HBS shall grant to Licensee an exclusive, non-assignable, non-sublicensable, non-transferable, license only within the Territory for the duration of the Term to host, publicly display (for marketing purposes only), market, operate, maintain, and grant User access to the Localized Website. Licensee is prohibited from granting any third party access to any component of the Website, except Users as contemplated hereunder.
2.7.	Grant of rights to sub-license: Wholly owned subsidiary. Notwithstanding anything contained herein to the contrary, but subject to the conditions below, Licensee shall be entitled to sub-license such of its rights hereunder to its wholly owned subsidiary in the Territory as may be necessary for the purposes of dedicated hosting, operations and management of the Game. Licensee shall first obtain the prior approval and consent of HBS for the sub-license to the wholly owned subsidiary.
2.7.1.	Licensee shall accept and comply with such additional terms, conditions and requirements as HBS may impose for the purpose of the sub-license to the wholly owned subsidiary. Licensee shall execute a valid agreement with the wholly owned subsidiary for the sub-license ensuring (a) the rights, interests and entitlements of Flagship/HBS under this Agreement are fully reserved and protected, and (b) the wholly owned subsidiary receives no greater or wider rights than that available to Licensee under this Agreement. Without limiting the forgoing, such agreement shall also provide that the rights of the wholly owned subsidiary shall terminate following the expiry and/or earlier termination of this Agreement, and further state that the continued hosting, operations, management, sale of the Game following the termination of this Agreement for any reason constitutes an infringement of HBS’s and/or Flagship’s intellectual property rights and

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	Flagship/HBS shall be entitled to enforce its rights directly against the subsidiary, although Licensee shall remain primarily liable for any such infringement;
2.7.2.	Licensee shall ensure that its wholly owned subsidiary complies with all the governmental requirements for the hosting, operation and management of the Game, including but not limited to obtaining all the necessary governmental approvals, licenses, permissions as the case may be. Licensee shall also control, manage and supervise the wholly-owned subsidiary to ensure it complies fully with the terms of this Agreement and at all times to act in the best interest of HBS and Flagship, The approved subsidiary may not further sublicense this Agreement; and
2.7.3.	Notwithstanding the above, the Licensee shall remain wholly responsible for the full and proper performance of its obligations under this Agreement. Accordingly, Licensee shall remain primarily, wholly and solely liable to Flagship/HBS for all actions, omissions, negligence, infringement, breach and/or willful default of its wholly owned subsidiary and shall indemnify Flagship/HBS for any loss, damages, costs and/or expense arising howsoever caused.
2.8.	Legends. Licensee agrees that it shall cause to be displayed, conspicuously and legibly, on all materials produced pursuant to this Agreement, appropriate copyright and/or trademark notices in the name of and as approved by HBS and Flagship, Licensee further agrees to prominently feature the logos of Flagship and HBS on all such materials. Licensee agrees not to alter, erase, deface, or overprint any HBS Trademark or Flagship Trademark provided to Licensee by Flagship/HBS.
2.9.	Domain Names.
2.9.1.	Licensee agrees not to use or register, or authorize others to use or register, any corporate, domain, trade or service name containing Flagship’s/HBS’s trademarks, service marks, or other intellectual property, or any component or alternate spelling thereof or any similar or confusingly similar term thereto, at any time, whether during the Term or after termination or expiration of this Agreement.
2.9.2.	If Licensee wishes to register a domain name in connection with the trademarks and/or service marks, or other Flagship/HBS intellectual property regarding to the operation of the Game, Licensee shall submit a written request to Flagship/HBS containing all applicable information regarding the registration of such domain, including but not limited to the requested domain name, the organization registering such domain name, the duration of the requested domain name registration, and how the domain name and website will be administered and maintained. If HBS in its sole discretion authorized such registration, Licensee shall register such domain name in the name of Flagship. Licensee shall be responsible for all costs or fees associated with such domain name registration. In the event the domain name cannot be registered in the name of Flagship due to prohibition by local law and/or regulation, Licensee shall register such domain name in its own name and expressly agrees to assign such domain name to Flagship or its designee within ten (10) business days following expiration or termination of this Agreement.
2.9.3.	If Licensee has registered any corporate, domain, trade or service name containing a HBS or Flagship trademark, service mark, or other intellectual property, or any component or alternate spelling thereof or any similar or confusingly similar term thereto, prior to the execution of this Agreement, Licensee shall assign such corporate, domain or service name and all rights and good will associated therewith to HBS and/or Flagship as appropriate or either of their respective designees within ten (10) business days of the execution of this Agreement.
2.9.4.	If Licensee fails to assign such corporate, domain or service names within ten (10) business days as required herein, HBS or Flagship (as determined by HBS and Flagship depending on the corporate, domain, trade or service name registered) shall automatically be deemed appointed Licensee’s attorney-in-fact (which agency shall be coupled with an interest) with full right, power, and authority to execute, verify, acknowledge, and deliver such assignments, documents, or other instruments in the name of and on behalf of Licensee.

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2.10.	HBS’s Reserved Rights.
2.10.1.	Changes in the Game. As between Licensee and HBS, HBS shall have the right to modify the Game in any manner and at any time without liability to Licensee. Licensee agrees to cooperate with and promptly implement any changes mandated by HBS and/or Flagship, including without limitation, creating new Marketing Materials, Localizations or changes to the Website, EULA and TOU.
2.10.2.	Release Dates. As between Licensee and HBS, HBS shall determine all release dates related to the Localized Game, including without limitation (i) the release date of the Alpha, Closed Beta, Open Beta and length of the testing periods for all of the foregoing; (ii) the Commercial Release Date; and (iii) any dates related to (a) any updates or upgrades to the Localized Game and/or (b) Expansions, if any.
2.10.3.	Intentionally Deleted.
2.10.4.	Other HBS and Game products and/or services within the Territory. The licenses granted hereunder are personal and specific. Excepting those rights expressly granted to Licensee hereunder, Flagship/HBS reserves the right to exploit its intellectual property in any manner, including the right to grant licenses to third parties for further exploitation of the Game franchise, such as movie and television exploitation and merchandising, displaying and/or transmitting advertising within the Game, or the exploitation of other versions of the Game. Licensee shall not be due any consideration regarding any such exploitation. Except as solely provided in this Section 2, HBS and Flagship reserve the right to promote, advertise, distribute and otherwise exploit any Game product or item including subsequent versions of the Game during the Term throughout the world.
2.11.	Breach. Licensee understands and agrees that Flagship/HBS will suffer irreparable harm in the event that Licensee fails to comply with any of its obligations pursuant to this Agreement, and that monetary damages in such event would be inadequate to compensate Flagship/HBS. Consequently, in such event Flagship/HBS shall be entitled, in addition to such monetary relief as may be recoverable by law, in any court of competent jurisdiction (notwithstanding the provisions of Section 14.7 herein) to such temporary, preliminary and/or permanent injunctive relief as may be necessary to restrain any continuing or further breach by Licensee, without showing or proving any actual damages sustained by Flagship/HBS, nor the posting of any bond.
2.12.	Management Team and Dedication to Game. Licensee shall dedicate the services of those individuals and positions set forth in the Implementation Plan (the “Management Team”) to the performance of its obligations under this Agreement. Licensee understands and agrees that the dedication of the Management Team’s priority and focused efforts toward the performance of this Agreement, including but not limited to the implementation, marketing, hosting, and operating of the Localized Game is a significant inducement to HBS entering into this Agreement. Licensee shall promptly notify HBS should any of the Management Team be terminated or re-tasked for any reason and Licensee shall promptly replace such person, with a person of equivalent or higher qualifications and experience to be approved by HBS, which approval shall not be unreasonably withheld. As part of such approval process, Licensee shall arrange for in-person interviews of each potential Management Team replacement with HBS at Licensee’s sole cost. Additionally, Licensee agrees that upon execution of this Agreement, Licensee shall not whether by itself or through license or other arrangement with any third party, market, host and operate (whether commercially or non-commercially) any new OLMMP and Licensee agrees that it will not commence development of any concept or product under any arrangement with a third party that will significantly interfere with Licensee’s obligations under this Agreement, Licensee represents and warrants that it shall have the necessary resources and capabilities to perform it obligations hereunder in a professional manner and its performance shall be of a high grade, nature, and quality.
2.13.	Licensee Personnel. In addition to the Management Team, Licensee shall make good faith diligent efforts to hire or assign personnel for the key positions set forth in the Implementation Plan to perform Licensee’s obligations under this Agreement (“Key Positions”). Licensee shall promptly notify HBS should any of the persons in the Key Positions be terminated for any reason and

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	Licensee shall promptly replace such person, with a person of equivalent or higher qualifications and experience. For in-game support, Licensee shall ensure that there are sufficient game masters for providing customers service of the highest quality available in the Territory to the Users at all times, or as otherwise reasonably determined by HBS.
2.14.	Additional Restrictions. Licensee acknowledges that the Game and Server Software, its underlying source code, structure and organization, constitute valuable Intellectual Property Rights of HBS and/or Flagship. Licensee shall take all steps necessary to protect HBS’s and Flagship’s rights in the Game and Server Software and all other components of the Game. Except as expressly provided in this Agreement, Licensee may not use or otherwise exploit the Game and Server Software. Without limiting the foregoing, Licensee shall not:
2.14.1.	modify the Game and Server Software, and/or any component thereof; or
2.14.2.	remove any copyright or other proprietary notices or labels on or in the Game and Server Software or omit it from (or make less readable in) the Localized Game and Server Software; or
2.14.3.	develop concepts, specifications or content for any software in reliance or reference to those of the Game and Server Software; or
2.14.4.	decipher, reverse engineer, decompile or disassemble the Game and Server Software, develop derivative works thereof, or attempt to do any of the foregoing, or knowingly allow others to do so.

3. Ownership.

3.1.	Ownership. Notwithstanding anything contained herein to the contrary, Flagship (subject to the underlying rights of its licensors) owns and shall own all of the Intellectual Property Rights in and to all elements, versions, improvements and derivatives oft the Game; the Localized Game; the Server Software; the Localized Server Software; the Game Cards; the Flagship Trademarks; Accounts, Promotional Merchandise; Marketing Materials; Promotional Events; and the Website, including but not limited to the Game Data, User and game databases, Work Product, character names and likenesses, Virtual Property, music, sounds, environments, inventions, and know-how relating to the implementation, design, content, Localization and maintenance of the Game. HBS owns and shall own all of the Intellectual Property Rights in and to all elements, versions, improvements and derivatives of the HBS Trademarks. Additionally, HBS and Flagship shall own all customer and User lists and information learned and/or acquired by Licensee pursuant to the terms of this Agreement, The use by Licensee of any of these property rights is authorized only for the purposes and under the terms herein set forth and upon expiration or termination of this Agreement for any reason, such authorization shall immediately cease.
3.2.	Licensee’s Ownership. Licensee (or its lendor or lessor) shall own all Hardware, subject to HBS’s and/or Flagship’s ownership of the intellectual property contained on or in such Hardware, Licensee shall ensure that no Person shall be permitted to remove any Hardware or component thereof containing any of the elements described in Section 3.1 without Flagship/HBS first receiving written notice and reasonable time to have such elements removed from such Hardware or component thereof.
3.3.	Work for Hire: Assignment. As part of this Agreement, and without additional compensation, Licensee acknowledges and agrees that any and all tangible and intangible property and work products, ideas, inventions, discoveries and improvements, whether or not patentable, which are conceived/developed/created/obtained or first reduced to practice by Licensee or any third party under the direction of Licensee in connection with the marketing, implementation, operation, Localization, and maintenance of the Game (collectively referred to as the “Work Product”), including, without limitation, all technical notes, schematics, software source and object code, prototypes, breadboards, computer models, artwork, sketches, designs, game rules, drawings, paintings, illustrations, computer-generated artwork, animations, video, film, artistic materials, photographs, literature, methods, processes, voice recordings, vocal performances, narrations, music, spoken word recordings and unique character voices, shall be considered “works made for

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	hire” and therefore all right, title and interest therein (including, without limitation, Patents and Copyrights) shall vest exclusively in Flagship. To the extent that all or any part of such Work Product does not qualify as a “work made for hire” under applicable law, Licensee without further compensation therefor does hereby irrevocably assign, transfer and convey in perpetuity to Flagship and its successors and assigns the entire worldwide right, title, and interest in and to the Work Product including, without limitation, all patent rights, copyrights, mask work rights, trade secret rights and other proprietary rights therein. Such assignment includes the transfer and assignment to Flagship and its successors and assigns of any and all moral rights which Licensee may have in the Work Product. Licensee acknowledges and understands that moral rights include the right of an author: to be known as the author of a work; to prevent others from being named as the author of the works; to prevent others from falsely attributing to an author the authorship of a work which he/she has not in fact created; to prevent others from making deforming changes in an author’s work; to withdraw a published work from distribution if it no longer represents the views of the author; and to prevent others from using the work or the author’s name in such a way as to reflect on his/her professional standing.
3.4.	In the event that assignment, transfer and conveyance in perpetuity to Flagship under Section 3,3 above is not permissible under local laws, Licensee agrees as follows:-
3.4.1.	it hereby grants a royalty free and assignable/sublicensabie right to Flagship to use the Work Product for the duration of this Agreement for such purpose as Flagship shall deem appropriate;
3.4.2.	it shall immediately assign, transfer and convey all its rights, title and interest in the aforesaid Work Product to Flagship upon the expiry or earlier termination of this Agreement; and
3.4.3.	it shall only exploit the Work Product as otherwise permitted under this Agreement and will not allow any third party to use such Work Product without first obtaining Flagship’s prior Approval.
3.5.	Cooperation and Execution of Further Documents. Upon request, Licensee agrees to promptly assist HBS and/or Flagship in the filing and recording of HBS’s and/or Flagship’s trade names, Copyrights, Patents and Trademarks in the Territory, ail reasonable costs to be paid by HBS and or Flagship, as applicable.
3.6.	Goodwill and Protection: Licensee acknowledges that:
3.6.1.	The Game, including without limitation, the Localization thereof, characters, character names, environments, locations, Trademarks, service marks, logos and images associated with the Game, are unique and original and Flagship is the owner thereof;
3.6.2.	As the result of the marketing, exhibition and exploitation of the Game and the Localized Game, Flagship has acquired a substantial and valuable goodwill therein;
3.6.3.	The names of the characters and their likenesses, as applicable, and the title of the Game and Localized Game have acquired a secondary meaning as trademarks uniquely associated with merchandise authorized by Flagship;
3.6.4.	All rights in any additional material, new versions, Localizations, rearrangements or other changes in the Game which may be created by or for Licensee shall be and will remain the exclusive property of Flagship from creation, and;
3.6.5.	Any Copyrights, Trademarks and Patents heretofore obtained by Flagship in connection with the Game and Localized Game are good and valid.
3.7.	No Licensee Rights in Trademarks. Patents or Copyrights. Licensee has paid no consideration for the use of Flagship’s and/or HBS’s Trademarks, Patents, logos, character names and likenesses, Copyrights, trade secrets, trade names or designations, and nothing contained in this Agreement shall give Licensee any interest in any of them. Licensee acknowledges that Flagship owns and retains all proprietary rights in all elements of the Game and Localized Game and the associated

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	marketing thereof, and agrees that it shall not at any time during or after this Agreement challenge the validity of such ownership, assert or claim any interest in or do anything that may adversely affect the validity or enforceability of any Trademark, Patent, trade name, trade secret, Copyright or logo asserted as belonging to or licensed to HBS and/or Flagship (including, without limitation, any act, or assistance to any act, which may infringe or lead to the infringement of any Copyright in any HBS or Flagship product).
3.8.	No Continuing Right. Upon expiration or termination of this Agreement, Licensee shall cease marketing and use of all Flagship’s and/or HBS’s names, marks, logos and designations.
3.9.	Obligation to Protect. Licensee agrees to use its best efforts to protect Flagship’s and HBS’s proprietary rights and to cooperate with Flagship’s and/or HBS’s efforts to protect its proprietary rights.
3.10.	No unauthorized access, modification or interference with Flagship’s and/or HBS’s intellectual property rights. Licensee shall not without prior written authorization and consent of Flagship and/or HBS access, modify or otherwise interfere with the intellectual property rights on Flagship and/or HBS, as applicable including but not limited to Integrated Server Software, the Localized Game or any component thereof, the Trademarks and copyrighted materials belonging to or provided by Flagship and/or HBS. Licensee may not integrate any third party materials, software or hardware with the Game or with the Server Software (localized or otherwise) without first obtaining Approval from HBS. Licensee shall propose an integration plan regarding Licensee’s billing system to HBS for HBS’s review and approval.

4. Hardware and Software.

4.1.	Network Consultation. The parties acknowledge that the operation of the Came requires a complex, high-quality computer network with high-volume access to the Internet. The parties shall collaborate regarding the projected hardware, software, Internet connection requirements, and bandwidth and collocation service providers for the Territory. Following this collaboration, but in no event later than thirty (30) business days following the Effective Date, Licensee shall deliver to HBS for Approval by HBS, the Implementation Plan which shall include specifications and timing which Licensee hereby agrees to comply with. From lime to time, HBS may recommend system and operating system requirements of Licensee. Regardless of system requirements recommended by HBS, Licensee is ultimately responsible for paying for and maintaining sufficient hardware, technology and personnel in order to meet Licensee’s obligations hereunder.
4.2.	Implementation Plan. Licensee shall ensure the timely performance of its obligations under the Implementation Plan, including, without limitation, procurement and installation of the specific equipment, third-party software and online services and implementation of employee hiring as required by the Implementation Plan. Notwithstanding anything in the Implementation Plan or this Agreement to the contrary, should Licensee fail to release the Open Beta within eight (8) calendar months following Closed Beta commencement date, which shall be decided by HBS (subject to Section 2.10.2). For any reason, including, without limitation, failure to obtain government approvals to release the Open Beta, HBS may immediately terminate this Agreement upon written notice to Licensee, without any liability to Licensee of any kind.
4.3.	Network Infrastructure. Licensee warrants, undertakes and guarantees that the Online Services including but not limited to bandwidth requirements, system availability, on-line access, verification and payment mechanisms, dedicated servers, remote access and control, security, maintenance and technical support, shall at all times comply with the Specifications and that it has obtained the necessary license, approval, permits and consents from the relevant government or regulatory authorities in the Territory to provide the aforesaid Online Services for the Term of this Agreement.
4.4.	Hardware Installation: Data-Center Layout. Licensee agrees to pay for and install all hardware in accordance with the Implementation Plan, including installing the equipment in accordance with the data-center layout plan contained therein and any updates thereto.

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4.5.	Modifications. Any variance by Licensee from or modification to the Implementation Plan or Specifications must first be Approved by HBS. HBS shall respond to any such requests for Approval from Licensee within a reasonable time. HBS shall have the right to unilaterally change the Implementation Plan and Specifications from time to time in its sole discretion and Licensee agrees to timely comply with all such changes at Licensee’s cost.
4.6.	Security. Licensee shall comply with HBS’s requirements for the security of all hardware and software as set forth in the Specifications, including without limitation, locked doors, biometrics, access logs, key cards and video surveillance.
4.7.	Access by HBS and the HBS Contractor. Licensee shall at all times grant Flagship’s/HBS’s Approved employees and the employees of HBS’s Contractor access, either in-person or by remote means, within twenty-four hours’ prior written notice from Flagship/HBS, to Licensee’s premises, the data-center and all systems contained therein. In addition to the foregoing, Licensee shall at all times grant Flagship/HBS remote access, through a secure online connection to be Approved by Flagship/HBS, to all Hardware on which Server Software is installed, including, without limitation, all Realms, and any and all Game Data stored therein.
4.8.	Maintenance. Licensee shall ensure the regular maintenance, management and administration of the Online Services, Local Server, Localized Server Software as set forth in the Specifications, including but not limited to twenty-four (24) hours a day, every day of the year, rapid response to issues. HBS shall provide such reasonable technical assistance as HBS deems appropriate pertaining to the Game and Server Software to facilitate the foregoing. HBS shall provide the service level and quality assurance requirements in the Implementation Plan. Licensee shall immediately report any failures, interruptions and customer complaints and notify HBS of the proposed and the actual fixes.
4.9.	Required Upgrades. Licensee acknowledges that technological evolution and the demands of the User base will likely require the occasional upgrade of hardware and software systems. HBS will notify Licensee of required upgrades from time to time. Licensee shall promptly implement any such upgrades.
4.10.	Localization. Licensee and HBS shall collaborate regarding the elements of the current and future Game and Server Software that should be Localized. Subsequently, HBS shall provide Licensee with a Localization specification describing the materials needing Localization, along with any applicable files, etc. Licensee agrees to timely complete all Localizations and deliver the Localized materials to HBS for approval and integration no later than forty-five (45) days following Licensee’s receipt of the materials to be Localized from HBS. HBS will provide Licensee with a “style guide” for use when Localizing materials; Licensee agrees to comply with the provisions and spirit of such style guide. Licensee shall launch the Open Beta within Two (2) calendar months following receipt thereof from HBS. Licensee’s failure to launch the Open Beta on the date set forth in the immediately preceding sentence shall be deemed a material breach hereof and Flagship/HBS may, in addition to any other rights or remedies available to it at law or in equity, terminate this Agreement immediately upon written notice to Licensee, without any liability to Licensee whatsoever.
4.11.	Integration. HBS shall be responsible for the Integration of all Localizations of the Game and Server Software.
4.12.	Updates: Error Corrections. In the event Licensee discovers any material errors (also known as “bugs”) in either the Localized Game or Localized Server Software, Licensee will promptly notify HBS with reasonable detail regarding the occurrence of the error. From time to time, Flagship/HBS may develop updates of the Game and/or Server Software to correct errors or improve the Game. If Localization is necessary, HBS will inform Licensee and Licensee agrees to promptly perform such Localization. It is anticipated that certain updates to the Localized Game may be able to be effected when the User logs into the Localized Server Software, however, it may be necessary for HBS to replace the replication master of the Localized Game; in which case, HBS shall provide the replication master to Licensee, and upon receipt thereof, Licensee agrees to destroy its existing

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	inventory of the Localized Game and replicate and distribute the updated Localized Game. HBS may, but is not obligated to provide Licensee with incremental content updates if any. In such event Licensee agrees to localize the content if necessary.
4.13.	Expansions. In the event that HBS provides any Expansions to Licensee during the Term, such Expansions will likely require Localization and possibly production of a new Client. Licensee agrees to cooperate with HBS and use best efforts to market Expansions and will promptly replace the Client inventory if necessary. For avoidance of doubt, Expansions shall not constitute a Sequel as defined in Section 1.12.
4.14.	Hacking and Pirate Realm Monitoring and Response. Licensee acknowledges that the Hacking of an OLMMP and/or the creation, hosting, commercialization or other utilization of unauthorized or “pirated” Realms (each a “Pirate Realm”) by third parties has been found to have a material adverse effect on the commercial viability and User experience of the game. Licensee agrees to dedicate qualified personnel to monitor for Hacking and promptly respond when it is detected, so as to eliminate or minimize such negative impact. In the event Flagship/HBS requests that Licensee deploy anti-hacking software, Licensee at its sole expense agrees to procure and operate same in accordance with Flagship/HBS’s instructions. Additionally, Licensee shall use its best efforts to aggressively police for and shut down Pirate Realms, including, without limitation, taking any and all legal actions and remedies available in the Territory against the owners, hosts, creators and/or any other third parties related to such Pirate Realms.
4.15.	No Unauthorized Bundling. Licensee shall not bundle any software, unauthorized billing solution, advertisement or other material with any Game materials including but not limited to the Client, Game Cards or Game Marketing Materials without the prior written approval of HBS. Further, Licensee shall not commingle any advertising, software or other material on the Website or the Localized Server Software without the prior written approval of HBS.
4.16.	Backups. Licensee shall facilitate HBS’s or HBS’s designee’s backup efforts to backup the Localized Server Software and all related databases. Licensee shall maintain the hardware necessary to support HBS’s backup efforts according to the Implementation Plan. Licensee may not make any copies of the Server Software or databases. Licensee shall have a plan in place to promptly restore a backup in the event the need arises. Upon request by HBS, Licensee shall rehearse such a restore during the Game Beta test (or at any other time) for the Territory. HBS shall have the right to require a third party be used for performing the backup function and Licensee agrees to grant such party access to the data center and allow the party to remove backup media for offsite storage in such instance.
4.17.	Training. Except as set forth in Section 4.18 below, HBS, at its own expense, shall provide Licensee’s personnel with initial training (including the training regarding to each Expansion) regarding the operation of the Game without charge. The duration and scope of the training is set forth in the Implementation Plan. Thereafter, Licensee shall pay HBS the rate stated in the Implementation Plan for the provision of further training and assistance.
4.18.	Travel Expenses. To the extent that Licensee requests employees, officers or directors of either of HBS or Flagship to travel to the Territory, Licensee shall pay all travel and hotel expenses for such employees, officer or directors. Any airfare shall be business class or higher, and any hotels shall have a minimum Michelin (or equivalent in the Territory) rating of four (4) stars. Licensee shall either directly pay such travel expenses or reimburse HBS for such travel expenses upon request, as decided by HBS from time to time. Any such expenses shall not be recoupable against Royalties and shall not be paid from Marketing Support Sums (as defined in Exhibit C).

5. Marketing.

5.1. Marketing Plan and Minimum Marketing Expenditure. Licensee shall use its best efforts to market the Localized Game, establish dedicated space in key retail outlets for Game promotion, distribute the Localized Game and sell Game Cards and Online Virtual Game Cards both vigorously and aggressively throughout the Territory in accordance with the terms of this Agreement. In

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	furtherance of the foregoing, Licensee shall prepare a Marketing Plan for HBS’s Approval and shall commit the minimum sums specified in Exhibit C for such promotional, marketing and advertising purposes. Licensee agrees that the Marketing Plan will include, but not be limited to, descriptions regarding efforts to distribute the Localized Game and sell Game Cards; Online Virtual Game Cards; print, television, radio, online and other media advertising; in-store merchandising and/or circulars; co-op advertising; tradeshows; in-game promotions; promotions outside of the Game including without limitation via websites; national public relations programs; attendance and participation in videogame industry trade shows for each year of the Term (which participation shall include hosting up to fifteen (15) Flagship employees, officers or directors) and other marketing efforts (collectively, the “Marketing Support Commitment”). HBS agrees to provide Licensee with a certain amount of promotional Game Cards as part of the promotional efforts limited to the purpose of signing up new account users. The amount shall be determined solely by HBS in consultation with Licensee. Such promotional Game Cards shall be non-royalty bearing and shall be not for resale.
5.2.	Marketing Reports. In addition to the Marketing Plan, Licensee shall submit (i) quarterly marketing reports to HBS together with a detailed description and exact cost for each marketing effort occurring during the previous quarter and the results of previous marketing efforts, including quarterly sales results and quarterly sales forecasts by Revenue Generation Method (as described in Section 6), channel and region, in order to allow HBS to provide meaningful input into future marketing plans and (ii) monthly electronic delivery of updates and/or database reports of Accounts and other customer and Localized Game information and data from the system of the Game.
5.3.	Standards. Licensee agrees: that (i) the Localized Game and all Marketing Materials shall be of the highest standard and of such style, appearance and quality as shall in the sole judgment of Flagship/HBS be adequate and suited to their exploitation to the best advantage and to the protection and enhancement of Flagship’s/HBS’s reputation and the goodwill associated with the Flagship Trademarks and/or HBS Trademarks; (ii) the Game Cards, Online Virtual Game Cards, and Localized Game shall be produced, packaged, sold, distributed, marketed and serviced in accordance with all applicable Law; (iii) the policy of sale, distribution, and/or Exploitation by Licensee hereunder shall be of equivalent high standard and style as that of HBS in Korea and Flagship in the United States; and (iv) the same shall in no manner reflect adversely upon the Game or Flagship or HBS either inside or outside the Territory, Licensee acknowledges that if the Localized Game, Game Cards, Online Virtual Game Cards, Website and Marketing Materials manufactured, operated, distributed and/or sold by it hereunder, as applicable, were of inferior quality in design, material or workmanship, the substantial goodwill which Flaghsip/HBS has established and now possesses in the Flagship/HBS Trademarks would be impaired. Accordingly, Licensee further specifically covenants and agrees to keep HBS informed of its implementation of the Marketing Plan, and to consult HBS as the Localization of the Game is being prepared under the Implementation Plan so that there will be full opportunity for HBS to deter Licensee from any use of the Game that would alter the successful concepts associated with the Game, including any new concepts Flagship develops for the Game. Licensee will maintain the spirit of the Game and will use the Flagship Trademarks and/or HBS Trademarks only in conformity with the usage standards set forth in this Section 5.3. All uses of the Flagship Trademarks and/or HBS Trademarks in the marketing of the Localized Game as well as the Localization of the Game and Server Software will be consistent with the high standards, quality and spirit of the Game. No uses of the Flagship Trademarks and/or HBS Trademarks as well as no Localization of the Game and Server Software will deviate substantially from the Game, impair the value of the Game by reason of poor quality, insufficient resemblance to the Game, or be in bad taste or otherwise objectionable. The content and character of the Localized Game will, in all circumstances, be free of vulgar and/or obscene content (under any standards). The appearance, dialogue and actions of the characters portrayed in the Localized Game will be consistent with the spirit of such characters as they appear in the Game. The Localized Game released under this license will be of AAA quality as that term is generally understood in the United States interactive video game software industry. Licensee will not distribute, offer to sell or sell any Game Card, Online Virtual Card, or Localized Game that is damaged, defective or otherwise fails to meet the specifications and/or quality control or notice requirements of this Agreement. Licensee will comply with all applicable Law in connection with the Localized Game, Game Cards, Online Virtual Game Cards, and Marketing Materials, and any sale and/or distribution by Licensee hereunder will accord with good commercial practices.

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	Licensee agrees to use commercially reasonable efforts to secure safe and humane working conditions and reasonable environmental protections for its employees involved in the Exploitation of Game and in all its contractual arrangements for manufacturing and distribution of the Marketing Materials, Game Cards, Online Virtual Game Cards, and Localized Game.
5.4.	Intentionally Deleted.
5.5.	Submissions. Without limitation to the foregoing, Licensee shall submit to HBS for its review with a reasonable amount of production samples each of the materials set forth in this Section 5.5 along with English-language translations of same. All submissions made to HBS pursuant to this Section 5.5 must be made within a reasonable amount of time for HBS to diligently review the submissions and allow for reasonable changes, if any. Any submissions involving Game or Server Software which require access keys or codes shall be accompanied by ten (10) such access keys or codes, as applicable.
5.5.1.	Detailed specifications for the Localization of the Game, Server Software, and Website, which will be submitted to HBS on the timetable set forth in the Implementation Plan;
5.5.2.	Any proposed and preliminary Original Artwork and text created by or on behalf of Licensee to be embodied or incorporated into a Localized Game, Localized Server Software, Game Card, Online Virtual Game Card, or Marketing Materials thereof, which will be submitted to HBS at least thirty (30) days before the creation of any “alpha” release;
5.5.3.	The Alpha release of the Localized Game, and any upgrades thereto and all proposed Instructional Guides, which will be submitted to HBS upon creation;
5.5.4.	The Beta releases (Open and Closed Betas) of the Localized Game and any upgrades thereto and all proposed Instructional Guides, which will be submitted to HBS at least ninety (90) days prior to its scheduled public release.
5.5.5.	The Website for the Localized Game which will be submitted to HBS promptly after it is created but at least sixty (60) days prior to its scheduled first public display.
5.5.6.	The “final release candidate” of the Localized Game, and any upgrades thereto which will be submitted to HBS promptly after it is created but at least sixty (60) days prior to its scheduled Commercial Release (“Final Release Candidate”);
5.5.7.	The “gold master” of the Localized Game, and any upgrades thereto, meaning a replication master embodying the Localized Game together with its Packaging Materials and all proposed Instructional Guides intended for Commercial Release, promptly upon creation, but at least thirty (30) days prior to its scheduled Commercial Release;
5.5.8.	Each version of a proposed Game Card and Online Virtual Card together with, if any, its Packaging Materials and Instructional Guides;
5.5.9.	All Marketing Materials and Packaging Materials;
5.5.10.	All proposed press releases or published public statements involving this Agreement or the rights or obligations herein contained (other than those for filing with NASDAQ);
5.5.11.	All proposed Promotional Events and/or other promotional activities, which shall describe and detail in writing the proposed activity, advertising or other promotional materials, the proposed venue and any proposed vendor of such activity, and such other information HBS may request from time to time; and
5.5.12.	Any changes desired by Licensee to any of the submissions above after that original Approval by Flagship/HBS hereunder in accordance with the same procedures set forth herein.

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5.6.	Failure to Achieve Approval. If Licensee cannot achieve the quality or technical standards equivalent to those of the English version of the Game within forty-five (45) calendar days after Licensee’s initial submission to HBS for approval of the each of the Alpha, Beta, Final Release Candidates, and Gold Master versions, HBS may terminate this Agreement upon seven (7) days prior notice.
5.7.	No Distribution prior to Approval. Licensee will not Commercially Release or publicly distribute or perform, as applicable, any Game Card, Online Game Virtual Card, Localized Game (or components thereof), or related Marketing Materials, Promotional Events, or any press releases or public statements involving this Agreement that fails to conform to the specifications submitted to and Approved by HBS and the standards set forth herein. Breach of this provision will be deemed a material breach of this Agreement.
5.8.	No Modification of Approved Materials. Once each of the submissions has been Approved, Licensee shall not depart therefrom in any respect without first obtaining HBS’s further Approval in accordance herewith or add any additional element(s) (including without limitation, in-packed flyers, business reply cards and so on) without HBS’s additional Approval in each case. Licensee agrees to periodically furnish HBS, at no charge, additional samples of Game Cards, Online Virtual Game Cards, Localized Game (or components thereof), and Marketing Materials which HBS may deem reasonably necessary in order to permit HBS to ensure that the quality of the Game has been maintained and that no deviation and/or modification of HBS Approved Game Cards, Online Virtual Game. Cards, Localized Game (or components thereof), or Marketing Materials has occurred. Without limiting its rights and remedies, HBS shall have the right to withdraw its prior Approval if the quality of any Game Card, Online Virtual Game Cards, Localized Game (or components thereof), or Marketing Material ceases to be acceptable and, further, to require that Licensee immediately discontinue marketing, distribution, and sales of any such items that do not meet the quality standards of Flagship. Without limiting the foregoing, Licensee will send to HBS and Flagship three (3) samples of any Game Card, Online Virtual Game Cards, Localized Game (and components thereof), and Marketing Materials within ten (10) days after their first Commercial Release or public distribution. If such item includes or consists of Server Software or Game Software that is acquired and installed by the User by means of a “download” or transmission via an online connection, Licensee will provide HBS and Flagship with access to such Server Software or Game Software (by way of a password or any other means) prior to its Commercial Release. Approval under this Section does not waive HBS’s rights or Licensee’s duties under any provision of the Agreement. Approval by HBS does not imply or suggest endorsement or approval of the safety of the proposed item.
5.9.	Inspection. Duly authorized representatives of Flagship/HBS shall have the right, at any and all reasonable times, upon at least 48 hour prior notice, to inspect all facilities or premises maintained by Licensee including, without limitation, the plants, factories, customer service areas or other manufacturing or producing facilities of Licensee or third parties at which the Game Cards, Online Virtual Game Cards, Localized Game, or Marketing Materials, and/or any components thereof are being created, manufactured or distributed. Said representatives shall have the right to inspect and test any Game Card, Online Virtual Card, Localized Game, or Marketing Materials, and/or any components thereof, and to take any other action which in the sole opinion of Flagship/HBS is necessary or proper to assure Flagship/HBS that the nature and quality of the Game Card, Online Virtual Card, Localized Game, and Marketing Materials, and/or all components thereof are in accordance with the requirements of this Agreement.
5.10.	Restriction on Game Unit Commerce. Licensee shall not engage in, endorse or associate itself with any commerce by Users or third parties of the Virtual Property contained in the Game, unless specifically authorized in writing by HBS.
5.11.	Licensee Covenants. Licensee covenants and agrees:
5.11.1.	Efforts. To conduct business in a manner that reflects favorably on the goodwill and reputation of Flagship/HBS;

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5.11.2.	Marketing Practices. To avoid deceptive, misleading or unethical trade practices, including but not limited to making representations, warranties or guarantees to customers or to the trade with respect to the specifications, features or capabilities of Game Cards, Online Virtual Game Cards, and Localized Game that are inconsistent with the literature distributed by HBS, including all warranties and disclaimers contained in HBS literature;
5.11.3.	Object Code. To distribute the Localized Game only in machine-readable object code format;
5.11.4.	EULA and TOU. Not to add to, delete or otherwise vary from any of the terms and conditions of the Flagship/HBS Approved EULA and TOU without the prior written approval of HBS, which approval shall not be unreasonably withheld if such modifications are required by Governmental Order of any country in the Territory. Each user of the Localized Game must be shown and agree to the EULA and TOU agreement for the Localized Game. Licensee will use its best efforts to police and enforce the terms of use applicable to such Localized Game.
5.11.5.	Trademarks and Trade Names. Not to distribute any Game Cards, Online Virtual Game Cards, and the Localized Game and Marketing Materials under any trade names or trademarks other than those employed by Flagship/HBS with respect thereto without the Approval of HBS;
5.11.6.	Age Appropriateness. Licensee shall place a conspicuous disclaimer regarding the lowest consumer age demographic which meets at least the minimum requirements prescribed by each governmental agency within the Territory as applicable for the Game Cards, Online Virtual Game Cards, or Localized Game on any Marketing Material, promotional or other material for the Game Cards, Online Virtual Game Cards, or Localized Game; and
5.11.7.	Personnel. Licensee shall have adequate personnel dedicated to the marketing of the Game Cards, Online Virtual Game Cards, and Localized Game.
5.12.	Intentionally Deleted.
5.13.	Market Conditions. Licensee shall advise HBS promptly concerning any market information that comes to Licensee’s attention regarding the Game, HBS’s market position or the continued competitiveness of the Game in the marketplace.
5.14.	Dealing with Users. Prior to accepting any fee or other charge from any User interested in acquiring access to the Localized Game, Licensee shall inform the User that acquisition of such access is subject to the terms and conditions of the EULA and TOU. A sample copy of the EULA and TOU shall be available from the Licensee for review by all prospective Users dealing with Licensee prior to access of the Localized Game.
5.15.	Artwork. HBS shall supply Licensee with reasonable amounts of artwork and related materials, including without limitation, artwork from the Game style guide for use in the Localized Game and Marketing Materials, upon reasonable request by Licensee. Licensee shall pay HBS’s direct, actual, out-of-pocket cost for providing artwork which is specifically requested by Licensee, including any fees or royalties due creators or artists in connection therewith. All artwork which is dependent upon, derived from or incorporating any of the Game, or any reproduction thereof, and all copyrights therein shall, notwithstanding its creation or use by Licensee, be and remain solely the property of Flagship, Flagship/HBS shall be entitled to use the same and to license the use of the same by others outside of the Territory during the Term and throughout the world, including within the Territory following the termination or expiration of this Agreement. Any reproduction or use of such artwork shall be on a non-exclusive basis. Any artwork created by or for Licensee shall be true to the Flagship style guide for the Game.
5.16.	Inventory. Licensee shall maintain an inventory of Game Cards, Online Virtual Game Cards, and the Localized Game sufficient to adequately serve the needs of Users within a commercially reasonable time frame. Licensee shall not modify, change, increase or decrease the declared retail price of the Game Cards and/or Online Virtual Game Cards without prior notification to HBS.

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5.17.	No Premiums. Unless Approved by Flagship/HBS, Licensee will not offer any Game Cards or Online Virtual Game Cards as a premium in connection with any other product or service.
5.18.	Logos. Licensee’s logo may appear no greater than the size, either horizontally or vertically, of Flagship’s or HBS’s logo, on any Game element, Game Card, Online Virtual Game Card, or Website. All mention of Licensee’s name and logo shall be in the context of Flagship’s distributor within the Territory. No Marketing Materials shall contain Licensee’s or any third party logos without the prior written approval of Flagship/HBS.
5.19.	Public Announcement. Licensee and HBS agree to participate in joint press conferences to take place on a date determined by HBS in consultation with Licensee for the announcement of each of the following events: (i) the execution of this Agreement; (ii) release of the Closed Beta; (iii) release of the Open Beta; and (iv) the Commercial Release of the Localized Game. For each such press conference, (a) Licensee shall host, pursuant to Section 4.18 above, no less than ten (10) employees, officers or directors of HBS and/or Flagship (which employees, officers or directors shall be determined by HBS and Flagship at their discretion), and (b) Licensee shall invite and cause major media outlets in the Territory to attend. The form and content of any joint press release shall be mutually agreed upon by the Parties in writing prior to any publication thereof. Licensee’s, HBS’s and Flagship’s name and logo shall be included in such press release, and shall appear with equal prominence.
5.20.	Corporate Guarantee. As a condition precedent to this Agreement, and in a manner acceptable to HBS, Licensee shall, simultaneously with the execution of this Agreement, cause Infocomm Asia Holdings Pte Ltd and and GigaMedia Limited jointly and severally, to enter into that certain Guarantee Agreement attached hereto and incorporated herein as Exhibit H.

6. Financial.

6.1.	Revenue Generation Methods. All revenue generated by Game activities hereunder must be recorded by Licensee and/or its 100% owned subsidiary which is granted the sub-license rights pursuant to Section 2.7 of the Agreement. At execution of this Agreement, the parties have agreed upon one particular type of revenue generation for the Game within the Territory; that being the use of Game Cards and Online Virtual Game Cards. In order to easily allow for future payment methods, the parties have agreed to describe revenue generation and the associated royalties on Exhibit D, Initially, Exhibit D1 will only describe the Game Card and Online Virtual Game Card revenue model in terms of the sale and distribution of Game Cards and Online Virtual Game Cards through wholesalers, distributors and retailers of video games and/or prepaid cards. As HBS and Licensee mutually approve additional or alternative revenue models, if ever, these will be added to the agreement as additional Exhibit Ds, with a numerical designator added (e.g., Game Cards as described in the immediately preceding sentence are covered by Exhibit D1, the next revenue model will be described on Exhibit D2, the next on D3, and so on). In the event of an inconsistency between the main body of this Agreement and Exhibit D, then Exhibit D shall prevail.
6.2.	Payments. In consideration of the exclusive appointment and grant of license herein, Licensee shall pay HBS the following:
6.2.1.	Non-recoupable License Fee. Licensee shall pay to HBS a non-refundable and non-recoupable license fee in the amount of Two Million Five Hundred Thousand U.S. Dollars (the “License Fee”) within five (5) working days following the execution of this Agreement. Licensee’s failure to pay payment of the License Fee within the time period set forth herein shall be deemed a material breach of this Agreement, and HBS, in addition to any remedies available to it at law or in equity, may immediately terminate this Agreement upon written notice to Licensee without any liability to Licensee of any kind.
6.2.2.	Minimum Guarantee. Licensee shall pay to HBS a non-refundable minimum guarantee against royalties in the amount of Six Million Five Hundred Thousand U.S. Dollars ($6,500,000 U.S.D) (the “Minimum Guarantee”) as follows:

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6.2.2.1.	Two Million Five Hundred Thousand U.S. Dollars ($2,500,000 U.S.D) during the twelve (12) month period immediately following the Commercial Release Date (the “First Period”), which shall be paid to HBS on the earlier of either March 31, 2007 or the launch date of the Closed Beta in the Territory.
6.2.2.2.	Two Million U.S. Dollars ($2,000,000 U.S.D) during the second twelve (12) month period following the Commercial Release Date (the “Second Period”), which shall be paid and payable in four equal installments of Five Hundred Thousand U.S. Dollars ($500,000 U.S.D), each on the first day of each Quarter of the Second Period; and
6.2.2.3.	Two Million U.S. Dollars ($2,000,000 U.S.D) during the third twelve (12) month period following the Commercial Release Date (the “Third Period”), which shall be paid and payable in four equal installments of Five Hundred Thousand U.S. Dollars ($500,000 U.S.D), each on the first day of each Quarter of the Third Period.
6.2.2.4.	The Minimum Guarantee shall be recoupable by Licensee against Royalties pursuant to and as stated in Section 6.2.3 below. Notwithstanding anything in this Section 6.2.2 to the contrary, should Licensee pay to HBS at least Six Million Five Hundred Thousand U.S. Dollars ($6,500,000 U.S.D) in Royalties at any time prior to the expiration of the Third Period (the “Minimum Guarantee Payout”) following recoupment of the applicable portion of the Minimum Guarantee paid to HBS for the applicable Period in which the Minimum Guarantee Payout is paid, Licensee shall not be obligated to pay HBS the remaining portions of the Minimum Guarantee payable for the remaining Periods, provided, however, that nothing in this Section 6.2.2.4 shall waive HBS’s right to, or relieve Licensee of its obligation to pay, accrued Royalties during the Term. By way of example, if by the end of the First Period, Licensee has recouped Two Million Five Hundred Thousand U.S. Dollars ($2,500,000 U.S.D) of the Minimum Guarantee payable to HBS for the First Period and paid to HBS Six Million Five Hundred Thousand U.S. Dollars ($6,500,000 U.S.D) in Royalties, Licensee shall not be obligated to pay the remaining portions of the Minimum Guarantee for the Second Period and the Third Period.

6.2.3. Royalties. Licensee shall pay HBS the royalties (“Royalties”) in accordance with the rates described in Exhibit D. The Royalties payable during the First Period through the Third Period as stated above shall be recouped only against the amount of the Minimum Guarantee paid in the respective Period stated in Section 6.2.2 above. Royalties may not be cross-collateralized between Periods for purposes of recoupment of the Minimum Guarantee. Without limiting the generality of the foregoing, should Licensee recoup from Royalties the applicable amount of the Minimum Guarantee paid to HBS for any given Quarter during the First through Third Period (each a “Quarterly MG Payment”), Licensee shall pay to HBS all Royalties in excess of such Quarterly MG Payment for such Quarter . By way of example, if Royalties in the second Quarter of the Second Period are $1,000,000, Licensee must pay HBS $500,000, which is the amount of Royalties remaining following recoupment of the Quarterly MG Payment for such Quarter. Licensee shall ensure all royalties are paid in accordance with the provisions of this Agreement and Exhibit D.

6.3. Payments. As security for the payment requirements herein, Licensee shall set up the necessary facilities as HBS shall determine, including but not limited to order based Letters of Credit. In the event Licensee is unable to timely pay any amounts due hereunder, HBS shall have the right to make an immediate draw on the Standby LC set out in Section 6.5 below to meet the outstanding sums due. HBS shall also have the right to immediately terminate this Agreement upon written notice to Licensee. Except as otherwise provided by HBS in writing, The License Fee described in Section 6.2.1, the Minimum Guarantee described in Section 6.2.2 and all royalties payable to HBS pursuant to Section 6.2.3 hereunder shall be paid by wire transfer to the following account with no deductions set-off or withholding of any kind, including, without limitation for currency conversion, wiring charges or any tax that may be levied according to local or international law:

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BANK OF SHINHAN Youido MMBC Branch,
Address : Shinhan Building, 45-11, Youido-dong, Yongdungpo-gu, Seoul, Korea 150-010
Account Number: 264-82-001466
For Credit to : HANBITSOFT INC.

6.4.	Exchange Rate. The starting currency exchange rate under this agreement shall be the exchange rate announced by the Bank of America on the date of the wire transfer. Any exchange rate fluctuation between US Dollars and local currency in the Territory will not change the US Dollar value of the License Fee and/or the Minimum Guarantee stated in the contract. However, any exchange rate fluctuation between US Dollars and local currency in the Territory will immediately apply to payable Royalties and any Royalties to be recouped against the Minimum Guarantee as permitted herein. If any local currency in the Territory fluctuates daily on the open market, HBS will reserve the right to set up a quarterly exchange rate to be used for payable royalties’ calculation. New quarterly rates will be based on the average of the 90 previous days as per the official rate from Bank of America.
6.5.	Intentionally Deleted.
6.5.1.
6.6.	All payments hereunder shall be made in the United States Dollars without any exception whatsoever.
6.7.	Except and/or unless as otherwise expressly stated in this Agreement, all advances, royalties or other payments made to HBS hereunder shall be made without deduction for any local, state, federal or foreign taxes or duties and/or withholding taxes. Licensee shall be responsible for the payment of any and all taxes, licenses, duties and fees of Licensee or HBS including any withholding tax in connection with the marketing, distribution, sale, possession, use or sublicensing of the Localized Game (inclusive of value added taxes, but exclusive of taxes based on HBS’s net income). Licensee hereby agrees to pay and to indemnify HBS from all such duties, taxes and fees as may be imposed upon HBS with respect to the marketing, distribution, sale, possession, use or sublicensing of the replicated HBS Products pursuant to this Agreement. In the event Licensee is precluded by applicable law from making payments free of deductions, then Licensee shall pay to HBS such additional amounts as necessary so that the actual amount received by HBS shall be the same as though no such deduction had been made.
6.8.	Currency Control. Licensee shall obtain the necessary approvals and registrations (including any reporting requirements to the central bank or monetary authority as the case may be) as required by the appropriate authorities to ensure that all currency control requirements have been met in order to facilitate the smooth and timely payments of the sums (in United States Dollars) due to HBS under this Agreement.
6.9.	Pricing. Licensee shall determine the pricing of the Localized Game within the Territory in consultation with HBS.
6.10.	Accounting: Payment Method.
6.10.1.	Licensee will, not later than the fifteenth (15th) day following each calendar month during the Term of this Agreement and any extension thereof, and thereafter so long as any revenue or sales are generated or otherwise made by Licensee, furnish to HBS a full, complete and accurate statement itemized by Revenue Generation Method, under Section 6.1 and each Exhibit D, showing, for each country in the Territory: (i) the number, description, prices at which the Game is Exploited, (ii) Retail Sales, (iii) Gross Sales, (iv) the quantity and monetary value of the Online Virtual Game Cards, Game Cards issued, (v) Online Revenue of the Game, (vi) Localized Games manufactured, distributed, shipped, and/or sold by Licensee, and (vii) Royalties generated for the preceding month (each a

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	“Monthly Statement”). Licensee will also include a statement of any returns made and copies of all related invoices. All such statements will be furnished whether or not any payments have been made to Licensee in the said preceding month and will be certified to be accurate by an officer of Licensee. Unless payable earlier pursuant to Section 6.8.2 or Exhibit D, Licensee shall, with the submission of each Monthly Statement pay all Royalties payable to HBS as shown thereon. In addition to the foregoing, Licensee shall provide, no later than twenty-five (25) days following the end of each Quarter, a full, complete statement certified to be accurate by an officer of Licensee, summarizing each Monthly Statement issued for such Quarter (each a “Quarterly Statement”), regardless of whether any Royalties are payable during such Quarter. In addition to the information provided in each Monthly Statement, each Quarterly Statement shall include a statement of Royalties generated during the applicable calendar quarter which have not otherwise been paid to HBS by Licensee. Licensee shall pay such Royalties to HBS with the submission of the applicable Quarterly Statement.
6.10.2.	Licensee shall pay to HBS the License Pee and Minimum Guarantee in accordance with the terms in Sections 6.2.1 and 6.2.2. With respect to Royalties generated from Game Cards and Online Game Cards, HBS will invoice Licensee following receipt of Licensee’s purchase orders for the serial numbers of Game Cards and Licensee shall make payment due to HBS forthwith upon receipt of HBS’s invoice date for such orders. HBS shall deliver the serial numbers of Game Card and Online Virtual Game Card codes to Licensee following receipt of payment. HBS’s receipt of statements or payments will not prevent it from questioning the correctness of the statements.
6.10.3.	Licensee agrees that any inconsistencies or mistakes discovered in the statements will be promptly rectified and the appropriate payments made by Licensee. Interest at the rate of five percent (5%) per month, not compounded, (but in no event more than the maximum amount permitted by law), shall accrue on any amount due hereunder, from the date such payments are due until the date of payment. Time is of the essence with respect to all payments under this Agreement. HBS’s right hereunder to interest on late payments shall not preclude HBS from exercising any of its other rights or remedies pursuant to this Agreement or otherwise with regard to Licensee’s failure to make timely remittances.
6.10.4.	Licensee shall, upon HBS’s demand, but not more than once per year, at Licensee’s own expense, furnish to HBS a detailed statement prepared by an independent certified public accountant specifying the kinds and quantities of Game Cards, Online Virtual Game Cards and Localized Games in inventory, sold and the prices received therefor up to the date of HBS’s demand.
6.11.	Usage Reports; Management Reports.
6.11.1.	In conjunction with the Accounting statements set forth in Section 6.10, Licensee shall provide to HBS written reports for every one-month period, or more or less often if requested by HBS, showing Licensee’s shipments and uploads of the Localized Game, usage of the Server Software and any other information HBS reasonably requests. Licensee shall contractually obligate any duplicator/replicator with which it contracts to replicate the Client to send detailed and accurate reports regarding the number of units of the Localized Game duplicated. The reports shall be submitted to HBS no later than the thirtieth of each and every month that any such duplication/replication takes place.
6.11.2.	On a quarterly basis, Licensee shall provide to HBS written management reports to include, but not limited to Gross Sales revenue in local currency delineating applicable to individual subscriptions, product SKU’s and wholesale customers, as well as a report of royalty calculation, detailed profit & loss statement, balance sheet, cash flow statement and other information as HBS may reasonably request.

6.12. Records. Licensee shall maintain, for at least three (3) years after termination of this Agreement, its records, contracts and accounts relating to the Game. For the purpose of verifying compliance by the Licensee with the provisions of this Agreement, Licensee agrees that HBS and its representatives shall be permitted with full access to and shall be permitted to make copies of or abstracts from, the books and records of Licensee relating to all facets of Licensee’s Exploitation of

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	the Game, HBS shall be permitted to audit such books and records at reasonable intervals. Such records, contracts and accounts shall be deemed confidential information by HBS.
6.13.	Audit Rights. Licensee shall maintain accurate books and records pertaining to the reproduction and distribution of the Game and the operation of the Game at Licensee’s headquarters .. HBS’s designated auditors (who shall be certified public accountants) shall have the right twice a year during ordinary business hours and upon twenty (20) working days’ prior written notice, to gain access to Licensee’s accounts and records related to the Game. Licensee will at all times keep an accurate and separate record of all transactions covered by this Agreement. Records will include all documents and other information relevant to the performance by Licensee of its rights and obligations under this Agreement. HBS’s auditors, upon reasonable notice and at its own expense, will have free and full access to and will have the right to audit, copy and make abstracts of Licensee’s records and other relevant documents and information in the possession of Licensee, in order to verify any statements rendered hereunder. HBS shall also have access to audit the components of the billing system operated by Licensee. Any such audit will be conducted only by certified public accountants and will take place only during reasonable business hours and in such manner so as not to unreasonably interfere with Licensee’s normal business activities. All of the information contained in Licensee’s records will be kept confidential except to the extent necessary to permit enforcement of Flagship’s/HBS’s rights hereunder (including, but not limited to, disclosing such records to Flagship), and HBS agrees that such information inspected and/or copied on behalf of HBS hereunder will be used only for the purposes of determining the accuracy of the statements, and will be revealed only to such employees, agents and/or representatives of HBS as necessary to verify the accuracy of the statements except to the extent necessary to permit enforcement of HBS’s rights hereunder. Licensee will be furnished with a copy of HBS’s auditor report within thirty (30) days after the completion of such report. In no event will such an audit with respect to any statement rendered hereunder: (i) commence after the date on which such statement has become conclusive and binding upon HBS; (ii) be made hereunder more frequently than twice annually; or (iii) be conducted on the premises of Licensee for more than fifteen (15) business days per audit without a compelling reason, such as the unusual complexity of the audit or Licensee’s failure to reasonably cooperate with, or promptly provide information reasonably requested by, the auditor. All such records will be kept available for at least three (3) years after the expiration or termination of this Agreement. Should the audit disclose a discrepancy in payments to HBS during the period that is covered by the audit of more than three percent (3%) of any amount subject to the audit, Licensee will bear the reasonable cost of the audit. Any underpaid amount as disclosed by an audit will be paid immediately to HBS, together with interest at the rate of five percent (5%) per month (not compounded), or (if lower), the highest rate allowed by applicable law, commencing on the date such payment was originally due hereunder.
6.14.	HBS has not made nor does it make hereunder any representation regarding the amount of revenue or the expense that Licensee will incur pursuant to this Agreement.

7. Support.

7.1.	Customer Service. Licensee acknowledges that the substantial goodwill of Flagship/HBS and the Flagship Trademarks and HBS Trademarks in the Territory will be greatly damaged if the User support by Licensee is anything other than first class. Licensee agrees to provide Users first class support, including: twenty-four (24) hour a day, every day of the year customer and game user support via call-in center, in-game presence and email. Further, Licensee agrees to comply with the requirements of Exhibit E which describes the minimum levels of both customer and game support.
7.2.	Support to Licensee. HBS shall provide Licensee’s personnel with initial training regarding the support of the Game (including the Expansions, if any), without charge. The duration and scope of the training is set forth in the Implementation Plan. Thereafter, Licensee shall pay HBS the rate stated in the Implementation Plan for the provision of further training and assistance.
7.3.	Licensee Personnel. Licensee shall train and maintain a sufficient number of capable technical personnel at its expense in the Territory; (1) to serve the needs of Users; and (2) otherwise to carry out the responsibilities of Licensee pursuant to this Agreement.

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7.4.	Technical Expertise. Licensee and its staff shall be conversant with the technical language conventional to HBS’s Products and similar computer products in general. HBS may require minimum proficiency levels in the Implementation Plan.
7.5.	Licensee agrees that notwithstanding the provision of initial training and support by HBS, Licensee shall remain solely and wholly responsible for the provision of the On-Line Services technical support, billing, connection, bandwidth, etc., Customer Service, and the discharge of all of its other duties and obligations hereunder. In this regard, Licensee agrees that it shall promptly attend to all customer queries and/or complaints relating to the provision of the On-Line Services and the Localized Game and ensure that such queries and/or complaints are satisfactorily attended to and resolved. Licensee shall take all necessary measures to ensure that Flagship/HBS and their respective parent, affiliates, and related entities are not exposed to any suits, claims, demands or proceedings from customers in connection with the above.
7.6.	Dispatching HBS Employees. HBS may, at its sole discretion, dispatch up to three (3) HBS employees to Licensee’s offices or such other locations in the Territory from time to time for the purpose of providing marketing and/or technical support to Licensee during the Term. For each HBS employee dispatched to Licensee as set forth herein, Licensee shall pay: (a) all travel costs associated with such employee, including, without limitation, airfare and reasonable hotel or housing accommodations (the standards of which shall be subject to HBS approval); (b) any and all costs associated with obtaining a visa for the Territory; and (c) a support fee of $2,500 U.S.D per month. The support fee set forth in the immediately preceding sentence shall be paid to the account set forth in Section 6.3 on the last day of each month that each such employee is providing Licensee support services. Payment of partial months of support service shall be calculated by dividing the service fee by 30 and then multiplying the result by the number of days of support service provided.
7.7.	Middleware Installation. HBS may license, under a separate software license agreement with Licensee, certain HBS software products for the purpose of assisting in providing the Online Services (the “Middleware”), including (a) a concurrent user monitoring solution; (b) a billing system which shall provide daily/cumulative charged deposit points and daily/cumulative consumed deposit points; and (c) access to total subscriber numbers, daily new subscriber numbers, and daily unique visitor numbers. Licensee shall provide reasonable support to HBS at HBS’s request for the purpose of installing the Middleware.

8. Representations and Warranties.

8.1. Licensee Representations and Warranties. Licensee represents and warrants that: (i) Licensee has the right, power and authority to enter into this Agreement; (ii) the name “Infocomm Asia Holdings Pte Ltd.” (or other name mutually approved by the parties) and related logo, and use thereof as permitted by Licensee under this Agreement, do not and will infringe any Intellectual Property Rights or other proprietary rights of any third party and that as of the Effective Date, there are no lawsuits or proceedings pending in any forum or any claims asserting concerning any aspect of the same; (iii) the Game Cards, Online Virtual Game Cards, Marketing Materials, Instructional Guides, Promotional Merchandise, Promotional Events, Localized Game, and Localized Server Software as developed, manufactured, performed or otherwise provided by Licensee and any other materials of any kind provided by Licensee or any third party hereunder do not and will not violate or infringe any Intellectual Property Rights or other proprietary rights of any third party; (iv) Licensee shall comply with applicable international, national, state, regional and local laws and regulations in performing its duties hereunder and in any of its business with its customers and with respect to the Localized Game in the Territory; (v) the Game Cards, Online Virtual Game Cards, Localized Games, Localized Server Software, Hardware or other related software will not contain any known viruses, bugs, or other harmful code; (vi) the media on which the Game Cards and Localized Games and other items related to the Game that are furnished to its customers by Licensee will be free from defects in materials and workmanship; (vii) Licensee’s performance of this Agreement does not conflict with any other agreement to which Licensee is bound and, while performing this Agreement, Licensee will not enter into any other agreement which would impair the ability of Licensee to perform this Agreement; (viii) Licensee’s performance of this Agreement shall be in a

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professional manner and shall be of a high grade, nature, and quality; (ix) it has obtained and will maintain throughout the duration of this Agreement, the requisite approvals, consents, permissions, licenses or permits as the case may be from the relevant government or statutory authorities for the performance of its obligations herein; and (x) this Agreement has been duly authorized, executed and delivered by Licensee and constitutes a valid, binding and enforceable agreement of Licensee.

8.2.

HBS Representations and Warranties. HBS represents and warrants this Agreement has been duly authorized, executed and delivered by HBS and constitutes a valid, binding and enforceable agreement of HBS.

9. Disclaimer of Warranties. LICENSEE ACKNOWLEDGES THAT (A) THE GAME AND SERVER ARE PROVIDED “AS IS” AND “WHERE IS” BY FLAGSHIP/HBS AND ARE ACCEPTED BY LICENSEE AS SUCH, AND (B) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, FLAGSHIP/HBS DISCLAIMS ALL WARRANTIES, AND LICENSEE RECEIVES NO WARRANTIES UNDER THIS AGREEMENT OF ANY KIND, INCLUDING BUT NOT LIMITED TO WITH REGARD TO THE GAME AND SERVER, WHETHER EXPRESSED OR IMPLIED, OR ARISING OUT OF ANY COURSE OF PERFORMANCE, CUSTOM, INDUSTRY STANDARD, OR USAGE IN TRADE, INCLUDING BUT NOT LIMITED TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT AND TITLE OR OTHERWISE. WITHOUT LIMITING THE FOREGOING, FLAGSHIP/HBS SPECIFICALLY DOES NOT WARRANT, GUARANTEE OR MAKE ANY REPRESENTATIONS: (i) THAT GAME AND SERVER WILL MEET LICENSEE’S REQUIREMENTS; (ii) THAT GAME AND SERVER WILL BE ERROR FREE OR FUNCTION IN AN UNINTERRUPTED MANNER; (iii) REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE GAME AND SERVER IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, CURRENTNESS, OR OTHERWISE. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF GAME AND SERVER IS ASSUMED BY LICENSEE. THE WARRANTIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OR REMEDIES. NO VERBAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY FLAGSHIP/HBS OR THEIR RESPECTIVE AGENTS, REPRESENTATIVES OR EMPLOYEES SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THIS WARRANTY, AND LICENSEE SHALL NOT RELY ON ANY SUCH INFORMATION OR ADVICE. THE FOREGOING DISCLAIMERS OF WARRANTY CONSTITUTE AN ESSENTIAL PART OF THIS AGREEMENT.

10. Limitation of Liability. UNDER NO CIRCUMSTANCES SHALL FLAGSHIP/HBS BE LIABLE TO LICENSEE ON ACCOUNT OF ANY CLAIM (REGARDLESS OF THEORY OF LIABILITY WHETHER BASED UPON PRINCIPLES OF CONTRACT, WARRANTY, NEGLIGENCE OR OTHER TORT, BREACH OF ANY STATUTORY DUTY, PRINCIPLES OF INDEMNITY, THE FAILURE OF ANY LIMITED REMEDY TO ACHIEVE ITS ESSENTIAL PURPOSE, OR OTHERWISE) FOR ANY SPECIAL, CONSEQUENTIAL, RELIANCE, INDIRECT, INCIDENTAL, PUNITIVE-OR EXEMPLARY DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING BUT NOT LIMITED TO LOST PROFITS, REVENUE, OR GOODWILL OR COST OF REPLACEMENT SERVICES OCCASIONED BY ANY DEFECT IN THE GAME OR SERVER, THE INABILITY TO USE, LOCALIZE OR INTEGRATE THE GAME OR SERVER WITH LICENCEE’S HARDWARE, SOFTWARE OR OTHER EQUIPMENT, GAMECARDS, OR ANY OTHER CAUSE WHATSOEVER WITH RESPECT TO THE GAME OR SERVER OR THIS AGREEMENT, DAMAGE OR LOSS OF PROPERTY, EQUIPMENT, INFORMATION OR DATA, OR FOR ANY DAMAGES OR SUMS PAID BY LICENSEE TO THIRD PARTIES, EVEN IF FLAGSHIP/HBS HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. LICENSEE ACKNOWLEDGES AND AGREES THAT (1) LICENSEE HAS NO EXPECTATION AND HAS RECEIVED NO ASSURANCES THAT ITS BUSINESS RELATIONSHIP WITH FLAGSHIP/HBS WILL CONTINUE BEYOND THE STATED TERM OF THIS AGREEMENT OR ITS EARLIER TERMINATION, AND THAT FLAGSHIP/HBS HAS NOT MADE ANY PROMISES WITH RESPECT TO LICENSEE’S ABILITY TO RECOUP ANY INVESTMENT OR COSTS BY LICENSEE IN CONNECTION WITH THE PROMOTION OF LOCALIZED GAME BY VIRTUE OF THIS AGREEMENT; AND (2) LICENSEE SHALL NOT HAVE OR ACQUIRE BY VIRTUE OF THIS AGREEMENT OR OTHERWISE ANY VESTED, PROPRIETARY OR OTHER RIGHT IN THE PROMOTION OF LOCALIZED GAME OR IN ANY GOODWILL CREATED BY ITS EFFORTS HEREUNDER. LICENSEE AGREES THAT FLAGSHIP/HBS WILL NOT BE LIABLE FOR ANY DAMAGES THAT LICENSEE OR ITS CUSTOMERS OR END USERS MAY INCUR ARISING OUT OF THE USE OR INABILITY TO USE THE LOCALIZED GAME OR GAME CARD.

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FOR THE AVOIDANCE OF DOUBT, THE ABOVE LIMITATION OF LIABILITY DOES NOT APPLY TO DAMAGES AND LOSS CAUSED DIRECTLY AS A RESULT OF HBS’S GROSS NEGLIGENCE AND/OR WILFUL MISCONDUCT.

LICENSEE’S SOLE REMEDY AND HBS’S SOLE OBLIGATION SHALL BE GOVERNED BY THIS AGREEMENT, AND IN NO EVENT SHALL HBS’S MAXIMUM AGGREGATE LIABILITY EXCEED THE FEE ACTUALLY PAID TO HBS FOR THE GAME CARDS HEREUNDER. THE EXISTENCE OF MORE THAN ONE CLAIM SHALL NOT ENLARGE OR EXTEND THE LIMIT.

11. Indemnification.

11.1.	Licensee’s Indemnification. Licensee shall defend, indemnify and hold harmless Flagship/HBS, their respective parent, subsidiaries, affiliated companies and partners and their respective officers, directors, employees and agents (each, an “Indemnified Party”) from and against any and all liabilities, damages, judgments, costs, expenses, and fees (including reasonable attorney’s fees) resulting from any claims, litigation, or actions arising out of or relating to actual or alleged: (i) distribution by Licensee of the Localized Game, Online Virtual Game Cards, Game Cards, Instructional Guide, or any other Game related materials; or (ii) Licensee marketing and sale of the Game Cards, Online Virtual Game Cards or Localized Game; or (iii) defects in the Game Cards, Online Virtual Game Cards, Localized Game or Localized Server; or (iv) unauthorized use of any patent, process, method or device or out of the infringement of any copyrights, trade name, patent, or libel or invasion of the right of privacy, contract, publicity or other property rights of any party; or (v) breach by Licensee of any and all provisions of this Agreement in connection with the performance by Licensee of its rights or obligations under this Agreement; or (vi) breach of any representations and warranties or covenants Licensee has made hereunder; or (vii) infringement caused by any modification to the Game Cards, Online Virtual Game Cards, Localized Game or Localized Server or Documentation not authorized by HBS; or (viii) any third-party claim arising from Licensee’s use of any trademarks or copyrighted material added to the Game Cards, Online Virtual Game Cards, Localized Game, Instructional Guide, Marketing Materials or other Game related materials. An Indemnified Party will timely notify Licensee in a writing that sets forth with specificity the claim or action to which such indemnification obligation applies but any failure to provide timely notice or information shall not impair such Indemnified Party’s rights to indemnification except to the extent that such failure has materially prejudiced or materially delayed Licensee in defense of the claim. Licensee shall have the right to control the defense of each such claim and any lawsuit or proceeding arising therefrom. Licensee will cause its counsel to cooperate fully with the Indemnified Party and its counsel in the defense of such action. Licensee shall not admit any liability or compromise any suit without first obtaining the Indemnified Party’s consent in writing. Each Indemnified Party shall have the right to participate in the defense and settlement of such claim being defended by Licensee through separate counsel at such Indemnified Party’s expense. Notwithstanding the foregoing, in the event Licensee does not timely undertake to defend an Indemnified Party from a claim or suit described above, the Indemnified Party shall have the right to undertake the defense itself and Licensee promises to repay all liabilities, damages, costs and fees (including reasonable attorney’s fees) resulting from such defense regardless of the outcome.
11.2.	No Combination Claims. Flagship/HBS shall not be liable to Licensee for any claim arising from or based upon the combination, operation or use of any Game Cards, Online Virtual Game Cards, Localized Game or Localized Server with equipment, data or programming not supplied by Flagship/HBS, or arising from any alteration or modification of the Game or Server Software.
11.3.	Insurance. Licensee will carry and maintain at its sole cost and expense appropriate and sufficient policy(s) of insurance, which must comply with all statutory regulations in each state (or country) where this Agreement is being performed, naming each of Flagship and HBS and their respective subsidiaries as additional named insureds. Such policy(s) of insurance shall provide protection against any and all claims, demands and causes of action arising out of or in connection with the Localized Game, including without limitation, Game Cards, Online Virtual Game Cards, Localized Client or Localized Server or the use thereof or failure to perform, alleged or otherwise, in the

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Localized Game, including without limitation Game Cards, Online Virtual Game Cards, Localized Client or Localized Server or any technology, equipment, material or other component used in connection therewith, and shall include, but not limited to, the following (or equivalent thereof): (i) Workers’ Compensation and State Disability, including Employers’ Liability, (ii) Comprehensive General Liability (including broad form of coverage for contractual, products liability and personal injury liability (including bodily injury and death)), and (iii) Umbrella Liability. The amount of coverage providing adequate protection for Flagship/HBS, and their respective Affiliates and each of their respective agents, servants, employees, officers and directors, and Licensee against any such claims or suits shall be a minimum amount of One Million U.S. Dollars (US$1,000,000.00) combined single limit for each single occurrence. Such policy(s) of insurance shall be in effect at least as early as the Effective Date of this Agreement and shall remain in force and provide coverage throughout the Territory until one (1) year after the effective date of expiration or any termination of this Agreement. Licensee shall be solely responsible for the payment of all deductibles on its policy(s). Within ten (10) business days after the Effective Date of this Agreement, Licensee will deliver to HBS a certificate(s) of insurance or other documentary proof that Licensee has obtained the required insurance policy(s) pursuant to this Agreement. Without prejudice to the forgoing, HBS may at its discretion specify alternative insurance type and amount that would be sufficient to protect its interest, in accordance with the best practices of the industry in general, if any one or more of the aforementioned insurance is not available to the Licensee.

12. Term and Termination.

12.1.	Term. This Agreement shall remain in full force and effect during the Term.
12.2.	Termination by HBS with Cause. Without prejudice to any rights which HBS may have under the Agreement or in law, equity, or otherwise:
12.2.1.	HBS shall have the right to terminate this Agreement as set forth in Sections 2.1, 4.2, 4.10, 5.6, 6.2.1.3 or immediately upon written notice delivered to the Licensee if, at any time Licensee is in material breach of any other term, condition, warranty, representation or covenant of this Agreement, including without limitation those breaches listed in this Section 12, and fails to cure such breach (if such breach is by its nature curable) within thirty (30) days of written notice thereof (ten (10) days in the case of any breach of payment obligations pursuant to Section 6). Licensee may cure any particular curable breach section only twice, i.e., HBS may immediately terminate the Agreement for cause if Licensee breaches any section for a third time even though Licensee cured the breach twice before within the proper cure period; or
12.2.2.	HBS shall have the right to terminate this Agreement automatically and without further notice to Licensee in the event that Licensee shall make or attempt any unauthorized assignment for the benefit of creditors, file any petition for reorganization, readjustment or rearrangement of its business or affairs under any laws or governmental regulations relating to relief of debtors, bankruptcy or insolvency of any jurisdiction, have or suffer a receiver or trustee to be appointed for its business or property, discontinues its business, or be adjudicated a bankrupt or an insolvent. In the event that the Agreement so terminates, neither Licensee nor its receivers, representatives, trustees, agents, administrators, successors, and/or assigns shall have any right to manufacture, distribute, sell, exploit or in any way deal with any aspect of the Localized Game, including without limitation, Game Cards, Localized Client, Localized Server Software, Instructional Guides, Promotional Events, Promotional Merchandise or any Marketing Materials except with and pursuant to HBS’s consent and instructions in writing.
12.2.3.	HBS shall have the right to terminate this Agreement automatically and without further notice to Licensee in the event that Licensee is merged, consolidated, sells all or substantially all of its assets or implements or experiences any substantial change in management or control (the transfer of fifty percent (50%) or more of a Licensee’s common stock or the equivalent, shall be considered a substantial change in control hereunder), unless the prior consent and approval of HBS is obtained.
12.2.4.	HBS shall have the right to terminate this Agreement automatically and without further notice to Licensee in the event that Licensee enters into any arrangement, partnership or takes part in activities

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	that HBS considers to be prejudicial or adverse to its business interest, reputation, good standing, image and/or goodwill or which would in any way negatively impact the commercial viability of the Game. Accordingly, Licensee shall notify and obtain the approval of HBS before entering into any of the aforesaid arrangements above. Such approval is revocable by Flagship on a change of circumstances that negatively impacts Flagship.
12.3.	Failure to Manufacture or Distribute. Licensee’s failure to commence in good faith the manufacture, shipping and sale in substantial quantities of the Licensed Products by the Scheduled Production Date, and to continue during the Term to distribute and sell the Game Cards, Online Virtual Game Cards or Localized Game in all commercially viable parts of the Territory, will result in immediate damage to HBS and will constitute a material breach of this Agreement.
12.4.	Licensee Violations of the Agreement. The following also shall constitute breaches subject to HBS’s right to terminate this Agreement in accordance with the provisions of Section 12:
12.4.1.	If Licensee fails to deliver to Flagship/HBS or to maintain in full force and effect the insurance required in Section 11.3; or
12.4.2.	If Licensee fails to provide timely statements, make payments and/or provide access to Licensee’s premises as required by this Agreement; or
12.4.3.	If Licensee sells to any third party who intends to sell, any Game Cards, Online Virtual Game Cards or Localized Games outside the Territory or channels of distribution; or
12.4.4.	If Licensee distributes or sells the Game, Game Cards or Virtual Online Game Cards other than as set forth in Exhibit D; or
12.4.5.	If any governmental or regulatory agency finds that the Game Cards, Online Virtual Game Cards or Localized Games are defective in any way, manner or form or if Licensee sells “seconds” or inferior Game Cards or Localized Games; or
12.4.6.	If Licensee manufactures, sells or distributes, whichever occurs first, any of the Promotional Merchandise, Instructional Guides, Packaging Material, Marketing Materials, press releases, Game Cards, Online Virtual Game Cards or Localized Games without the prior written approval of Flagship/HBS as provided in Section 5; or
12.4.7.	If Licensee has made a material misrepresentation or has omitted to state a material fact necessary to make the statements not misleading; or
12.4.8.	If Licensee fails to mark all aspects of the Localized Game, including without limitation Game Cards, Localized Games, Localized Server Software, Instructional Guides, Promotional Merchandise, Packaging Materials and Marketing Materials with the appropriate copyright and trademark notice provided to Licensee; or
12.4.9.	If Licensee assigns or attempts to transfer, assign this Agreement or any of Licensee’s rights under this Agreement to any third party without HBS’s prior written consent; or
12.4.10.	If Licensee sells the Server Software; or
12.4.11.	If Licensee fails to obtain the requisite approvals, license, permits and/or permission from the government and regulatory authorities pursuant to Section 2.1.
12.5.	Effect of Termination. Upon expiration or termination for any reason of this Agreement:
12.5.1.	Licensee shall cease using any Flagship/HBS trademarks, logos or trade names and shall immediately cease manufacture, distribution, sale or advertisement for sale of the Game Cards, Online Virtual Game Cards and Localized Games. Licensee shall immediately turn off the Server Software and cease operations pertaining to the Localized Game.

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12.5.2.	All Game masters, Game Cards, access codes, Game Data, Accounts, Localized Games, Localized Servers, Replication materials, Game, Server Software, source code, trademarks, trade names, patents, samples, literature and sales aids of every kind and any other items provided to Licensee by Flagship/HBS shall remain the property of Flagship/HBS as more specifically set forth in that certain Software Publishing Agreement regarding the Game between Flagship and HBS. Within thirty (30) days after the termination of this Agreement, Licensee shall prepare all such items, and any other Game related materials including Work Product and localization materials in its possession for shipment, as HBS may direct, at BBS’s expense. Licensee shall not make or retain any copies of any confidential or proprietary items or information, including without limitation any Account and other customer information or data, which may have been entrusted to it and shall immediately return the same as directed by HBS. HBS shall have the right, which shall survive termination of this Agreement to conduct a physical inventory of Licensee at its places of business to verify such statement of remaining inventory. Licensee shall immediately surrender all Account and other database of Game and customer information to HBS. The transfer of any and all such information by Licensee to HBS shall be performed by Licensee in such a manner that HBS or a third party designated by HBS shall be able to assume the Online Services in the Territory without causing any interruption or inconvenience to Users.
12.5.3.	Licensee shall provide HBS with a written report, sworn to by an authorized officer of Licensee, detailing all inventory of the Game Cards, access codes and Localized Games in its possession at the effective date of termination within ten (10) business days. Licensee shall have no sell-off rights whatsoever and as set forth in Section 12.5.2, any remaining inventory of Game Cards, access codes and Localized Games shall become the property of HBS without any payment by HBS to Licensee and shall be promptly delivered to HBS at a destination designated by HBS at Licensee’s expense.
12.5.4.	Save where the Agreement is terminated on the grounds that Licensee has failed to obtain the requisite approvals, license, permits and/or permission from the government and regulatory authorities pursuant to Section 2.1 and referenced in Section 12.4.10, the Minimum Guarantee and/or Royalties due for the current Period in which the termination is effected, as well as the Minimum Guarantee for the immediately following Period, and all other payments due and owing shall be immediately due and payable to HBS within ten (10) days of the effective date of termination for cause. In the event HBS terminates this Agreement for cause, Licensee shall not be entitled to, and shall waive its right to make any claim to, any refund of any fees or other payments made by Licensee to HBS under this Agreement. HBS reserves all other rights and remedies available at law or equity.
12.6.	Survival. HBS’s rights and Licensee’s obligations to pay HBS all amounts due hereunder, as-well as Sections 3, 6, 8-14 and any provision of this Agreement that expressly states that it shall survive termination or expiration shall survive termination or expiration of this Agreement or any determination that this Agreement or any portion hereof or exhibit hereto is void or voidable.

13. Non-Disclosure or Use. In the course of this Agreement, it is anticipated that either Licensee or HBS will learn confidential or proprietary information about Flagship/HBS and/or Licensee. Each Party shall keep in trust and confidential this information and any other information which other Party may acquire with respect to Flagship’s/HBS’s business, including, but not limited to, information developed and relating to new products, product plans, product designs, customers, technology, computer codes, trade secrets, pricing, know-how, inventions, techniques, programs, algorithms, schematics, documentation, business opportunities, processes, and practices, and any information that ought, in good faith, to be treated as confidential given its nature and/or the circumstances of its disclosure, unless and until the other Party consents to disclosure, or unless such knowledge and information otherwise becomes generally available to the public through no fault of the receiving Party. Neither Party shall disclose to others, without the other Party’s consent, the subject of this relationship without first providing the other Party with the opportunity to review and offer reasonable objection to the contemplated publication. In addition to the duty to maintain such confidential information in strictest confidence, Each Party shall take all reasonable precautions to prevent its unauthorized dissemination and to refrain from sharing any or all of the-information with any third party for any reason whatsoever except as required by court order, both during and after the termination of this Agreement. Without limiting the scope of this duty, each Party agrees to limit its internal distribution of the confidential information only on a “need to know” basis, solely to those who are informed of the confidential nature of such information and agree to be bound by the terms of confidentiality under this Agreement, and solely in connection with the performance of

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this Agreement, and to take steps to ensure that the dissemination is so limited. Each Party shall require each of its employees performing services relating to the Game to execute a Confidentiality Agreement, if requested by HBS. This undertaking to keep information confidential shall survive the termination of this Agreement.

It is understood, however that the restrictions listed above shall not apply to any portion of confidential information which: (i) was previously known to the receiving Party without obligations of confidentiality; (ii) is obtained after the Effective Date of this Agreement from a third party which is lawfully in possession of such information and not in violation of any contractual or legal obligation to the disclosing Party with respect to such information; (iii) is or becomes part of the public domain through no fault of Licensee; (iv) is independently ascertainable or developed by the receiving Party or its employees; (v) is required to be disclosed by administrative or judicial action, or stock exchange regulation provided that the receiving Party immediately after receiving notice of such action notifies the other Party of such action to give the other Party the opportunity to seek any other legal remedies to maintain such confidential information in confidence; or (vi) is approved for release by written authorization of the disclosing Party. Each Party agrees that the terms and conditions, and this Agreement itself, shall be considered confidential information, except as expressly otherwise stated in this Agreement.

Licensee acknowledges and agrees that the Game, the Client, the Server Software, the terms of this Agreement and all component parts of all of the foregoing are the confidential or proprietary information of Flagship/HBS. Licensee agrees not to use the confidential information for its own benefit or for the benefit of any third party, or Other than in accordance with the terms and conditions of this Agreement. All such confidential information remains the property of Flagship/HBS. Promptly at the termination of this Agreement for any reason, Licensee shall return to HBS all originals and copies of any material in any form containing or representing the confidential information, including but not limited to all computer codes, discs, drawings, specifications, manuals and other printed or reproduced material (including information stored on machine readable media), or shall destroy the same at the request of Flagship/HBS.

Since unauthorized transfer of Flagship/HBS’s confidential information will substantially diminish its value and injure Flagship/HBS in ways that cannot be remedied fully by money, Licensee’s breach of these Section 13 obligations will entitle Flagship/HBS to equitable relief (including orders for specific performance and injunctions), as well as monetary damages.

14. General.

14.1.	Relationship of the Parties. Licensee’s relationship with HBS during the term of this Agreement will be that of an independent contractor. Licensee will not have, and shall not represent that it has, any power, right or authority to bind HBS, or to assume or create any obligation or responsibility express or implied, on behalf of HBS or in HBS’s name, except as herein expressly provided. Nothing stated in this Agreement shall be construed as making partners of Licensee and HBS, nor as creating the relationships of employer/employee, franchisor/franchisee, or principal/agent between the parties. In all matters relating to this Agreement, neither Licensee nor its employees or agents are, or shall act as, employees of HBS within the meaning or application of any obligations or liabilities to HBS by reason of an employment relationship. Licensee shall reimburse HBS for and hold it harmless from any liabilities or obligations imposed or attempted to be imposed upon HBS by virtue of any such law with respect to employees of Licensee in performance of this Agreement.
14.2.	Assignment. The rights granted to Licensee hereunder are personal in nature and Licensee agrees that this Agreement shall not be assignable, nor may Licensee delegate its duties hereunder without the prior written consent of HBS and Flagship. Any attempted delegation or assignment without the required consent shall be void and of no effect.
14.3.	Waiver and Modification. No waiver or modification of the Agreement shall be effective unless in writing and signed by the party against whom such waiver or modification is asserted. Waiver by either party in any instance of any breach of any term or condition of this Agreement shall not be construed as a waiver of any subsequent breach of the same or any other term or condition hereof. None of the terms or conditions of this Agreement shall be deemed to have been waived by course of dealing or trade usage.

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14.4.	Notices. All notices and demands hereunder shall be in writing and shall be served by personal delivery, express courier, or mail at the address of the receiving party set forth in this Agreement (or at such different address as may be designated by such party by written notice to the other party), and shall be deemed complete upon receipt. All notices or demands by mail shall be by certified or registered airmail, return receipt requested. If receipt of such notice or demand is refused or a party has changed its address without informing the other, the notice shall be deemed to have been given and received upon the seventh (7th) day following the date upon which it is first postmarked by the postal service of the sender’s nation. Licensee shall notify HBS in writing of any material claim or proceeding involving the Game within the Territory within seven (7) days after Licensee learns of such claim or proceeding. Licensee shall also immediately report to HBS all claimed or suspected product defects. Licensee shall also notify HBS in writing not more than seven (7) days after any change in the management or control of Licensee or any transfer of a majority share of Licensee’s voting control or a transfer of substantially all its assets. Licensee shall provide written notice the Chief Executive Officer of HBS.
14.5.	Attorney’s Fees. In the event any legal or administrative action or proceeding (an “Action”) is brought by either party in connection with this Agreement, the prevailing party in such Action shall be entitled to recover from the other party all the costs, attorneys’ fees and other expenses incurred by such prevailing party in such Action.
14.6.	Complete Execution. This Agreement shall become effective only after it has been executed by Licensee, HBS and Flagship.
14.7.	Choice of Law, Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California, USA. THE APPLICATION OF THE UNITED NATIONS CONVENTION OF CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS IS EXPRESSLY EXCLUDED. If any dispute, difference of opinion or claim which HBS and Licensee are unable to resolve through amicable negotiation arises out of, or in connection with this Agreement, either party may, after having the other party hereto so notified with a notice period of no less than twenty (20) days, refer the matter in question to arbitration for settlement in accordance with the Rules of Arbitration of the International Chamber of Commerce by one or more (maximum of three (3)) arbitrators appointed in accordance with the said Rules. The arbitration shall be conducted in Seoul, Republic of Korea, Both parties hereby submit to the jurisdiction of such body over each of them personally in connection with such litigation, and waive any objection to venue and any claim that such forum is an inconvenient forum. Notwithstanding any of the foregoing to the contrary, Licensee hereto voluntarily and irrevocably submits and consents to the sole and exclusive jurisdiction of the courts of the State of California, San Francisco county, including Federal courts located therein, should Federal jurisdiction requirements exist, in any action brought by Flagship to enforce (or otherwise relating to) this Agreement, and Licensee hereby waives any objection thereto on the basis of personal jurisdiction or venue. The English-language version of this Agreement controls when interpreting this Agreement and all proceedings shall be conducted in English.
14.8.	Severability. In the event that any provision of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be unenforceable, such provision shall be enforced to the maximum extent permissible and the remaining portions of this Agreement shall remain in full force and effect. In the event the infirmed provision causes the contract to fail of its essential purpose, then the entire Agreement shall fail and become void.
14.9.	Force Majeure. Neither Party shall be responsible for any failure to perform due to unforeseen circumstances or cause beyond such Party’s control, including but not limited to acts of God, war, riot, embargoes; acts of civil or military authorities, fire, floods, accidents, strikes, or shortages of transportation facilities, fuel, energy, labor or materials.
14.10.	Time is of the essence. Licensee acknowledges that time is of the essence regarding its performance and discharge of all its duties and obligations under this Agreement.

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14.11.	Entire Agreement. This Agreement, including all Schedules and Exhibits hereto, constitutes and contains the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior oral or written agreement. Nothing herein contained shall be binding upon the parties until this Agreement has been executed by each party and an executed copy has been delivered to the parties. This Agreement may not be changed, modified, amended or supplemented except in a writing signed by all parties to this Agreement. Each of the parties acknowledges and agrees that the other has not made any representations, warranties or agreements of any kind, except as may be expressly set forth herein.
14.12.	Third Party Beneficiary. Licensee hereby acknowledges and agrees that Flagship is a third party beneficiary with respect to this Agreement with full power and authority to enforce the provisions of this Agreement as if a direct party hereto. Sections 9 and 10 of this Agreement shall apply to Flagship as if Flagship directly made such disclaimers and limitations of liability therein. Except as otherwise provided for by this Agreement, the terms hereto shall inure to the benefit of, and be binding upon, the respective successors and assign of the parties hereto.
14.13.	Expenses. Each party shall bear all expenses related to its respective rights and obligations described herein. For purposes of example only and without limitation, Licensee shall be responsible for all expenses associated with the Marketing Support Commitment, the Online Services, hardware and Localization.
14.14.	Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. For purposes hereof, a facsimile copy of this Agreement, including the signature pages hereto, shall be deemed to be an original. Notwithstanding the foregoing, the parties shall deliver original execution copies of this Agreement to one another as soon as practicable following execution thereof.
14.15.	Language. All statements and reports to be sent to HBS shall be in the English language. If this Agreement is executed in more than one language then the English version shall be binding on the parties in the event of a conflict between documents.

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IN WITNESS WHEREOF, the parties have entered into this Agreement.

HanbitSoft, Inc.
By:	/s/ Steve Kim
Title	CEO
Date	Dec. 13. 2006.
DRAGONGATE ENTERPRISES LIMITED
By:	/s/ Arthur Wang
Title	Director
Date	13 Dec 06
ACKNOWLEDGED AND AGREED: Flagship Studios, Inc.
By:	/s/ Bill Roper
Title	CEO
Date	13 Dec 06

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EXHIBIT A

TECHNICAL SPECIFICATIONS

To be completed by HBS

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EXHIBIT B

IMPLEMENTATION PLAN

To be completed by HBS

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EXHIBIT C

MINIMUM MARKETING SUPPORT SUMS

For the purpose of marketing, promoting and advertising the Localized Game, Licensee agrees that it shall commit not less than Five Million U.S. Dollars ($10,000,000 USD) (“Marketing Support Sums”) during the Term:

For the period from the Effective Date to the Commercial Release Date, a sum of not less than USD $5,000,000.

For the remaining period after Commercial Release Date, a sum of not less than USD $5,000,000.

Licensee shall provide a detailed budget plan within 10 working days upon HBS’ request for approval. Revision of such approved plan shall require the prior written approval of HBS.

The marketing commitments allocated and actually spent by sponsors approved by HBS may be credited against the Marketing Support Sums.

The Marketing Support Sums may not be used for: costs relating to the cost of goods or distribution costs of the Game Cards (in any format) or the Localized Game; selling expenses; labor, distributors’ margin, channel incentives, overhead expenses or other related costs.

MARKETING PLAN

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EXHIBIT D

REVENUE GENERATION MODEL(S)

EXHIBIT D1

1.	Date: The Effective Date.
2.	Revenue generation model type: Game Cards and Online Virtual Game Cards
3.	Description: Game Cards and Online Virtual Game Cards are currently the dominant payment mechanism for OLMMPs within the Territory. A User purchases a Game Card from a retail outlet or an Online Virtual Game Card on the Internet in one of varying amounts of currency which amount is directly associated with the amount of Localized Server Software access time the User will receive when using the Game Card or Online Virtual Game Card. The Game Card or Online Virtual Game Card contains a secure window which, when opened, reveals a security code that the User enters into the Localized Server Software via the Localized Game and/or Internet after which the User’s account is credited with such amount of time.
4.	Approved Sales Channels. For purposes of the Agreement and this Exhibit D, Licensee may only distribute and sell (i) Game Cards, Online Virtual Game Cards to distributors, wholesalers and retailers of video games and/or prepaid cards for resale to Users; and (ii) Game Cards (but specifically excluding Online Virtual Game Cards) to Users at Licensee-hosted promotional events for the Game, as previously approved by HBS. Under no circumstances shall Licensee (i) directly or indirectly sell Game Cards to Users except as provided in the immediately preceding sentence, or (ii) directly or indirectly sell Online Virtual Game Cards to Users in any manner (other than through distributors, wholesalers and retailers of video games and/or prepaid cards as set forth in part (i) of the immediately preceding sentence), including, without limitation, selling Online Virtual Game Cards to Users through the Localized Website. To the extent that HBS authorizes (which authorization shall be at HBS’s sole discretion) Licensee to sell and distribute Game Cards and/or Online Virtual Game Cards directly to Users, the terms and conditions of such sale and distribution shall be subject to a separate Exhibit D to be mutually agreed by the Parties.
5.	Royalty payable by Licensee to HBS: Twenty-One percent (21%) of the retail value of each Game Card and Online Virtual Game Card produced for use with the Localized Server Software. A Game Card or Online Virtual Game Card shall be deemed “produced” when HBS delivers the associated security codes to the Game Card manufacturer or Licensee.
6.	Security code acquisition procedure: Licensee will notify HBS of the number of Game Cards and Online Virtual Game Cards Licensee desires, together with a breakdown of how much time each card shall credit a User’s account and the corresponding retail value of the card (e.g., 5,000 total cards: 2,000 of which are 5 hour cards with a retail value of x; 3,000 of which are 10 hour cards with a retail value of y). HBS will then prepare and transmit to Licensee an invoice regarding such order. Upon HBS’s receipt of the full amount described on the invoice (in accordance with Section 6 of the Agreement), HBS shall promptly transmit the security codes to the Game Card manufacturer and HBS shall enable those codes in the Localized Server Software. Licensee shall not permit the actual retail Game Card or Online Virtual Game Card price to deviate from that in a corresponding security code request without the Approval of HBS, and in the event such Approval is granted and the retail price is increased, HBS will transmit to Licensee an invoice for the difference due HBS regarding the associated royalty for such Game Cards and Licensee agrees to pay to HBS such invoiced amount in accordance with Section 6 of the Agreement within five (5) days of Licensee’s receipt of the invoice. For purposes of clarification, should Licensee order a number of Game Cards and/or Online Virtual Game Cards whereby the invoice amount to be paid is in excess of the portion of the Minimum Guarantee paid for the applicable Quarter, Licensee shall pay such excess amount to HBS according to the terms of this paragraph 6.
7.	Inventory: Licensee agrees at all times to maintain and distribute a sufficient inventory of Game Cards and Online Virtual Game Cards to meet User demand throughout the Territory.
8.	Bundling: Game Cards and Online Virtual Game Cards shall not be capable of enabling credit toward any other good or service, including any other OLMMP game.

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EXHIBIT E

MINIMUM SUPPORT OBLIGATIONS

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EXHIBIT F

PROFESSIONAL SERVICES AGREEMENT

Beginning on the       day of                                          200 ,                                          (“Replicator”) agrees to perform services for [COMPANY NAME] (“COMPANY NAME”) pursuant to the following terms and conditions:

1. Acting as an independent contractor, Replicator shall render the services as stated in Exhibit 1 (“Services”). Replicator shall take direction from and report to                                         .

2. In consideration for performance of the Services and upon COMPANY NAME’s acceptance of completion of same, Replicator shall receive from COMPANY NAME a fee which is payable in accordance with Exhibit 1.

3. Replicator understands that he/she is not authorized to incur any expenses on behalf of COMPANY NAME without prior written consent, and all statements for the Services and expenses shall be in the form prescribed by COMPANY NAME and shall be approved by                                         , or his/her supervisor.

4. COMPANY NAME has the right, in its sole discretion, to terminate this Agreement for any reason with seven (7) days prior written notice. In the event of such a termination, COMPANY NAME’s sole obligation shall be to pay Replicator, pro rata, for the fees with respect to all milestones achieved or Services performed, as applicable, which shall have been accepted as of that date by COMPANY NAME. COMPANY NAME shall have no further obligation, whether financial or otherwise, to Replicator after such cancellation. COMPANY NAME may terminate this Agreement immediately upon Replicator’s refusal or inability to perform pursuant to, or Replicator’s breach of, any provision of this Agreement.

5. Replicator shall not, either during or subsequent to the term of this Agreement, directly or indirectly disclose any information designated as confidential by COMPANY NAME; nor shall Replicator disclose to anyone other than a COMPANY NAME employee or use in any way other than in the course of the performance of this Agreement any information regarding COMPANY NAME, including but not limited to COMPANY NAME’s product, market, financial or other plans, product designs and any other information not known to the general public whether acquired or developed by Replicator during performance of this Agreement or obtained from COMPANY NAME employees; nor shall Replicator, either during or subsequent to the term of this Agreement, directly or indirectly disclose or publish any such information without prior written authorization from COMPANY NAME to do so. Unless otherwise specifically agreed to in writing, all information about and relating to projects under development by COMPANY NAME and/or parties doing work under contract to COMPANY NAME including the Services rendered hereunder by Replicator shall be considered confidential information. Replicator acknowledges and agrees that all of the foregoing information is proprietary to COMPANY NAME, that such information is a valuable and unique asset of COMPANY NAME, and that disclosure of such information to third parties or unauthorized use of such information would cause substantial and irreparable injury to COMPANY NAME’s ongoing business for which there would be no adequate remedy at law. Accordingly, in the event of any breach or attempted or threatened breach of any of the terms of this Paragraph 5, Replicator agrees that COMPANY NAME shall be entitled to seek injunctive and other equitable relief, without limiting the applicability of any other remedies.

6. Replicator shall return to COMPANY NAME any COMPANY NAME property that has come into his/her possession during the term of this Agreement, when and as requested to do so by COMPANY NAME and in all events upon termination of Replicator’s engagement hereunder, unless Replicator receives written authorization from COMPANY NAME to keep such property. Replicator shall not remove any COMPANY NAME property from COMPANY NAME premises without written authorization from COMPANY NAME.

7. As part of this Agreement and without additional compensation, Replicator acknowledges and agrees that any and all tangible and intangible property and work products, ideas, inventions, discoveries and improvements, whether or not patentable, which are conceived/developed/created/obtained or first reduced to practice by Replicator for COMPANY NAME in connection with the performance of the Services (collectively referred to as the “Work Product”), including, without limitation, all technical notes, schematics, software source and object code, prototypes,

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breadboards, computer models, artwork, sketches, designs, drawings, paintings, illustrations, computer generated artwork, animations, video, film, artistic materials, photographs, literature, methods, processes, voice recordings, vocal performances, narrations, spoken word recordings and unique character voices, shall be considered “works made for hire” and therefore all right, title and interest therein (including, without limitation, patents and copyrights) shall vest exclusively in COMPANY NAME. To the extent that all or any part of such Work Product does not qualify as a “work made for hire” under applicable law, Replicator without further compensation therefor does hereby irrevocably assign, transfer and convey in perpetuity to COMPANY NAME and its successors and assigns the entire worldwide right, title, and interest in and to the Work Product including, without limitation, all patent rights, copyrights, mask work rights, trade secret rights and other proprietary rights therein. Such assignment includes the transfer and assignment to COMPANY NAME and its successors and assigns of any and all moral rights which Replicator may have in the Work Product. Replicator acknowledges and understands that moral rights include the right of an author: to be known as the author of a work; to prevent others from being named as the author of the works; to prevent others from falsely attributing to an author the authorship of a work which he/she has not in fact created; to prevent others from making deforming changes in an author’s work; to withdraw a published work from distribution if it no longer represents the views of the author; and to prevent others from using the work or the author’s name in such a way as to reflect on his/her professional standing.

8. None of the Work Product is to be used by Replicator on any other project or with any other client except with COMPANY NAME’s written consent. If any part of such Work Product is the work of a subcontractor employed by Replicator, then Replicator shall require such subcontractors to execute an assignment document so as to secure for COMPANY NAME exclusive ownership in such Work Product. In the event Replicator is unable to obtain exclusive ownership from such subcontractors, Replicator shall obtain a license for the benefit of COMPANY NAME. Replicator shall promptly thereafter deliver such originally executed assignment or license documents to COMPANY NAME.

9. With respect to all subject matter including ideas, processes, designs and methods which Replicator discloses or uses in the performance of the Services: a) Replicator warrants that Replicator has the right to make disclosure and use thereof without liability or compensation to others; b) to the extent that Replicator has patent applications, patents or other rights in the subject matter, Replicator hereby grants COMPANY NAME, subsidiaries and affiliates a royalty-free, irrevocable world-wide, non-exclusive license to make, have made, sell, use and disclose such subject matter, excluding only such subject matter, if any, which is set forth in writing in Exhibit 1 and which is agreed to specifically by COMPANY NAME as being excluded from the grant; and c) Replicator agrees to defend indemnify and hold COMPANY NAME harmless from any claims, litigations, actions, damages or fees of any kind (including reasonable attorney’s fees) arising from COMPANY NAME’s or Replicator’s use or disclosure of subject matter which Replicator knows or reasonably should know others have rights in, except, however, for subject matter and the identity of others having rights therein that Replicator discloses to COMPANY NAME in writing before COMPANY NAME uses the subject matter.

10. It is understood and agreed that in performing the Services for COMPANY NAME hereunder, Replicator shall act in the capacity of an independent contractor and not as an employee or agent of COMPANY NAME. Replicator agrees that it shall not represent itself as the agent or legal representative of COMPANY NAME for any purpose whatsoever. When Replicator is working on the premises of COMPANY NAME, Replicator shall observe the working hours, working rules, and security procedures established by COMPANY NAME. No right or interest in this Agreement shall be assigned by Replicator without the prior written permission of COMPANY NAME, and no delegation of the performance of the Services or other obligations owed by Replicator to COMPANY NAME shall be made without the prior written consent of COMPANY NAME. This Agreement shall be deemed to have been made and executed in the State of California and any dispute arising hereunder shall be resolved in accordance with the law of California. This Agreement may be amended, altered or modified only by an instrument in writing, specifying such amendment, alteration or modification, executed by both parties. This Agreement constitutes and contains the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior oral or written agreements. Nothing herein contained shall be binding upon the parties until this Agreement has been executed by an officer or agent of each and has been delivered to the parties.

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Agreed to and Accepted:
COMPANY NAME	Replicator
Signature	Signature
Date:	Date:

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EXHIBIT “G” APPROVAL REQUEST Tracking No.

o	First submission. We will assign a tracking number if this is first submission.
	Always use this number when resubmitting this item.

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EXHIBIT “H” GUARANTEE AGREEMENT

     THIS GUARANTY, dated as of December ____, 2006 (the “Guaranty”), by and among GigaMedia Limited, a corporation incorporated, organized and existing under the laws of Taiwan, having its principal office at [14/F, 122, Tunhwa North Road, Taipei, Taiwan, and Infocomm Asia Holdings Pte Ltd, a company incorporated, organized and existing under the laws of Singapore, having its principal office at 100 Beach Road, #34-01 Shaw Tower, Singapore 189702 (collectively, the “Guarantor”), is provided on a joint and several basis in favor of HanbitSoft Inc, a corporation duly organized and existing under the laws of the Republic of Korea, having its principal office at Specialty Construction Center 25F, 395-70, Shindaebang-2dong, Dongjak-gu, Seoul, Republic of Korea (“HBS”) and Flagship Studios, Inc., a corporation organized under the laws of the State of Delaware (“Flagship”), and sets forth the irrevocable (during the period in which Guaranteed Obligations (as defined below) exist) and joint and several guaranty of the Guarantor regarding the obligations of Obligor (as defined below) under the Agreement (as defined below). HBS and Flagship are hereinafter sometimes referred to, singly and collectively as the “Companies”.

PRELIMINARY STATEMENT

HBS contemplates entering into a License and Distribution Agreement to be dated of even date herewith (as amended from time to time, the “Agreement”) with DRAGONGATE ENTERPRISES LIMITED, a company incorporated under the laws of British Virgin Islands, having its principal office at ____ Akara Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands (the “Obligor”). It is a condition to the obligation of HBS to enter into and perform its obligations under the Agreement that the Guarantor execute this Guaranty in favor of the Companies. The Guarantor is willing to provide this Guaranty to induce the Companies to enter into and perform its obligations under the Agreement.

     Capitalized terms used herein but not otherwise defined shall have the meanings given to such terms in the Agreement.

     1. Guaranty; Direct Obligations. Subject to the terms and conditions set forth herein, the Guarantor hereby irrevocably (during the period in which Guaranteed Obligations (as defined below) exist) guarantees to the Companies (i) the full and prompt payment when due of all the payment obligations of the Obligor under the Agreement, whether for revenue share obligations, payments of advances or otherwise, and (ii) the full and prompt performance by the Obligor of all of its performance obligations in respect of the Agreement (clauses (i) and (ii), collectively, the “Guaranteed Obligations”). In the event of any default by the Obligor in the payment or performance of any of the Guaranteed Obligations, the Guarantor shall, on demand by Notice (as hereinafter defined), forthwith pay in full to the Companies and perform such Guaranteed Obligations; provided, however, that Guarantor’s obligations hereunder are subject in their entirety to any and all laws, regulations or equitable principles now or hereafter in effect which would modify or restrict the Guaranteed Obligations. For the avoidance of doubt, the parties hereto acknowledge and agree that the obligations of Guarantor hereunder are joint and several and accordingly, the Companies may seek to enforce such obligations against one or both of the entities comprising the Guarantor for the full Guaranteed Obligations, each of which has agreed to guaranty, and be liable for, jointly and severally, the Guaranteed Obligations.

     2. Absolute Obligation; Waiver of Defenses.

     2.1 Invalidity. The Guarantor agrees that the Guaranteed Obligations shall be absolute irrespective of any inaccuracy or breach of any representation or warranty made by the Obligor in Section 8.1 of the Agreement or by the Guarantor in this Guaranty.

     2.2 Protest. The Guarantor hereby waives any protest, diligence, demand or notice with respect to any breach by the Obligor of its obligations under the Agreement, except for demand by Notice for payment or performance of this Guaranty as provided in Section 1, and the Guarantor hereby waives the filing of any proof of claim or any diligence with respect to any proceeding of bankruptcy, insolvency, winding up, receivership, reorganization or analogous proceeding of the Obligor.

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     2.3 Modification. The Guarantor agrees that the Guaranteed Obligations shall be absolute irrespective of (i) any amendment, modification, waiver or consent of the Companies with respect to the Agreement, whether or not the Guarantor has received Notice thereof or has given consent thereto, including any change in the time, manner, place or currency of payment or any change in the amount of the payment of obligations of the Obligor thereunder or any postponement or indulgence granted by the Companies with respect to the payment of the Guaranteed Obligations, or the performance by the Obligor of any term of the Agreement and (ii) any amendment, modification, waiver, release or termination of any rights of the Companies pursuant to the Agreement or any amendment, modification, waiver, release or termination of any rights, mortgages, security interests, liens, charges or other encumbrances created pursuant to the Agreement notwithstanding that any such amendment, modification, waiver, release or termination may diminish the value of assets or collateral, if any, against which the Companies can realize value as an alternative to a demand for payment or performance under this Guaranty. Notwithstanding the foregoing, however, any such amendment, modification, consent, waiver, release or termination of any rights shall be deemed to modify the Guaranteed Obligations to the extent that Obligor’s underlying obligations are so modified.

     2.4 Collection. The Guarantor agrees that the Guaranteed Obligations shall be absolute, and the Companies shall have the right to demand and receive payment or performance of such Guaranteed Obligations without any prior attempt or undertaking to collect amounts past due from the Obligor or to enforce performance past due by the Obligor and without any attempt or undertaking to foreclose on, or to realize value from, any collateral. The Guarantor further agrees that the election of any remedy by the Companies shall not preclude the Companies from the right to payment or performance under this Guaranty, and this Guaranty shall continue in full force and effect and constitute the enforceable obligation of the Guarantor notwithstanding the dismissal, compromise or abandonment of any proceeding against the Obligor or in relation to the Agreement; provided, however, that prior to compromising or settling any proceeding against the Obligor or in relation to the Agreement, the Companies shall provide not less than ten (10) business days prior written notice to Guarantor. In the event that the Companies do elect to undertake collection from the Obligor or does elect to enforce the Agreement, any deficiency or remaining amount due following such collection proceeding is guaranteed hereunder as a Guaranteed Obligation and shall be paid by the Guarantor without limitation. If the Companies, by taking any action or commencing any proceeding were to forfeit or release any rights against the Guarantor because of the application of any laws or equitable principles relating to the “election of remedies”, then, to the fullest extent permitted by law, the Guarantor hereby waives and consents to such action or proceeding by the Companies constituting such “election of remedies”, and such waiver and consent shall be effective even if that results in a full or partial loss by the Guarantor of any rights of subrogation, contribution or reimbursement that the Guarantor might otherwise have had, again provided that prior to compromising or settling any proceeding against the Obligor or in relation to the Agreement, the Companies shall provide not less than ten (10) business days prior written notice to Guarantor.

     2.5 Bankruptcy. The Guarantor agrees that the Guaranteed Obligations shall be absolute notwithstanding the commencement of any proceeding in bankruptcy, receivership, reorganization or analogous proceedings under the United States Bankruptcy Code of 1978, as amended, 11 U.S.C. Secs. 101-1330 (the “Bankruptcy Code”) or any other foreign laws similar thereto with respect to the Obligor, The Guaranteed Obligations shall not be modified or affected by reason of any election by the Companies in any such proceeding of the application of Section 1111 (b)(2) of the Bankruptcy Code or any similar election in an analogous proceeding or by the disallowance under the Bankruptcy Code or foreign laws similar thereto of all or any portion of the claims of the Companies for payment or performance by the Obligor of its obligations under the Agreement. The Guarantor consents and agrees that the Companies shall be under no obligation to marshal any assets or property of the Obligor in order to protect the interest of the Guarantor with respect to any claims, by subrogation or otherwise, for reimbursement after payment by the Guarantor to the Companies hereunder.

     3. Representations and Warranties. The Guarantor hereby represents and warrants that, as of the date of this Guaranty: (i) the Guarantor is duly organized, validly existing and in good standing under the laws of the place of its incorporation or organization; (ii) this Guaranty has been duly and validly authorized and executed by persons with authority to bind the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms (subject to the effect, if any, of applicable bankruptcy and other similar laws affecting the rights of creditors generally and rules of law governing specific performance, injunctive relief and other equitable remedies); (iii) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Guarantor of this Guaranty, except for such notices and filings which, if not filed, would not have a material adverse effect on the Guarantor and its subsidiaries, taken as a whole; (iv) the execution, delivery

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and performance by the Guarantor of this Guaranty do not and will not conflict with, contravene, violate or result in a breach of or default under any laws applicable to the Guarantor or any order, decree or judgment of any court or governmental authority binding on the Guarantor or any agreement or instrument to which the Guarantor is a party or by which it or any of its assets are bound, except for such conflicts, contraventions, violations, breaches or defaults as would not have a material adverse effect on the Guarantor and its subsidiaries, taken as a whole, and will not result in or require the creation or imposition of any lien, charge or encumbrance upon any assets of the Guarantor, except for such liens, charges or encumbrances as would not have a material adverse effect on the Guarantor and its subsidiaries, taken as a whole; and (v) the Guarantor is solvent and able to pay its debts as they become due.

     4. Currency. All sums payable by the Guarantor hereunder shall be payable to the Companies in the currency, place and manner of payment required by the Agreement.

     5. Survival. This Guaranty shall remain in full force and effect until payment in full and performance in full of the Guaranteed Obligations.

     6. Cumulative Rights. No failure on the part of the Companies to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not alternative or exclusive, and such rights and remedies shall exist in addition to all other rights and remedies of the Companies in relation to this Guaranty and the Agreement in accordance with the provisions thereof and applicable law. Failure by the Companies at any time or times hereafter to require strict performance by the Obligor or the Guarantor of any of the terms and conditions of this Guaranty or of the Agreement shall not waive, release or diminish any right of the Companies at any other time to demand strict performance thereof, and such right shall not be deemed to have been waived or released by any act, course of conduct or knowledge of the Companies, its agents, officers or employees, unless such waiver or release is contained in an instrument in writing signed by the Companies. No waiver by the Companies of any default of the Obligor or the Guarantor shall operate as a waiver of any other default or the same default on a future occasion. Any determination by an arbitrator or court of competent jurisdiction of the amount of the Guaranteed Obligations shall be conclusive and binding on the Guarantor irrespective of whether the Guarantor was a parly to the suit or action in which such determination was made; provided, however, that prior to seeking such determination, the Companies shall provide not less than ten (10) business days prior written notice to Guarantor.

     7. Amendments. This Guaranty may be amended, supplemented, waived or modified only by an instrument in writing signed by the Guarantor and consented to by the Companies.

     8. Assignments. This Guaranty shall be binding upon and inure to the benefit of the Parties’ permitted successors and permitted assigns. Guarantor may not assign this Agreement, in whole or in part, without the Companies’ written consent.

     9. Notices. All notices and demands hereunder shall be in writing and shall be served by personal delivery, express courier, or mail at the address of the receiving party set forth in the Agreement (or at such different address as may be designated by such party by written notice to the other party), and shall be deemed complete upon receipt. All notices or demands by mail shall be by certified or registered airmail, return receipt requested. If receipt of such notice or demand is refused or a party has changed its address without informing the other, the notice shall be deemed to have been given and received upon the seventh (7th) day following the date upon which it is first postmarked by the postal service of the sender’s nation.

     10. Governing Law and Jurisdiction. This Guarantee shall be governed by and construed in accordance with the laws of the State of California, USA. THE APPLICATION OF THE UNITED NATIONS CONVENTION OF CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS IS EXPRESSLY EXCLUDED. If any dispute, difference of opinion or claim which HBS and Guarantor are unable to resolve through amicable negotiation arises out of, or in connection with this Agreement, either party may, after having the other party hereto so notified with a notice period of no less than twenty (20) days, refer the matter in question to arbitration for settlement in accordance with the Rules of Arbitration of the International Chamber of Commerce by one or more (maximum of three (3)) arbitrators appointed in accordance with the said Rules. The arbitration with regard such claims shall be conducted in Hong Kong. Both parties hereby submit to the jurisdiction of such body over each of them personally in connection with such litigation, and waive any objection to venue and any claim that such forum is an inconvenient

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forum. Notwithstanding any of the foregoing to the contrary, Guarantor hereto voluntarily and irrevocably submits and consents to the sole and exclusive jurisdiction of the courts of the State of California, San Francisco county, including Federal courts located therein, should Federal jurisdiction requirements exist, in any action brought by Flagship to enforce (or otherwise relating to) this Guarantee, and Guarantor hereby waives any objection thereto on the basis of personal jurisdiction or venue. The English-language version of this Guarantee controls when interpreting this Guarantee and all proceedings shall be conducted in English.

     IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officers or other representative as of the date first set forth above.

GUARANTOR:
INFOCOMM ASIA HOLDINGS PTE. LTD.
By:	/s/ Roland Ong
Name:	Roland Ong
Title:	CEO
GIGAMEDIA LIMITED
BY:	/s/ Arthur Wang
Name:	Arthur Wang
Title:	CEO

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EX-4.50

Exhibit 4.50

THIRD AMENDMENT TO THE END USER LICENSE AGREEMENT
Contract No. EULA-010404-Third Amendment

     THIS THIRD AMENDMENT TO EULA-010404 (this Amendment) is made and entered into this the first day of March 2007, by and between Internet Media Licensing Limited, a British Virgin Island corporation (“IML”), having its registered office at Akara Bldg., 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands and Ultra Internet Media, S.A. a Nevis corporation, having its registered address at Veira Grant & Associates, Chambers, #10 Solomon’s Arcade, Charlestown, Nevis (“Licensee”).

     WHEREAS, Grand Virtual (Alderney) Limited, a company registered in Alderney with company number 1443 whose registered office is at York House, Victoria Street, Alderney GY9 3TA (“GVA”) and Licensee entered into a certain End User License Agreement (EULU-010404) as of April 1, 2004 for the License of Grand Virtual software, and

     WHEREAS, GVA and Licensee entered into an Amendment agreement on January 1, 2005 (EULA-010404-First Amendment), to amend Schedule B, for Software Royalties fees associated with Grand Virtual’s multi-player game software and to delete in its entirety and replace Section 6.3 of the End User License Agreement.

     WHEREAS, GVA, IML and the Licensee entered into a Novation agreement on April, 1, 2005, which released and discharged GVA from the End User License Agreement and IML assumed full liability to perform the Contract and to be bound by the terms in every way as if IML had been a party to it in place of GVA.

     WHEREAS, GVA and Licensee entered into an Amendment agreement on March 1, 2006 (EULA-010404-Second Amendment), to amend Schedule B, for Software Royalties fees associated with Grand Virtual’s multi-player game software.

     WHEREAS, IML and Licensee desire to amend the Second Amendment to the End User License Agreement, dated March 1, 2006, (EULA-010404-Second Amendment) with the terms set forth herein.

     NOW THEREFORE, IML and Licensee hereby agree to amend the Second Amendment to the End User License Agreement (EULA-010404-Second Amendment), effective as follows:

          1. SCHEDULE B of the agreement is hereby deleted in its entirety and replaced with the following:

Payment	Due
Up-front, non-refundable license fee, of USD $0	Upon signing of agreement
Software Royalties for Games of Chance Software - - the royalty shall be equal to Forty-two percent (42%) of Gross Revenues (“Royalty Rate”) derived from the Games of Chance Software, received in the particular Calculation Period, effective March 1, 2007.	On the tenth day of each calendar month following the end of the preceding Calculation Period.
Software Royalties for Multi Player Game Software - the royalty shall be equal to Seventeen and one half percent (17.5%) of Gross Revenues (“Royalty Rate”) derived from the Multi-Player Game Software, received in the particular Calculation Period, effective January 1, 2007.

Internet Media Licensing Limited. Standard EULA	Page 1 of 2
3rd Amendment	Contract No. EULA-010404

IML will record all data relevant to the determination of Software Royalties from Licensee’s databases by means of utilities included in the Software. On the basis of such recorded data, Licensor shall invoice Licensee immediately following the end of each Calculation Period for that Calculation Period’s Software Royalty. In the event that a calculation period ends on a day in which revenues are not processed by the software (i.e. holiday), the Licensor is entitled to a pro-rata share.

Gross Revenues for the Calculation Period are defined as:

ALL Gross Receipts from Credit Cards receipts, Bank Wires, and all other third party payment providers (e.g. NETeller, 1-Pay) before any and all processor (transaction) fees and reserve withholdings.

Excluded from the Gross Receipts definition are ALL payments. For example, ALL payments to End Users (Withdrawals, Distributions and Refunds), End User, Chargebacks (including fees and penalties), and ALL operational expenditures (third party licensee commissions, Marketing Expenditures, data center, bandwidth, legal & accounting, etc.).

Marketing Events - If requested, IML will provide on-site Marketing personnel in conjunction with direct end user marketing programs and events (e.g. Poker Tours, Poker Events, Investigating and Negotiating Marketing Contracts). IML may bill Licensee for all direct travel expenditures in relation to such programs and events.

IN WITNESS WHEREOF, the parties’ authorized representatives have executed this Agreement as of the Effective Date.

Internet Media Licensing Limited		Ultra Internet Media S.A. :
By:	/s/ Kenneth Huang	By:	/s/ William Lee
Name: Kenneth Huang		Name:	William Lee
Title: Director		Title: Director

Internet Media Licensing Limited. Standard EULA	Page 2 of 2
3rd Amendment	Contract No. EULA-010404

EX-4.51

Exhibit 4.51

EXECUTION COPY

DATED THE 7TH DAY OF DECEMBER 2006

BETWEEN

MANAGEMENT CAPITAL INTERNATIONAL LTD

INFOCOMM INVESTMENTS PTE LTD

COMMERZBANK INFOCOMM SEGREGATED PORTFOLIO

GLOBAL STAR INTERNATIONAL DEVELOPMENT LIMITED

ETHERFAST PTE LTD

GIGAMEDIA ASIA PACIFIC LIMITED

AND

INFOCOMM ASIA HOLDINGS PTE. LTD.

SHAREHOLDERS’ AGREEMENT

9 Raffles Place
#32-00 Republic Plaza
Singapore 048619
Tel: (65) 6389 3000
Fax: (65) 6389 3099
www.stamfordlaw.com.sg

EXECUTION COPY

TABLE OF CONTENTS

CLAUSE NO.	HEADING	PAGE NO.
1.	DEFINITIONS		2
2.	SHARE CAPITAL AND ALLOTMENT OF SHARES		6
3.	CONVERSION RIGHTS		7
4.	ANTIDILUTION ADJUSTMENTS		7
5.	REDEMPTION OF CLASS A SHARES		8
6.	REDEMPTION OF CLASS B SHARES		8
6A.	LIDUIDATION PREFERENCE		8
7.	LISTING AND AUTOMATIC CONVERSION		9
8.	BOARD OF DIRECTORS		10
9.	GENERAL MEETINGS		12
10.	BUSINESS OF THE COMPANY		14
11.	FINANCE		15
12.	MANAGEMENT, ACCOUNTS AND INFORMATION		16
13.	TRANSFER OF SHARES		17
14.	COMPULSORY TRANSFERS		20
15.	TAG-ALONG RIGHTS		22
16.	BRING ALONG RIGHTS		23
17.	REGISTRATION RIGHTS		23
18	DURATION AND TERMINATION		27
19.	NON-COMPETITION AND OTHER RESTRICTIONS		27
20.	REPRESENTATIONS AND WARRANTIES		29
21.	FORCE MAJEURE		30
22.	ARTICLES OF ASSOCIATION		30
23.	CONFIDENTIALITY		30
24.	CONTINUING EFFECTS OF THIS AGREEMENT		31
25.	COUNTERPARTIES		31
26.	NOTICES		31
27.	MISCELLANEOUS		32
SCHEDULE 1			37

EXECUTION COPY

THIS AGREEMENT is made on the 7th day of December 2006

BETWEEN:

(1)	Management Capital International Ltd, a company incorporated in the British Virgin Islands and having its registered office at Portcullis Trustnet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands (“MCIL”);
(2)	Infocomm Investments Pte Ltd (Company Registration Number 199608120R), a company incorporated in Singapore and having its registered office at 6 Temasek Boulevard #29-00 Suntec Tower 4 Singapore 038986 (“IIPL”);
(3)	Commerzbank Infocomm Segregated Portfolios, a specific segregated portfolio within Commerz Asia Best SPC (Company Registration Number CB-142661), a segregated portfolio company incorporated in the Cayman Islands and having its registered office at Coconut Villa 2 Jennifer Drive P.O. Box 10211 APO Grand Cayman BW1 (“CISP”);
(4)	Global Star International Development Limited (Company Registration Number 1032166), a company which is a wholly owned subsidiary of The9 Limited and incorporated in Hong Kong Special Administrative Region and having its registered office at 34/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong (“Global Star”);
(5)	Etherfast Pte Ltd (Company Registration Number 200604316G), a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (“Etherfast”); and
(6)	GigaMedia Asia Pacific Limited (IBC Number 1068168), a company incorporated in the British Virgin Islands and having its registered office at Overseas Management Company Trust (B.V.I.) Ltd., OMC Chambers, P.O. Box 3152, Road Town, Tortola, British Virgin Islands (“GigaMedia”);

collectively referred to as “Shareholders”; and

(7) Infocomm Asia Holdings Pte. Ltd. (Company Registration Number 200414722H), a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (the “Company”),

all the parties above shall be referred to individually as a “Party” and collectively as the “Parties”.

WHEREAS:

(A)	The Company has been incorporated for the purpose of engaging in the Business (as defined hereunder).
(B)	The shareholding structure of the Company as at the Completion Date, based on a fully converted basis, will be as follows:

1

EXECUTION COPY

		Number of Ordinary
	Type of Shares	Shares on a Converted
Shareholder	held	Basis
Management Capital International Limited	Ordinary Shares		150,000
Infocomm Investments Pte Ltd	Class A Shares		300,000
Commerzbank Infocomm Segregated Portfolio	Class A Shares		300,000
Global Star International Development Limited	Class A Shares		200,000
Gigamedia Limited	Class B Shares		500,000
Total number of Shares			1,450,000

(C) It is anticipated that Etherfast will subscribe for 100,000 new Ordinary Shares (as defined below) to be issued by the Company, following which the shareholding structure of the Company will be as follows:

		Number of Ordinary
	Type of Shares	Shares on a Converted
Shareholder	held	Basis
Management Capital International Limited	Ordinary Shares		150,000
Etherfast Pte Ltd	Ordinary Shares		100,000
Infocomm Investments Pte Ltd	Class A Shares		300,000
Commerzbank Infocomm Segregated Portfolio	Class A Shares		300,000
Global Star International Development Limited	Class A Shares		200,000
Gigamedia Limited	Class B Shares		500,000
Total number of Shares			1,550,000

(D)	The parties hereto wish to enter into this Agreement to regulate the affairs of the Company and the relationship between them as Shareholders of the Company.
(E)	It is understood that each of the parties have entered into this Agreement in reliance upon the participation of other parties on the terms and subject to the conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.	DEFINITIONS
1.1	In this Agreement unless the subject or context otherwise requires:
	“Act” means the Companies Act, Chapter 50 of Singapore;
	“Antidilution Exceptions” shall have the meaning ascribed under the clause 4 of this Agreement;
	“Applicable Securities Law” means (i) with respect to any offering of securities in the United States of America, or any other act or omission within that jurisdiction, the securities

2

EXECUTION COPY

law of the United States, as amended from time to time, including the Exchange Act and the Securities Act, and any applicable law of any state of the United States of America, and (ii) with respect to any offering of securities in any jurisdiction other than the United States of America, or any related act or omission in that jurisdiction, the applicable laws of that jurisdiction;

“Articles” means the Articles of Association of the Company, as amended to incorporate the amendments set out in the Annex to the Subscription Agreement and as may be further amended from time to time;

“Auditors” means such approved company auditors acceptable to the parties hereto as may at the given time be the auditors of the Company;

“Board” means the board of Directors for the time being of the Company;

“Business” means the business to be carried on by the Company, including but not limited to the operation and distribution of online games by way of securing the exclusive distribution rights for online internet games or mobile games, for distribution in the South Asia region and to make strategic investments in operating hubs;

“Business Day” means any day in Singapore except for Saturdays and Sundays and days which have been gazetted as public holidays in Singapore;

“Chairman” means the Chairman of the Board and the Company;

“Class A Conversion Rate” means the ratio at which Class A Shares are converted into Ordinary Shares which shall be ten (10) Class A Shares for one (1) Ordinary Share, subject to such adjustments as may be made from time to time in accordance with this Agreement and the Articles;

“Class A Issue Price” means US$1.00 for each Class A Share;

“Class A Shares” means such number of redeemable, convertible, preference shares in the capital of the Company, each bearing the terms and conditions as set out in the Articles;

“Class B Conversion Rate” means the ratio at which Class B Shares are converted into Ordinary Shares, which shall initially be one (1) Class B Share for one (1) Ordinary Share, subject to such adjustments as may be made from time to time in accordance with this Agreement and the Articles;

“Class B Issue Price” means US$20.00 for each Class B Share;

“Class B Shares” means such number of redeemable, convertible, preference shares in the capital of the Company, each bearing the terms and conditions as set out in the Articles;

“Commission” means (i) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States of America or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States of America, the relevant regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction;

“Completion Date” has the meaning ascribed to it by the Subscription Agreement;

“Conversion Rate” means the Class A Conversion Rate and the Class B Conversion Rate;

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“Converted Basis” means such number of Ordinary Shares held as a result of the conversion of Preference Shares into Ordinary Shares of the Company at the Class A Conversion Rate or the Class B Conversion Rate (as the case may be), pursuant to the terms and conditions set out in the relevant Subscription Agreements;

“CUSIP Number” means the number assigned to identify securities in the North America as maintained by the Committee on Uniform Securities and Identification Procedures;

“Directors” means the proposed directors of the Company including, where applicable, alternate directors and “Director” refers to any of them;

“Form F-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission. Form F-3, as applied in this Agreement, could be either Form F-3, if the Company is deemed a foreign private issuer under the Securities Exchange Act of 1934, as amended, or Form S-3, if the Company is deemed a domestic issuer under such Act;

“Founder” means the shareholder(s) of MCIL as at the Completion Date;

“Holder” means the holders of Class B Shares;

“Initiating Holder” means a Shareholder holding at least 25% of the Registrable Securities on a Converted Basis;

“Investment Budget” means the investment budget to be approved by the Investment Committee that will be in line with the Use of Funds (as defined in the Subscription Agreement);

“Management” means the management team of the Company as set out in Schedule 1 of this Agreement and such other persons who may from time to time be appointed as members to the management team of the Company and who become shareholders of MCIL;

“net tangible asset value” means the total tangible assets value of the Company less total liabilities (including deferred taxation), which is equal to the shareholders’ equity, which comprises the following:

(a)	the amount paid up or credited as paid up on the issued share capital of the Company; and
(b)	the amounts standing to the credit of the reserves of the Company as recorded in the accounts of the Company, howsoever described, including:

(i)	any share premium account;
(ii)	any capital redemption reserve fund; and
(iii)	any amount standing to the credit of the profit and loss account, all as shown by the accounts of the Company but after:

(aa) deducting therefrom (if not other deducted) any amounts attributable to intangible assets including goodwill and the amount of any debit balance on the profit and loss account in the accounts of the Company; and

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(bb) making such other adjustments (if any) as the Auditors consider appropriate in accordance with generally accepted accounting principles;

“Ordinary Shares” means the ordinary shares in the capital of the Company;

“Preference Shares” means the Class A Shares and the Class B Shares;

“Person” means any individual, body corporate, corporation, partnership, limited partnership, proprietorship, association, limited liability company, trust, estate, enterprise or other entity;

“Qualifying Buy-Back” means a share buy-back undertaken by the Company in accordance with the applicable provisions of Singapore law;

“Registrable Securities” means the Ordinary Shares, including such Ordinary Shares issuable upon the conversion of the Preference Shares;

“Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of the Registration Statement; and the terms “Register” and “Registered” have the same meanings concomitant with the foregoing;

“Registration Statement” means a registration statement prepared on Form F-1, F-2 or F-3 under the Securities Act, or on any comparable form in connection with registration in a jurisdiction other than the United States;

“Securities Act” means the United States Securities Act of 1933, as amended;

“Secretary” means the secretary for the time being of the Company;

“Shareholders” means IIPL, CISP, MCIL, Global Star, Etherfast and GigaMedia;

“Shareholder Proportions” means, in relation to a Shareholder, the proportion which the number of Ordinary Shares (on a Converted Basis) set against the name of each Shareholder in the tables as set out in Recitals B and C (the “Tables”), as the case may be, bears to the total number of Ordinary Shares in the Company (on a Converted Basis) as set out in the Tables, subject to changes in share capital of the Company as permitted by the terms and conditions of this Agreement, the Subscription Agreement and the Articles;

“Shares” means the Class A Shares, the Class B Shares and the Ordinary Shares;

“South Asia Region” includes Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and other territories as agreed by the Parties from time to time;

“S$” means the lawful currency of Singapore;

“US$” means the lawful currency of the United States of America;

“Use of Funds” has the meaning ascribed to it under clause 2.3 of the Subscription Agreement; and

“WOW” means the massively multiplayer online role-playing game known as World of Warcraft.

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1.2 In this Agreement:

(a)	words importing the singular include the plural and vice versa;
(b)	words importing a gender include every gender; and
(c)	references to persons shall be construed as including references to an individual, firm, company, corporation, trust, unincorporated body of persons or any State or government or any agency thereof.

1.3	Headings are for ease of reference only and have no legal effect. References to clauses are to clauses of this Agreement.
1.4	Any reference to a statutory provision shall include such provision as from time to time modified, amended or re-enacted so far as such modification, amendment or re-enactment applies or is capable of applying to any transactions entered into hereunder.

2.	SHARE CAPITAL AND ALLOTMENT OF SHARES
2.1	As at the Completion Date, the Company will have an issued share capital of 250,000 Ordinary Shares, 8,000,000 Class A Shares, and 500,000 Class B Shares.
2.2	The Shareholders shall take such steps for the time being as lie within their power to procure that save for a further 250,000 Class B Shares which may be issued within the period of ten weeks after the Completion Date, the Company shall not issue any further shares whether forming part of its unissued shares or new shares. Notwithstanding the foregoing, if the Board determines in good faith and after due commercial considerations that additional shareholders’ equity is necessary, the Shareholders shall cause the Company to issue such number of additional shares as the Board may recommend. Such additional shares shall be offered in the first instance to holders of Preference Shares in proportion to their shareholdings (as determined by their voting rights on a Converted Basis) in the Company immediately prior to such proposed increase in the issued share capital of the Company and the holders of the Preference Shares may elect to subscribe for such number of additional shares. In offering such shares in the first instance to the holders of the Preference Shares, the offer shall be made by written notice specifying the number of such additional shares offered and reasonably limiting the time within which the offer, if not accepted, will be deemed to be declined (which shall not be less than 21 Business Days) and after the expiration of that time or on the receipt of an intimation from any Shareholder to whom the offer is made that it declines to accept the additional shares offered, the other Shareholders shall be entitled to subscribe to all such additional shares and if more than one other Shareholder desires to so subscribe, then such additional shares will be allocated pro rata between them in the proportion that their respective shareholdings in the Company bear to one another. Prior to the subscription of any shares in the capital of the Company, each new shareholder of the Company shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement. Such right shall terminate at or upon a Public Offering (hereinafter defined).
2.3	The foregoing right would not apply to:

(a) the issuance by the Company of Ordinary Shares (or any options or rights convertible into Ordinary Shares) to employees, officers, directors or consultants of the Company pursuant to share option plans or other share incentive arrangements approved by the Board;

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(b)	securities issued by the Company in connection with any merger or acquisition event undertaken by the Company;
(c)	Ordinary Shares issued in connection with any subdivision, consolidation or reclassification of Shares;
(d)	Ordinary Shares issued upon the conversion or automatic conversion of the Preference Shares pursuant to clauses 3, 7.2 and 7.3 of this Agreement;
(e)	the issuance of equity securities pursuant to a public offering; or
(f)	the issuance of equity securities pursuant to an approved management incentive plan.

3.	CONVERSION RIGHTS
	Each Holder shall be entitled, at any time after the Completion Date, at its option, to convert all or any of the Class B Shares it holds into Ordinary Shares. Each Class B Share shall be convertible into one Ordinary Share, subject to any adjustments provided in Clause 4 below and the Articles of the Company.

4. ANTIDILUTION ADJUSTMENTS

4.1 Each of the Parties agrees to procure (insofar as it lawfully can), for so long as any Class A Shares or Class B Shares are outstanding, that:

(i)

in the event of a subdivision, consolidation or reclassification of shares, or the issuance of Shares by way of a capitalisation of profits and reserves, all necessary steps will be taken to ensure that the Shareholder Proportions in relation to the Shareholders remain unchanged (“Proportional Antidilution Protection”), including, without limiting the generality of the above, making such adjustments to the Conversion Rate as may be necessary to maintain the Shareholder Proportions amongst the Shareholders (“Antidilution Adjustments”); and

(ii)

in the event that the Company issues any additional Shares or rights or options to subscribe for Shares (including by way of a rights issue), or any options, rights, warrants or other securities convertible or exercisable into, or exchangeable for or redeemable with any Shares in or assets of the Company at a price that is less than the Class B Issue Price (the “New Issue Price”), the Class B Conversion Rate shall be adjusted such that the number of Ordinary Shares arising from the conversion of each Class B Share shall be equal to the Class B Issue Price divided by the New Issue Price.

4.2 Notwithstanding clause 4.1, the following events (“Antidilution Exceptions”) will not trigger an Antidilution Adjustment:

(a) the issue of Ordinary Shares upon conversion of any Preference Share pursuant to the terms of this Agreement; and

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(b) Ordinary Shares and/or options that may be issued or registered for issuance to employees pursuant to a share option plan or other share incentive plan approved by the Board.

5. REDEMPTION OF CLASS A SHARES

5.1	Upon receiving a written request from the holders of a majority of the Class A Shares at any time after the fourth anniversary of 31 May 2005, the Company shall redeem the number of Class A Shares submitted by such holders for redemption.
5.2	The redemption price for each Class A Share under this clause 5 shall be the Class A Issue Price, plus interest accrued thereon at the rate of ten per cent (10%) per annum compounded annually, less any declared and paid dividends (“Class A Redemption Amount”).

6.	REDEMPTION OF CLASS B SHARES
6.1	The Holders shall have the right, at such holder’s option, to require the Company to redeem in cash the Class B Shares which are not converted (1) on the fifth (5th) anniversary of the issuance of the Class B Shares, or (2) upon the redemption of any Class A Shares whichever is earlier, by way of a written request to the Company.
6.2	The redemption price per Class B Share shall be 100 per cent. of the Class B Issue Price, plus interest accrued thereon at the rate of ten per cent (10%) on the Class B Issue Price per annum compounded annually, less any declared and paid dividends thereon (the “Redemption Amount”). In the case of a redemption triggered by the redemption of any Class A Shares, the Holders shall be entitled to payment of the Premium Amount in priority to the holders of Class A Shares, where:
	Premium Amount = A + B
	Where:
	A = (Class B Issue Price – Class A Issue Price) x number of Class B Shares to be redeemed;
	B = interest accrued on the Class B Shares to be redeemed at the rate of 10% per annum compounded annually less any declared and paid dividends on such Class B Shares;
	The remaining Redemption Amount owing to the Holders will be paid to the Holders pari passu with the Class A Redemption Amounts.
6.3	The Class B shareholders shall also be entitled, at their option, to require the Company to redeem the Class B Shares within two (2) weeks of a change in Control of the Company. For the purposes of this clause, “Control” shall mean the right to exercise, directly or indirectly, more than 50 per cent of the voting rights attributable to the shares of the Company.

6A.	LIDUIDATION PREFERENCE
	The Parties agree that in the event of any liquidation, dissolution or winding up of the Company, or on a return of capital (other than a Qualifying Buy-Back) by the Company, the holders of the Class B Shares shall be entitled to receive, prior to and in preference to any distribution to the holders of Ordinary Shares, Class A Shares or any other class of shares,

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an amount equal to the price per Class B Share over the price paid per Class A Share, plus all declared but unpaid dividends thereon (the “Preference Amount”). After the full Preference Amount on all outstanding Class B Shares and the preference amount on the Class A Shares have been paid, any remaining funds and assets of the Company shall be distributed pro rata amongst the holders of the Shares on a Converted Basis.

If the Company has insufficient assets to permit payment of the Preference Amount in full to all Holders, then the assets of the Company shall be distributed ratably to the Holders in proportion to the Preference Amount each holder would otherwise be entitled to receive.

7.	LISTING AND AUTOMATIC CONVERSION
7.1	All the Shareholders agree that the Company shall seek a listing for its shares as soon as practicable, once it achieves the IPO Targets (as defined below) set out herein.
7.2	All Class A Shares shall be automatically converted into Ordinary Shares, at the then applicable Class A Conversion Rate, upon:

(a)	the closing of an underwritten public offering of shares of the Company (“Public Offering”) or such other date as may be agreed between the Parties and the issue manager, at a public offering price per share which satisfies the IPO Targets as defined in Clause 7.4 below and with a reasonably anticipated aggregate offering size of at least US$15,000,000 (a “Qualified Public Offering” or “QPO”); or
(b)	the election of at least 70% of the Class A Shareholders.

7.3 All Class B Shares shall be automatically converted into Ordinary Shares, at the then applicable Class B Conversion Rate, upon:

(a)	the closing of an underwritten public offering of shares of the Company (“Public Offering”) or such other date as may be agreed between the Parties and the issue manager, at a public offering price per share which satisfies the IPO Targets as defined in Clause 7.4 below and with a reasonably anticipated aggregate offering size of at least US$15,000,000 (a “Qualified Public Offering” or “QPO”); or
(b)	the election of at least 70% of the Class B Shareholders.

7.4 For the purposes of this clause, unless otherwise agreed by the holders of no less than seventy-five per cent (75%) of the Ordinary Shares on a fully converted basis and the holders of no less than two-thirds of the Preference Shares, the targets for a Public Offering (the “IPO Targets”) shall be:

(a)	two times of the Class B Issue Price per Class B Share for a Public Offering in 2007;
(b)	four times of the Class B Issue Price per Class B Share for a Public Offering in 2008; or
(c)	eight times of the Class B Issue Price per Class B Share for a Public Offering in 2009 or later.

7.5 The Preference Shareholders may by written request to the Company at any time after a Public Offering, require the Company to take all necessary steps and do all such things as may be necessary to facilitate the sale or transfer or any other dealings of any Ordinary Shares issued pursuant to a conversion of Preference Shares, including but without

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limitation to the generality of the foregoing, making all necessary applications for such Ordinary Shares to be listed on the exchange on which the Company’s Shares are listed.

8.	BOARD OF DIRECTORS
8.1	Unless all the Shareholders otherwise agree in writing, the Board shall comprise five (5) Directors of which one (1) Director will be nominated by IIPL, one (1) Director will be nominated by CISP, one (1) Director will be nominated by Global Star, one (1) Director will be nominated by the holders of Ordinary Shares and one (1) Director will be appointed by GigaMedia.
8.2	The first Chairman shall be appointed by the Management and subsequent Chairmen shall be appointed by a majority vote of the Board.
8.3	The right of appointment of the Directors conferred on the Shareholders shall include the right at any time and from time to time to remove from office and to determine the period which such persons shall hold office as Director. Whenever a Director ceases to be a Director for any reason whatsoever, the party which appointed him shall be entitled to appoint another person to replace him as a Director.
8.4	Any appointment or removal of Directors as aforesaid shall be made in writing and be signed by the duly authorised officer of the appointor and shall take effect as from the date of its receipt at the registered office of the Company or on the date of appointment specified in the notice, whichever is later.
8.5	A Director may at any time and from time to time appoint any other person (other than another Director) to be his alternate, and to remove such alternate Director. All appointments and removals of alternate Directors made by any Director shall be in writing under the hand of the Director making the same and shall take effect as of its receipt at the registered office of the Company or on the date of appointment specified in the notice, whichever is the later. Such alternate Director shall be entitled while holding office as such, to receive notices of Board meetings and to attend and vote at any such Board meetings at which the Director appointing him is not present and to exercise all the authorities, powers and rights and perform all the functions of his appointer thereat.
8.6	The quorum for all meetings of the Board shall be three (3) Directors, each present personally or by his alternate. If within half an hour after the time fixed for the meeting, the Directors constituting the quorum are not present, the meeting shall be adjourned and reconvened to discuss the same agenda on the third working day at the same time of the day and the same venue, and during the reconvened meeting, any two (2) Directors shall be deemed to form a quorum provided always that three (3) days’ written notice of each meeting or reconvened meeting shall be given to each Director entitled to attend such meetings.
8.7	The Shareholders shall use all reasonable endeavours to procure that a quorum is present throughout each meeting of the Board.
8.8	The Directors may meet at any place for the despatch of their business, adjourn and otherwise regulate their meetings as they deem fit. A Director may participate at a meeting of Directors by telephone, teleconference or similar communications equipment or any other form of audio or visual instantaneous communication by which all persons participating in the meeting are able to hear and be heard by all participants, without a Director being in the physical presence of another Director in which event such Director shall be deemed to be present at the meeting. A Director participating in a meeting in the manner aforesaid may also

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	be taken into account in ascertaining the presence of a quorum at the meeting. Unless otherwise agreed unanimously, a Board meeting shall be held at least once every three (3) months in Singapore.
8.9	At any time, any Director may, and the Secretary on the requisition of a Director shall, summon a meeting of the Directors. At least seven (7) days’ notice in writing of each meeting of the Board shall be given to each Director of the Company at the address from time to time provided by him to the Company for such purpose and such notice shall be accompanied by an agenda of the matters to be considered at the meeting. Where a Director is absent from Singapore, such notice may be given by telefax or telex, to a telefax number, or telex number as the case may be, given by that absent Director to the Secretary. Any Director may waive notice of any meeting and any such waiver may be retroactive and for this purpose, the presence of a Director at the meeting shall be deemed to constitute a waiver on his part. No decision shall be taken on any matter at a meeting of the Board unless notice of such matter shall have been given in the manner aforesaid or waiver of such notice has been given in respect of such matter by all of the members of the Board.
8.10	Except as otherwise provided for in clause 8.15(f) of this Agreement, a Director shall not be prohibited from voting or being counted in a quorum at any Board meeting in respect of any contract or arrangement in which he is or may be interested provided he has disclosed the nature of his interest in accordance with applicable law (if any).
8.11	Except as otherwise provided in this Agreement, all resolutions of the Board shall be passed by a simple majority of the votes of the Directors.
8.12	The Chairman of any meeting of the Board shall have a second or casting vote in case of an equality of votes.
8.13	A resolution in writing signed by all the Directors appointed to the Company for the time being shall be as effective as a resolution duly passed at a meeting of the Directors and may consist of several documents in the like form, each signed by one or more Directors. The expression “in writing” and “signed” include approval by telefax, telex, cable, telegram, digital or electronic signature or such other mode of approval or indication of approval as may be permitted by law by any such Director.
8.14	The Board shall appoint an investment committee (the “Investment Committee”) comprising of four (4) members, one of whom shall be nominated by IIPL, one by Global Star and one by GigaMedia. The unanimous approval of the Investment Committee is required for any investment, including but not limited to, that relating to any online internet game or mobile game, any capital expenditure of the Company of US$250,000 and above and any other investment decision by the Company regarding the Use of Funds.
8.15	Notwithstanding the foregoing, the following matters shall require the affirmative vote of three (3) Directors elected by the holders of Class A Shares including a director nominated by each of IIPL and Global Star and a director elected by the Holder (whether before or after conversion into Ordinary Shares according to the Subscription Agreement):

(a)	the adoption of the Company’s annual budget (“Annual Budget”) and operating plan (“Operating Plan”);
(b)	any major corporate or financial matters that may either singly or in aggregate result in a variance of more than fifteen per cent (15%) from the Annual Budget and Operating Plan approved by the Board;

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(c)	any financial or investment commitment or expenditure which either singly or in aggregate amounts to more than US$50,000 not provided for in the Annual Budget;
(d)	any management remuneration plan, hiring dismissal or annual reappointment of the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) or any increase in the remuneration package of any such executive officer;
(e)	the issuance of any management and employee share options or incentive shares;
(f)	the entry into any transaction with any director, officer or shareholder of the Company (or affiliate or relative thereof) involving (i) the disbursement of funds or transfer of property in the Company or (ii) the formation, termination, extension, renewal or waiver of any contract;
(g)	the giving of any guarantee or indemnity by the Company in connection with any borrowing;
(h)	any change in the accounting policies adopted by the Company;
(i)	the creation of any encumbrance with respect to (i) any intellectual property of the Company and (ii) any other asset or assets of the Company which either singly or in aggregate have a value of more than US$50,000;
(j)	the provision of any credit, loan or the making of any advance by the Company;
(k)	the sale, transfer, lease, assignment or disposal of assets which either singly or in aggregate have a value of more than US$50,000;
(l)	the purchase, lease or acquisition of assets which either singly or in aggregate have a value of more than US$50,000 not provided for in the annual budget of the Company;
(m)	the appointment or removal of any auditor;
(n)	the licensing or other transfer of any intellectual property other than in the ordinary course of business;
(o)	the commencement or settlement of any legal proceeding involving more than US$50,000; and
(p)	the entry into by the Company of any transaction or series or transactions involving an aggregate amount in excess of US$50,000 including incurrence of any borrowing under any existing or future banking and credit facilities and the granting of any guarantee, indemnity, performance bond, lien, pledge, charge, mortgage or other security and the incurrence of any form of indebtedness.

9.

GENERAL MEETINGS

9.1

Notwithstanding anything to the contrary in the Articles, the quorum for a general meeting of the Company shall be three (3) Shareholders, including a representative from each of GigaMedia, IIPL and Global Star, personally present or represented by proxy, attorney or representative, present throughout that general meeting. If within half an hour after the time fixed for the meeting, the Shareholders constituting the quorum are not present, the meeting

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	shall be adjourned and reconvened and any two (2) Shareholders present throughout such adjourned general meeting shall constitute a quorum.
9.2	The Shareholders shall use all reasonable endeavours to procure that a quorum is present at and throughout each general meeting.
9.3	All questions and issues arising at a general meeting of the Company shall, unless otherwise required by any applicable law and subject to clause 9.9, be decided in accordance with the votes of a simple majority of the Shareholders.
9.4	Each Preference Shareholder shall have the right to that number of votes equal to the number of votes carried by their respective number of Ordinary Shares then issuable upon conversion of all its Preference Shares based on the prevailing Conversion Rate. Holders of all series of Preference Shares and Ordinary Shares shall vote together as a class except as provided in clause 9.10 below or as required by law.
9.5	A resolution in writing signed by all the Shareholders shall be as effective as a resolution duly passed at a general meeting of the Company and may consist of such documents in the like form, each signed by one or more directors. The expressions “in writing” and “signed” shall include approval by telefax, telex, cable, telegram, digital or electronic signature or such other mode of approval or indication of approval as may be permitted by law by any such Shareholder.
9.6	The notice of a general meeting of the Company shall set out an agenda identifying in reasonable detail the matters to be discussed (unless the Shareholders agree otherwise).
9.7	Without prejudice to clause 9.8, the parties agree that all Shareholders’ meetings shall be held in Singapore unless otherwise agreed to by all of the Shareholders.
9.8	Without prejudice to clause 9.1, the Shareholders may meet together in person or by telephone, teleconference or similar communications equipment or any other form of audio or visual instantaneous communication by which all persons participating in the meeting are able to hear and be heard by all participants, for the despatch of business and adjourn and otherwise regulate their meetings as they think fit. A resolution passed by such a conference shall, notwithstanding that the Shareholders are not present together at one place at the time of the conference, be deemed to have been passed at a meeting of the Shareholders held on the day and at the time at which the conference was held and shall be deemed to have been held at the registered office of the Company and, unless otherwise agreed, all the Shareholders participating at the meeting shall be deemed for all purposes of this Agreement to be present at that meeting.
9.9	Notwithstanding the foregoing, the consent of the holders representing seventy-five per cent (75%) of the Ordinary Shares (including the holders of the outstanding Preference Shares voting on a Converted Basis together with the holders of Ordinary Shares and not as a single class) and the holders representing two-thirds of the Preference Shares shall be required for:

(a)	The issuance by the Company of any new shares of any class;
(b)	Any repurchase or redemption of shares of the Company (other than pursuant to restricted stock agreements with employees, redemption provisions in the Articles or pursuant to the terms upon which the shares of the Company were issued);
(c)	Any amendment or repeal of any provision of the Memorandum and Articles of Association of the Company and its subsidiaries;

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(d)	Any change in the nature of the business of the Company;
(e)	Any merger, sale, consolidation of the Company with or into any entity;
(f)	The liquidation or dissolution of the Company or any of its subsidiaries;
(g)	The sale of all or substantially all the Company’s assets or the purchase of all or substantially all of the assets of another entity;
(h)	The disposal of any intellectual property rights including all game licensing contracts;
(i)	The declaration or payment of a dividend on any shares of the Company;
(j)	Any incurrence of debt by the Company other than the trade debts not exceeding an aggregate value of US$50,000; and
(k)	Decisions regarding the terms of a public offering.

9.10 Without prejudice to the above, the consent of the holders of at least 70% in value of the respective series of Preference Shares shall be required for:

(a)	any change in any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the holders of that series of Preference Shares;
(b)	the authorization, creation or issuance of (1) any Ordinary Shares or (2) any class or series of shares having any right, preference or priority superior to or on a pari passu basis with their series of Preference Shares; or
(c)	any new issuance of debt or equity security of the Company or its subsidiaries.

10.	BUSINESS OF THE COMPANY
10.1	The Shareholders agree that, effective from the Completion Date, their respective rights in the Company shall be regulated by this Agreement and the Articles.
10.2	Subject to clause 10.1, the Shareholders and the Company agree to be bound by and comply with the provisions of this Agreement which relate to them and all provisions of the Articles will be enforceable by the parties between themselves.
10.3	Subject to clause 10.1, each of the Shareholders agrees to exercise its respective rights under this Agreement and as a Shareholder (insofar as it lawfully can) to:

(a)	procure that the Company proceeds with the Business in all respects and continues to pursue the same with reasonable despatch;
(b)	procure that the Business is conducted in the best interests of the Company and in accordance with sound and good commercial and business practice and profit-making principles so as to generate the maximum achievable profits available for distribution;

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(c)	ensure that the Director(s) appointed by it exercises his powers as Director and otherwise uses its reasonable endeavours to seek to ensure that the business of the Company is confined to the Business;
(d)	procure that the Company complies with the Articles and all applicable laws as well as the terms and conditions of any licence, permit or consent by which the Company is bound at all times; and
(e)	ensure that the Director(s) appointed by it exercises his powers as Director and otherwise uses its reasonable endeavours to seek to ensure that all employees of the Company enter into non-compete and assignment of invention agreements in favour of the Company.

10.4	Any dealings with the Company and/or the Shareholders or any associates of such persons in relation to the supply of goods or services shall be on normal arm’s length terms negotiated between the relevant parties and no such person shall claim or be entitled to any preferential treatment in relation thereto by reason of the relationship of such persons under this Agreement or any shareholding in connection with the Company.
10.5	Without the prior consent of IIPL, and whether or not IIPL is then a shareholder of the Company, neither the Company nor its subsidiaries shall use, publish or reproduce the “IDA” or “IIPL” name or logo, or any similar name, trademark, or logo in any of their marketing, advertising or promotional materials or otherwise for any marketing, advertising or promotional purposes.
10.6	Each of the Parties acknowledges that the Company and GigaMedia shall become strategic partners and to the extent permitted by the licensing and other contracts entered into between the Company and the publishers of the online games conferring on the Company publishing rights in respect of those games in Hong Kong and/or Taiwan (if any), each of the Shareholders agrees to exercise its respective rights under this Agreement (insofar as it lawfully can) to procure that the Company shall, if it decides not to exercise such right, first offer GigaMedia the right to operate such online games in Hong Kong and/or Taiwan on terms no less favourable to those offered to any other party.

11.	FINANCE
11.1	(a)	In the event any additional working capital is required by the Company with regards to the Business, such working capital shall be met through the provision of revolving credit facilities. Any additional working capital of the Company may be met through (i) provision of loans, letters of credit or credit facilities to the Company from such financial institutions as the Board may from time to time agree; or (ii) subject to the consent of the relevant Shareholder, provision of advance loans by the Shareholders to the Company on such terms as may be agreed between the relevant Shareholder and the Company.

(b) In respect of any loan by any Shareholder to be provided pursuant to this clause, such loan shall be entitled to interest payment by the Company at the rate to be agreed from time to time on the basis of a one (1) month interest period. Unless otherwise agreed between the parties hereto, such loans shall be repaid in full within two (2) months of the disbursement.

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12. MANAGEMENT, ACCOUNTS AND INFORMATION

12.1 The Shareholders shall, for so long as they remain Shareholders of the Company, be furnished with such information relating to the Business and/or the Company as they may from time to time reasonably request, in particular but without prejudice to the generality of the foregoing, the following information:

(a)	the Annual Budget and Operating Plan for the succeeding fiscal year no later than thirty (30) days prior to the end of each fiscal year;
(b)	copies of the audited consolidated accounts of the Company in respect of each financial year forthwith on the same becoming available and in any event not later than forty five (45) days from the date of each such financial year, such accounts to be audited by a Big Four accounting firm of the Company’s choice, being PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young or KPMG;
(c)	copies of unaudited consolidated accounts of the Company no later than twenty-five (25) days from the end of the first three (3) fiscal quarters of each financial year, such accounts to be reviewed by a Big Four accounting firm of the Company’s choice, being PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young or KPMG;
(d)	copies of the unaudited consolidated monthly accounts of the Company no later than twenty-five (25 days) days from the end of each month;
(e)	monthly bank account(s) statements of the Company within fifteen (15) days after the end of each month; and
(f)	information relating to the operation of the Company or its subsidiaries, including information on the average number of concurrent users for each online game operated by the Company.

12.2	The accounts of the Company shall be prepared on a consistent basis and in accordance with generally accepted accounting principles consistently applied in Singapore and the United States.
12.3	Each Shareholder shall have the right independently to call for, to exercise and inspect at all reasonable times, the books, records and accounts of the Company and any of its subsidiaries and may appoint and authorise any person or persons to make such examination on their behalf. The Shareholders shall procure that the Auditors shall co-operate with such persons and provide access to such information and records as well as any explanations as such persons may reasonably request in relation to the Company’s accounts and records. Each Shareholder shall also have the right to request for any discussions with, or explanations from any Director, officer, employee, Auditor, legal or other professional adviser of the Company in relation to any queries it may have relating to the Business and/or the operations of the Company. Any costs incurred shall be borne by the Shareholder requesting for the examination, unless any material or substantial defect was found through such examination evidencing breach of this Agreement in which case the party so breaching this Agreement shall bear the costs so incurred.
12.4	The financial year of the Company shall be from 1 January to 31 December of each year.
12.5	The Company shall maintain two (2) bank accounts (respectively the “Investment Account” and “Operating Account”) for the purpose of its business activities. The Investment Account through which all investment activities approved by the Investment Committee are transacted shall require two (2) signatories for all transactions, one of whom

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shall be a director appointed by IIPL and the other of whom shall be appointed by Global Star. The Operating Account, through which the daily operational expenses and budgeted expenditure are transacted will require two (2) account signatories for withdrawals of more than US$100,000, one of whom shall be a director appointed by IIPL and the other of whom shall be appointed by Global Star. For the avoidance of doubt, drawings shall be in accordance with the proper authorisation of the Board and Investment Committee and all financing raised by the Company shall be credited into the Investment Account and the annual operating budget approved by the Board shall be drawn down from the Investment Account into the Operating Account prior to the start of the financial year.

13.	TRANSFER OF SHARES
13.1	Except as otherwise provided for in this Agreement, a Shareholder shall be entitled to sell, transfer or otherwise dispose of all but not some only, of its Shares provided that that Shareholder first makes an offer to sell the same to the holders of Preference Shares in compliance with the rights of pre-emption contained in clause 13.2.
13.2	Any Shareholder desirous of selling its Shares or any interest therein (the “Seller”) shall do the following:

(a)	The Seller shall give a notice in writing (a “Transfer Notice”) to the holders of Preference Shares specifying the number of Shares held by him to be offered at the prescribed price (the “Prescribed Price”);
(b)	The Prescribed Price shall be a price to be agreed upon between the Seller and the Directors and, in a case where the Seller and Directors are unable to agree, at a price which the Auditors shall by writing under his hand certify to be in his opinion, the fair value thereof as between a willing seller and a willing buyer having regard to the tangible net asset value per Share of the Company;
(c)	The Transfer Notice shall specify a period (the “Prescribed Period”) being not less than twenty-one (21) days from the date of the Transfer Notice within which the offer must be accepted or (in default) will lapse. A Transfer Notice once given shall be irrevocable;
(d)	If within the Prescribed Period, any or all of the holders of Preference Shares (the “Buyer(s)”) accept(s) the offer contained in a Transfer Notice by giving notice (an “Acceptance Notice”) to that effect to the Seller, the Seller shall allocate the said Shares to or amongst the Buyer(s) and in the case of competition, pro-rata (as nearly as possible) according to the pro-rata proportion of their shareholdings in the issued share capital of the Company, on a Converted Basis, Provided that no Buyer(s) shall be obliged to take more than the maximum number of Shares specified by him (if any) in the Acceptance Notice; and the Seller shall upon the expiry of the Prescribed Period give notice of such allocation to the Buyer(s) (an “Allocation Notice”) to whom the Shares have been allocated and shall specify in such Allocation Notice, the place and time (being not later than twenty-one (21) days after the date of the said Allocation Notice) at which the sale of the Shares so allocated shall be completed. Where however, any holder of Preference Shares does not accept the offer contained in the Transfer Notice and the aggregate number of Shares specified in the Acceptance Notices received is less than the number of Shares offered by the Seller, the other holders of Preference Shares shall be entitled, at their election, to purchase the remaining Shares at the Prescribed Price and where more than one other holder of Preference Shares wishes to purchase such Shares, the Shares will be allocated between the holders pro-rata (as nearly as possible) according to the

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	pro-rata proportion of their shareholdings in the issued share capital of the Company, on a Converted Basis;
(e)	The Seller shall be bound to transfer the Shares comprised in the Allocation Notice(s) to the Buyer(s) named therein at the time and place therein specified and, if he shall fail to do so, any one Director or the Secretary shall be deemed to have been appointed agent of the Seller with full power to execute, complete and deliver, in the name and on behalf of the Seller, transfers of the Shares to the Buyer(s) thereof against payment of the Prescribed Price to the Company. On payment of the Prescribed Price to the Company, the Buyer(s) shall be deemed to have obtained a good discharge for such payment. The Company shall forthwith pay the relevant monies into a separate bank account in the Company’s name and shall hold such monies in trust for the Seller. After the Buyer(s) is/are registered in the Register of Members as the holder(s) of such Shares pursuant to the transfer thereof, the validity of the proceedings shall not be questioned by any person;
(f)	Subject to the provisions of this clause 13.2, any Buyer(s) which serves an Acceptance Notice shall become bound to purchase all of the Shares allocated to him in accordance with clause 13.2(d) above;
(g)	If, by the end of the Prescribed Period, no Acceptance Notice has been served or not all the Shares comprised in the Transfer Notice are subject to the Acceptance Notice(s) issued by the Buyer(s), the Seller shall subject to clause 13.3 be entitled to sell its Shares to a third party at a price which is not lower than the Prescribed Price provided that if any Shareholder does not purchase its entitlement of the Shares offered, such Shares shall first be offered to the other Shareholders at the Prescribed Price before they are offered to any third party. The Seller shall give prior notice in writing of the identity of the third party (the “Intended Transferee”) to whom he intends to sell the Shares, to the Shareholders and the Company.

13.3 It shall be a condition precedent to the right of any Shareholder to transfer Shares to the Intended Transferee that:

(a)	the other Shareholder(s) unanimously agree in writing to the transfer of the Shares to the Intended Transferee and such consent shall not be unreasonably withheld; and
(b)	the Intended Transferee if not already bound by the provisions of this Agreement, executes a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party hereto, in place of the transferor prior to the date of such transfer.

13.4

The Shareholders shall procure that any transfer of Shares in accordance with this clause 13 and the transferee thereto shall (subject to all formalities in respect thereof having been fulfilled) be duly registered by the Company.

13.5

No Shareholder shall without the prior written consent of the other Shareholders create or permit to subsist any mortgage, charge, pledge, lien or other encumbrance of any nature whatsoever over its Shares. No Shareholder shall grant any option or other rights to dispose of any interest in any Shares held by it (otherwise than by a transfer in accordance with clause 13 and the Articles). Except as provided in this Agreement, no Shareholder shall enter into any agreement with respect to the voting rights attached to all or any of its Shares or other securities in the Company or grant any option in relation thereto.

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13.6 On a sale, transfer or disposition of Shares in accordance with the preceding sub-clauses of this clause 13:

(a)	the Seller shall repay all loans, borrowings and indebtedness outstanding to the Company from the Seller (together with any accrued interest thereon);
(b)	the other Shareholders shall procure the Company to repay all loans, borrowings and indebtedness outstanding to the Seller from the Company (together with accrued interest thereon); and
(c)	the Seller shall procure the resignation and/or removal of any Director appointed by it.

13.7	For the avoidance of doubt, the foregoing right of first refusal shall not apply to transfers to affiliates or immediate family members (or trust thereof) of a holder.
13.8	For the purposes of the remaining provisions of this clause 13:

(a)	the word “company” includes any body corporate;
(b)	the expression “a Member of the Same Group” in relation to any company, means a company which is for the time being a related company to the first mentioned company as defined in the Act;
(c)	the expression “Transferor Company” means a company which has transferred or proposes to transfer Shares to a Member of the Same Group;
(d)	the expression “Transferee Company” means a company for the time being holding Shares in consequence, directly or indirectly, of a transfer of Shares or series of transfers of Shares between Members of the Same Group (the relevant Transferor Company in the case of a series of such transfer being the first transferor in such series); and
(e)	the expression “the Relevant Shares” means and includes (so far as the same remain for the time being held by any Transferee Company) the Shares originally transferred to such Transferee Company and any additional Shares issued to or acquired by such Transferee Company.

13.9

All but not some only of a Shareholder’s Shares may at any time be transferred by the Shareholder to a company which is a Member of the Same Group. If any Shareholder transfers its Shares to a Member of the Same Group, then the Shareholder hereby guarantees the performance by the Transferee Company of all obligations to be performed by it under this Agreement or in respect of such Shares. It shall be a condition precedent to the transfer of Shares to a Member of the Same Group that the Transferee Company executes a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party in place of the transferor prior to the date of such transfer.

13.10

If a Transferee Company ceases to be a Member of the Same Group as the Transferor Company from which (whether directly or by a series of transfers) the Relevant Shares were derived, then within 14 days of such cessation the Transferee Company shall transfer the Relevant Shares to the Transferor Company or any other nominee of the Transferor Company (which shall be a Member of the Same Group) and the Transferor Company shall be bound to either accept the Relevant Shares or to procure that its nominee shall accept the Relevant Shares, as the case may be. In case of default of this clause 13.10, the Transferee

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Company shall be deemed to have appointed a Director appointed by the other Shareholders as its lawful attorney with full power to execute any instrument of transfer, deed of assignment or any other document necessary to implement the said transfer and the Transferor Company is deemed either to have consented to accept the Relevant Shares and to being registered in the Company’s register of members and register of transfers as the holder of the Relevant Shares or to have undertaken to procure such consent from its nominee, as the case may be. Where the Relevant Shares are transferred back to the Transferor Company, the Transferor Company shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party prior to the date of such transfer. Where the Relevant Shares are transferred back to a nominee of the Transferor Company, the Transferor Company shall procure that its nominee shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party in place of the transferor prior to the date of such transfer.

14.	COMPULSORY TRANSFERS
14.1	If any Shareholder (a “Defaulting Shareholder”):

(a)	shall commit any material breach of its obligations under this Agreement and, if remediable, shall fail to take all necessary action to remedy such breach within fourteen (14) days upon the service of notice by any of the other Shareholder(s) (the “Non-Defaulting Shareholder(s)”) complaining of such breach;
(b)	shall go into voluntary liquidation otherwise than for the purpose of reconstruction or amalgamation or an order of the court is made for its compulsory liquidation or shall have a receiver (or a receiver and manager) or similar officer appointed in respect of any substantial part of its assets or shall have a judicial manager or equivalent officer appointed;
(c)	shall compound or make any composition or arrangement with its creditors;
(d)	shall cease or threaten to cease wholly or to carry on its business, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholders;
(e)	shall sell, transfer, lease or otherwise dispose of the whole or substantially the whole of its assets, rights and undertaking;
(f)	shall become insolvent;
(g)	is subject to a distress, sequestration, execution, attachment or garnishee which is levied or enforced against its property, undertaking or revenues and is not discharged within ten (10) days;
(h)	is unable to pay its debts as and when they fall due; or
(i)	any of the matters in sub-clauses (b), (c), (d), (e) and (f) above occurs in relation to any holding company or ultimate holding company for the time being of the Defaulting Shareholder,

then upon notice by any of the Non-Defaulting Shareholder(s) to the Company and the Defaulting Shareholder, the Defaulting Shareholder shall thereupon be deemed to have served on the Non-Defaulting Shareholder, a notice (the “Default Transfer Notice”)

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offering irrevocably to sell the legal and beneficial ownership of all its Shares (the “Sale Shares”) at the fair value of the Shares less twenty per cent (the “Default Prescribed Price”) as determined by the Auditors in accordance with clause 14.2 within fourteen (14) days after the issue of the Auditor’s certificate in accordance with clause 14.2 or such longer period as agreed by the Non-Defaulting Shareholders (the “Default Prescribed Period”). The procedure governing the sale of the Sale Shares pursuant hereto shall be in accordance with the procedure set out in clause 13.2 save for:

(aa)	any reference to the Seller in clause 13.2 shall be deemed to be a reference to the Defaulting Shareholder;
(bb)	any reference to the Purchaser(s) shall be deemed to be a reference to the Non-Defaulting Shareholder(s) who issue acceptance notice(s) in respect of the Sale Shares respectively;
(cc)	the Default Prescribed Price and the Default Prescribed Period shall be as determined in the manner set out in this clause 14.1;

Save as provided herein, any Transfer Notice served by a Defaulting Shareholder pursuant to clause 13.2 during the Default Prescribed Period mentioned in this clause shall be void and of no effect. The provisions of clauses 13.4 and 13.6 shall mutatis mutandis apply to the sale of the Sale Shares hereunder.

14.2 The Auditors will act as experts and not as arbitrators and will certify in writing what in their opinion was the fair value of the Sale Shares on the date the Default Transfer Notice was deemed to have been served pursuant to clause 14.1, on the following assumptions:

(a)	valuing the Sale Shares as an arm’s length sale between a willing seller and a willing purchaser;
(b)	if the Company was then carrying on business as a going concern, on the assumption that it will continue to do so; and
(c)	valuing the Sale Shares as a rateable proportion of the total value of the issued share capital of the Company which value shall not be discounted or enhanced by reference to the number of the Sale Shares having regards to the net tangible asset value of the Company.

If any difficulty shall arise in applying any of the foregoing assumptions then such difficulty shall be resolved by the Auditors in such manner as they shall in their absolute discretion think fit. All costs of the Auditors shall be borne by the Defaulting Shareholder. The Shareholders shall procure the Auditors to determine the Default Prescribed Price in accordance with this clause 14.2 as soon as practicable after the service of a notice of default on the Defaulting Shareholder and the Company by any of the Non-Defaulting Shareholders.

14.3.

Notwithstanding anything hereinbefore mentioned, on the occurrence of any of the events mentioned in clause 14.1, the Non-Defaulting Shareholder(s) may by notice to the Defaulting Shareholder request that the Company be liquidated and unless the Shareholders otherwise agree, they shall each take such steps as may be necessary to forthwith liquidate the Company.

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15.	TAG-ALONG RIGHTS
15.1	Notwithstanding clause 13.1, if any Shareholder proposes to transfer, in a single transaction or a series of related transactions, any of the Shares held by it in a bona fide sale (the “Transfer”), then that Shareholder (the “Transferring Shareholder”) shall promptly give written notice (the “Notice of Transfer”) simultaneously to the Company and to the Preference Shareholders. The Notice of Transfer shall describe in reasonable detail the terms and conditions of the proposed Transfer including, without limitation, the number of Shares to be transferred, the nature of such Transfer, the consideration to be paid, and the name and address of each prospective purchaser transferee.
15.2	Each of the Preference Shareholders shall have the right, exercisable upon written notice (the “Notice of Participation”) to the Company within thirty (30) days after the receipt of the Notice of Transfer, to inform the Company in writing whether it elects to participate in the Transfer by the Transferring Shareholder on the same terms and conditions as set forth in the Notice of Transfer. The Notice of Participation shall indicate the number of Shares that other Shareholder elects to Transfer pursuant to this clause 15.2, up to that number of Shares equal to the product obtained by multiplying (i) the aggregate number of Shares set forth in the Notice of Transfer by (ii) that other Shareholder’s Shareholder Proportion at time of the Transfer. That other Shareholder who elects to participate in the Transfer by the Transferring Shareholder pursuant to this clause 15.2 (a “Tag-Along Participant”) shall promptly deliver to the Company (who shall be deemed to be constituted the agent of the Transferring Shareholder and the Tag-Along Participant for the Transfer in accordance with the Articles) for transfer to the prospective purchaser one or more share transfer forms, properly executed for transfer, which represent the number of Shares which such Tag-Along Participant elects to Transfer, together, where applicable with the relevant share certificates and any other documents required for the Transfer.
15.3	To the extent that a Preference Shareholder fails to elect to participate in the Transfer by the Transferring Shareholder, that Preference Shareholder shall be deemed to have consented to the Transfer by the Transferring Shareholder on the terms and conditions and to the prospective purchaser as set forth in the Notice of Transfer. Any proposed Transfer on terms and conditions more favourable than those described in the Notice of Transfer or to a transferee not identified in such notice, as well as any subsequent proposed Transfer of any of the Shares held by the Transferring Shareholder, shall again be subject to the tag-along rights of the other Shareholders and shall require compliance by the Transferring Shareholder with the procedures described in this clause 15. The exercise or non-exercise of the rights of a Shareholder hereunder to participate in one or more sales by another Shareholder shall not adversely affect the first-mentioned Shareholder’s rights to participate in subsequent sales of Shares by a Shareholder pursuant to this clause 15.
15.4	Upon consummation of the Transfer of the Shares pursuant to the terms and conditions specified in the Notice of Transfer, the Transferring Shareholder or the Company, as the case maybe, shall remit to the Tag-Along Participant that portion of the proceeds to which such Tag-Along Participant is entitled by reason of its participation in such Transfer. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase Shares from a Tag-Along Participant exercising its tag-along rights hereunder, the Transferring Shareholder shall not Transfer to such prospective purchaser or purchasers any of its Shares unless and until, simultaneously with such Transfer, the Transferring Shareholder shall purchase the Shares from the Tag-Along Participant on the same terms and conditions as specified in the Notice of Transfer.
15.5	Notwithstanding the foregoing, tag-along rights shall not apply to any Transfer or Transfers by a Shareholder to a subsidiary of such a Shareholder or made pursuant to a bona

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fide loan transaction with a financial institution that creates a mere security interest; Provided that in the event of any Transfer made pursuant to this clause 15.5 such Shareholder shall inform the Company and the other Shareholders of such Transfer prior to effecting it and the transferee, prior to the completion of the Transfer, shall have executed documents (in such form as may be reasonably approved by the other Shareholders) assuming the obligations of the relevant Shareholder under this Agreement with respect to the Shares so transferred to such transferee.

15.6

Any purported Transfer by a Shareholder in violation of this Agreement shall be null and void and of no force and effect and the purported transferees shall have no rights or privileges in or with respect to the Company or the Shares purported to have been so transferred. The Company shall refuse to recognise any such Transfer and shall not reflect on its records any change in ownership of such Shares purported to have been so transferred.

16.

BRING ALONG RIGHTS

If the holders of at least seventy five per cent (75%) of the outstanding Ordinary Shares (including the votes of the holders of the outstanding Preference Shares voting on a Converted Basis together with the holders of the Ordinary Shares and not as a single class) propose to enter into an agreement or arrangement for the sale of all of their shares to a third party, this majority shall have the right to cause all the holders of the Ordinary Shares and Preference Shares to sell their shares in the Company pursuant to such transaction.

17.	REGISTRATION RIGHTS
17.1	An Initiating Holder shall be entitled, at any time after a QPO, to request for the Registration of Registrable Securities by way of notice to writing to the Company where the reasonably anticipated aggregate offering size to the public is at least US$15,000,000. Upon the receipt of such a request, the Company shall (a) promptly give written notice of the proposed Registration to all other Shareholders and (b) as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities, to be Registered and/or qualified for sale and distribution in such jurisdictions as the Initiating Holder may reasonably request. The Company shall be obligated to effect only three (3) such Registrations.
17.2	An Initiating Holder shall be entitled, at any time after a QPO, to request by way of notice to writing to the Company, for the filing of a Registration Statement on Form F-3 (or any successor form to Form F-3, or any comparable form for Registration in a jurisdiction other than the United States) for a public offering of the Registrable Securities where the reasonably anticipated aggregate offering price to the public is at least US$15,000,000, and the Company will be entitled to use Form F-3 or a comparable form to Register the Registrable Securities. Upon receipt of such a request the Company shall, as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities specified in the request, to be Registered and qualified for sale and distribution in such jurisdictions as the Initiating Holder may reasonably request. The Company’s obligation to effect registrations pursuant to this clause 17.2 is unlimited.
17.3	Where the Company proposes to Register for its own account any of its Shares in connection with the public offering of such Shares, the Company shall promptly give notice in writing to the Shareholders and, upon the written request of such Shareholders (such request to be in writing and given not later than 20 days after the delivery of the notice by the Company of such Registration), the Company shall use all reasonable endeavours to include in such Registration any Registrable Securities requested by the Shareholders.

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17.4 Whenever required under this Agreement to effect the Registration of any Registrable Securities, the Company shall, as expeditiously as possible:

(a)	Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and use its best efforts to cause that Registration Statement to become effective, and, upon the request of the Shareholders, keep the Registration Statement effective for up to a year;
(b)	Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Law with respect to the disposition of all securities covered by the Registration Statement;
(c)	Furnish to the Shareholders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Law, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
(d)	Use its best efforts to Register and qualify the securities covered by the Registration Statement under the securities laws of any jurisdiction, as reasonably requested by the Shareholders, provided that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdictions, and provided further that in the event any jurisdiction in which the securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the qualification of the securities be borne by selling shareholders, those expenses shall be payable pro rata by selling shareholders;
(e)	In the event of any underwritten public offering, entering into and performing its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of the offering. Each shareholder participating in the underwriting shall also enter into and perform its obligations under such an agreement;
(f)	Notify the holders of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Law or of the happening of any event as a result of which any prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(g)	Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration;
(h)	Furnish, at the request of any Initiating Holder, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this Agreement, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the independent certified public accountants of the Company, in form and substance as is customarily given by

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	independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters; and
(i)	Take all reasonable action necessary to list the Registrable Securities on the primary exchange upon which the Company’s securities are then traded.

17.5	To the extent permitted by law, all expenses (other than any underwriting discounts and commissions applicable to the sale of the Registrable Securities) incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including (without limitation) all Registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and underwriters, shall be borne by the Company. The Company shall not, however, be required to pay for any expenses of any Registration proceeding begun pursuant to this Agreement if the Registration request is subsequently withdrawn at the request of the Shareholders.
17.6	The right to cause the Company to Register Registrable Securities pursuant to this Agreement may be assigned by a Shareholder to a transferee or assignee of such securities provided that: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement. In the event that a transfer or assignment of Registrable Securities does not satisfy the conditions set forth above, such securities shall no longer be deemed to constitute “Registrable Securities” for purposes of this Agreement.
17.7	The Company shall not without the prior written consent of the Holders, enter into any agreement with any Shareholder or any prospective Shareholder which would allow such Shareholder or prospective Shareholder to enjoy Registration rights on terms more favourable than those granted to the Holders or any other Shareholder.
17.8	To the extent permitted by law, the Company (the “indemnifying party”) will indemnify and hold harmless the Shareholder, its officers, directors, shareholders, legal counsel and accountants, any underwriter (as defined in the Securities Act) for such Shareholder and each Person, if any, who controls (as defined in the Securities Act) the Shareholder or underwriter (each an “indemnified party”) against any losses, claims, damages or liabilities (joint or several) to which they may become subject under laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration, qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws. The Company will reimburse the Shareholders, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action.
17.9	Promptly after receipt by an indemnified party under clause 17.8 above of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under clause

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	17.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, to assume the defense thereof. The indemnified party shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under clause 17.8, but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this clause 17.
17.10	If any indemnification provided for in clause 17.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
17.11	The obligations of the Company and the Shareholders under clauses 17.8, 17.9 and 17.10 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, and otherwise.
17.12	With a view to making available to the Shareholders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Law that may at any time permit such Shareholders to sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 (or any comparable form in a jurisdiction other than the United States), the Company agrees to:

(i)	make and keep public information available, as those terms are understood and defined in Commission Rule 144 (or comparable provision under Applicable Securities Laws in any jurisdiction where the Company’s securities are listed), at all times following ninety (90) days after the effective date of a Qualified Public Offering;
(ii)	file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and
(iii)	at any time following 90 days after the effective date of the Qualified Public Offering, promptly furnish to the Shareholders, upon request (i) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s

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securities are listed), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as may be filed by the Company with the Commission, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits the selling of any such securities without Registration or pursuant to such form.

18	DURATION AND TERMINATION
18.1	This Agreement shall take effect from Completion Date and shall continue without limit in time until terminated by (i) an underwritten public offering of the Company or (ii) a merger, amalgamation or consolidation of the Company (in which the shareholders of the Company immediately prior to such event hold, immediately after, Shares representing less than a majority of the voting power of the outstanding Shares of the surviving entity) or the sale of all or substantially all of the Company’s assets or (iii) liquidation, dissolution or winding up of the Company or (iv) the unanimous agreement of all the parties hereto in writing, whichever is earlier.
18.2	If any Shareholder sells all of its Shares in accordance with the provisions of this Agreement then subject to clause 18.3, it shall be released from all of its obligations hereunder save for its obligations under clauses 19.1 and 23 and 24.1. If, following any such transfer, there is more than one Shareholder bound by the provisions of this Agreement, then this Agreement shall continue in full force and effect as between the continuing Shareholders.
18.3	The termination of this Agreement howsoever caused and the ceasing by any Shareholder to hold any Shares shall be without prejudice to any obligations or rights of any of the parties hereto which have accrued prior to such termination and shall not affect any provision of this Agreement which is expressly or by implication provided to come into effect on or to continue in effect after such termination.
18.4	The information rights as set out in clause 12.1 shall terminate upon the Company’s first underwritten public offering or the date the Company becomes subject to the periodic reporting requirements of the relevant exchange regulations.

19.	NON-COMPETITION AND OTHER RESTRICTIONS
19.1	None of the Shareholders shall, at any time whilst it is beneficially interested in any Shares of the Company or for a period of one (1) year from the date on which such Shareholder ceases to be beneficially interested in the Shares, do or permit to be done any of the following without the prior written consent of the other Shareholder(s):

(a)	either solely or jointly with or on behalf of any person directly or indirectly carry on or be engaged or interested in or assist any person in carrying on any business competing with the Business;
(b)	solicit or assist any person in soliciting the custom of any person who is or has been at any time during the term of this Agreement, a customer of the Company, for the purpose of offering to such customer, goods or services similar to or competing with those of the Business;
(c)	solicit or entice away or endeavour to solicit or entice away or assist any person to solicit or entice away or endeavour to solicit or entice away any Director or employee of the Company or of any subsidiary of the Company, but without

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	prejudice to the right of such Shareholder to terminate arrangements under which any of its staff are seconded to the Company; or
(d)	cause or permit any person directly or indirectly under its control to do any of the foregoing acts or things.

Provided that nothing herein shall preclude or restrict either Shareholder(s) or their respective subsidiaries from:

(i)	carrying on any activity carried on during the period of twelve (12) months immediately preceding the date of this Agreement; or
(ii)	offering any service or goods similar to those previously supplied as part of the Business but subsequently discontinued and not supplied by the Company at the time when such similar service or goods are offered.

19.2 Nothing in this clause 19 shall preclude or restrict IIPL, Global Star and GigaMedia from either solely or jointly with any person directly or indirectly be engaged or interested in any business competing with the Business by reason of its participation, whether via an equity stake or otherwise, in such business provided that:

(j)	the relevant party has declared its interests in the competing business;
(ii)	the relevant party signs a confidentality undertaking in favour of the Company not to disclose any confidential or proprietary information of the Company to the parties involved in the competing business; and
(iii)	the relevant party and the director appointed by such relevant party abstains from voting on resolutions and participating in discussions of the Company which may:

(a)	provide the competing business the relevant party is engaged or interested in with a competitive advantage; or
(b)	cause the Company to compete with the competing business the relevant party is engaged or interested in.

19.3 Each Founder and member of the Management undertakes that it shall not, for a period of one year following the termination of the employment or services of such Founder or member of the Management:

(a)	either solely or jointly with or on behalf of any person directly or indirectly carry on or be engaged or interested in or assist any person in carrying on any business competing with the Business;
(a)	solicit or assist any person in soliciting the custom of any person who is or has been at any time during the term of this Agreement, a customer of the Company, for the purpose of offering to such customer, goods or services similar to or competing with those of the Business;
(b)	solicit or entice away or endeavour to solicit or entice away or assist any person to solicit or entice away or endeavour to solicit or entice away any Director or employee of the Company or of any subsidiary of the Company, but without prejudice to the right of such Shareholder to terminate arrangements under which any of its staff are seconded to the Company; or

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(c) cause or permit any person directly or indirectly under its control to do any of the foregoing acts or things.

19.4	Each undertaking contained in clause 19.1 shall be read and construed independently of the other covenants therein contained so that if one or more should be held to be invalid as an unreasonable restraint of trade or for any other reason whatsoever, then the remaining covenants shall be valid to the extent that they are not held to be so invalid.
19.5	While the covenants in clause 19.1 are considered by the parties to be reasonable in all the circumstances, if one or more should be held invalid as an unreasonable restraint of trade or for any other reason whatsoever, but would have been held valid if part of the wording thereof had been deleted or the period thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said covenants shall apply with such modifications as may be necessary to make them valid and effective.
19.6	Each Founder and member of the Management agrees that it shall not, within a period of (a) three years or (b) one year after the listing of the Shares on a recognised stock exchange, whichever is earlier, directly or indirectly: (1) offer, sell, transfer, give or otherwise dispose of, (2) grant an option, right or warrant to purchase in respect of, (3) charge, mortgage, pledge or otherwise encumber or (4) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the legal, beneficial or economic consequences of ownership of, all or any of the Shares held, whether directly or indirectly, by such Founder or member of the Management or any interest therein, or (5) enter into any agreement with a view to effecting any of the foregoing.

20.	REPRESENTATIONS AND WARRANTIES
20.1	Each of the parties acknowledges that it has entered into this Agreement in full reliance on the representations made by each of the other parties in the following terms and each party now warrants to each of the other parties:

(a)	it is a duly established legal entity of good standing in its country of incorporation and has the power and authority to enter into, exercise its rights and perform and comply with its obligations under this Agreement;
(b)	all actions, conditions and things required to be taken, fulfilled or done (including the obtaining of any necessary consents and permits) in order (i) to enable it lawfully to enter into, exercise its rights and perform and comply with its obligations under this Agreement; and (ii) to ensure that those obligations that are valid, legally binding and enforceable have been taken, fulfilled or done;
(c)	no order has been made or petition presented for its bankruptcy/insolvency;
(d)	no composition in satisfaction of its debts, or scheme of arrangement of its affairs, or compromise or arrangement between it and its creditors and/or members of any class of its creditors and/or members, has been proposed, sanctioned or approved;
(e)	no distress, distraint, charging order, garnishee order, execution or other process has been levied or applied for in respect of the whole or any part of any of its property, assets and/or undertaking; and
(f)	its obligations under this Agreement are valid, binding and enforceable.

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21.	FORCE MAJEURE
21.1	If either party hereto is temporarily rendered unable, wholly or in part, by Force Majeure (as defined below) to perform its duties or accept performance by the other party under this Agreement, it is agreed that the affected party shall within fourteen (14) days of the occurrence of the Force Majeure give written notice to the other party, setting out full particulars of such Force Majeure. The duties of the party affected by such Force Majeure shall, with the approval of the other party, be suspended during the continuance of the disability so caused, but for no longer period, and such cause shall as far as possible be removed with all reasonable despatch. None of the parties hereto shall be responsible for delay caused by Force Majeure. No claim for damage or any other remedy shall arise out of any breach of, or any failure or delay to perform any of the obligations arising under this Agreement, if such breach, delay or failure is caused by a Force Majeure event.
21.2	For the purpose of this clause 21, “Force Majeure” shall mean act of God, restraint of government (including compliance by any party with any law, regulation, order or other rules having force of law or intervention or action by any state or federal authority) or by any person representing any such authority, strikes, lockouts, industrial disturbances, explosions, fires, floods, earthquakes, storms, lightning and any other causes similar to the kind herein enumerated which are beyond the control of either party and which by the exercise of due care and diligence, neither party is able to overcome.

22.	ARTICLES OF ASSOCIATION
	In the event of any conflict between the provisions of this Agreement and the Articles, this Agreement shall prevail and the parties shall wherever necessary procure the Articles to be amended to reflect the provisions of this Agreement.

23.	CONFIDENTIALITY
23.1	No party shall divulge or communicate to any person (other than those whose province it is to know the same or with proper authority) or use or exploit for any purpose whatsoever, any of the trade secrets or confidential knowledge or information of the Company or any of the other parties which the first-mentioned party may receive or obtain as a result of entering into this Agreement, and each party shall use its reasonable endeavours to prevent its employees or agents if any from so doing. This restriction shall continue to apply without limit in point in time, but shall cease to apply to information or knowledge which may properly come into the public domain through no fault of the relevant party.
23.2	For the avoidance of doubt, the terms and conditions of the transaction as set forth in the Subscription Agreement shall be considered confidential information and shall not be disclosed by any party hereto to any third party except in accordance with clause 23.3.
23.3	Notwithstanding the foregoing, any party may disclose:

(a)	the financing terms of their investment in the Company to its current or bona fide prospective, investors, partners, limited partners, shareholders, employees, investment bankers, lenders, accountants and attorneys;
(b)	such information that may be required to be disclosed pursuant to any competent governmental or statutory authority or pursuant to statute, rules or regulations of any relevant regulatory body; and

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(c) any information which is required to be disclosed pursuant to any legal process used by any court or tribunal in Singapore or elsewhere.

	Any party disclosing information pursuant to this clause 23.3 shall exercise reasonable efforts to obtain reliable assurance that such information disclosed shall be kept confidential.
23.4	Notwithstanding the foregoing, in the event that IIPL is requested by any entity or person associated with the Singapore Government in connection with such entity or person’s association with the Singapore Government to disclose the financing terms or any other information relating to the issuance and purchase of Class A Shares to any entity or persons associated with the Singapore Government, IIPL shall not be required to seek a protective order, confidential treatment or other remedy with respect to such disclosure, and IIPL shall not be required to provide notice to the parties prior to such disclosure.
23.5	Without limiting the generality of other provisions in clause 23, in the event that any party is requested by regulatory authorities or becomes legally compelled (including, without limitation, pursuant to the relevant securities laws and regulations) to disclose the existence of this Agreement and other relevant agreements, any of the exhibits and schedules attached to such agreements, or any of the financing terms hereof and thereof in contravention of the provisions of clause 23, such party (the “Disclosing Party”) shall, where applicable, provide the other parties (the “Non-Disclosing Parties”) with prompt written notice of that fact. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required to be disclosed and shall exercise reasonable efforts to keep confidential such information to the extent reasonably requested by any Non-Disclosing Party.

24.	CONTINUING EFFECTS OF THIS AGREEMENT
24.1	This Agreement shall be binding on and shall enure for the benefit of each Shareholder’s successors and assigns.
24.2	No Shareholder may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other Shareholders.

25.	COUNTERPARTIES
	This Agreement may be signed in any number of counterparts and by the parties on separate counterparts, each of which when duly executed shall be an original but all the counterparts shall together constitute one and the same document.

26.	NOTICES
26.1	Any notice, demand or other communication required or permitted to be given or given in connection with this Agreement shall be made in writing and may be:

(a)	delivered by hand;
(b)	sent by registered post;
(c)	transmitted by facsimile; or
(d)	transmitted by telex;

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	at the address, facsimile or telex numbers and marked for the attention of the person(s) (if any) set out in the execution pages of this Agreement or to such other address, facsimile or telex numbers or person(s) as any party hereto may have notified to the other parties hereto in writing at least seven (7) Business Days in advance of such change:
26.2	Each notice, demand or other communication under this Agreement shall be deemed to be received by the recipient and duly served:

(a)	if delivered by hand, at the time of delivery;
(b)	if sent by post, seven (7) days after posting; or
(c)	if sent by facsimile or telex, be deemed to have been received upon receipt by the sender of a facsimile transmission report (or other appropriate evidence) that the facsimile has been transmitted to the addressee;

as the case may be, Provided that if any of the aforesaid dates when the communications are deemed to be received and duly served fall on a day which is not a Business Day, the date on which such communications are deemed to be received and duly served shall be on the Business Day immediately following upon the said dates.

27.	MISCELLANEOUS
27.1	Each party shall bear its own costs and expenses incurred in connection with the preparation, negotiation, finalisation and execution of this Agreement.
27.2	Unless otherwise provided for in this Agreement, this Agreement and the Subscription Agreement (where applicable) constitutes the entire complete and exclusive agreement and understanding between the parties in connection with the conduct of the Business and the operations of the Company and supersedes all prior representations, arrangements, understandings and agreements thereon. No party has relied on any representation, arrangement, understanding or agreement (whether written or oral) not expressly set out or referred to in this Agreement or the Subscription Agreement.
27.3	Notwithstanding that any provision of this Agreement may prove to be illegal, void, invalid or unenforceable, such provision shall be deemed to be deleted from this Agreement and the remaining provisions of this Agreement shall continue in full force and effect.
27.4	Each Shareholder agrees to exercise its voting rights in the Company and to take such other steps as lie within its power to procure, that the Company shall perform and observe the provisions of this Agreement.
27.5	No purported variation, modification, amendment or cancellation of this Agreement shall be effective unless made in writing and signed by all Shareholders.
27.6	Any waiver of any breach of this Agreement shall not be deemed to apply to any succeeding breach of the provision or of any other provision of this Agreement. No failure to exercise and no delay in exercising on the part of any of the parties hereto any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies otherwise provided by law.

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27.7	Nothing in this Agreement shall constitute a partnership or establish a relationship of principal and agent or any other relationship of a similar nature between or among any of the parties.
27.8	The parties do not intend that any term of this Agreement shall be enforceable, by virtue of the Contract (Rights of Third Parties) Act, Chapter 53B of Singapore by any person who is not a party to this Agreement.
27.9	This Agreement is governed by, and shall be construed in accordance with, the laws of Singapore.
27.10	Each party hereto hereby submits to the jurisdiction of the Singapore Courts but this Agreement may be enforced in any court of competent jurisdiction. Each Shareholder of the Company irrevocably:

(a)	submits to the non-exclusive jurisdiction of the courts of Singapore in relation to any legal action or proceedings arising out of or in connection with this Agreement;
(b)	consents to service of process in any manner permitted by the laws of Singapore;
(c)	waives any objections on the ground of venue or forum non conveniens or any similar grounds;
(d)	consents generally to relief being given against it by way of specific performance or for the recovery of any property whatsoever and to its property being subject to any process for the enforcement of a judgement or any other remedy available under the laws of Singapore; and
(e)	waives and agrees not to claim any immunity from all forms or execution or attachment to which its property is now or may hereafter become entitled under the laws of any jurisdiction and declares that such waiver shall be effective to the fullest extent permitted by such laws.

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IN WITNESS whereof this Agreement has been entered into the day and year first above written.

Signed by	)
for and on behalf of	)
MANAGEMENT CAPITAL INTERNATIONAL LTD	)
in the presence of:	)
Address	:	28 Maxwell Road #04-01 Red Dot Traffic
		Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Ong Toon Wah

Signed by	)
for and on behalf of	)
INFOCOMM INVESTMENTS PTE LTD	)
in the presence of:	)
Address	:	6 Temasek Boulevard #29-00 Suntec Tower 4
		Singapore 038986
Facsimile No.	:	(65) 6211 2213
Contact Person	:

Signed by	)
for and on behalf of	)
COMMERZBANK INFOCOMM	)
SEGREGATED PORTFOLIO
in the presence of:	)
Address	:	care of 8 Shenton Way #36-01 Temasek Tower
		Singapore 068811
Facsimile No.	:	(65) 6225 6234
Contact Person	:	Cheong Kum Hong/Choo Hsun Yang

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Signed by	)
for and on behalf of	)
GLOBAL STAR INTERNATIONAL	)
DEVELOPMENT LIMITED
in the presence of:	)
Address	:	34/F, The Lee Gardens, 33 Hysan Avenue,
		Causeway Bay, Hong Kong
Facsimile No.	:
Contact Person	:	Jiwei

Signed by	)
for and on behalf of	)
ETHERFAST PTE LTD	)
in the presence of:	)
Address	:	28 Maxwell Road, Red Dot Traffic, #04-01
		Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Lee Teng Teng

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Signed by	)
for and on behalf of	)
GIGAMEDIA ASIA PACIFIC LIMITED	)
in the presence of:	)
Address	:	14 Floor, 122 TunHwa North Road, Taipei,
		Taiwan ROC
Facsimile No.	:	+8862-8770-7576
Contact Person	:	Chief Executive Officer, Arthur Wang and
		General Counsel, Jennifer Tseng

Signed by	)
for and on behalf of	)
INFOCOMM ASIA HOLDINGS PTE. LTD.	)
in the presence of:	)
Address	:	28 Maxwell Road Red Dot Traffic
		#04-01 Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Ong Toon Wah

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SCHEDULE 1

The Management of the Company is as follows:

Ong Toon Wah (Chief Executive Officer)

Richard Chua Choon Kiat (Business Development Officer)

David Heng Wee Koon (Technical Director)

Roderick Chia Yeow Kheng (Chief Technology Officer)

Yeo Yeoh Chuan (Vice President, Marketing & Strategy)

Lee Jinsi (Chief Strategy Operations Officer)

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EX-4.52

Exhibit 4.52

EXECUTION COPY

DATED THE 2 DAY OF FEBRUARY 2007

BETWEEN

MANAGEMENT CAPITAL INTERNATIONAL LTD

INFOCOMM INVESTMENTS PTE LTD

COMMERZBANK INFOCOMM SEGREGATED PORTFOLIO

GLOBAL STAR INTERNATIONAL DEVELOPMENT LIMITED

ETHERFAST PTE LTD

GIGAMEDIA ASIA PACIFIC LIMITED

BODHI CHINA AND INDIA INVESTMENTS LLC

AND

INFOCOMM ASIA HOLDINGS PTE. LTD.

SHAREHOLDERS’ AGREEMENT

TABLE OF CONTENTS

CLAUSE NO.	HEADING	PAGE NO.
1.	DEFINITIONS	2
2.	SHARE CAPITAL AND ALLOTMENT OF SHARES	6
3.	CONVERSION RIGHTS	7
4.	ANTIDILUTION ADJUSTMENTS	7
5.	REDEMPTION OF CLASS A SHARES	8
6.	REDEMPTION OF CLASS B SHARES	8
6A.	LIDUIDATION PREFERENCE	8
7.	LISTING AND AUTOMATIC CONVERSION	9
8.	BOARD OF DIRECTORS	10
9.	GENERAL MEETINGS	13
10.	BUSINESS OF THE COMPANY	14
11.	FINANCE	15
12.	MANAGEMENT, ACCOUNTS AND INFORMATION	16
13.	TRANSFER OF SHARES	17
14.	COMPULSORY TRANSFERS	20
15.	TAG-ALONG RIGHTS	22
16.	BRING ALONG RIGHTS	23
17.	REGISTRATION RIGHTS	23
18	DURATION AND TERMINATION	27
19.	NON-COMPETITION AND OTHER RESTRICTIONS	27
20.	REPRESENTATIONS AND WARRANTIES	29
21.	FORCE MAJEURE	30
22.	ARTICLES OF ASSOCIATION	30
23.	CONFIDENTIALITY	30
24.	CONTINUING EFFECTS OF THIS AGREEMENT	31
25.	COUNTERPARTIES	32
26.	NOTICES	32
27.	MISCELLANEOUS	32
SCHEDULE 1		38

THIS AGREEMENT is made on the 2nd day of February 2007

BETWEEN:

(1)	Management Capital International Ltd, a company incorporated in the British Virgin Islands and having its registered office at Portcullis Trustnet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands (“MCIL”);
(2)	Infocomm Investments Pte Ltd (Company Registration Number 199608120R), a company incorporated in Singapore and having its registered office at 6 Temasek Boulevard #29-00 Suntec Tower 4 Singapore 038986 (“IIPL”);
(3)	Commerzbank Infocomm Segregated Portfolios, a specific segregated portfolio within Commerz Asia Best SPC (Company Registration Number CB-142661), a segregated portfolio company incorporated in the Cayman Islands and having its registered office at Coconut Villa 2 Jennifer Drive P.O. Box 10211 APO Grand Cayman BW1 (“CISP”);
(4)	Global Star International Development Limited (Company Registration Number 1032166), a company which is a wholly owned subsidiary of The9 Limited and incorporated in Hong Kong Special Administrative Region and having its registered office at 34/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong (“Global Star”);
(5)	Etherfast Pte Ltd (Company Registration Number 200604316G), a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (“Etherfast”); and
(6)	GigaMedia Asia Pacific Limited (IBC Number 1068168), a company incorporated in the British Virgin Islands and having its registered office at Overseas Management Company Trust (B.V.I.) Ltd., OMC Chambers, P.O. Box 3152, Road Town, Tortola, British Virgin Islands (“GigaMedia”);
(7)	Bodhi China and India Investments LLC, a limited liability company incorporated in the Republic of Mauritius and having its registered office at International Financial Services Limited, IFS Court, TwentyEight, Cybercity, Ebene, Mauritius (“SoftBank”);

collectively referred to as “Shareholders”; and

(7) Infocomm Asia Holdings Pte. Ltd. (Company Registration Number 200414722H), a company incorporated in Singapore and having its registered office at 28 Maxwell Road Red Dot Traffic #04-01 Singapore 069120 (the “Company”),

all the parties above shall be referred to individually as a “Party” and collectively as the “Parties”.

WHEREAS:

(A)	The Company has been incorporated for the purpose of engaging in the Business (as defined hereunder).
(B)	The shareholding structure of the Company as at the Completion Date, based on a fully converted basis, will be as follows:

1

		Number of Ordinary
		Shares on a
Shareholder	Type of Shares held	Converted Basis
Management Capital International Limited	Ordinary Shares		150,000
Etherfast Pte Ltd	Ordinary Shares		100,000
Infocomm Investments Pte Ltd	Class A Shares		300,000
Commerzbank Infocomm Segregated Portfolio	Class A Shares		300,000
Global Star International Development Limited	Class A Shares		200,000
Gigamedia Asia Pacific Limited	Class B Shares		500,000
Bodhi China and India Investments LLC	Class B Shares		208,881
Total number of Shares			1,758,881

(C)	This Agreement sets forth the complete and entire agreement between the parties and supercedes and replaces any prior shareholders’ agreements entered into among the parties, whether oral or in writing.
(D)	The parties hereto wish to enter into this Agreement to regulate the affairs of the Company and the relationship between them as Shareholders of the Company.
(E)	It is understood that each of the parties have entered into this Agreement in reliance upon the participation of other parties on the terms and subject to the conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.	DEFINITIONS
	In this Agreement unless the subject or context otherwise requires:
	“Act” means the Companies Act, Chapter 50 of Singapore;
	“Antidilution Exceptions” shall have the meaning ascribed under the clause 4 of this Agreement;
	“Applicable Securities Law” means (i) with respect to any offering of securities in the United States of America, or any other act or omission within that jurisdiction, the securities law of the United States, as amended from time to time, including the Exchange Act and the Securities Act, and any applicable law of any state of the United States of America, and (ii) with respect to any offering of securities in any jurisdiction other than the United States of America, or any related act or omission in that jurisdiction, the applicable laws of that jurisdiction;
	“Articles” means the Articles of Association of the Company, substantially in the form set out in the Annex to the Subscription Agreement and as may be further amended from time to time;
	“Auditors” means such approved company auditors acceptable to the parties hereto as may at the given time be the auditors of the Company;

2

“Board” means the board of Directors for the time being of the Company;

“Business” means the business to be carried on by the Company, including but not limited to the operation and distribution of online games by way of securing the exclusive distribution rights for online internet games or mobile games, for distribution in the South Asia region and to make strategic investments in operating hubs;

“Business Day” means any day in Singapore except for Saturdays and Sundays and days which have been gazetted as public holidays in Singapore;

“Chairman” means the Chairman of the Board and the Company;

"Class A Conversion Rate” means the ratio at which Class A Shares are converted into Ordinary Shares which shall be ten (10) Class A Shares for one (1) Ordinary Share, subject to such adjustments as may be made from time to time in accordance with this Agreement and the Articles;

"Class A Issue Price” means US$1.00 for each Class A Share;

“Class A Shares” means such number of redeemable, convertible, preference shares in the capital of the Company, each bearing the terms and conditions as set out in the Articles;

“Class B Conversion Rate” means the ratio at which Class B Shares are converted into Ordinary Shares, which shall initially be one (1) Class B Share for one (1) Ordinary Share, subject to such adjustments as may be made from time to time in accordance with this Agreement and the Articles;

“Class B Issue Price” means US$20.00 for each Class B Share;

“Class B Shares” means such number of redeemable, convertible, preference shares in the capital of the Company, each bearing the terms and conditions as set out in the Articles;

“Commission” means (i) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States of America or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States of America, the relevant regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction;

"Completion Date” has the meaning ascribed to it by the Subscription Agreement;

"Conversion Rate” means the Class A Conversion Rate and the Class B Conversion Rate;

“Converted Basis” means such number of Ordinary Shares held as a result of the conversion of Preference Shares into Ordinary Shares of the Company at the Class A Conversion Rate or the Class B Conversion Rate (as the case may be), pursuant to the terms and conditions set out in this Agreement and in the Articles;

“CUSIP Number” means the number assigned to identify securities in North America as maintained by the Committee on Uniform Securities and Identification Procedures;

“Directors” means the proposed directors of the Company appointed pursuant to clause 8, including, where applicable, alternate directors and “Director” refers to any of them;

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“Form F-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission. Form F-3, as applied in this Agreement, could be either Form F-3, if the Company is deemed a foreign private issuer under the Securities Exchange Act of 1934, as amended, or Form S-3, if the Company is deemed a domestic issuer under such Act;

“Founder” means the shareholder(s) of MCIL as at the Completion Date;

“Holder” means the holders of Class B Shares;

“Initiating Holders” means Class B Shareholder(s) holding, individually or in the aggregate, at least 25% of the Class B Shares on a Converted Basis;

"Investment Budget” means the investment budget to be approved by the Investment Committee that will be in line with the Use of Funds;

"Management” means the management team of the Company as set out in Schedule 1 of this Agreement and such other persons who may from time to time be appointed as members to the management team of the Company and who become shareholders of MCIL;

“net tangible asset value” means the total tangible assets value of the Company less total liabilities (including deferred taxation), which is equal to the shareholders’ equity, which comprises the following:

(a)	the amount paid up or credited as paid up on the issued share capital of the Company; and
(b)	the amounts standing to the credit of the reserves of the Company as recorded in the accounts of the Company, howsoever described, including:

(i)	any share premium account;
(ii)	any capital redemption reserve fund; and
(iii)	any amount standing to the credit of the profit and loss account, all as shown by the accounts of the Company but after:

(aa)	deducting therefrom (if not other deducted) any amounts attributable to intangible assets including goodwill and the amount of any debit balance on the profit and loss account in the accounts of the Company; and
(bb)	making such other adjustments (if any) as the Auditors consider appropriate in accordance with generally accepted accounting principles;

“Ordinary Shares” means the ordinary shares in the capital of the Company;

“Preference Shareholders” means collectively, the holders of Class A Shares and the holders of Class B Shares, and “Preference Shareholder” refers to any of them;

“Preference Shares” means the Class A Shares and the Class B Shares;

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“Person” means any individual, body corporate, corporation, partnership, limited partnership, proprietorship, association, limited liability company, trust, estate, enterprise or other entity;

“Pro Rata” means:

(a)	in relation to any Preference Shareholder, a fraction, the numerator of which shall be the number of Preference Shares on a Converted Basis held by such holder and the denominator shall be the total number of Preference Shares on a Converted Basis issued and outstanding as of the date of such calculation; and
(b)	in relation to all Shareholders, a fraction, the numerator of which shall be the number of Shares on a Converted Basis held by such holder and the denominator shall be the number of Shares on a Converted Basis issued and outstanding as of the date of such calculation.

“Qualifying Buy-Back” means a share buy-back undertaken by the Company in accordance with the applicable provisions of Singapore law;

“Registrable Securities” means the Preference Shares, including such Ordinary Shares issuable upon the conversion of the Preference Shares;

“Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of the Registration Statement; and the terms “Register” and “Registered” have the same meanings concomitant with the foregoing;

"Registration Statement” means a registration statement prepared on Form F-1, F-2 or F-3 under the Securities Act, or on any comparable form in connection with registration in a jurisdiction other than the United States;

“Securities Act” means the United States Securities Act of 1933, as amended from time to time;

“Secretary” means the secretary for the time being of the Company;

“Shareholders” means IIPL, CISP, MCIL, Global Star, Etherfast, GigaMedia and Softbank;

“Shareholder Proportions” means, in relation to a Shareholder, the proportion which the number of Ordinary Shares (on a Converted Basis) set against the name of each Shareholder in the tables as set out in Recital B (the “Table”), as the case may be, bears to the total number of Ordinary Shares in the Company (on a Converted Basis) as set out in the Table, subject to changes in share capital of the Company as permitted by the terms and conditions of this Agreement, the subscription agreements entered into between each of the Shareholders and the Company and the Articles;

“Shares” means the Class A Shares, the Class B Shares and the Ordinary Shares;

“South Asia Region” includes Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and other territories as agreed by the Parties from time to time;

“Subscription Agreement” means the subscription agreement to be entered into between Softbank and the Company at the date hereof for the subscription of 208,881 Class B Shares on the terms and subject to the conditions set out therein;

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“S$” means the lawful currency of Singapore;

“US$” means the lawful currency of the United States of America; and

“Use of Funds” has the meaning ascribed to it under clause 2.3 of the Subscription Agreement.

In this Agreement:

(a)	words importing the singular include the plural and vice versa;
(b)	words importing a gender include every gender; and
(c)	references to persons shall be construed as including references to an individual, firm, company, corporation, trust, unincorporated body of persons or any State or government or any agency thereof.

Headings are for ease of reference only and have no legal effect. References to clauses are to clauses of this Agreement.

Any reference to a statutory provision shall include such provision as from time to time modified, amended or re-enacted so far as such modification, amendment or re-enactment applies or is capable of applying to any transactions entered into hereunder.

2.	SHARE CAPITAL AND ALLOTMENT OF SHARES
2.1	As at the Completion Date, the Company will have an issued share capital of 250,000 Ordinary Shares, 8,000,000 Class A Shares, and 708,881 Class B Shares.
2.2	The Company shall not issue any further shares whether forming part of its unissued shares or new shares. However, if the Board determines in good faith and after due commercial considerations that additional shareholders’ equity is necessary, the Shareholders shall cause the Company to issue such number of additional shares as the Board may recommend. Such additional shares shall be offered in the first instance to Preference Shareholders on a Pro Rata basis immediately prior to such proposed increase in the issued share capital of the Company and the Preference Shareholders may elect to subscribe for such number of additional shares. In offering such shares in the first instance to the holders of the Preference Shares, the offer shall be made by written notice specifying the number of such additional shares offered and the price per share, and reasonably limiting the time within which the offer, if not accepted, will be deemed to be declined (which shall not be less than 21 Business Days) and after the expiration of that time or on the receipt of an intimation from any Shareholder to whom the offer is made that it declines to accept the additional shares offered, the other Shareholders shall be entitled to subscribe to all such additional shares and if more than one other Shareholder desires to so subscribe, then such additional shares will be allocated pro rata between them in the proportion that their respective shareholdings in the Company bear to one another on a Converted Basis. Any remaining Shares not subscribed by the Shareholders pursuant to this clause may be offered by the Company to third parties at the same price per share offered to the Shareholders previously, or shall otherwise be offered to the Shareholders again in the manner set out in this clause 2.2. Prior to the subscription of any shares in the capital of the Company, each new shareholder of the Company shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement. Such right shall terminate at or upon a Public Offering (hereinafter defined).

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2.3 The foregoing right would not apply to:

(a)	the issuance by the Company of Ordinary Shares (or any options or rights convertible into Ordinary Shares) to employees, officers, directors or consultants of the Company pursuant to share option plans or other share incentive arrangements approved by the Board;
(b)	securities issued by the Company in connection with any merger or acquisition event undertaken by the Company;
(c)	Ordinary Shares issued in connection with any subdivision, consolidation or reclassification of Shares;
(d)	Ordinary Shares issued upon the conversion or automatic conversion of the Preference Shares pursuant to clauses 3, 7.2 and 7.3 of this Agreement;
(e)	the issuance of equity securities pursuant to a public offering; or
(f)	the issuance of equity securities pursuant to an approved management incentive plan as approved by the Board.

3.	CONVERSION RIGHTS
	Each Holder shall be entitled, at any time after the Completion Date, at its option, to convert all or any of the Class B Shares it holds into Ordinary Shares. Each Class B Share shall be convertible into one Ordinary Share, subject to any adjustments provided in Clause 4 below and the Articles of the Company.

4.	ANTIDILUTION ADJUSTMENTS
4.1	Each of the Parties agrees to procure (insofar as it lawfully can), for so long as any Class A Shares or Class B Shares are outstanding, that:

(i)

in the event of a subdivision, consolidation or reclassification of shares, or the issuance of Shares by way of a capitalisation of profits and reserves, all necessary steps will be taken to ensure that the Shareholder Proportions in relation to the Shareholders remain unchanged (“Proportional Antidilution Protection”), including, without limiting the generality of the above, making such adjustments to the Conversion Rate as may be necessary to maintain the Shareholder Proportions amongst the Shareholders (“Antidilution Adjustments”); and

(ii)

in the event that the Company issues any additional Shares or rights or options to subscribe for Shares (including by way of a rights issue), or any options, rights, warrants or other securities convertible or exercisable into, or exchangeable for or redeemable with any Shares in or assets of the Company at a price that is less than the Class B Issue Price (the “New Issue Price”), the Class B Conversion Rate shall be adjusted such that the number of Ordinary Shares arising from the conversion of each Class B Share shall be equal to the Class B Issue Price divided by the New Issue Price.

4.2 Notwithstanding clause 4.1, the following events (“Antidilution Exceptions”) will not trigger an Antidilution Adjustment:

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(a)	the issue of Ordinary Shares upon conversion of any Preference Share pursuant to the terms of this Agreement; and
(b)	Ordinary Shares and/or options that may be issued or registered for issuance to employees pursuant to a share option plan or other share incentive plan approved by the Board.

5.	REDEMPTION OF CLASS A SHARES
5.1	Upon receiving a written request from the holders of a majority of the Class A Shares at any time after the fourth anniversary of 31 May 2005, the Company shall redeem the number of Class A Shares submitted by such holders for redemption.
5.2	The redemption price for each Class A Share under this clause 5 shall be the Class A Issue Price, plus interest accrued thereon at the rate of ten per cent (10%) per annum compounded annually, less any declared and paid dividends (“Class A Redemption Amount”).

6.	REDEMPTION OF CLASS B SHARES
6.1	Each Holder shall have the right, at such holder’s option, by way of a written request to the Company, to require the Company to redeem in cash the Class B Shares which are not converted, upon the earlier of (1) the fifth (5th) anniversary from 12 January 2007, and (2) the redemption of any Class A Shares.
6.2	The redemption price per Class B Share shall be 100 per cent. of the Class B Issue Price, plus interest accrued thereon at the rate of ten per cent (10%) on the Class B Issue Price per annum compounded annually, less any declared and paid dividends thereon (the “Redemption Amount”). In the case of a redemption triggered by the redemption of any Class A Shares, the Holders shall first be entitled to payment of the Premium Amount in priority to the holders of Class A Shares, where:

Premium Amount = A + B

Where:

A = (US$20.00 - US$10.00) x number of Class B Shares to be redeemed;

B = interest accrued on the Class B Shares to be redeemed at the rate of 10% per annum compounded annually less any declared and paid dividends on such Class B Shares;

The remaining Redemption Amount owing to the Holders will be paid to the Holders pari passu with the Class A Redemption Amounts.

6.3 Each Holder shall also be entitled, at its option, to require the Company to redeem its Class B Shares in an amount equal to such holder’s Redemption Amount within two (2) weeks of a change in Control of the Company. For the purposes of this clause, “Control” shall mean the right to exercise, directly or indirectly, more than 50 per cent of the voting rights attributable to the shares of the Company.

6A. LIDUIDATION PREFERENCE

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The Parties agree that in the event of any liquidation, dissolution or winding up of the Company, or on a return of capital (other than a Qualifying Buy-Back) by the Company, the holders of the Class B Shares shall be entitled to receive, prior to and in preference to any distribution to the holders of Ordinary Shares, Class A Shares or any other class of shares, an amount per Class B Share equal to the Class B Issue Price over the Class A Issue Price, plus all declared but unpaid dividends thereon (the “Preference Amount”). After the full Preference Amount on all outstanding Class B Shares and the preference amount on the Class A Shares have been paid, any remaining funds and assets of the Company shall be distributed Pro Rata amongst all Shareholders.

If the Company has insufficient assets to permit payment of the Preference Amount in full to all Holders, then the assets of the Company shall be distributed ratably to the Holders in proportion to the Preference Amount each Holder would otherwise be entitled to receive.

7.	LISTING AND AUTOMATIC CONVERSION
7.1	All the Shareholders agree that the Company shall seek a listing for its shares as soon as practicable, once it achieves the IPO Targets (as defined below) set out herein.
7.2	All Class A Shares shall be automatically converted into Ordinary Shares, at the then applicable Class A Conversion Rate, upon:

(a)

the closing of an underwritten public offering of shares of the Company (“Public Offering”) or such other date as may be agreed between the Parties and the issue manager, at a public offering price per share which satisfies the IPO Targets as defined in Clause 7.4 below and with a reasonably anticipated aggregate offering size (before payment of underwriters’ discounts, commissions and offering expenses) of at least US$15,000,000 (a “Qualified Public Offering” or “QPO”); or

(b)

the election of at least 70% of the Class A Shareholders.

7.3 All Class B Shares shall be automatically converted into Ordinary Shares, at the then applicable Class B Conversion Rate, upon:

(a)	the closing of a QPO; or
(b)	the election of at least 75% of the Class B Shareholders.

7.4 For the purposes of this clause, unless otherwise agreed by the holders of no less than seventy-five per cent (75%) of the Ordinary Shares on a fully converted basis and no less than two-thirds of the Preference Shareholders, the targets for a Public Offering (the “IPO Targets”) shall be:

(a)	two times of the Class B Issue Price per Class B Share for a Public Offering in 2007;
(b)	four times of the Class B Issue Price per Class B Share for a Public Offering in 2008; or
(c)	eight times of the Class B Issue Price per Class B Share for a Public Offering in 2009 or later.

7.5 Each Preference Shareholder may by written request to the Company at any time after a Public Offering, require the Company to and the Company shall take all necessary steps and

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do all such things as may be necessary to facilitate the sale or transfer or any other dealings of any Ordinary Shares issued pursuant to a conversion of Preference Shares, including but without limitation to the generality of the foregoing, making all necessary applications for such Ordinary Shares to be listed on the exchange on which the Company’s Shares are listed.

8.	BOARD OF DIRECTORS
8.1	Unless all the Shareholders otherwise agree in writing, the Board shall comprise six (6) Directors of which one (1) Director will be nominated by IIPL, one (1) Director will be nominated by CISP, one (1) Director will be nominated by Global Star, one (1) Director will be nominated by the holders of Ordinary Shares, one (1) Director will be appointed by GigaMedia and one (1) Director will be appointed by Softbank.
8.2	The first Chairman shall be appointed by the Management and subsequent Chairmen shall be appointed by a majority vote of the Board.
8.3	The right of appointment of the Directors conferred on the Shareholders referred to in clause 8.1 above shall include the right at any time and from time to time to remove from office and to determine the period which such persons shall hold office as Director. Whenever a Director ceases to be a Director for any reason whatsoever, the party which appointed him shall be entitled to appoint another person to replace him as a Director.
8.4	Any appointment or removal of Directors as aforesaid shall be made in writing and be signed by the duly authorised officer of the appointor and shall take effect as from the date of its receipt at the registered office of the Company or on the date of appointment specified in the notice, whichever is later.
8.5	A Director may at any time and from time to time appoint any other person (other than another Director) to be his alternate, and to remove such alternate Director. All appointments and removals of alternate Directors made by any Director shall be in writing under the hand of the Director making the same and shall take effect as of its receipt at the registered office of the Company or on the date of appointment specified in the notice, whichever is the later. Such alternate Director shall be entitled while holding office as such, to receive notices of Board meetings and to attend and vote at any such Board meetings at which the Director appointing him is not present and to exercise all the authorities, powers and rights and perform all the functions of his appointer thereat.
8.6	The quorum for all meetings of the Board shall be four (4) Directors, including at least one (1) Director appointed by the Holders, each present personally or by his alternate. If within half an hour after the time fixed for the meeting, the Directors constituting the quorum are not present, the meeting shall be adjourned and reconvened to discuss the same agenda on the third working day at the same time of the day and the same venue, and during the reconvened meeting, any two (2) Directors shall be deemed to form a quorum provided always that three (3) days’ written notice of each meeting or reconvened meeting shall be given to each Director entitled to attend such meetings.
8.7	The Shareholders shall use all reasonable endeavours to procure that a quorum is present throughout each meeting of the Board.
8.8	The Directors may meet at any place for the despatch of their business, adjourn and otherwise regulate their meetings as they deem fit. A Director may participate at a meeting of Directors by telephone, teleconference or similar communications equipment or any other form of audio or visual instantaneous communication by which all persons participating in the meeting are able to hear and be heard by all participants, without a Director being in the physical presence of another Director in which event such Director shall be deemed to be

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	present at the meeting. A Director participating in a meeting in the manner aforesaid may also be taken into account in ascertaining the presence of a quorum at the meeting. Unless otherwise agreed unanimously, a Board meeting shall be held at least once every three (3) months in Singapore.
8.9	At any time, any Director may, and the Secretary on the requisition of a Director shall, summon a meeting of the Directors. At least seven (7) days’ notice in writing of each meeting of the Board shall be given to each Director of the Company at the address from time to time provided by him to the Company for such purpose and such notice shall be accompanied by an agenda of the matters to be considered at the meeting. Where a Director is absent from Singapore, such notice may be given by telefax or telex, to a telefax number, or telex number as the case may be, given by that absent Director to the Secretary. Any Director may waive notice of any meeting and any such waiver may be retroactive and for this purpose, the presence of a Director at the meeting shall be deemed to constitute a waiver on his part. No decision shall be taken on any matter at a meeting of the Board unless notice of such matter shall have been given in the manner aforesaid or waiver of such notice has been given in respect of such matter by all of the members of the Board.
8.10	Except as otherwise provided for in clause 8.15(f) of this Agreement, a Director shall not be prohibited from voting or being counted in a quorum at any Board meeting in respect of any contract or arrangement in which he is or may be interested provided he has disclosed the nature of his interest in accordance with applicable law (if any).
8.11	Except as otherwise provided in this Agreement, all resolutions of the Board shall be passed by a simple majority of the votes of the Directors.
8.12	The Chairman of any meeting of the Board shall have a second or casting vote in case of an equality of votes.
8.13	A resolution in writing signed by all the Directors appointed to the Company for the time being shall be as effective as a resolution duly passed at a meeting of the Directors and may consist of several documents in the like form, each signed by one or more Directors. The expression “in writing” and “signed” include approval by telefax, telex, cable, telegram, digital or electronic signature or such other mode of approval or indication of approval as may be permitted by law by any such Director.
8.14	The Board shall appoint an investment committee (the “Investment Committee”) comprising of four (4) members, one of whom shall be nominated by IIPL, one by CISP, one by Global Star and one by GigaMedia. The unanimous approval of the Investment Committee is required for any investment, including but not limited to, that relating to any online internet game or mobile game, any capital expenditure of the Company of US$250,000 and above and any other investment decision by the Company regarding the Use of Funds.
8.15	Notwithstanding the foregoing, the following matters shall require the affirmative vote of three (3) Directors elected by each of IIPL and Global Star and GigaMedia:

(a)	the adoption of the Company’s annual budget (“Annual Budget”) and operating plan (“Operating Plan”);
(b)	any major corporate or financial matters that may either singly or in aggregate result in a variance of more than fifteen per cent (15%) from the Annual Budget and Operating Plan approved by the Board;

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(c)	any financial or investment commitment or expenditure which either singly or in aggregate amounts to more than US$150,000 not provided for in the Annual Budget;
(d)	any management remuneration plan, hiring dismissal or annual reappointment of the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) or any increase in the remuneration package of any such executive officer;
(e)	the issuance of any management and employee share options or incentive shares;
(f)	the entry into any transaction with any director, officer or shareholder of the Company (or affiliate or relative thereof) involving (i) the disbursement of funds or transfer of property in the Company or (ii) the formation, termination, extension, renewal or waiver of any contract;
(g)	the giving of any guarantee or indemnity by the Company;
(h)	any change in the accounting policies adopted by the Company;
(i)	the creation of any encumbrance with respect to (i) any intellectual property of the Company and (ii) any other asset or assets of the Company which either singly or in aggregate have a value of more than US$150,000;
(j)	the provision of any credit, loan or the making of any advance by the Company;
(k)	the sale, transfer, lease, assignment or disposal of assets which either singly or in aggregate have a value of more than US$150,000;
(l)	the purchase, lease or acquisition of assets which either singly or in aggregate have a value of more than US$150,000 not provided for in the annual budget of the Company;
(m)	the appointment or removal of any auditor;
(n)	the licensing or other transfer of any intellectual property other than in the ordinary course of business;
(o)	the commencement or settlement of any legal proceeding involving more than US$150,000; and
(p)	the entry into by the Company of any transaction or series or transactions involving an aggregate amount in excess of US$150,000 including incurrence of any borrowing under any existing or future banking and credit facilities and the granting of any guarantee, indemnity, performance bond, lien, pledge, charge, mortgage or other security and the incurrence of any form of indebtedness.

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9.	GENERAL MEETINGS
9.1	Notwithstanding anything to the contrary in the Articles, the quorum for a general meeting of the Company shall be four (4) Shareholders, including a representative from each of GigaMedia, IIPL, Global Star and Softbank, personally present or represented by proxy, attorney or representative, present throughout that general meeting. If within half an hour after the time fixed for the meeting, the Shareholders constituting the quorum are not present, the meeting shall be adjourned and reconvened and any three (3) Shareholders present throughout such adjourned general meeting shall constitute a quorum.
9.2	The Shareholders shall use all reasonable endeavours to procure that a quorum is present at and throughout each general meeting.
9.3	All questions and issues arising at a general meeting of the Company shall, unless otherwise required by any applicable law and subject to clause 9.9, be decided in accordance with the votes of a simple majority of the Shareholders.
9.4	Each Preference Shareholder shall have the right to that number of votes equal to the number of votes carried by their respective number of Ordinary Shares then issuable upon conversion of all its Preference Shares based on the prevailing Conversion Rate. Holders of all series of Preference Shares and Ordinary Shares shall vote together as a class except as provided in clause 9.10 below or as required by law.
9.5	A resolution in writing signed by all the Shareholders shall be as effective as a resolution duly passed at a general meeting of the Company and may consist of such documents in the like form, each signed by one or more directors. The expressions “in writing” and “signed” shall include approval by telefax, telex, cable, telegram, digital or electronic signature or such other mode of approval or indication of approval as may be permitted by law by any such Shareholder.
9.6	The notice of a general meeting of the Company shall set out an agenda identifying in reasonable detail the matters to be discussed (unless the Shareholders agree otherwise).
9.7	Without prejudice to clause 9.8, the parties agree that all Shareholders’ meetings shall be held in Singapore unless otherwise agreed to by all of the Shareholders.
9.8	Without prejudice to clause 9.1, the Shareholders may meet together in person or by telephone, teleconference or similar communications equipment or any other form of audio or visual instantaneous communication by which all persons participating in the meeting are able to hear and be heard by all participants, for the despatch of business and adjourn and otherwise regulate their meetings as they think fit. A resolution passed by such a conference shall, notwithstanding that the Shareholders are not present together at one place at the time of the conference, be deemed to have been passed at a meeting of the Shareholders held on the day and at the time at which the conference was held and shall be deemed to have been held at the registered office of the Company and, unless otherwise agreed, all the Shareholders participating at the meeting shall be deemed for all purposes of this Agreement to be present at that meeting.
9.9	Notwithstanding the foregoing, the consent of the holders representing seventy-five per cent (75%) of the Ordinary Shares (including the holders of the outstanding Preference Shares voting on a Converted Basis together with the holders of Ordinary Shares and not as a single class), the holders representing two-thirds of the Preference Shares, and the holders representing seventy-five per cent (75%) of the outstanding Class B Shares shall be required for:

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(a)	The issuance by the Company of any new shares of any class;
(b)	Any repurchase or redemption of shares of the Company (other than pursuant to restricted stock agreements with employees, redemption provisions in the Articles or pursuant to the terms upon which the shares of the Company were issued);
(c)	Any amendment or repeal of any provision of the Memorandum and Articles of Association of the Company and its subsidiaries;
(d)	Any change in the nature of the business of the Company;
(e)	Any merger, sale, consolidation of the Company with or into any entity;
(f)	The liquidation or dissolution of the Company or any of its subsidiaries;
(g)	The sale of all or substantially all the Company’s assets or the purchase of all or substantially all of the assets of another entity;
(h)	The disposal of any intellectual property rights including all game licensing contracts;
(i)	The declaration or payment of a dividend on any shares of the Company;
(j)	Any incurrence of debt by the Company other than the trade debts not exceeding an aggregate value of US$150,000; and
(k)	Decisions regarding the terms of a public offering.

9.10 Without prejudice to the above, the consent of the holders of at least 75% in value of the each respective series of Preference Shares shall be required for:

(a)	any change in any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the holders of that series of Preference Shares;
(b)	the authorization, creation or issuance of (1) any Ordinary Shares or (2) any class or series of shares having any right, preference or priority superior to or on a pari passu basis with their series of Preference Shares; or
(c)	any new issuance of debt or equity security of the Company or its subsidiaries.

10.	BUSINESS OF THE COMPANY
10.1	The Shareholders agree that, effective from the Completion Date, their respective rights and obligations in the Company shall be regulated by this Agreement and the Articles.
10.2	Subject to clause 10.1, the Shareholders and the Company agree to be bound by and comply with the provisions of this Agreement which relate to them and all provisions of the Articles will be enforceable by the parties between themselves.
10.3	Subject to clause 10.1, each of the Shareholders agrees to exercise its respective rights under this Agreement and as a Shareholder (insofar as it lawfully can) to:

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(a)	procure that the Company proceeds with the Business in all respects and continues to pursue the same with reasonable despatch;
(b)	procure that the Business is conducted in the best interests of the Company and in accordance with sound and good commercial and business practice and profit-making principles so as to generate the maximum achievable profits available for distribution;
(c)	ensure that the Director(s) appointed by it exercises his powers as Director and otherwise uses its reasonable endeavours to seek to ensure that the business of the Company is confined to the Business;
(d)	procure that the Company complies with the Articles and all applicable laws as well as the terms and conditions of any licence, permit or consent by which the Company is bound at all times; and
(e)	ensure that the Director(s) appointed by it exercises his powers as Director and otherwise uses its reasonable endeavours to seek to ensure that all employees of the Company enter into non-compete and assignment of invention agreements in favour of the Company.

10.4	Any dealings with the Company and/or the Shareholders or any associates of such persons in relation to the supply of goods or services shall be on normal arm’s length terms negotiated between the relevant parties and no such person shall claim or be entitled to any preferential treatment in relation thereto by reason of the relationship of such persons under this Agreement or any shareholding in connection with the Company.
10.5	Without the prior consent of IIPL, and whether or not IIPL is then a shareholder of the Company, neither the Company nor its subsidiaries shall use, publish or reproduce the “IDA” or “IIPL” name or logo, or any similar name, trademark, or logo in any of their marketing, advertising or promotional materials or otherwise for any marketing, advertising or promotional purposes.
10.6	Each of the Parties acknowledges that the Company and GigaMedia shall become strategic partners and to the extent permitted by the licensing and other contracts entered into between the Company and the publishers of the online games conferring on the Company publishing rights in respect of those games in Hong Kong and/or Taiwan (if any), each of the Shareholders agrees to exercise its respective rights under this Agreement (insofar as it lawfully can) to procure that the Company shall, if it decides not to exercise such right, first offer GigaMedia the right to operate such online games in Hong Kong and/or Taiwan on terms no less favourable to those offered to any other party.

11. FINANCE

11.1   (a) In the event any additional working capital is required by the Company with regards to the Business, such working capital shall be met through the provision of revolving credit facilities. Any additional working capital of the Company may be met through (i) provision of loans, letters of credit or credit facilities to the Company from such financial institutions as the Board may from time to time agree; or (ii) subject to the consent of the relevant Shareholder, provision of advance loans by the Shareholders to the Company on such terms as may be agreed between the relevant Shareholder and the Company.

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(b) In respect of any loan by any Shareholder to be provided pursuant to this clause, such loan shall be entitled to interest payment by the Company at the rate to be agreed from time to time on the basis of a one (1) month interest period. Unless otherwise agreed between the parties hereto, such loans shall be repaid in full within two (2) months of the disbursement.

12.	MANAGEMENT, ACCOUNTS AND INFORMATION
12.1	The Shareholders shall, for so long as they remain Shareholders of the Company, be furnished with such information relating to the Business and/or the Company as they may from time to time reasonably request, in particular but without prejudice to the generality of the foregoing, the following information:

(a)	the Annual Budget and Operating Plan for the succeeding fiscal year no later than thirty (30) days prior to the end of each fiscal year;
(b)	copies of the audited consolidated accounts of the Company in respect of each financial year forthwith on the same becoming available and in any event not later than forty five (45) days from the date of each such financial year, such accounts to be audited by a Big Four accounting firm of the Company’s choice, being PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young or KPMG;
(c)	copies of unaudited consolidated accounts of the Company no later than twenty-five (25) days from the end of the first three (3) fiscal quarters of each financial year, such accounts to be reviewed by a Big Four accounting firm of the Company’s choice, being PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young or KPMG;
(d)	copies of the unaudited consolidated monthly accounts of the Company no later than twenty-five (25 days) days from the end of each month;
(e)	monthly bank account(s) statements of the Company within fifteen (15) days after the end of each month; and
(f)	information relating to the operation of the Company or its subsidiaries, including information on the average number of concurrent users for each online game operated by the Company.

12.2

The accounts of the Company shall be prepared on a consistent basis and in accordance with generally accepted accounting principles consistently applied in Singapore and the United States.

12.3

Each Shareholder shall have the right independently to call for, to exercise and inspect at all reasonable times, the books, records and accounts of the Company and any of its subsidiaries and may appoint and authorise any person or persons to make such examination on their behalf. The Shareholders shall procure that the Auditors shall co-operate with such persons and provide access to such information and records as well as any explanations as such persons may reasonably request in relation to the Company’s accounts and records. Each Shareholder shall also have the right to request for any discussions with, or explanations from any Director, officer, employee, Auditor, legal or other professional adviser of the Company in relation to any queries it may have relating to the Business and/or the operations of the Company. Any costs incurred shall be borne by the Shareholder requesting for the examination, unless any material or substantial defect was found through

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	such examination evidencing breach of this Agreement in which case the party so breaching this Agreement shall bear the costs so incurred.
12.4	The financial year of the Company shall be from 1 January to 31 December of each year.
12.5	The Company shall maintain two (2) bank accounts (respectively the “Investment Account” and “Operating Account”) for the purpose of its business activities. The Investment Account through which all investment activities approved by the Investment Committee are transacted shall require two (2) signatories for all transactions, one of whom shall be a director appointed by IIPL and the other of whom shall be appointed by Global Star. The Operating Account, through which the daily operational expenses and budgeted expenditure are transacted will require two (2) account signatories for withdrawals of more than US$100,000, one of whom shall be a director appointed by IIPL and the other of whom shall be appointed by Global Star. For the avoidance of doubt, drawings shall be in accordance with the proper authorisation of the Board and Investment Committee and all financing raised by the Company shall be credited into the Investment Account and the annual operating budget approved by the Board shall be drawn down from the Investment Account into the Operating Account prior to the start of the financial year.

13.	TRANSFER OF SHARES
13.1	Except as otherwise provided for in this Agreement, a Shareholder shall be entitled to sell, transfer or otherwise dispose of all but not some only, of its Shares provided that that Shareholder first makes an offer to sell the same to the holders of Preference Shares in compliance with the rights of pre-emption contained in clause 13.2.
13.2	Any Shareholder desirous of selling its Shares or any interest therein (the “Seller”) shall do the following:

(a)	The Seller shall give a notice in writing (a “Transfer Notice”) to the holders of Preference Shares specifying the number of Shares held by him to be offered at the prescribed price (the “Prescribed Price”);
(b)	The Prescribed Price shall be a price offered by a bona fide purchaser of such Shares to be sold or transferred, or a price to be agreed upon between the Seller and the Directors and, in a case where the Seller and Directors are unable to agree, at a price which the Auditors shall by writing under his hand certify to be in his opinion, the fair value thereof as between a willing seller and a willing buyer having regard to the tangible net asset value per Share of the Company;
(c)	The Transfer Notice shall specify a period (the “Prescribed Period”) being not less than ten (10) days from the date of the Transfer Notice within which the offer must be accepted or (in default) will lapse. A Transfer Notice once given shall be irrevocable;
(d)	If within the Prescribed Period, any or all of the Preference Shareholders (the “Buyer(s)”) accept(s) the offer contained in a Transfer Notice by giving notice (an “Acceptance Notice”) to that effect to the Seller, the Seller shall allocate the said Shares to or amongst the Buyer(s) and in the case of competition, Pro Rata amongst the Preference Shareholders, provided that no Buyer(s) shall be obliged to take more than the maximum number of Shares specified by him (if any) in the Acceptance Notice; and the Seller shall upon the expiry of the Prescribed Period give notice of such allocation to the Buyer(s) (an “Allocation Notice”) to whom the Shares have been allocated and shall specify in such Allocation Notice, the place

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and time (being not later than ten (10) days after the date of the said Allocation Notice) at which the sale of the Shares so allocated shall be completed. Where however, any Preference Shareholder does not accept the offer contained in the Transfer Notice and the aggregate number of Shares specified in the Acceptance Notices received is less than the number of Shares offered by the Seller, the other Preference Shareholder shall be entitled, at their election, to purchase the remaining Shares at the Prescribed Price and where more than one other holder of Preference Shares wishes to purchase such Shares, the Shares will be allocated Pro Rata amongst the Preference Shareholders;

(e)	The Seller shall be bound to transfer the Shares comprised in the Allocation Notice(s) to the Buyer(s) named therein at the time and place therein specified and, if he shall fail to do so, any one Director or the Secretary shall be deemed to have been appointed agent of the Seller with full power to execute, complete and deliver, in the name and on behalf of the Seller, transfers of the Shares to the Buyer(s) thereof against payment of the Prescribed Price to the Company. On payment of the Prescribed Price to the Company, the Buyer(s) shall be deemed to have obtained a good discharge for such payment. The Company shall forthwith pay the relevant monies into a separate bank account in the Company’s name and shall hold such monies in trust for the Seller. After the Buyer(s) is/are registered in the Register of Members as the holder(s) of such Shares pursuant to the transfer thereof, the validity of the proceedings shall not be questioned by any person;
(f)	Subject to the provisions of this clause 13.2, any Buyer(s) which serves an Acceptance Notice shall become bound to purchase all of the Shares allocated to him in accordance with clause 13.2(d) above;
(g)	If, by the end of the Prescribed Period, no Acceptance Notice has been served or not all the Shares comprised in the Transfer Notice are subject to the Acceptance Notice(s) issued by the Buyer(s), the Seller shall subject to clause 13.3 be entitled to sell its Shares to a third party at a price which is not lower than the Prescribed Price provided that if any Preference Shareholder does not purchase its entitlement of the Shares offered, such Shares shall first be offered to the other Shareholders at the Prescribed Price. Such Shareholders shall have not less than ten (10) days to accept the offer before such Shares are offered to any third party. The Seller shall give prior notice in writing of the identity of the third party (the “Intended Transferee”) to whom he intends to sell the Shares, to the Shareholders and the Company.

13.3 It shall be a condition precedent to the right of any Shareholder to transfer Shares to the Intended Transferee that:

(a)	the other Shareholder(s) unanimously agree in writing to the transfer of the Shares to the Intended Transferee and such consent shall not be unreasonably withheld; and
(b)	the Intended Transferee if not already bound by the provisions of this Agreement, executes a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party hereto, in place of the transferor prior to the date of such transfer.

13.4	The Shareholders shall procure that any transfer of Shares in accordance with this clause 13 and the transferee thereto shall (subject to all formalities in respect thereof having been fulfilled) be duly registered by the Company.
13.5	No Shareholder shall without the prior written consent of the other Shareholders create or permit to subsist any mortgage, charge, pledge, lien or other encumbrance of any nature

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whatsoever over its Shares. No Shareholder shall grant any option or other rights to dispose of any interest in any Shares held by it (otherwise than by a transfer in accordance with clause 13 and the Articles). Except as provided in this Agreement, no Shareholder shall enter into any agreement with respect to the voting rights attached to all or any of its Shares or other securities in the Company or grant any option in relation thereto.

13.6 On a sale, transfer or disposition of Shares in accordance with the preceding sub-clauses of this clause 13:

(a)	the Seller shall repay all loans, borrowings and indebtedness outstanding to the Company from the Seller (together with any accrued interest thereon);
(b)	the other Shareholders shall procure the Company to repay all loans, borrowings and indebtedness outstanding to the Seller from the Company (together with accrued interest thereon); and
(c)	the Seller shall procure the resignation and/or removal of any Director appointed by it.

13.7	For the avoidance of doubt, the foregoing right of first refusal shall not apply to transfers to affiliates or immediate family members (or trust thereof) of a holder.
13.8	For the purposes of the remaining provisions of this clause 13:

(a)	the word “company” includes any body corporate;
(b)	the expression “a Member of the Same Group” in relation to any company, means a company which is for the time being a related company to the first mentioned company as defined in the Act;
(c)	the expression “Transferor Company” means a company which has transferred or proposes to transfer Shares to a Member of the Same Group;
(d)	the expression “Transferee Company” means a company for the time being holding Shares in consequence, directly or indirectly, of a transfer of Shares or series of transfers of Shares between Members of the Same Group (the relevant Transferor Company in the case of a series of such transfer being the first transferor in such series); and
(e)	the expression “the Relevant Shares” means and includes (so far as the same remain for the time being held by any Transferee Company) the Shares originally transferred to such Transferee Company and any additional Shares issued to or acquired by such Transferee Company.

13.9

All but not some only of a Shareholder’s Shares may at any time be transferred by the Shareholder to a company which is a Member of the Same Group. If any Shareholder transfers its Shares to a Member of the Same Group, then the Shareholder hereby guarantees the performance by the Transferee Company of all obligations to be performed by it under this Agreement or in respect of such Shares. It shall be a condition precedent to the transfer of Shares to a Member of the Same Group that the Transferee Company executes a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party in place of the transferor prior to the date of such transfer.

13.10

Notwithstanding any provisions to the contrary, all or part of the Class A Shares or Class B

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Shares may at any time be transferred, sold or otherwise disposed without compliance with Clauses 13, 14 or 15, to a bona fide third party who is not a Person carrying on any business in competition with the Business or the Company, subject to the prior consent of IIPL, such consent not to be unreasonably withheld. It shall be a condition precedent to the transfer of Shares to such third party that the transferee executes a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party in place of the transferor prior to the date of such transfer.

13.11 If a Transferee Company ceases to be a Member of the Same Group as the Transferor Company from which (whether directly or by a series of transfers) the Relevant Shares were derived, then within 14 days of such cessation the Transferee Company shall transfer the Relevant Shares to the Transferor Company or any other nominee of the Transferor Company (which shall be a Member of the Same Group) and the Transferor Company shall be bound to either accept the Relevant Shares or to procure that its nominee shall accept the Relevant Shares, as the case may be. In case of default of this clause 13.11, the Transferee Company shall be deemed to have appointed a Director appointed by the other Shareholders as its lawful attorney with full power to execute any instrument of transfer, deed of assignment or any other document necessary to implement the said transfer and the Transferor Company is deemed either to have consented to accept the Relevant Shares and to being registered in the Company’s register of members and register of transfers as the holder of the Relevant Shares or to have undertaken to procure such consent from its nominee, as the case may be. Where the Relevant Shares are transferred back to the Transferor Company, the Transferor Company shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party prior to the date of such transfer. Where the Relevant Shares are transferred back to a nominee of the Transferor Company, the Transferor Company shall procure that its nominee shall execute a deed of ratification and accession under which it agrees to be bound by and be entitled to the benefit of this Agreement as if an original party in place of the transferor prior to the date of such transfer.

14.	COMPULSORY TRANSFERS
14.1	If any Shareholder (a “Defaulting Shareholder”):

(a)	shall commit any material breach of its obligations under this Agreement and, if remediable, shall fail to take all necessary action to remedy such breach within fourteen (14) days upon the service of notice by any of the other Shareholder(s) (the “Non-Defaulting Shareholder(s)”) complaining of such breach;
(b)	shall go into voluntary liquidation otherwise than for the purpose of reconstruction or amalgamation or an order of the court is made for its compulsory liquidation or shall have a receiver (or a receiver and manager) or similar officer appointed in respect of any substantial part of its assets or shall have a judicial manager or equivalent officer appointed;
(c)	shall compound or make any composition or arrangement with its creditors;
(d)	shall cease or threaten to cease wholly or to carry on its business, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholders;
(e)	shall sell, transfer, lease or otherwise dispose of the whole or substantially the whole of its assets, rights and undertaking;

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(f)	shall become insolvent;
(g)	is subject to a distress, sequestration, execution, attachment or garnishee which is levied or enforced against its property, undertaking or revenues and is not discharged within ten (10) days;
(h)	is unable to pay its debts as and when they fall due; or
(i)	any of the matters in sub-clauses (b), (c), (d), (e) and (f) above occurs in relation to any holding company or ultimate holding company for the time being of the Defaulting Shareholder,

then upon notice by any of the Non-Defaulting Shareholder(s) to the Company and the Defaulting Shareholder, the Defaulting Shareholder shall thereupon be deemed to have served on the Non-Defaulting Shareholder, a notice (the “Default Transfer Notice”) offering irrevocably to sell the legal and beneficial ownership of all its Shares (the “Sale Shares”) at the fair value of the Shares less twenty per cent (the “Default Prescribed Price”) as determined by the Auditors in accordance with clause 14.2 within fourteen (14) days after the issue of the Auditor’s certificate in accordance with clause 14.2 or such longer period as agreed by the Non-Defaulting Shareholders (the “Default Prescribed Period”). The procedure governing the sale of the Sale Shares pursuant hereto shall be in accordance with the procedure set out in clause 13.2 save for:

(aa)	any reference to the Seller in clause 13.2 shall be deemed to be a reference to the Defaulting Shareholder;
(bb)	any reference to the Purchaser(s) shall be deemed to be a reference to the Non-Defaulting Shareholder(s) who issue acceptance notice(s) in respect of the Sale Shares respectively;
(cc)	the Default Prescribed Price and the Default Prescribed Period shall be as determined in the manner set out in this clause 14.1;

Save as provided herein, any Transfer Notice served by a Defaulting Shareholder pursuant to clause 13.2 during the Default Prescribed Period mentioned in this clause shall be void and of no effect. The provisions of clauses 13.4 and 13.6 shall mutatis mutandis apply to the sale of the Sale Shares hereunder.

14.2 The Auditors will act as experts and not as arbitrators and will certify in writing what in their opinion was the fair value of the Sale Shares on the date the Default Transfer Notice was deemed to have been served pursuant to clause 14.1, on the following assumptions:

(a)	valuing the Sale Shares as an arm’s length sale between a willing seller and a willing purchaser;
(b)	if the Company was then carrying on business as a going concern, on the assumption that it will continue to do so; and
(c)	valuing the Sale Shares as a rateable proportion of the total value of the issued share capital of the Company which value shall not be discounted or enhanced by reference to the number of the Sale Shares having regards to the net tangible asset value of the Company.

If any difficulty shall arise in applying any of the foregoing assumptions then such difficulty shall be resolved by the Auditors in such manner as they shall in their absolute discretion

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think fit. All costs of the Auditors shall be borne by the Defaulting Shareholder. The Shareholders shall procure the Auditors to determine the Default Prescribed Price in accordance with this clause 14.2 as soon as practicable after the service of a notice of default on the Defaulting Shareholder and the Company by any of the Non-Defaulting Shareholders.

14.3. Notwithstanding anything hereinbefore mentioned, on the occurrence of any of the events mentioned in clause 14.1, the Non-Defaulting Shareholder(s) may by notice to the Defaulting Shareholder request that the Company be liquidated and unless the Shareholders otherwise agree, they shall each take such steps as may be necessary to forthwith liquidate the Company.

15.	TAG-ALONG RIGHTS
15.1	Notwithstanding clause 13.1, if any Shareholder proposes to transfer, in a single transaction or a series of related transactions, any of the Shares held by it in a bona fide sale (the “Transfer”), then that Shareholder (the “Transferring Shareholder”) shall promptly give written notice (the “Notice of Transfer”) simultaneously to the Company and to the Preference Shareholders. The Notice of Transfer shall describe in reasonable detail the terms and conditions of the proposed Transfer including, without limitation, the number of Shares to be transferred, the nature of such Transfer, the consideration to be paid, and the name and address of each prospective purchaser transferee.
15.2	Each of the Preference Shareholders shall have the right, exercisable upon written notice (the “Notice of Participation”) to the Company within ten (10) days after the receipt of the Notice of Transfer, to inform the Company in writing whether it elects to participate in the Transfer by the Transferring Shareholder on the same terms and conditions as set forth in the Notice of Transfer. The Notice of Participation shall indicate the number of Shares that other Shareholder elects to Transfer pursuant to this clause 15.2, up to that number of Shares equal to the product obtained by multiplying (i) the aggregate number of Shares set forth in the Notice of Transfer by (ii) that other Shareholder’s Shareholder Proportion at time of the Transfer. That other Shareholder who elects to participate in the Transfer by the Transferring Shareholder pursuant to this clause 15.2 (a “Tag-Along Participant”) shall promptly deliver to the Company (who shall be deemed to be constituted the agent of the Transferring Shareholder and the Tag-Along Participant for the Transfer in accordance with the Articles) for transfer to the prospective purchaser one or more share transfer forms, properly executed for transfer, which represent the number of Shares which such Tag-Along Participant elects to Transfer, together, where applicable with the relevant share certificates and any other documents required for the Transfer.
15.3	To the extent that a Preference Shareholder fails to elect to participate in the Transfer by the Transferring Shareholder, that Preference Shareholder shall be deemed to have consented to the Transfer by the Transferring Shareholder on the terms and conditions and to the prospective purchaser as set forth in the Notice of Transfer. Any proposed Transfer on terms and conditions more favourable than those described in the Notice of Transfer or to a transferee not identified in such notice, as well as any subsequent proposed Transfer of any of the Shares held by the Transferring Shareholder, shall again be subject to the tag-along rights of the other Shareholders and shall require compliance by the Transferring Shareholder with the procedures described in this clause 15. The exercise or non-exercise of the rights of a Shareholder hereunder to participate in one or more sales by another Shareholder shall not adversely affect the first-mentioned Shareholder’s rights to participate in subsequent sales of Shares by a Shareholder pursuant to this clause 15.
15.4	Upon consummation of the Transfer of the Shares pursuant to the terms and conditions

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specified in the Notice of Transfer, the Transferring Shareholder or the Company, as the case maybe, shall remit to the Tag-Along Participant that portion of the proceeds to which such Tag-Along Participant is entitled by reason of its participation in such Transfer. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase Shares from a Tag-Along Participant exercising its tag-along rights hereunder, the Transferring Shareholder shall not Transfer to such prospective purchaser or purchasers any of its Shares unless and until, simultaneously with such Transfer, the Transferring Shareholder shall purchase the Shares from the Tag-Along Participant on the same terms and conditions as specified in the Notice of Transfer.

15.5

Notwithstanding the foregoing, tag-along rights shall not apply to any Transfer or Transfers by a Shareholder to a subsidiary of such a Shareholder or made pursuant to a bona fide loan transaction with a financial institution that creates a mere security interest; Provided that in the event of any Transfer made pursuant to this clause 15.5 such Shareholder shall inform the Company and the other Shareholders of such Transfer prior to effecting it and the transferee, prior to the completion of the Transfer, shall have executed documents (in such form as may be reasonably approved by the other Shareholders) assuming the obligations of the relevant Shareholder under this Agreement with respect to the Shares so transferred to such transferee.

15.6

Any purported Transfer by a Shareholder in violation of this Agreement shall be null and void and of no force and effect and the purported transferees shall have no rights or privileges in or with respect to the Company or the Shares purported to have been so transferred. The Company shall refuse to recognise any such Transfer and shall not reflect on its records any change in ownership of such Shares purported to have been so transferred.

16. BRING ALONG RIGHTS

If the holders of at least seventy five per cent (75%) of the outstanding Ordinary Shares (including the votes of the holders of the outstanding Preference Shares voting on a Converted Basis together with the holders of the Ordinary Shares and not as a single class) propose to enter into an agreement or arrangement for the sale of all of their shares to a third party for a price per Share of at least two times the Class B Issue Price, this majority shall have the right to cause all the holders of the Ordinary Shares and Preference Shares to sell their shares in the Company pursuant to such transaction.

17. REGISTRATION RIGHTS

17.1

Initiating Holders shall be entitled, at any time after a QPO, to request for the Registration of Registrable Securities by way of notice in writing to the Company where the reasonably anticipated aggregate offering size to the public is at least US$15,000,000 (before payment of underwriters’ discounts, commissions and offering expenses). Upon the receipt of such a request, the Company shall (a) promptly give written notice of the proposed Registration to all other Shareholders and (b) as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities, to be Registered and/or qualified for sale and distribution in such jurisdictions as the Initiating Holders may reasonably request. The Company shall be obligated to effect only three (3) such Registrations.

17.2

Initiating Holders shall be entitled, at any time after a QPO, to request by way of notice in writing to the Company, for the filing of a Registration Statement on Form F-3 (or any successor form to Form F-3, or any comparable form for Registration in a jurisdiction other than the United States) for a public offering of the Registrable Securities where the

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reasonably anticipated aggregate offering price to the public is at least US$15,000,000 (before payment of underwriters’ discounts, commissions and offering expenses), and the Company will be entitled to use Form F-3 or a comparable form to Register the Registrable Securities. Upon receipt of such a request the Company shall, as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities specified in the request, to be Registered and qualified for sale and distribution in such jurisdictions as the Initiating Holders may reasonably request. The Company’s obligation to effect registrations pursuant to this clause 17.2 is unlimited.

17.3 Where the Company proposes to Register for its own account any of its Shares in connection with the public offering of such Shares, the Company shall promptly give notice in writing to the Shareholders and, upon the written request of such Shareholders (such request to be in writing and given not later than 20 days after the delivery of the notice by the Company of such Registration), the Company shall use all reasonable endeavours to include in such Registration any Registrable Securities requested by the Shareholders.

17.4 Whenever required under this Agreement to effect the Registration of any Registrable Securities, the Company shall, as expeditiously as possible:

(a)	Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and use its best efforts to cause that Registration Statement to become effective, and, upon the request of the Shareholders, keep the Registration Statement effective for up to a year;
(b)	Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Law with respect to the disposition of all securities covered by the Registration Statement;
(c)	Furnish to the Shareholders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Law, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;
(d)	Use its best efforts to Register and qualify the securities covered by the Registration Statement under the securities laws of any jurisdiction, as reasonably requested by the Shareholders, provided that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdictions, and provided further that in the event any jurisdiction in which the securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the qualification of the securities be borne by selling shareholders, those expenses shall be payable pro rata by selling shareholders;
(e)	In the event of any underwritten public offering, entering into and performing its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of the offering. Each shareholder participating in the underwriting shall also enter into and perform its obligations under such an agreement;
(f)	Notify the holders of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Law or of the happening of any event as a result of which any prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be

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stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

(g)	Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration;
(h)	Furnish, at the request of any Initiating Holders, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this Agreement, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters; and
(i)	Take all reasonable action necessary to list the Registrable Securities on the primary exchange upon which the Company’s securities are then traded.

17.5	To the extent permitted by law, all expenses (other than any underwriting discounts and commissions applicable to the sale of the Registrable Securities) incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including (without limitation) all Registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and underwriters, shall be borne by the Company. The Company shall not, however, be required to pay for any expenses of any Registration proceeding begun pursuant to this Agreement if the Registration request is subsequently withdrawn at the request of the Shareholders.
17.6	The right to cause the Company to Register Registrable Securities pursuant to this Agreement may be assigned by a Shareholder to a transferee or assignee of such securities provided that: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement. In the event that a transfer or assignment of Registrable Securities does not satisfy the conditions set forth above, such securities shall no longer be deemed to constitute “Registrable Securities” for purposes of this Agreement.
17.7	The Company shall not without the prior written consent of the Holders, enter into any agreement with any Shareholder or any prospective Shareholder which would allow such Shareholder or prospective Shareholder to enjoy Registration rights on terms more favourable than those granted to the Holders or any other Shareholder.
17.8	To the extent permitted by law, the Company (the “indemnifying party”) will indemnify and hold harmless the Shareholder, its officers, directors, shareholders, legal counsel and accountants, any underwriter (as defined in the Securities Act) for such Shareholder and each Person, if any, who controls (as defined in the Securities Act) the Shareholder or underwriter (each an “indemnified party”) against any losses, claims, damages or liabilities (joint or several) to which they may become subject under laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration, qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”): (i) any untrue statement or alleged

25

untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws. The Company will reimburse the Shareholders, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action.

17.9 Promptly after receipt by an indemnified party under clause 17.8 above of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under clause 17.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, to assume the defense thereof. The indemnified party shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under clause 17.8, but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this clause 17.

17.10 If any indemnification provided for in clause 17.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

17.11 The obligations of the Company and the Shareholders under clauses 17.8, 17.9 and 17.10 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, and otherwise.

17.12 With a view to making available to the Shareholders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Law that may at any time permit such Shareholders to sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 (or any comparable form in a jurisdiction other than the United States), the Company agrees to:

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(i)	make and keep public information available, as those terms are understood and defined in Commission Rule 144 (or comparable provision under Applicable Securities Laws in any jurisdiction where the Company’s securities are listed), at all times following ninety (90) days after the effective date of a Qualified Public Offering;
(ii)	file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and
(iii)	at any time following 90 days after the effective date of the Qualified Public Offering, promptly furnish to the Shareholders, upon request (i) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s securities are listed), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as may be filed by the Company with the Commission, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits the selling of any such securities without Registration or pursuant to such form.

18 DURATION AND TERMINATION

18.1 This Agreement shall take effect from Completion Date and shall continue without limit in time until terminated by (i) an underwritten public offering of the Company or (ii) a merger, amalgamation or consolidation of the Company (in which the shareholders of the Company immediately prior to such event hold, immediately after, Shares representing less than a majority of the voting power of the outstanding Shares of the surviving entity) or the sale of all or substantially all of the Company’s assets or (iii) liquidation, dissolution or winding up of the Company or (iv) the unanimous agreement of all the parties hereto in writing, whichever is earlier.

18.2 If any Shareholder sells all of its Shares in accordance with the provisions of this Agreement then subject to clause 18.3, it shall be released from all of its obligations hereunder save for its obligations under clauses 19.1 and 23 and 24.1. If, following any such transfer, there is more than one Shareholder bound by the provisions of this Agreement, then this Agreement shall continue in full force and effect as between the continuing Shareholders.

18.3 The termination of this Agreement howsoever caused and the ceasing by any Shareholder to hold any Shares shall be without prejudice to any obligations or rights of any of the parties hereto which have accrued prior to such termination and shall not affect any provision of this Agreement which is expressly or by implication provided to come into effect on or to continue in effect after such termination.

18.4 The information rights as set out in clause 12.1 shall terminate upon the Company’s first underwritten public offering or the date the Company becomes subject to the periodic reporting requirements of the relevant exchange regulations.

19. NON-COMPETITION AND OTHER RESTRICTIONS

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19.1 None of the Shareholders shall, at any time whilst it is beneficially interested in any Shares of the Company or for a period of one (1) year from the date on which such Shareholder ceases to be beneficially interested in the Shares, do or permit to be done any of the following without the prior written consent of the other Shareholder(s):

(a)	either solely or jointly with or on behalf of any person directly or indirectly carry on or be engaged or interested in or assist any person in carrying on any business competing with the Business;
(b)	solicit or assist any person in soliciting the custom of any person who is or has been at any time during the term of this Agreement, a customer of the Company, for the purpose of offering to such customer, goods or services similar to or competing with those of the Business;
(c)	solicit or entice away or endeavour to solicit or entice away or assist any person to solicit or entice away or endeavour to solicit or entice away any Director or employee of the Company or of any subsidiary of the Company, but without prejudice to the right of such Shareholder to terminate arrangements under which any of its staff are seconded to the Company; or
(d)	cause or permit any person directly or indirectly under its control to do any of the foregoing acts or things.

Provided that nothing herein shall preclude or restrict either Shareholder(s) or their respective subsidiaries from:

(i)	carrying on any activity carried on during the period of twelve (12) months immediately preceding the date of this Agreement; or
(ii)	offering any service or goods similar to those previously supplied as part of the Business but subsequently discontinued and not supplied by the Company at the time when such similar service or goods are offered.

19.2 Nothing in this clause 19 shall preclude or restrict IIPL, Global Star, GigaMedia and Softbank from either solely or jointly with any person directly or indirectly be engaged or interested in any business competing with the Business by reason of its participation, whether via an equity stake or otherwise, in such business provided that:

(i)	the relevant party has declared its interests in the competing business;
(ii)	the relevant party signs a confidentiality undertaking in favour of the Company not to disclose any confidential or proprietary information of the Company to the parties involved in the competing business; and
(iii)	the relevant party and the director appointed by such relevant party abstains from voting on resolutions and participating in discussions of the Company which may:

(a)	provide the competing business the relevant party is engaged or interested in with a competitive advantage; or
(b)	cause the Company to compete with the competing business the relevant party is engaged or interested in.

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19.3 MCIL shall procure an undertaking from each Founder and member of the Management that it shall not, for a period of one year following the termination of the employment or services of such Founder or member of the Management:

(a)	either solely or jointly with or on behalf of any person directly or indirectly carry on or be engaged or interested in or assist any person in carrying on any business competing with the Business;
(b)	solicit or assist any person in soliciting the custom of any person who is or has been at any time during the term of this Agreement, a customer of the Company, for the purpose of offering to such customer, goods or services similar to or competing with those of the Business;
(c)	solicit or entice away or endeavour to solicit or entice away or assist any person to solicit or entice away or endeavour to solicit or entice away any Director or employee of the Company or of any subsidiary of the Company; or
(d)	cause or permit any person directly or indirectly under its control to do any of the foregoing acts or things.

19.4 Each undertaking contained in clause 19.1 shall be read and construed independently of the other covenants therein contained so that if one or more should be held to be invalid as an unreasonable restraint of trade or for any other reason whatsoever, then the remaining covenants shall be valid to the extent that they are not held to be so invalid.

19.5 While the covenants in clause 19.1 are considered by the parties to be reasonable in all the circumstances, if one or more should be held invalid as an unreasonable restraint of trade or for any other reason whatsoever, but would have been held valid if part of the wording thereof had been deleted or the period thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said covenants shall apply with such modifications as may be necessary to make them valid and effective.

19.6 MCIL shall procure that an undertaking from each Founder and member of the Management that it shall not, within a period of (a) three years or (b) one year after the listing of the Shares on a recognised stock exchange, whichever is earlier, directly or indirectly: (1) offer, sell, transfer, give or otherwise dispose of, (2) grant an option, right or warrant to purchase in respect of, (3) charge, mortgage, pledge or otherwise encumber or (4) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the legal, beneficial or economic consequences of ownership of, all or any of the Shares held, whether directly or indirectly, by such Founder or member of the Management or any interest therein, or (5) enter into any agreement with a view to effecting any of the foregoing.

20. REPRESENTATIONS AND WARRANTIES

20.1 Each of the parties acknowledges that it has entered into this Agreement in full reliance on the representations made by each of the other parties in the following terms and each party now warrants to each of the other parties:

(a)	it is a duly established legal entity of good standing in its country of incorporation and has the power and authority to enter into, exercise its rights and perform and comply with its obligations under this Agreement;
(b)	all actions, conditions and things required to be taken, fulfilled or done (including the obtaining of any necessary consents and permits) in order (i) to enable it

29

lawfully to enter into, exercise its rights and perform and comply with its obligations under this Agreement; and (ii) to ensure that those obligations that are valid, legally binding and enforceable have been taken, fulfilled or done;

(c)	no order has been made or petition presented for its bankruptcy/insolvency;
(d)	no composition in satisfaction of its debts, or scheme of arrangement of its affairs, or compromise or arrangement between it and its creditors and/or members of any class of its creditors and/or members, has been proposed, sanctioned or approved;
(e)	no distress, distraint, charging order, garnishee order, execution or other process has been levied or applied for in respect of the whole or any part of any of its property, assets and/or undertaking; and
(f)	its obligations under this Agreement are valid, binding and enforceable.

21. FORCE MAJEURE

21.1 If either party hereto is temporarily rendered unable, wholly or in part, by Force Majeure (as defined below) to perform its duties or accept performance by the other party under this Agreement, it is agreed that the affected party shall within fourteen (14) days of the occurrence of the Force Majeure give written notice to the other party, setting out full particulars of such Force Majeure. The duties of the party affected by such Force Majeure shall, with the approval of the other party, be suspended during the continuance of the disability so caused, but for no longer period, and such cause shall as far as possible be removed with all reasonable despatch. None of the parties hereto shall be responsible for delay caused by Force Majeure. No claim for damage or any other remedy shall arise out of any breach of, or any failure or delay to perform any of the obligations arising under this Agreement, if such breach, delay or failure is caused by a Force Majeure event.

21.2 For the purpose of this clause 21, “Force Majeure” shall mean act of God, restraint of government (including compliance by any party with any law, regulation, order or other rules having force of law or intervention or action by any state or federal authority) or by any person representing any such authority, strikes, lockouts, industrial disturbances, explosions, fires, floods, earthquakes, storms, lightning and any other causes similar to the kind herein enumerated which are beyond the control of either party and which by the exercise of due care and diligence, neither party is able to overcome.

22. ARTICLES OF ASSOCIATION

In the event of any conflict between the provisions of this Agreement and the Articles, this Agreement shall prevail and the parties shall wherever necessary procure the Articles to be amended to reflect the provisions of this Agreement.

23. CONFIDENTIALITY

23.1 No party shall divulge or communicate to any person (other than those whose province it is to know the same or with proper authority) or use or exploit for any purpose whatsoever, any of the trade secrets or confidential knowledge or information of the Company or any of the other parties which the first-mentioned party may receive or obtain as a result of entering into this Agreement, and each party shall use its reasonable endeavours to prevent its employees or agents if any from so doing. This restriction shall continue to apply without

30

limit in point in time, but shall cease to apply to information or knowledge which may properly come into the public domain through no fault of the relevant party.

23.2 For the avoidance of doubt, the terms and conditions of the transaction as set forth in the subscription agreements entered into between each of the Shareholders and the Company shall be considered confidential information and shall not be disclosed by any party hereto to any third party except in accordance with clause 23.3.

23.3 Notwithstanding the foregoing, any party may disclose:

(a)	the financing terms of their investment in the Company to its current or bona fide prospective, investors, partners, limited partners, shareholders, employees, investment bankers, lenders, accountants and attorneys;
(b)	such information that may be required to be disclosed pursuant to any competent governmental or statutory authority or pursuant to statute, rules or regulations of any relevant regulatory body; and
(c)	any information which is required to be disclosed pursuant to any legal process used by any court or tribunal in Singapore or elsewhere.

Any party disclosing information pursuant to this clause 23.3 shall exercise reasonable efforts to obtain reliable assurance that such information disclosed shall be kept confidential.

23.4 Notwithstanding the foregoing, in the event that IIPL is requested by any entity or person associated with the Singapore Government in connection with such entity or person’s association with the Singapore Government to disclose the financing terms or any other information relating to the issuance and purchase of Class A Shares to any entity or persons associated with the Singapore Government, IIPL shall not be required to seek a protective order, confidential treatment or other remedy with respect to such disclosure, and IIPL shall not be required to provide notice to the parties prior to such disclosure.

23.5 Without limiting the generality of other provisions in clause 23, in the event that any party is requested by regulatory authorities or becomes legally compelled (including, without limitation, pursuant to the relevant securities laws and regulations) to disclose the existence of this Agreement and other relevant agreements, any of the exhibits and schedules attached to such agreements, or any of the financing terms hereof and thereof in contravention of the provisions of clause 23, such party (the “Disclosing Party”) shall, where applicable, provide the other parties (the “Non-Disclosing Parties”) with prompt written notice of that fact. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required to be disclosed and shall exercise reasonable efforts to keep confidential such information to the extent reasonably requested by any Non-Disclosing Party.

24. CONTINUING EFFECTS OF THIS AGREEMENT

24.1 This Agreement shall be binding on and shall enure for the benefit of each Shareholder’s successors and assigns.

24.2 Except for assignments and transfers to affiliates or otherwise set forth in this Agreement, no Shareholder may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other Shareholders.

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25. COUNTERPARTIES

This Agreement may be signed in any number of counterparts and by the parties on separate counterparts, each of which when duly executed shall be an original but all the counterparts shall together constitute one and the same document.

26. NOTICES

26.1 Any notice, demand or other communication required or permitted to be given or given in connection with this Agreement shall be made in writing and may be:

(a)	delivered by hand;
(b)	sent by registered post;
(c)	transmitted by facsimile; or
(d)	transmitted by telex;

at the address, facsimile or telex numbers and marked for the attention of the person(s) (if any) set out in the execution pages of this Agreement or to such other address, facsimile or telex numbers or person(s) as any party hereto may have notified to the other parties hereto in writing at least seven (7) Business Days in advance of such change:

26.2 Each notice, demand or other communication under this Agreement shall be deemed to be received by the recipient and duly served:

(a)	if delivered by hand, at the time of delivery;
(b)	if sent by post, seven (7) days after posting; or
(c)	if sent by facsimile or telex, be deemed to have been received upon receipt by the sender of a facsimile transmission report (or other appropriate evidence) that the facsimile has been transmitted to the addressee;

as the case may be, Provided that if any of the aforesaid dates when the communications are deemed to be received and duly served fall on a day which is not a Business Day, the date on which such communications are deemed to be received and duly served shall be on the Business Day immediately following upon the said dates.

27. MISCELLANEOUS

27.1 Each party shall bear its own costs and expenses incurred in connection with the preparation, negotiation, finalisation and execution of this Agreement.

27.2 Unless otherwise provided for in this Agreement, this Agreement and each of the subscription agreements entered into between the Shareholders and the Company (where applicable) constitutes the entire complete and exclusive agreement and understanding between the parties in connection with the conduct of the Business and the operations of the Company and supersedes all prior representations, arrangements, understandings and agreements thereon. No party has relied on any representation, arrangement, understanding or agreement (whether written or oral) not expressly set out or referred to in this Agreement

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or the subscription agreements entered into between each of the Shareholders and the Company.

27.3 Notwithstanding that any provision of this Agreement may prove to be illegal, void, invalid or unenforceable, such provision shall be deemed to be deleted from this Agreement and the remaining provisions of this Agreement shall continue in full force and effect.

27.4 Each Shareholder agrees to exercise its voting rights in the Company and to take such other steps as lie within its power to procure, that the Company shall perform and observe the provisions of this Agreement.

27.5 No purported variation, modification, amendment or cancellation of this Agreement shall be effective unless made in writing and signed by all Shareholders.

27.6 Any waiver of any breach of this Agreement shall not be deemed to apply to any succeeding breach of the provision or of any other provision of this Agreement. No failure to exercise and no delay in exercising on the part of any of the parties hereto any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies otherwise provided by law.

27.7 Nothing in this Agreement shall constitute a partnership or establish a relationship of principal and agent or any other relationship of a similar nature between or among any of the parties.

27.8 The parties do not intend that any term of this Agreement shall be enforceable, by virtue of the Contract (Rights of Third Parties) Act, Chapter 53B of Singapore by any person who is not a party to this Agreement.

27.9 This Agreement is governed by, and shall be construed in accordance with, the laws of Singapore.

27.10 Each party hereto hereby submits to the jurisdiction of the Singapore Courts but this Agreement may be enforced in any court of competent jurisdiction. Each Shareholder of the Company irrevocably:

(a)	submits to the non-exclusive jurisdiction of the courts of Singapore in relation to any legal action or proceedings arising out of or in connection with this Agreement;
(b)	consents to service of process in any manner permitted by the laws of Singapore;
(c)	waives any objections on the ground of venue or forum non conveniens or any similar grounds;
(d)	consents generally to relief being given against it by way of specific performance or for the recovery of any property whatsoever and to its property being subject to any process for the enforcement of a judgement or any other remedy available under the laws of Singapore; and
(e)	waives and agrees not to claim any immunity from all forms or execution or attachment to which its property is now or may hereafter become entitled under the laws of any jurisdiction and declares that such waiver shall be effective to the fullest extent permitted by such laws.

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IN WITNESS whereof this Agreement has been entered into the day and year first above written.

Signed by for and on behalf of MANAGEMENT CAPITAL INTERNATIONAL LTD in the presence of:	) ) ) ) )
Address	:	28 Maxwell Road #04-01
		Red Dot Traffic
		Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Ong Toon Wah
Signed by for and on behalf of INFOCOMM INVESTMENTS PTE LTD in the presence of:	) ) ) )
Address	:	6 Temasek Boulevard #29-00
		Suntec Tower 4 Singapore 038986
Facsimile No.	:	(65) 6211 2213
Contact Person	:
Signed by for and on behalf of COMMERZBANK INFOCOMM SEGREGATED PORTFOLIO in the presence of:	) ) ) ) )
Address	:	care of 8 Shenton Way #36-01 Temasek Tower
		Singapore 068811
Facsimile No.	:	(65) 6225 6234
Contact Person	:	Cheong Kum Hong/Choo Hsun Yang

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Signed by for and on behalf of GLOBAL STAR INTERNATIONAL DEVELOPMENT LIMITED in the presence of:	) ) ) ) )
Address	:	34/F, The Lee Gardens, 33 Hysan Avenue,
		Causeway Bay, Hong Kong
Facsimile No.	:
Contact Person	:	Jiwei
Signed by or and on behalf of ETHERFAST PTE LTD in the presence of:	) ) ) )
Address	:	28 Maxwell Road, Red Dot Traffic, #04-01
		Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Lee Teng Teng
Signed by for and on behalf of GIGAMEDIA ASIA PACIFIC LIMITED in the presence of:	) ) ) )
Address	:	14 Floor, 122 TunHwa North Road, Taipei,
		Taiwan ROC
Facsimile No.	:	+8862-8770-7576
Contact Person	:	Chief Executive Officer, Arthur Wang and
		General Counsel, Jennifer Tseng

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Signed by for and on behalf of INFOCOMM ASIA HOLDINGS PTE. LTD. in the presence of:	) ) ) ) )
Address	:	28 Maxwell Road Red Dot Traffic
		#04-01 Singapore 069120
Facsimile No.	:	(65) 6294 9345
Contact Person	:	Ong Toon Wah
Signed by for and on behalf of BODHI CHINA AND INDIA INVESTMENTS LLC in the presence of:	) ) ) ) )
Address	:	Suite 3705, Citic Square
		1168 Nanjing Xi Lu, Shanghai, PRC
Facsimile No.	:	+86 21 5292 5822
Contact Person	:	Kabir Misra

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SCHEDULE 1

The Management of the Company is as follows:

Ong Toon Wah (Chief Executive Officer)

Richard Chua Choon Kiat (Business Development Officer)

David Heng Wee Koon (Technical Director)

Roderick Chia Yeow Kheng (Chief Technology Officer)

Yeo Yeoh Chuan (Vice President, Marketing & Strategy)

Lee Jinsi (Chief Strategy Operations Officer)

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EX-12.1

Exhibit 12.1

CERTIFICATION
PURSUANT TO SECTION 302
THE SARBANES-OXLEY ACT OF 2002

I, ARTHUR WANG, certify that:

     1. I have reviewed this annual report on Form 20-F of GIGAMEDIA LIMITED;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

     4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

     5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 29th, 2007

/s/ Arthur Wang

Name: ARTHUR WANG
Title: CHIEF EXECUTIVE OFFICER

EX-12.2

Exhibit 12.2

CERTIFICATION
PURSUANT TO SECTION 302
THE SARBANES-OXLEY ACT OF 2002

I, THOMAS HUI, certify that:

     1. I have reviewed this annual report on Form 20-F of GIGAMEDIA LIMITED;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

     4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

     5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 29th, 2007

/s/ Thomas Hui

Name: THOMAS HUI
Title: CHIEF FINANCIAL OFFICER

EX-13.1

Exhibit 13.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 20-F of GigaMedia Limited (the “Company”) for the yearly period ended December 31, 2006 as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Arthur Wang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 29th, 2007

/s/ Arthur Wang

Name: ARTHUR WANG
Title: CHIEF EXECUTIVE OFFICER

EX-13.2

Exhibit 13.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 20-F of GigaMedia Limited (the “Company”) for the yearly period ended December 31, 2006 as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Thomas Hui, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 29th, 2007

/s/ Thomas Hui

Name: THOMAS HUI
Title: CHIEF FINANCIAL OFFICER

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-142963 and Form S-8 No. 333-119616) of GigaMedia Limited of our report dated May 26, 2005, except as to the change in presentation basis for the discontinued operation as described in Note 1, which is as of December 9, 2005 relating to the financial statements for the year ended December 31, 2004, which appears in this Form 20-F.

/s/ PricewaterhouseCoopers
Taipei, Taiwan
June 27, 2007

EX-15.2

Exhibit 15.2

CONSENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We hereby consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-142963 and Form S-8 No. 333-119616) of GigaMedia Limited of our report dated April 23, 2007, except for Note 25(a), as to which the date is May 8, 2007, and Note 25(b), as to which the date is June 1, 2007, which appears on page F-1 of the Annual Report on this Form 20-F of GigaMedia Limited for the year ended December 31, 2006.

/s/ GHP HORWATH, P.C.
 
Denver, Colorado
June 27, 2007